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Art, Entertainment & Fashion Law Blog Legal updates, news, and commentary from the attorneys of Baker Sterchi Cowden & Rice LLC

The Piper is Finally Paid - the Hatch-Goodlatte Music Modernization Act Becomes Law

January 2, 2019 | John Patterson

As reported in a previous post, Congress spent a portion of the last year considering the Music Modernization Act (MMA), a sweeping piece of legislation meant to bring the world of music licensing into the era of online streaming services. In a rare show of bipartisanship, the MMA sailed through both houses of Congress, and was signed into law by President Trump last fall. This article discusses the key features of the new law.

Blanket Licenses and Royalty Rates

Before the MMA’s passage, streaming services negotiated licenses on an inconsistent basis, and often filed bulk Notices of Intention to use works with the Copyright Office. This haphazard practice created great uncertainty for streaming services and artists: the former faced the very real possibility that they were infringing upon copyrights and providing unlicensed work, while the latter could find themselves uncompensated for the use of their intellectual property.

Under the MMA, a process of blanket licensing has been established. Most works will now be subject to a blanket compulsory license, although the MMA still allows for parties to negotiate their own licensing terms if they so desire. A streaming service need only apply for such a license, and, once granted, the streaming service can make the work available without the fear of copyright infringement looming over it.

The MMA also sets a new standard for establishing royalty rates. Before, the royalty rate was determined by a formula having little to do with prevailing market rates. But now, a copyright royalty judge will determine the rate that would have been negotiated in the marketplace between a “willing buyer and a willing seller.” In reaching this decision, the judge must consider “economic, competitive and programming information” submitted by the parties. Section 102(c)(1)(F).

The Musical Licensing Collective

The MMA creates a body known as the Mechanical Licensing Collective (MLC) to administer this new licensing regime. The MLC will collect royalties from streaming services, pay royalties to artists, and assist in identifying the owners of any and all rights in a particular work. The MLC will be a non-profit entity, created and supported by copyright owners and funded by the payment of licensing fees. The composition of the MLC will be reviewed every five years. It will be overseen by a board of directors consisting of both industry and songwriter representatives.

One of the more interesting aspects of the MLC is the requirement that it establish and maintain a musical works database that will match artists and copyright owners with a particular work. This database will be fully searchable and publicly available. The initial creation of this database will be a formidable task for the MLC, and for the music industry.

Pre-1972 Sound Recordings

The final version of the MMA also incorporates portions of the Classic Protection and Access Act, extending full copyright protection to sound recordings, not already in the public domain, created on or before February 15, 1972. Service providers will now have to pay royalties to copyright owners when these pre-1972 sound recordings are streamed.

The MMA will bring interesting changes to the music industry, and, as with any new law, there will likely be unforeseen consequences of its enaction, whether for good or ill. However, the MMA has been greeted with approval by all sides of the industry, and will hopefully be a strong step towards fully modernizing the licensing and copyright of musical works in the age of streaming services.

The CASE Act - A Noble but Toothless Gesture Toward Fair Copyright Enforcement

April 24, 2018 | John Patterson

The cost of litigating copyright infringement claims in federal court can be immense, taxing the resources of even a well-heeled content creator. For many authors, artists, photographers, and others, this immensity become overwhelming. And at some point, the benefit of pursuing infringement litigation is grossly outweighed by the cost. Consequently, many creators are effectively barred from asserting the full bundle of rights provided by a copyright.

Recently introduced federal legislation purports to change this state of affairs. The Copyright Alternative in Small Claims Enforcement Act of 2017, H.R. 3945 (“CASE Act”) melds elements of traditional small claims procedure, administrative law, and arbitration principles in an attempt to level the playing field. While the bill appears to have some serious deficiencies, its passage would be an interesting first-step towards putting some degree of power back in the hands of average, every-day copyright holders. Here are some key points:

Procedure

The CASE Act would establish a three person board to hear small copyright claims. Parties would be allowed to represent themselves, and in-person appearances at proceedings would not be required. Rather, proceedings would be conducted by written submissions, and by “internet-based applications and other telecommunication facilities[.]” While the CASE Act does not set a formal schedule for proceedings before the board, it seems that a claim would proceed much faster in this forum than in a traditional court of law.

