Copyright Law Strikes a New Chord in the Music Industry

Posted by Ashley M. Bowcott on

Despite massive technological developments and the growth of the gig economy, copyright legislation in the United States remained largely stagnant over the last twenty years. That all changed on October 11, 2018 when the Music Modernization Act became law.

After years of lobbying and compromises, the Act is sure to be one of the most substantial changes to copyright law in recent history. First introduced by Representative Doug Collins of Georgia, the Music Modernization Act seeks to bring copyright law in the music industry up to date with technological advances such as streaming services, social media, and satellite radio. Its primary goal is to ensure that artists and others involved in the recording process are fairly compensated in light of new methods for listening to their creative works.

The Act significantly changes copyright law in the following ways:

  • Streaming services must obtain a blanket license from the non-profit Mechanical Licensing Collective (MLC) rather than individual licenses on a song-by-song basis.
  • Audio producers and engineers may collect royalty payments for streamed recordings and those royalty payments may be paid directly to the collaborators rather than through the recording artist if a letter of direction is executed.
  • Songs recorded and released before 1972 are now protected, and digital service providers, such as Apple Music, Pandora, and Spotify, must pay to use them.

The Act also sets rates for licensing and improves royalty rate proceedings by implementing new judicial procedures for rate setting.

The MLC will begin providing blanket licenses to the streaming service providers by January 1, 2021. During the transition period, streaming service providers’ copyright infringement liability is limited. The MLC is to use the next two years to select a board of directors and create licensing regulations.

The Music Modernization Act passed unanimously in both the House and the Senate. Despite this excitement, critics are nervous that the legislature was too ambitious. In addition to the licensing, rate, and reporting overhauls necessary to comply with the Act’s provisions, the MLC is also creating a comprehensive database to match compositions to recordings so owners may more easily detect copyright infringement: a challenge that has proved unsuccessful in other industries.

This Act not only benefits artists who will receive more royalties and have recourse for infringement of previously unprotected songs, but streaming services and other businesses in the industry will enjoy greater protection under the Act as well. If a blanket license is properly obtained, these companies’ defenses against copyright infringement claims are virtually airtight. Rather than being exposed to liability like Apple and Spotify have through class action suits for streaming songs without the individual song license, companies will have absolute license to make any song available for streaming. The licensing application process is therefore paramount, and businesses should consult an attorney to ensure compliance with the Act’s provisions.  

It is still unclear what the impact of the Music Modernization Act will be, but the Digital Millennium Copyright Act of 1998 (DMCA) was the last sweeping copyright legislation to be enacted. The DMCA changed the copyright landscape by providing Internet service providers a safe harbor from copyright infringement claims while expanding foreign copyright protection and giving copyright owners more avenues to enforce their rights. If the DMCA’s impact is any indication, the Music Modernization Act will have far-reaching and unintended consequences beyond the music industry.

As the law changes to catch up with technology, it’s more important than ever for business owners to understand the laws that impact their industries and to consult with attorneys to minimize liability. Importantly, if the MLC is successful in establishing a database and minimizing the number of unidentified copyright owners, other industries are sure to follow. Businesses would be wise to take inventory of their intellectual property and confirm ownership to avoid copyright infringement exposure. Experienced counsel can help.