The first of the month (August 2016), the Department of Justice issued a summary of findings with regard to two court orders that govern the operation of two of the U.S. performing rights organizations (the “PRO’s”), ASCAP and BMI.  If it stands, the decision will also affect the third PRO, SESAC.

Songwriters and music publishers around the country were horrified with the DOJ findings, as were the PRO’s, with many songwriters claiming that they would now have to refrain from co-writing with songwriters belonging to one of the sister PRO’s.  This article will examine the logic of the reaction by the music community.  Is the proverbial sky falling, or will this event pass into obscurity and irrelevance?  We’ll sort out what all this means in this article.

As an aside, if you were not fortunate enough to tune into last night’s episode of my friends Heino and Scott with The Music Row Show on WSM 650, go to their website and check out the archives, as much of the information we share here was talked about in that radio program.  My appearance and conversation with The Music Row Show made me realize just how confused many songwriters will be about all of this legal maneuvering.  

Background

Before we look at the court orders, referred to as “Consent Decrees,” a little historical background will be helpful.  As I said, there are primarily three PRO’s, ASCAP, SESAC and BMI, and they were created in that order.   The two largest US PRO’s, ASCAP and BMI, make up the majority of the industry.  SESAC, by most accounts, has between 10-20% market share (although it is growing exponentially).

This is because ASCAP and BMI were both created out of controversy and strife and that highly competitive environmental produced some robust and resilient entities.  ASCAP arouse out of the Tin Pan Alley days.  Several of the key songwriters, IRVING BERLIN, VICTOR HERBERT and JOHN PHILLIPS SOUSA, began to see their songs being performed in restaurants, hotel lobbies and other venues, and they realized that they were not receiving royalties from these performances, a right that was first granted in 1897 and then incorporated directly into the 1909 Act.  These famous writers banded together to form the first coalition of songwriters and publisher, the American Society of Authors, Composers and Publishers.

Their efforts may have been received well in the music community, but the entities that used the music did not share that enthusiasm.  Certain NYC restaurant and hotel magnets, namely Shanely and Vanderbilt, questioned whether they were required to pay the composer for performance of a song in their establishments, even though they charged no admission for those performances.  The music, they maintained, was just a side show and not the main focus of what their customers were paying for.

The case, Herbert et al. v. Shanley et al. went all the way to the Supreme Court.  Writing for the majority, Justice Oliver Wendell Holmes ruled in favor of ASCAP and songwriters, saying:

Music is part of the total for which the public pays and the fact that the price of the whole is attributable to a particular item which those present are expected to order is not important.  It is true that music is not the sole object, but neither is the food, which probably could be got cheaper elsewhere.

As a result, ASCAP had the stamp of approval from the highest court in the land.  They started an aggressive campaign to acquire licenses from venues where performances of music occurred, including broadcasters like television and radio stations. 

BMI arose as a direct result of ASCAP’s aggressive licensing activities.  From 1931-1939, ASCAP increased its royalty rates to radio and television stations over 400%, to the point where a group of broadcasters decided to get together and form Broadcast Musicians Incorporated in 1939.  They started signing their own composers and begin licensing non-ASCAP works for their catalog.  After a few years, most radio and television stations stopped using ASCAP music and would only use BMI-licensed music.

BMI and ASCAP have been adversaries ever since.  ASCAP, of course, had the upper hand, since they were first to market and arose out of the Tin Pan Alley environment.  ASCAP did not take kindly to being shut out of the lucrative broadcast market and the two organizations began a decades long fight for the music users.  This conflict ultimately caught the attention of the DOJ, who sued each entity under the Sherman Act (anti-trust) to address their comparative market power and balance the weight of power.  The result of the DOJ’s involvement were the consent decrees that, to this day, govern how terrestrial radio (Either AM/FM) digital rebroadcasts, and/or venues such as bars and arenas, license the performance of compositions.

SESAC, a European PRO at first licensing mostly classical, slipped into the U.S. in 1939 amidst all of this sibling rivalry and began licensing in the U.S., but as a private entity as opposed to operating as a non-profit like ASCAP and BMI.  They are not subject to any consent decrees and to this day remain under the radar, although the DOJ periodically audits them as well.

The ASCAP/BMI consent decrees defining what the PRO’s can and cannot not do – most notably, it requires them to issue “blanket licenses” to certain users.  These have been amended in 2003 and 1994 respectively.  The decrees also require that both entities offer licenses are similar terms and to similar clientele.  Importantly, for this discussion, the consent decree require that the PRO’s license to a user like Pandora one a request for license is made, regardless of whether a rate has been negotiated.  If the PRO’s and the user cannot agree on a rate, it is then presented to the “rate court” set up by the consent decree to decide.  The catch is that while all of this legal wrangling is going on, services like Pandora can continue performing the music.

The Recent DOJ Ruling

The gravamen of this issue happened in 2013 when several large music publishers, SONY ATV, EMI and Universal, among others, withdrew their “new media” licensing rights from ASCAP and BMI, leaving them to collect only their terrestrial right (read broadcasted radio or television).  They did this for a couple of reasons:  first, the consent decree do not allow the PRO’s to negotiate a market rate with digital streaming services; so, secondly, they did it in order to negotiate better deals directly with Pandora.  In 2013, Pandora negotiated a favorable percentage rate with Sony and Universal based on their gross revenues.

With their hands tied and major publishers going direct to digital stream services, ASCAP and BMI had no choice.  Streaming revenues have been increasing for years, and without these major players bringing in revenue, their revenues were decreasing.  So, in short, ASCAP and BMI went back to the DOJ seeking clarification with regard to the consent decrees with regard to operation and effectiveness.  Among other things, ASCAP/BMI ask that the decrees be modified to allow publishers/songwriters to “partially withdraw” their works.  This prompted a new review of the Consent Decrees by the Department of Justice that begin in 2014.  The DOJ released its findings on August 4, 2016 of this month.

The DOJ said that the ASCAP consent decrees doesn’t allow a publisher to withdraw partial shares.  It stated that consent decrees require a PRO “license to perform all the works in [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][its] repertory…” That meant, according to the DOJ, that it could not “rewrite the decree” to let publishers pick and choose how works are licensed and allow fractional shares.  This has great impact on the existing deals already negotiated with Pandora.  Specifically, the DOJ said:

The licensing of works through ASCAP is offered to publishers on a take-it-or-leave-it basis.

Specifically, the DOJ ruled:

1)  That the consent decrees would not be modified or abolished

2)  That the consent decrees to DO NOT allow “fractional” licenses that convey only fractional shares and required additional (read other PRO) to perform the works, i.e, the DOJ interpreted the consent decrees to require “full-work” licensing.

This new and dramatically different interpretation requires the PRO’s to convey licenses to radio, television, bars and digital music services giving them the right to public perform “100%” of their repertoires without the risk of adverse infringement.  This new “full-work licensing” principal applies even if ASCAP or BMI only represent a small fraction of a song’s copyright, which is almost always the case.  The problem, of course, is that ASCAP and BMI do not generally have the legal right to convey 100%!

Ironically, the DOJ findings state that “the current status quo system [used by the PRO’s]. . . has served the industry well for decades and should remain intact.”   This is confusing, since historically the PRO’s have licensed fractional shares, contrary to the DOJ’s findings.  A single song most often is written by multiple songwriters and those songwriters are generally affiliated with different performance rights organizations and only own a fractional interest in that song.  When a song such as All-American Girl, is written by Carrie Underwood, whose performance is licensed by BMI, with two other ASCAP songwriters, traditionally BMI would license 33.33% of the song and ASCAP would license the other 66.66%.  Now, according to the DOJ, either BMI and or ASCAP would have to license 100% of the song and report and pay the royalties for the other songwriters to the other PRO.  Imagine how these historic competitors view that prospect!

Herein lies a big part of this current problem.  If we look to copyright law, as we must, the answers may be clearer.  Under section 201(a), the author of song is the owner of the song.  But as all songwriters in Nashville are prone to collaborate, we have to factor in a second author/owner.  When that happens, the copyright law treats each owner as a tenant-in-common, just like two spouses who jointly own a house.  In other word, each one owns 100%.  So what does that mean?

