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House Clears Music Copyright Legislation

Sept. 25, 2018, 11:41 PM

The House of Representatives has unanimously cleared a music copyright bill to streamline royalty payments to artists from digital music platforms such as Spotify.

The popular measure, which the Senate passed by voice vote Sept. 18, now heads to President Trump’s desk.

The Music Modernization Act (H.R. 1551) would create a new collective to offer blanket rights to digital downloads, ending the need to secure rights from individual copyright holders. It also would create new federal protection for sound recordings made before 1972 and used by digital radio, which were previously governed by a patchwork of state laws.

The legislation would create legal certainty for streamers facing chronic copyright lawsuits and new revenue streams for creators in the increasingly dominant digital music realm. Musician advocacy groups, the recording industry and streaming companies all supported the bill.

The House passed an earlier version in April. The Senate made changes to address some concerns, including copyright term length for pre-1972 sound recordings, digital radio sound recording royalty rates, and requirements to try to track down artists owed unclaimed royalties. The House remained in the loop, according to legislative and music industry sources.

The music industry had deemed the bill’s passage this year to be critical, noting the potential for continued litigation and lost royalties if a new Congress—minus the bill’s original sponsors—tried to bring the measure back. Senate sponsor Orrin G. Hatch (R-Utah) and House sponsor Robert W. Goodlatte (R-Va.) will retire at the end of the Congress.

Holes in Copyright Law

The bill would address both new media technology and a decades-old loophole in federal copyright law.

Mechanical rights, needed to sell cassettes, CDs and now downloads, require acquiring rights from specific copyright holders. That proves effectively impossible for streamers trying to offer access to massive troves of music for a monthly fee, and has led to dozens of high-value copyright lawsuits.

Streamers wanted a path to litigation relief, while artists and recording industries preferred a guaranteed royalty stream that didn’t require suing over every infringement.

The attempt to solve that problem ultimately absorbed an older one. A 1971 law passed created a federally recognized copyright for sound recordings, generally owned by record labels and separate from composition rights owned by songwriters. But the law only protected future recordings. Laws in some states protected older sound recordings. The Music Modernization Act incorporated another bill extending federal protection to pre-1972 recordings.

With physical music sales declining and traditional AM/FM radio remaining exempt from federal sound recording copyright law, satellite and internet radio would bear the brunt of the changes under the measure. Sirius XM lobbied against the bill, but the overwhelming industry support overcame its objections and those from digital music company Music Choice.

Sirius locked in its current sound recording royalty rate until 2027 rather than 2022 in negotiations with lawmakers. It agreed in exchange to drop its pending appeal of that rate, a 40 percent increase over the previous rate.

To contact the reporter on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com

To contact the editor responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com