As with many administrative actions, the formal rules of evidence would be relaxed in CASE Act actions. It appears written discovery would be allowed, but there is no specific provision allowing for depositions. It also appears that the three person board would have very modest subpoena power, limited to commanding service providers to divulge the identity of alleged copyright infringers.

Factual findings would be subject to the “preponderance of the evidence” standard, and all decisions would require a majority of the board. Decisions of the board could be appealed to the United States District Court of the District of Columbia, but could only be overturned on the basis of fraud, misconduct, or other very limited circumstances. In this regard, the CASE Act resembles arbitration.

Participation is Voluntary

Under the CASE Act, participation would be voluntary for all parties. A petitioner would be required to serve a respondent, and a form of default judgment could be entered upon failure to timely respond. However, a responding party could immediately opt out of a CASE Act proceeding, and instead require that the claim be pursued in any court of competent jurisdiction.

Damages Limitations

In keeping with the spirit of small claims court, damages in CASE Act claims would be limited. In the aggregate, no more than $30,000 could be recovered in any one proceeding. Furthermore, recovery of attorney fees appears to be generally prohibited under the CASE Act (except in instances of bad faith conduct). This is a departure from traditional copyright claims brought under the Copyright Act, where attorney fees are available in certain circumstances if a copyright has been properly registered.

Conclusion

The primary problem with the CASE Act appears to be the aforementioned “opt out” provision. A respondent with deep pockets could opt out of any CASE Act proceeding, requiring the claimant to resort to a traditional court to pursue her claim, thereby nullifying a low cost option for those who don’t have the means to pour six or seven figures into full throated litigation. Without a mandate for all parties to participate in the proceedings, it could be argued that the CASE Act is essentially toothless in its current form.

Nevertheless, the mere existence of the CASE Act demonstrates that the plight of the individual artist, musician or other content creator is on the radar screen. With a few very important tweaks, its passage could serve make the copyright playing field a little more level. 

Political Divisions, Copyright Law, and a Strange Green Amphibian Meme - Pepe the Frog gets his Day in a Kansas City Area Court

February 27, 2018 | John Patterson

Pepe the Frog, a cartoon character created by comic book artist Matt Furie in the mid-2000’s, started out innocently enough. According to an interview given by Furie to the Daily Dot, Pepe’s philosophy on life was simply “feels good man.”  Unfortunately for Pepe, however, he became an internet meme thanks to the notorious 4Chan message board.  While some of the memes have maintained the laid back philosophy originally espoused by Pepe, it appears that the character has been adopted as a symbol of the “alt-right.”  Consequently, many Pepe the Frog memes contain overtly political messages, which are perceived by many as highly offensive or even racist.

Kansas City artist Jessica Logsdon appears to have capitalized on the Pepe phenomenon, and began creating, and selling on-line, politically charged artwork featuring a green frog with a striking resemblance to Pepe.  Furie, the original creator of Pepe, has sued in the United States District Court for the Western District of Missouri, alleging copyright infringement and seeking damages and injunctive relief against Logsdon.  The Complaint alleges that Pepe was originally a “peaceful frog dude,” but that:

“[I]ndividuals like Logsdon have misused Furie’s Pepe character and copied Pepe’s images for use in dozens of images sold online to promote violent and hateful messages espoused by alt-right fringe groups.  In doing so, Logsdon not only copies Furie’s original creation, but also freeloaded off Pepe’s popularity and Furie’s labor.” 

Logsdon has answered the Complaint, admitting that she is a “political artist,” and that she has used “Pepe” in the title of some of her artwork.  But she denies that she has copied the image created by Furie, while simultaneously claiming that her use of the image constitutes “fair use.”  Logsdon also claims that Furie lacks any registered copyright in the image of Pepe the Frog. 

Beyond its obvious socio-political angles, the case has wider legal ramifications as well, and we will observe with interest how Pepe the Frog’s meme status plays into the claims and defenses asserted by the parties.  We will continue to monitor the case and provide updates in this space.

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About Art, Entertainment & Fashion Law Blog

The BSCR Art, Entertainment & Fashion Law Blog examines developments in all aspects of the law affecting those in the creative community, including artists, designers, musicians, and venue owners. Learn more about the editor, John Patterson, and our Art, Entertainment & Fashion Law practice.

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