That means that “[e]ach co-owner may thus grant a nonexclusive license to use the entire work without the consent of other co-owners, provided that the licensor accounts for and pays over to his or her co-owners their pro-rata shares of the proceeds.” United States Copyright Office, Views of the United States Copyright Office Concerning PRO Licensing of Jointly Owned Works (2016).  Of course, the songwriters can alter this default situation through signing a collaboration agreement, but no one ever does because that would “harsh the songwriting vibe.”

Furthermore, in a joint author situation, either author of the work may enforce the right to exclude others from using the work.  So, each author of a joint work “has the independent right to use or license the copyright subject only to a duty to account for any profits he earns from the licensing or use of the copyright.” Ashton-Tate Corp., 916 F.2d at 522 (9th Cir.1990). Accordingly, a joint copyright owner may not exclude other joint owners or persons who have a license from another joint owner. 

But there is another part of this analysis that can’t be ignored, and that is the doctrine of indivisibility.  Under the prior, 1909 Copyright Act, the author(s) could NOT divide the copyright, meaning that if the copyright was licensed, the entire copyright had to be licensed, not just one of the exclusive rights.  So, I would not be able to issue a print license apart from a license to perform the work.  The 1976 Act eliminated this doctrine and effectively made the copyright divisible.  Specifically, Section 201(d)(1) of the Act states that the ownership of a copyright may be transferred in whole or in part by any means of conveyance or by operation of law.  Further, the following section 201(d)(2) specifies that this principle of divisibility applied to each of the exclusive rights – print, adaptation, distribution, reproduction and performance – which could be divided, transferred and owned separately.

Now, for the first time, an author could license only the performance rights.  But more specifically, the author could license only a portion of his/her performance rights.  So, you see, the idea of transferring fractional shares of a copyright, or one of the exclusive rights of a copyright, is actually built into the copyright act.  This is something the DOJ ruling completely ignored in its analysis when it interpreted the Consent Decrees to require the PRO’s to offer 100% licensing of their catalog. 

The DOJ, however, was focused primarily on the user of the music, completely ignoring the creators.  For the user, the DOJ felt it was egregious to have to go to all three PRO’s to get a license to perform one work.  To be fair, the PRO’s have tiptoed gingerly around this issue for years.  A license from one songwriter/publisher to perform a work should, in theory, be sufficient.  That is, after all, the meaning of a non-exclusive license.  The industry has avoided the user aspect of partial rights grants for years, requiring each user to obtain a “blanket license” from all three PRO’s in order to perform each PRO’s catalog (and consequently, glossing over the fact that a license to perform one individual work from the owner of copyright would suffice to perform the work).  In this way, each PRO could distribute the royalties collected on the benefit of their members to each one respectively according to their own algorithms. 

That process may change if the DOJ’s consent decree remains in effect.  Each PRO would have to agree who collects for a particular license, and then credit the other with their share.  This would require each one to adjust their rates accordingly and account to and pay some of the royalties received to the other PRO’s.  While it can’t be stated definitively, one just feels that this process will somehow negatively impact the songwriters and publishers, and not the PRO’s or the venues.

Most people in the industry predict that application of this “full-work” licensing approach will throw the music industry in complete and utter chaos – and they’re probably correct.  But, as I said earlier, all hope is not yet lost.  First, the DOJ gave ASCAP and BMI one year to get their act together and start operating on the 100% licensing principle they outlined.   Second, for perhaps the first time in history, ASCAP and BMI are bedfellows (you know what they say of politics) in that they have agreed to a course of reaction:  BMI is appealing the DOJ’s ruling while ASCAP is lobbying Congress for relief.   ASCAP and BMI both announced that they would join forces to fight this common foe.

The president of BMI, Michael O’Neill, was quoted in the Tennessean in response:

The DOJ’s interpretation of our consent decree serves no one, not the marketplace, the music publishers, the music users, and most importantly, not our songwriters and composers who now have the government weighing in on their creative and financial decisions.  Unlike the DOJ, we believe that our consent decree permits fractional licensing, a practice that encourages competition in our industry and fosters creativity and collaboration among music creators, a factor the DOJ completely dismissed.

For her part, CEO of ASCAP, Elizabeth Matthews stated that:

The DOJ decision puts the U.S. completely out of step with the entire global music marketplace, denies American music creators their rights, and potentially disrupts the flow of music without any benefit to the public.  That is why ASCAP will work with our allies in Congress, BMI and leaders within the music industry to explore legislative solutions to challenge the DOJ’s 100 percent licensing decision and enact the modifications that will protect songwriters, composers and the music we all love.

Most people outside the industry will have no idea how significant it is that both of this PRO’s are cooperating with each other on this issue.  ASCAP’s and BMI’s joint efforts may serve to put pressure on Congress to address an aging Copyright Act and implement some of the recommendations made by the Copyright Office in 2015, namely, the creation of a mega “Music Rights Organization” or MRO that, among other things, licenses all exclusive rights of the copyright owner, including both performance and mechanical rights.  The Copyright Office also recommended an elimination of the Consent Decrees.  U.S. Rep. Bob Goodlatte, R-Virginia, who is chairman of the House Judiciary Committee, is expected to recommend changes to the Copyright Act that could be taken up on the 2017 Congress.

In the midst of all of this activity, SESAC is again quietly biding their time, acquiring Harry Fox (mechanical rights) and Rumblefish (a “record label” including digital performance rights) in preparation for becoming perhaps the first effective “MRO.”

No one truly knows the ultimate outcome of all of this but one thing is certain:  the history of performance rights organizations in America continues to evolve.  The copyright law is very complex and have evolved over the years since its passage in 1976.  That law took almost half a century to pass and there is no reason to believe that a new revision wouldn’t take just as long given the multiple competing and often conflicting interests of various stakeholders.  But patience is not the songwriter’s only recourse here:  write your elected representative in Washington and plead your case, as free speech is the only right that will make a difference in this fight.

 

 

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[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][fusion_tagline_box backgroundcolor=”” shadow=”no” shadowopacity=”0.7″ border=”1px” bordercolor=”” highlightposition=”top” content_alignment=”left” link=”” linktarget=”_self” modal=”” button_size=”” button_shape=”” button_type=”” buttoncolor=”” button=”” title=”Purple Reign: Lessons Learned from Prince” description=”Part I: Introduction & Estates” margin_top=”” margin_bottom=”” animation_type=”0″ animation_direction=”down” animation_speed=”0.1″ animation_offset=”” class=”” id=””][/fusion_tagline_box][fusion_text]

By Morgan Wisted & Barry Neil Shrum

Just over half way through, and already it has been a tough year of losses in the music industry. Glenn Frey, one of the members of my favorite band of all time, the Eagles, kicked off the year early when he passed in January, shortly after the passing of pop icon, David Bowie.  Then, country fans ached greatly at the loss of the “Okie from Muskogee” when the legendary Merle Hagger died on his 79th birthday.  Later, fans of the Beastie Boys bemoaned the loss of John Berry.   Next came the horrifying news of the senseless murder of American Idol finalist, Christina Grimmie, proving that youth is no more an insulator from the Grimm Reaper than is fame. Finally, comes the loss of Prince, perhaps the greatest pop icon of all, who passed suddenly, thereby reclaiming again his self-proclaimed title of the “artist formerly known as . . . .” So, the collective heart of the industry is indeed heavy as the annual list of dead celebrities for the 59th Grammy Awards show grows larger.

In death, we are all equal in our solitude, but for our estates the relative differences are significant.  When celebrities set off for that great entertainment festival in the sky, they often leave behind enormous estates: for example, founding member of the Eagles, Glenn Fry left behind an estate estimated to be worth over 90 million dollars when he passed.  While magazines like People, Rolling Stone, and Time quickly assembled the expected tell-alls in memory of the greatest “fill in the blank” to ever live, these entertainment-oriented glamor pieces focus primarily on the glitz and glitter that was the celebrity.  They rarely explore what happens to the wealth and intellectual property of these great icons after the caskets close.  This unique series will examine all of that and more.

Prince may very well be the prime example of the myriad of legal issues that often surround a celebrity’s passing.  On April 21, 2016, the mastermind behind platinum selling albums and years of successful tours, left this world for the afterworld:  a world he so fondly talks about in his hit Let’s Go Crazy.  Although one can assume that Prince has punched his ticket to “a higher floor” and is currently living in that “world of never ending happiness where he can always see the sun, day or night,” here on the ground floor, his family and estate is shrouded in mystery and darkness that result from an unplanned estate.  As the Prince song explains, “…in this life, things are much harder than in the afterworld.  In this life, you’re on your own.”  Well, that last part may not be entirely true:  there were 700 people who claimed to be related to Prince, so they are not “on their own.”  As it is with many celebrities, Prince’s death opened a Pandora’s box of legal issues that will be sorted out for months and even years to come.

Now, the question that everyone seems to be asking in regard to Prince is, where is the will?  Many, including award-winning filmmaker Ian Halperin, have described Prince as a shrewd businessman who would have most certainly been prepared for his eventual demise.  Others, namely his sister, Tyka Nelson, has filed documentation in probate court declaring that he died intestate, i.e., without a will.

In the U.S., each individual state has its own laws regarding what happens to someone’s estate when someone dies without a will.  Since Prince lived in Minnesota, it will be that state’s statute that determines what happens if Tyka Nelson’s claims turn out to be true.  According to Minnesota law, when a person dies intestate, the estate property is distributed according to the so-called “intestate succession laws,” which is basically a flow chart of descendants. The Minnesota’s Heir Flowchart is available here.  As you can see from the chart, since Prince’s parents and only legitimate son, Ahmir Gregory Nelson, are deceased and he has no confirmed children (at least not yet), the first line of descent is his siblings, meaning that Tyka Nelson and his other five half siblings, John Nelson, Norrine Nelson, Sharon Nelson, Alfred Jackson and Omar Baker, stand to benefit the most from the non-existence of a will.

So it’s best not to be too hasty.  The judge in the probate case anticipated that paternity might be an issue, so he ordered DNA testing of Prince’s blood and opened a period of time to allow such children to come forward and stake a claim.   Several have, of course.  There’s Carlin Q. Williams, who claims that he is Prince’s biological son and the “sole heir” under Minnesota statute.  Marsha Henson, Williams’ mother, swore in a statement that she had unprotected sex with Prince in Kansas City, Missouri, in July 1976, after which she conceived Williams.  Another as of yet undisclosed man in his 30’s claims, through Heir Hunters International, that his mother has several sexual encounters with the pop legend in “the 80’s.”  As indicated earlier, over 700 people ultimately came forward claiming to be in Prince’s blood line, including cousins, half-siblings, children, etc.

This is, perhaps, the most damning result of dying intestate, other than of course the actual death itself.  Good estate planning could have avoided this chaotic Minnesota “gold rush” by designating the intended beneficiaries.  Just as important, if not more, than that, however, is the avoidance of estate taxes.

So, for the first installment of this Law on the Row series entitled Purple Reign: Lessons Learned from Prince, let’s review some some good reasons that a celebrity needs quality estate planning.  When someone such as a celebrity, who has acquired a great deal of wealth and assets, passes away, or in fact anytime a great deal of money is involved, you can expect to see a throng of people seeking their alleged share of it.  As we now see, Prince is no different.  With an estimated worth of $300 million, it will not be an easy quagmire for Prince’s family to navigate, and it be littered with numerous pitfalls and challenges as they traverse it. To date, the journey to peace for the Prince Estate has been littered with lost wills, quickly formed publicity rights acts, a vault of unreleased Prince songs, and the aforementioned 700 people claiming to be Prince’s half sibling! So, at least for now, the issue of “where Prince’s fortune will go” is still a mystery.  That leads us to some of our first lessons from the Purple Reign:

  1.  Settling estate issues without a will is very expensive and time consuming; best to have the issues sorted out before tragedy strikes;
  2. Planning ahead allows a celebrity to structure certain trusts and other legal vehicles designed to reduce and avoid enormous estate taxes; it is estimated that out of the $300 million dollar estate, Prince’s heirs, whoever they may be, will pay upwards to 50% to various governmental agencies, and then even more to court-appointed administrators.
  3. Proper estate planning also reduces the problems we see in the Prince fiasco.  If there were a written will, there’d be no doubt to whom Prince wanted his estate to descend.  As it is, the fight will continue and the legal bills will mount.
  4. Important descendants may not get anything.  If the celebrity marries a second or even a third spouse, will there be anything available for prior spouses and/or children?  Many intestate laws give everything to the current spouse, leaving prior children and spouses out of the loop, a end result that may be intended by the celebrity.

Just as important, if not more so, when you are dealing with a celebrity, is who has control of the the intellectual properties involved, the copyrights, trademarks, any patents, and of course, the rights of publicity.  When no will is involved, these properties are treated just the same as the money and pass according to the state’s intestate procedure.

So, in Part 2 of the series, will explore the issues surrounding Prince’s copyrights, including the fate of those hundreds of songs and sound recordings waiting to be released to the public.  Who owns those recordings discovered in Prince’s vault?  Can the family release them?  Who owns Prince’s publishing.  Can the family terminate the transfer of any of those rights?

Finally, Part 3 discusses the implications of Prince’s post-mortem rights of publicity.  For anyone familiar with this topic, the hastily formed PRINCE act could very well suffer the same fate the one Washington state assembled on behalf of Jimi Hendrix’ estate, which was ultimately upheld in the 9th Circuit, but only after a 13-year, hard fought legal battle.  Although these issues are changing and growing daily, we are thrilled to have you follow along with Law on the Row as we begin to wade through the river of issues created by at the end of the Purple Reign, and explore the ever changing laws surrounding the fate of all things Prince.

[/fusion_text][fusion_text]morganwisted1Morgan Wisted is an intern at Shrum & Associates and has her own blog at www.silkenraven.com.[/fusion_text][/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

“[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][E]very man has a property in his own person. This nobody has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his….”[1] John Locke – a political and social philosopher of 17th Century Enlightenment England and the father of “Classical Liberalism” – was the most influential advocate of natural rights and social contract theory. He believed that in order to establish a civil society, men must give up some of their natural power to the society in exchange for the guarantee of their God-given natural rights. A civil and just government must become a type of “social watchdog” that is charged20087270_jl (2)
with the protection of the individual’s inalienable rights, including, life, liberty and property. These concepts, inspiring in thought and revolutionary in action, were the single most important influence that shaped the founding of the United States. Influenced by Lockean thought, intellectual property – the products of the mind – possessed a value that arose during the framing of both the Declaration of Independence and the U.S. Constitution and would later influence modern day copyright law.

Locke directly influenced the author of the Declaration of Independence and the framers of the Constitution with his central political principle that rights in property are the basis of human freedom and government exists to protect them and preserve public order. Locke’s theory stemmed from the commonly accepted concept of “Natural Law” under which it was believed that every person has natural rights, not given by a ruler but rather derived from a higher power which, in the case of Locke, was the God of the Bible. These rights, according to Locke, were “inalienable,” i.e., they cannot be taken away.

In Locke’s understanding of Natural Rights, the right of property is paramount. For him, “property” encompassed not only physical possessions, but intellectual capital as well. Locke proposed that within any organized community, there is a type of “Social Contract” between all members of the community in order to gain collective advantages that the members of the body politic would not be able to secure individually. This contract forms the basis of the equitable distribution of rights and obligations between the people and their government. The political power of the government is granted to it by the people and is, therefore, a “trust” for the benefit of the people. In turn, the people give this power so that their own welfare is increased and their individual property is protected in a way not possible in what Locke calls the “State of Nature,” where the will of the stronger (or the many) is often forced upon the will of the weaker (or the few).[2]

Locke’s ideals of the “Contract of Society” and “Contract of Government” formed the basis of Thomas Jefferson’s passionate believes conveyed clearly in the Declaration of Independence:

“We hold these truths to be self evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. – That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –“[3]

Having been bound by the monarchy, Jefferson understood the importance of this radical, yet equitable and sensible, way of thinking. Locke’s ideas were widely circulated and debated throughout the Colonies by this point, and Jefferson would later confess that while writing the Declaration, he “…did not consider it a part of my charge to invent new ideas, but to place before mankind the common sense of the subject.”[4] Jefferson admits to referencing Locke and simply being the tool to communicate and apply the sensibility to the newly independent colonies.

Locke’s influence on American principals can also be seen in his work, A Letter Concerning Toleration. In it, he develops a means of understanding moral truths with strong political implications. Although420-founding-fathers-madison-jefferson_imgcache_rev1308943458862
his letter focuses primarily on the separation of church and state (something that also had a great impact on Jefferson), it has wider implications in that it provides the philosophical foundation for free speech and freedom of action that follows from free and independent thought. This, in turns, provides a basis for a future understanding of the protection of independent thought as intellectual property. The only precondition of thought, truth, creativity or innovation is political freedom. While in Locke’s letter this freedom of thought refers to specifically to religious ideas, it clearly develops the principal that government is not in the business of enforcing morality but rather protecting an individual’s personal rights from being violated by the collective society.

In a society governed by Locke’s social contract, then, laws established by the government are intended to provide safety and security of the commonwealth as well as every individual’s goods and person.[5] Later, the newly formed United States would incorporate Locke’s freedoms of expression in the First Amendment of the Constitution: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging, the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances”[6] Although the First Amendment, just like Locke’s letter, does not reference ownership of property, it will be referenced time and time again in court rulings securing our freedoms of expressions, and will play a crucial role in the development of copyright law in America.

A year after writing the letter referenced above, Locke published the Second Treatise On Civil Government. In it, Locke wrote that the basis of the equality, independence and ultimately the freedom that exists between all individual men, is their mutual possession of reason.  He asserted that through Natural Law, God has given the world to every man in common and he has given them reason to make use of it to the best advantage of life and convenience.[7] This is reflected clearly as Jefferson pens the word of the Declaration: “… the powers of the earth the separate and equal station to which the Laws of Nature of Nature’s God entitle them….”[8]

Locke continued to expand on the idea that man has a natural right to take advantage of the Laws of Nature by explaining that the labor of the body or the mind, and the resulting work of the hands, are the property of the individual and anything that nature has provided and man has joined to it makes it his property. Once man has removed it from the common state of nature, mixed it with his physical or intellectual labor, he is therefore annexing it and excluding it from the common right of other men.[9]

Locke further developed these ideas by providing insight into unilateral appropriation, the idea that there is something individuals can do on their own to establish rights over natural resources that others have a moral duty to respect.[10] In American jurisprudence, the idea of unilateral appropriation is used to justify private property rights and morally binding restrictions and limitations that are perhaps with greater authority than any other social agreement, to wit, there is a universal justification for people owning what is theirs. The implication of Locke’s universal appropriation theory is that a person owns his or her labor and any un-owned thing he mixes it with. This labor can improve resources, adding value through the pains of individual labor. Through this labor and improvement of natural resources more natural resources are available for others. Hence appropriators are entitled to some type of unconditional right to produce their own subsistence.[11] In the U.S., Locke’s concepts are incorporated in §102(b) of the Copyright in the form of our “idea/expression” dichotomy, in that a person is free to incorporate common and universal ideas into their own individual expressions.

A little over 100 years later, both Thomas Jefferson and James Madison would embrace the ideology presented by Locke in the Second Treatise, although Jefferson at first struggled with the idea that the protection of intellectual property might somehow become a monopoly and thereby denying others access to a natural flow of information and innovation. This is reflected in a letter to Isaac McPherson on August 13, 1813, often cited by opponents to the concept of intellectual property, in which Jefferson ultimately argues the notion that inventors and their heirs have a natural and exclusive right to their inventions. In the letter, Jefferson insists an idea in nature is excluded from exclusive property stating, “the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it.” Jefferson continued that “ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition.” He compares an idea to the air we breathe, “incapable of confinement or exclusive appropriation.”

There are two things to note about the famous quotation of Jefferson. First, he clearly notes that it is ideas that exist in nature that cannot be possessed, but implicitly does not stray from the Lockean idea that once a person mixes labor with it it, it can be possessed. He ultimately agrees with Locke that the one who initially possess as well as expresses the idea should have, “exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility.”[12] Because of the Colonies’ past experience with England, Jefferson’s principal intellectual conflict over the concept of ideas as property was the threat of monopolizing anything, including intellectual ideas.

Unlike Jefferson, however, Madison, the primary architect of our Constitution, fully embraced the idea of the protection of intellectual property and recognized that the nature of an individual piece of intellectual property is such that it could be useful to all people and yet could be owned by one person. When writing the Fifth Amendment, “No person shall… be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation,” Madison was directly referencing Locke’s idea of appropriation and preservation of their estate[13]

On the other hand, Madison did agree with Jefferson that ownership of property in general could amount to indefinite monopolization of that property by the owner. But Madison nonetheless recognized and later persuaded Jefferson, that intellectual property was a thing of value to all of society and was susceptible of being appropriated in the public interest without just compensation to the individual who was the inventor or author. In Madison’s words “….the (creative) few will be unnecessarily sacrificed to the (greedy)many”[14] (notations added). In these words, Madison ingeniously combined Locke’s idea that a person is entitled to the fruits of their labor as applied to the state of nature with the much more politically accepted notion of utilitarianism that laws should benefit the majority.

So even though Madison sought to protect and provide compensation for intellectual property, he agreed with Locke’s thought that there was a limitation to this protection. Locke describes this limitation as follows: “as much as any one can make use of to any advantage of life before it spoils, so much he may by his labor fix a property in. Whatever is beyond this is more than his share and belongs to others.”[15] Although Locke’s comment here refers specifically to tangible natural resources as mixed with the labors of man, the premise is nonetheless later used by Madison when writing, Article I, Section 8, Clause 8, of the Constitution, which provides that “…Congress shall have Power … To promote the Progress of Science and useful arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”[16] This Constitutional provision, birthed in the ideas of Locke in 1690, encapsulated by Jefferson in the Declaration of Independence in 1776, and later drafted into the United States Constitution by Madison in 1788, continues to form the basis for the protection of intellectual property in the United States today.

This is the historical and philosophical evolution of Article I, Section 8, Clause 8, the so-called Progress Clause, which is and always has been the basis for U.S. copyright law. The Progress Clause is the only clause in the Constitution that grants power to Congress and specifies the means to accomplish its stated purpose. The exact limitations of this clause have been the subject of countless U.S. Supreme Court cases. One case in particular, Petrella v. MGM, is a United States Supreme Court copyright decision that references Locke and Madison’s ideas on the limitation of intellectual property ownership. In Petrella, retired boxer Jake LaMotta and his friend Frank Petrella (Plaintiff) wrote a story about his career which resulted in three copyrighted works: a screenplay, written in 1963, the book Raging Bull: My Story, published in 1970 and yet another screenplay, written in 1973.

In 1976, LaMotta and Petrella assigned the copyrights in their works, including renewal rights, to Chartoff-Winkler Productions, Inc., which assigned them in 1978 to United Artists Corporation, which later became a subsidiary of Metro-Goldwyn-Mayer. In 1980, as a result, MGM released (and registered copyright in) the film Raging Bull, which achieved popular and critical success. Petrella died in 1981, during the initial terms in the three original works (these works will still under the auspice of the 1909 Copyright Act). After his death, the renewal rights in the works reverted to his heirs.

In 1991, Petrella’s daughter sought to renew the copyrights, but was unable to timely file except with respect to the 1963 screenplay. Approximately seven years later, she advised MGM that its exploitation of Raging Bull violated her copyright and threatened suit. Another 9 years after that notification, on January 6, 2009, Petrella finally filed her infringement suit against MGM, seeking monetary and injunctive relief limited to acts of infringement occurring on or after January 6, 2006.

MGM understandably moved for summary judgment, arguing that, under the equitable doctrine of laches, an unreasonable delay by the plaintiff in bringing the claim, Petrella’s 18-year delay in filing suit was unreasonable and prejudicial to MGM. The District Court granted MGM’s motion, holding that laches did in in fact bar Petrlla’s complaint.[17]

In this example, we see the interplay of the Locke/Madison ideology concerning the limitation of intellectual property rights and the checks and balances of our judicial system, and the effect of laches on those rights. Although Petrella fell within her legal right under legislation regarding the transfer of the copyrights, she was stymied by her unreasonable delay in bringing the claim that resulted in her loss. This is an example of how our legal system and doctrines serve to protect the ideas of Locke and our Founding Fathers that there be limits on intellectual property, preventing it from being held hostage for an indefinite period of time.

John Locke is America’s intellectual founding father, imparting knowledge and enlightened thinking to our Founding Fathers and leaving his philosophical fingerprints all over our founding documents. The human right to property, including intellectual madisonproperty, was understood by the Framers of the Constitution and evidenced in the Declaration. In order to advance society, the progress of science, creativity and innovation, i.e., intellectual property, must be encouraged with the protection under the law. Although Jefferson argued that thought is free flowing and feared “ideas” might become a monopoly, he had a greater passion for advancing the illumination of minds and the disseminating knowledge through a growing nation. Madison clearly understood that the continuum of existing knowledge to invent and innovate must be protected within the confines of the law so that the newly-created Republican majority didn’t take advantage of the individual’s rights. What began as radical enlightened thinking in the mind of Locke over three hundred years ago, implemented 100 years later by our Founding Fathers when securing the unalienable rights of the people, continues to encourage innovation under the protection of the law over 200 years later.

The author, Madison Brinnon, is an Entertainment Industry Studies major at Belmont University, minoring in Mass Communication.  She will be in Brazil and Argentina during Spring 2015 studying culture and music of Brazil while doing coursework in Music and International Business.  Through the summer she travels with the Turtles on their Happy Together Tour as an intern, and returns to college in the Fall at Belmont’s Los Angeles Campus.  Ms. Brinnon has also traveled to several countries in Europe and to a small medical clinic in Zimbabwe where she presented medical supplies that she collected through a small philanthropic organization in California that she helped found.   Madison indicates that her inspiration for this article, originally turned in as a research paper for Mr. Shrum’s Copyright Law class, was fueled a love for history, especially American History, and states, ”So many times we take our rights for granted and never consider the impact our founding fathers have on our lives today.  It is important to understand the foundation upon which modern day law, and in this case, copyright law is based.”


[1]John Locke. Two Treatises on Government. London, 1821. PDF e-book. 209.

[2] George Stephens. John Locke: His American and Carolinian Legacy.” In John Locke Foundation. Raleigh: John Locke Foundation.

[3] “The Declaration of Independence: A Transcription.” National Archives and

Records Administration. Accessed April 14, 2015.

http://www.archives.gov/exhibits/charters/declaration_transcript.html

[4] Richard J. Behn “Declaration of Independence Preparations Drafting Declaration Independence.” Accessed April 13, 2015. http://lehrmaninstitute.org/history/declaration-of-independence.html.

[5] Chuck Braman. “The Political Philosophy of John Locke, and Its Influence on the Founding Fathers and the Political Documents They Created.” 1996. Accessed March 28, 2015. http://www.chuckbraman.com/political-philosophy-of-john-locke.html.

[6] “First Amendment – U.S. Constitution” Findlaw. Accessed April 14, 2015. http://constitution.findlaw.com/amendment1.html.

[7] George Stephens. John Locke: His American and Carolinian Legacy.”

[8] “The Declaration of Independence: A Transcription.” National Archives and

Records Administration. Accessed April 14, 2015.

http://www.archives.gov/exhibits/charters/declaration_transcript.html

[9] Chuck Braman. “The Political Philosophy of John Locke, and Its Influence on the Founding Fathers and the Political Documents They Created.”

[10] Karl Widerquist. “Lockean Theories of Property: Justifications for Unilateral

Appropriation.” Public Reason 2, no. 1 (June 2010): Accessed March 28, 2015.http://www.publicreason.ro/articol/21.

[11] Chuck Braman. “The Political Philosophy of John Locke, and Its Influence on the Founding Fathers and the Political Documents They Created.”

[12] Thomas Jefferson, “Article 1, Section 8, Clause 8: Thomas Jefferson to Isaac McPherson.” Accessed March 28, 2015.

http://press-pubs.uchicago.edu/founders/documents/a1_8_8s12.html

[13] “Fifth Amendment – U.S. Constitution” Findlaw. Accessed April 14, 2015.

http://www.law.cornell.edu/wex/fifth_amendment.

[14] Howard W. Bremer., JD. “Chapter NO. 3.9 U.S. Laws Affecting the Transfer of Intellectual Property Editor’s Summary, Implications and Best Practices.” Accessed April 09, 2015. http://www.iphandbook.org/handbook/ch03/p09/eo/.

[15] Chuck Braman. “The Political Philosophy of John Locke, and Its Influence on the Founding Fathers and the Political Documents They Created.”

[16] “Article 1, Section 8, Clause 5.” Article 1. Accessed April 14, 2015. https://www.law.cornell.edu/constitution/article1.

[17] Petrella. v. Metro-Goldwyn-Mayer, Inc., (U.S. 9th Circuit Court of Appeals).[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Since taking over Mary Beth Peters as Register of Copyrights in 2011, Maria Pallante has been listening and responding to the concerns of a number of her constituents, particularly those in the music industry, and it most certainly shows. In the last few months, several pieces of Maria_Pallantework product have been delivered by the Copyright Office and/or Congress that have significant impact on the music industry and, in particular, those of my readers who practice the craft of songwriting. If you are a songwriter, you should pay particular attentions to two of these things specifically. The first is the Copyright Office’s report, released in February 2015, titled Copyright in the Music Marketplace. The second, more directly aimed on the songwriting community, is the Songwriter’s Equity Act reintroduced to Congress in this term.

The Copyright in the Music Marketplace Report.

Anyone who works in the music or entertainment industry should take the time to read the full report, available here. The report begins in the Preface by pointing out that “both music creators and innovators that support them are increasingly doing business in legal quicksand” (Emphasis added). This “legal quicksand” that the Copyright Office references refers to licensing as it relates to both sound recordings and musical works, and the disparities that have developed over the past decade or so as a result of various amendments to the 1976 Copyright Act. For example, with regard to performance royalties for musical compositions, ASCAP and BMI have operated under consent decrees issued by the Federal Courts for years. In addition, the rate courts establish the rates that must be paid for public performance under what is referred to as a “fair market value” analysis in which the court attempts to determine the price that a willing buyer and willing seller would agree to in an arm’s length transaction. The court also gives substantial weight to antitrust concerns in this regard. For the more astute readers, you may be wondering about SESAC. SESAC generally operates as if it is subject to the consent decrees, even though technically it was not a party to them. BMI and ASCAP frequently call attention to the fact that there is disparate treatment as to SESAC. The process of setting rates for the performance rights organizations in the rate courts can be lengthy and complicated, leaving music publishers and songwriters complaining that there should be a more efficient way to set the rates.

As for mechanical royalties for reproduction of musical compositions in sound recordings, the Copyright Royalty Board (“CRB”) establishes those rates. For this purpose, the CRB operates pursuant to the compulsory licensing guidelines in Section 115 of the Copyright Act, using the four‐factor, public policy‐oriented standard in section 801(b)(1). Not complicated at all right?

That brings us to Section 116(6) of the Copyright Act, which provides royalties to sound recording authors for digital transmissions of their works. The rates for the digital performance of sound recordings is proscribed in Section 114 using dramatically different standards, depending on the type of use. This the reason royalties received from Spotify look so much different than royalties received from Sirius or terrestrial performances. Older services such as Sirius XM, the only remaining satellite service, and Music Choice or Muzak, the only remaining subscription services, are governed by the same four‐factor standard as mechanical reproductions of musical works subject to compulsory licensing under section 115 as regards royalties. According to SiriusXM’s own website, the “U.S. Music Royalty Fee” for 2015 was 13.9% of the subscription fee charged for a particular service. That fee is placed into a fund that is used to pay royalties. Meanwhile, royalty rates for Internet radio services and newer noninteractive subscription services, and for all ephemeral recordings under Section 112 regardless of the type of service, are established under the so‐called “willing buyer/willing seller” standard, which many believe yields more market‐oriented rates than those established under section 801(b)(1).

So what about Spotify, you may ask? Spotify is, by far, the largest interactive streaming service available in the marketplace, and in many ways sets the tone for what a “willing buyer” is willing to pay. According to its response to the Copyright Office’s Notice of Inquiry, it pays out “70% of all money it receives to rightsholders.” But those songwriters who have received paltry royalty checks from Spotify revenue might question the accuracy of that statement, wondering why they don’t see more. That is because Spotify doesn’t pay on a “per song stream” model, as royalties get calculated when it comes to mechanical uses. Rather, they set aside the royalties and the total royalty pie is split among all rights holders based on the percentage of total Spotify streams their songs garner. But according to a New York Times article, the company does, in fact, calculate the per rate royalties, estimating that the average song generates between $0.006 and $0.0084 per stream in royalties. That is why, to songwriter in particular, this may seem like a pittance. That’s why Taylor Swift recently announced that her new album would not be available via Spotify. But Spotify’s counters these objections, producing data that it says illustrates that the numbers really do add up for big artists such as Swift. The company reports that the most-streamed album on the service each month typically generates more than $400,000 in royalties.

Finally, with regard to performance royalties, musical composition copyright owners enjoy performance royalties froRoyaltiesm terrestrial radio while the owners of sound recording copyrights do not. The radio industry has successfully convinced Congress on numerous occasions that it operates on a “quid pro quo” basis with the record industry so that there is no need for royalty payments. After all, without the marketing that radio provides by playing the records, there would be no hit records. This may seem like an antiquated loophole in the system, because it is. There is no reason why the owners of the sound recordings should not be compensated for performance over terrestrial radio, just as music publishers and songwriters are. This loophole needs to be closed to eliminate that obvious inequity.
So, as you can see, the rate setting standards under these various statutory licenses and consent decrees differ greatly, based on what rights are implicated and the use at issue. But even for arguably similar services, such as Spotify and SiriusXM, the structure produces inconsistent results and the royalties that are paid vary widely.
In addition to the disparity in setting royalty rates in the music industry, the report called attention to the fact that there is a general lack of transparency in regard to royalty streams and ownership. For the songwriter, the concern has always been that there is money being generated from the copyright that is not finding its way into royalty check. Now, with all of these disparate royalty streams being generated from new digital sources, particularly those involving direct deals between record companies and digital users, the songwriter legitimately feel as if those revenues are not being shared. For example, the labels ostensibly negotiated an 18% stake in Spotify, which is probably the real reason they love the service so much.

All of these concerns, among others, led the Copyright Office to articulate four guiding principles derived from their discussions with “stakeholder” during their research in regard to which it says it “appreciates and agrees.” The four principles are as follows:

  1. Music creators should be fairly compensated for their contributions;
  2. The licensing process should be more efficient;
  3. Market participants should have access to authoritative data to identify and license sound recording and musical works; and
  4. Usage and payment information should be transparent and accessible to rights owners.

However, the Office acknowledged that there was no consensus on how to achieve these goals, and in the end, developed some additional principles it believed should govern any future reform of Copyright Law:

  1. Government licensing processes should aspire to treat like uses of music alike;
  2. Government supervision should enable voluntary transactions while still supporting collective solutions;
  3. Rate setting and enforcement of antitrust laws should be separately managed and addressed; and
  4. A single, market‐oriented rate setting standard should apply to all music uses under statutory licensing.

If these principles are implemented, it would be dramatic changes in the way royalties are paid, collected and distributed. The Copyright Office was not kind to the compulsory licenses provisions under Section 115 of the Copyright Act, known to many as the “statutory royalty” provisions, proposing that we “sunset” these as they expire. The existing structures under Sections 112 and 114, on the other hand, it felt worked fairly well. There are various implications for organizations such as Harry Fox and others if these changes were to occur.

Overall, however, the report was fairly balanced, and songwriters should receive more favorable treatment from Congress if it follows these principles. It remains to be seen what Congress will do with the research developed by the Copyright Office in this report. That leads us to the next topic of discussion, and that is the Songwriter’s Equity Act, introduced in March.

Songwriter’s Equity Act

This Bill was originally introduced in February 2014, but died in committee. Now, it has been reintroduced by a bipartisan coalition to both houses of Congress and, with strong Republ5237697662_f8e465b716ican support and control, there is much more optimism. The Bill, introduced by Congressman Doug Collins (R-Ga), seeks to amend Section 114 and 115 of the Copyright Act to implement some of the suggestions proposed by the Copyright Office’s report. Orrin Hatch (R-Utah), a senior senator and member of the critical Judiciary Committee, co-sponsored the legislation and has frequently been an advocate for songwriters. For one thing, it would allow the royalty courts to adapt the “fair market rate” standards when setting mechanical license rates under Section 115, and allow them to consider royalties paid to recording artist when setting rates for songwriters under Section 114. Most people believe that this would be a more profitable structure for songwriters and music publishers.

When testifying in front of Congress in regard to last year’s identical legislation, National Music Publishers Assn. president David Israelite said that

[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][t]hree-quarters of a songwriter’s income is regulated by the federal government. While most property rights are valued in a free market, songwriters have suffered under a system that devalues their work and takes away their most basic property rights.”

Israelite applauded the legislatures for standing up for songwriters.

As the Copyright Office report on music licensing discussed above recommends, if songwriters’ royalties must be regulated by government, then they should at least be based on fair market value. Collins told the Tennessean that tell songwriters and publishers that “they’ll have a friend [in me] who’s going to fight for this bill.” The bill has support from both sides of the aisle, including not only Tennessee Senators Lamar Alexander and Bob Corker, but U.S. Rep. Jim Cooper and U.S. Rep. Marsha Blackburn, R-Brentwood.

In conclusion, I think it’s about time Congress considered the equitable situation of the songwriter, the lowly work horse of the music industry.  NSAI has been saying for years that “it all begins with a song,” a phrase that was quoted in the Copyright Report, by the way, and that is, in fact, where it all begins.  But over the past decade, the significance of the songwriter has diminished and the loss revenues from record sales created by illegal downloading made it impossible for most to practice this traditional craft.  These legislative efforts seek to remedy some of that loss.

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Is it time for Congress to draft a replacement for the 1976 Copyright Law? In point of fact, the law was drafted almost half a decade ago now and its last major amendment came in 1998 with the addition of the DMCA. Many argue that the advent of digital technology, driven of course by the ubiquitous Internet, makes the current iteration of the Progress Clause obsolete.
Recently, in March 2014, the current Register of Copyrights, Maria Pallante, made just such a proposal to Congress, urging them to create “the next great copyright act.” You can read those remarks here. But contrary to that proposal, other advocates of the status quo point out that Congress has amended the current law to keep it up to date. In fact, Pallante acknowledged as much in her remarks when she said “[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][a]s a general matter, Congress introduces bills, directs studies, conducts hearings and discusses copyright policy on a fairly regular basis and has done so for two centuries.” Her push is a part of a coordinated movement with the House Judiciary Chairman Rep. Bob Goodlatte (R-Va) to leave a mark on copyright law.
While I do not necessarily disagree with the Register of Copyrights that perhaps a consideration of a new consolidated law may be necessary to combine these various amendments, I am bothered by the fact that much of the urgency for a new law is driven by the various interested parties on the Internet who believe that just because a copyright finds its way into digital form, it is no longer protected and should be free for all to use, “mash up” or do whatever the hell they want to with it. These radical thinking individuals, such as The Pirate Bay, Lawrence Lessig, the Electronic Frontier Foundation and others use heated rhetoric and emotional appeals to call for a lessening of the copyright protection that has made America the most idea-rich country in the world. While these illogical and emotional appeals are a good way to drum up support dollars and defeat well-meaning and good legislation such as SOPA, they do very little to advance the philosophical and legal debate and should not be the driving force behind our legislation, good or bad. Good emotional causes make for very bad law.
These dramatic appeals for changing the copyright act are most often done with a lack of understanding as to its philosophical underpinnings, and often demonstrate ignorance of the business realities faced by those who create the arts and sciences, as well as the benefactors who support them.
One of the things that bothered me most about Pallante’s remarks was the total absence of any discussion of these philosophical underpinning of the copyright construct. There was no discussion of Article 1, Section 8, Clause 8 of our Constitution (the Progress Clause) or any reference to some of the chief architects of its current form, James Madison, Thomas Jefferson and Charles Pickney, just to name a few. It also worries me when Pallante suggests that the current term – Life + 75 – “is long and the length has consequences,” thereby questioning the validity of the Supreme Court’s proclamation to the contrary in Eldred v. Ashcroft. The latter, of course, is one of about a half a dozen cases the aforementioned anti-copyright advocates has levied against the law over the years.
Sandra Aistars, executive director of the Copyright Alliance, summed it up well in an opinion piece for The Hill entitled “Protect rights of artist in new copyright law.” She said “Should Congress take on the challenge of updating the Copyright Act, it must do so guided by sound principles, and its deliberations must be based in reality rather than rhetoric.” At least Aistars points out that the principle of copyright law is driven by the fact that “protecting authors in in the public interest” and based on “stable property rights.”
Article 1, Section 8, Clause 8 gives Congress the right “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” Madison and Jefferson debated the various components of this clause with some degree of fervor in their massive collection of actual correspondence, with Madison defending the idea that if our society gives up a monopoly (copyright) to creators, the value of that monopoly will generate the creation of widespread ideas that would ultimately reward society. There is no doubt that the equitable component that was bestowed upon authors and inventors the day the Congressional Congress approved the Progress Clause has created the America we know and love today through the wealth of new ideas and expressions that have been created in the form of books, music, films, visual arts, scholarly research and inventions. Without that value in the patent or copyright, there would be no Apple, no Microsoft, no IBM, no Ford, no Chevrolet . . . you get the point. This is the reward that Madison envisioned our society would gain by giving individuals control over their creations, a theory that Locke and others disseminated long before the new nation of America was conceived.
As Aistars summarized in her article, “Ensuring that all creators retain the freedom of choice in determining how their creative work is used, disseminated and monetized is vital to protecting freedom of expression. Consent is at the heart of freedom, thus we must judge any proposed update by whether it prioritizes artists’ rights to have meaningful control over their creative work and livelihood.”
The most important thing for Congress to consider if it picks up the gauntlet laid down by Ms. Pallante is this idea that society benefits by giving a monopoly to creators. Given an individual who has created a work of authorship stable property ownership in that work is the foundation of our great Country and is the primary goal of copyright. To take that away takes away one of our inherent and valuable Constitutional rights, even greater perhaps than our Freedom of Speech and Assembly. Any new proposal much cherish the rights of the creators that the current Copyright Act has created and retain the same privileges and advantages. The future of our Nation in the Internet Age depends on it.
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In 2009 the Recording Industry Association of America (RIAA) estimated 95% of all digitally downloaded music was obtained illegally. This leaves only 5% of potential revenue to be image distributed between all those who play a part in today’s music culture, including the most affected group, songwriters and music publishers.

While some opponents dispute that number, few serious observers would dispute that piracy has cost the industry billions of dollars. The outcome of this piracy is more harmful than most people truly understand.  There are currently over 70,000 U. S. jobs affected and 2.7 billion dollars in earnings lost in music and related manufacturing and retail industries, according to a recent independent report. More precisely, it has been estimated that the total impact of illegal downloading and piracy equates to 12 billion dollars of direct and indirect revenue lost annually in the U.S. economy. Something must be done to protect the art, industry, and creators of music from this threat.

Because of this dilemma, my client, Save the Music America, was formed and plays a increasingly influential role in spreading the word of the harm that is caused when people download music illegally. STMA is a new non-profit organization whose mission is to educate the public and create awareness of intellectual property protection and copyright laws. The goal of STMA is to produce future generations with a conscience, preserving the arts and the constitutional rights of people within the creative industries, as well as the history of American music. On their website, STMA states its purpose as:

“…[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][to] raise money through celebrity endorsed events and media platforms and to educate the public to the impact of illegal downloading, creating public support for the cause. STMA will use PSA’s (public service announcements), print and online media, social networks, and educational media to raise awareness and demonstrate the repercussions of illegal file sharing. STMA also plans to create short documentary dramas to illustrate the very real tragedies which have struck those once who were supported by the music industry. These stories will help give faces and personal testimonies to the loss of income and career for the ‘everyday’ people who make up much of the infrastructure, such as audio technicians and marketing personnel.”

Starting next week, a series of PSAs entitled “Please Share and Download Music Responsibly” will begin airing on GAC and CMT. More than forty artists, producers, managers, songwriters, and other music industry professionals gave their time to help with these PSAs and include names like Jerod Neimann, Billy Dean, Wayne Mills Band, Julie Ingram, and Joe Bonsall just to name a few.  Here is one example of the PSA’s that will be airing:

[youtube https://www.youtube.com/watch?v=Hf7_lA-KyWE]

Mark Dryer, co-founder and head of productions for STMA, stated: “I am thrilled at the momentum we have gained this year, after talking with over 200 people about piracy everyone agrees it is a huge problem and willing to help in some way .I believe the right company will align with us to help fund our efforts very soon.  We are looking forward to the bright future to make a difference”.

Check out their website at savethemusicamerica.org and be sure to have your channel set to either CMT or GAC next week to catch the first series of PSAs released by Save the Music America!!!

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We recently wrapped up the exclusive songwriting agreement between my client, Logan Brill and Carnival Music.  Logan and her family are from the Knoxville area.  She moved here to pursue a logan1music degree at Belmont University, but ended up with a major in French and a minor in vocal performance.  Logan is writing with other Carnival talents such as David Nail, Troy Jones, Scooter Carusoe, and others.  Carnival is owned and operated, of course, by producer Frank Liddell (Miranda Lambert, Kellie Pickler, Lee Ann Womack).  Liddell recent took home the coveted Producer of the Year award from

the Academy of Country Music.  Carnival’s prolific group of writers is responsible for generating eleven number ones in the past decade, including cuts by Kenny Chesney, George Strait, Reba McEntire and the Dixie Chicks.   She has recently begun writing for her forthcoming project with producers, Matthew Miller and Oran Thorton.  Logan’s debut performance was at the Tin Roof at the head of Music Row, Nashville.  She also performed as the opening act for Edwin McCain at the Square Room in Knoxville.  Logan is set to begin extensively touring during the summer of 2012.

Follow her on Facebook and Twitter.  I expect to see great things from Logan in the near future.

Logan at the Square Room in Knoxville

The recent decision presented by the honorable Judge Chin on the matter of copyright infringement in the case The Authors Guild v. Google Inc. raised numerous issues in the arena of Intellectual Property. In addition to opposing the “opt-out” stipulation written into the settlement, Judge Chin also contested the way Google Inc. approached and viewed “orphan works” in relation to digitizing books where no copyright owner or recipient could be located or reached. In Judge Chin’s opinion, the matter of orphan works should not to be decided by private enterprise, but is rather a matter for Congress to decide. In so deciding, Judge Chin refers to certain opinions issued by the Copyright Office, as well as legislation that was originally proposed back in 2008.

"Orphaned works" are defined as copyrighted works for wSAVEORPHANShich the owner cannot be identified, but which someone wants to use. In other words, works for which the potential user cannot locate or identify the actual owner of the work in order to seek proper permission. Under the current legal structure, even if a potential user makes a diligent effort to find the owner in order to seek permission, the user’s risk of copyright liability for such use is not eliminated because there is always a possibility, however remote, that a copyright owner could bring an infringement action after that use has begun. Although it is difficult to know precisely how many orphaned works are around, one 2009 study conducted by the JISC (Strategic Content Alliance) in the United Kingdom calculated that as many as 25 million such works existed in the libraries, museums and archives of that country. In such situations, productive and beneficial use of the work – something the concept of copyright is designed to encourage – is impeded.  It is such a real problem that many organizations, like the Society of American Archivists, have issued statements of best practices to assist their members in dealing with orphaned works.  But many potential creators are not members of such an organization and don’t know how to approach clearing an orphaned work for use.

Based on a report on orphaned works prepared by the Copyright Office in 2006 at the requests of Senators Orrin Hatch and Patrick Leahy, the “Shawn Bentley Orphan Works Act of 2008” (S. 2913) was ultimately introduced by Senator Leahy on April 24, 2008. It quickly passed by a unanimous vote on September 26, 2008. The act was referred to the House Judiciary Committee, where it unfortunately lies dormant or, more likely, has stalled or died in committee chambers, suffering the fate of many good laws. Several earlier actions which served the same purpose, such as Copyright Modernization Act of 2006 (H.R. 6052) suffered similar fates.  The proposed 2008 act outlined specific guidelines for individuals pursuing and currently using orphan works. The following is a brief overview of the proposed bill and its major provisions.

Under the proposed legislation, in order to use an orphan work, a person would be required to follow very specific steps in order to avoid financial and legal liability for infringement. These rules fall under the section entitled “Conditions for Eligibility,” which outlines the following as steps the person utilizing the orphaned works would need to takes in order to limit liability:

  1. provide extensive evidence that the infringer performed a detailed search in “good faith” to locate and identify the copyright holder and was unable to locate the copyright holder;
  2. acknowledge the copyright holder in an appropriate manner, assuming the copyright holder was known with a reasonable amount of confidence (a form of "moral rights");
  3. provide a mark or symbol in some regard indicating the work is used under this section;
  4. assert in an initial pleading the eligibility for such limitations; and
  5. provides documentation for the search undertaken to locate and identify the copyright holder.

The exceptions to the above guidelines for limited remedy collection do not apply to an "infringer" if: 1) the infringer receives notice of infringement and fails to negotiate in good faith with the claimant or 2) fails to provide payment for the use of the infringed material in a reasonable time period after reaching an agreement with the copyright holder.

Additionally, the individual must search with what the legislation described as "diligent effort” to locate the copyright holder. The phrase "diligent effort" requires, at a minimum: 1) a search of the records at the Copyright Office through the medium of the Internet 2) a search of “reasonably available sources of copyright authorship and ownership information” 3) use of intangible and tangible tools and publications, and where necessary, assistance of others and 4) use of databases available to the public, including those accessible by the Internet.

If someone utilizing an orphaned work follows these guidelines, any award for monetary relief “may not be made other than an order requiring the infringer to pay reasonable compensation to the owner of the exclusive right under the infringed copyright for the use of the infringed work.” Injunctive relief remains an additional remedy offered to the owner in order to prevent or restrain any further infringement action.

The act apparently died its quiet death because of opposition from many copyright groups and, in particular, notable expert Lawrence Lessig, who opposed the bill because of its vague definition of the "diligent efforts" required to avoid liability. Some of these opposition groups even referred to the proposed legislation as a “license to steal.”  The Register of Copyrights at the time, Marybeth Peters, believes to the contrary that the orphans works situation is a problem that is "overdue" and that the "pending legislation is both fair and responsible (See Marybeth Peter’s open letter).

This issue is particularly of concern for musicians and artists, since a large number of old recordings are no longer commercially available because of an uncertainty as to who owns them. In addition, creators of new recordings must often abandon projects if a work is "orphaned," for fear of liability. This is a loss not only for the artists, but for the public and our collective culture, i.e., the continuum.

Officially, legislator still deem the legislation to be "pending."  In his speech in 2009 in from of the World Copyright Summit, Senator Orrin Hatch state he “continue’s to be very active on passing orphan works legislation.”  He continued to say:

For years, I have been working with industry stakeholders and copyright experts, including Marybeth Peters, Register of Copyrights, to pass orphan works legislation. The bill seeks to unite users and copyright owners, and to ensure that copyright owners are compensated for the use of their works. I couldn’t agree more with Register Peters when she said, “A solution to the orphan works problem is overdue and the pending legislation is both fair and responsible.

Judge Chin felt that the Google settlement would have given Google an effective monopoly over orphan works, and that was one of his primary rationales in deciding the way he did.  His rejection of the Google settlement highlights this important issue and brings it to the light of public awareness again.  Anyone with an interest in intellectual property should contact their senators and representatives and ask why a more diligent effort, no pun intended, has not been made to address a problem that still exists, despite the fact that there has been no movement on the bill in three years.  With President Obama’s pro-intellectual property agenda, the time may right to solve this incredible hole in U.S. Copyright law.

NBC Universal recently hired a company called Envisional to study counterfeiting activity over the Internet. The results of this study – despite the fact that it is industry funded – are literally astonishing: 24% of all global Internet traffic involves digital theft!  Stated another way, one in every four people surfing the Internet are stealing intellectual property, i.e., illegally downloading either copyrighted or trademarked materials.  According to the International Federation of the Phonographic Industry, 95% of the music downloaded from the Internet is downloaded illegally!  Imagine how our society would react if one out of every four people in retail malls were carrying out stolen merchandise on a daily basis, or if 95% of the product leaving the mall was stolen.  It would be chaos.

Ring of FrodoNow consider whether these people who so quickly download a song or a movie on the Internet without paying for it would also walk up to an artist selling their painting in the park and steal one of their painting.  I firmly believe the answer to that question is a resounding no!  But why? What is different about the world wide web, i.e. cyberspace, that gives these consumers the feeling that they are entitled to download music and movies through mechanisms like BitTorrent without compensating those who created such product?  What are these people thinking?

I think the answer can be found in the writings of Plato.  In the second book of his Republic, Plato’s student, Glaucon, poses the illustration of the “Ring of Gyges.”  In the story, Gyges is a shepherd who finds a magical ring in a chasm created by a lightning storm.  The ring gives him a cloak of invisibility.  Using his newfound power, Gyges seduces the Queen of Lydia, murders the King, and takes the throne, gaining power, wealth and fame.  In the Republic, Glaucon argues that given a similar opportunity, any person, whether or not they were previously just or unjust, would use the power to commit as many crimes as necessary to get what they want [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Book II, 359d].    Glaucon was responding to Socrates’ refutation of arguments put forth by Thrasymachus in Book I of the Repbulic, i.e., that “justice is nothing but the advantage of the stronger”  [Book I, 338c].

I believe Glaucon’s experiment in thought informs us as to why someone who would not normally steal a tangible object in the physical world is nonetheless more than willing to download music or movies, intangible objects, on the Internet for free: because the fear of being punished or getting caught is eliminated in the evanescent world of Cyberspace.  The Internet, like Gyge’s ring, confers upon its users a seeming cloak of indivisibility as it were.  As one astute commentator surmised in response to an interview with Alice in Chain’s lead singer, Sean Kinney, “The real reason people steal music is that they CAN and very easily.”  That this is a truth is evident from the plethora of “how to” guides on the Internet, teaching people “How not to get caught.” There you have it in a nutshell.   All of the commentary about how the record industry has been thieves and how the RIAA unjustly goes after the defenseless people, these are mere justifications for actions people otherwise know in their hearts are wrong.

It’s important to read Plato’s response to his student to understand fully, as Plato did not agree with Glaucon.  Plato’s argument in the remaining portion of the Republic is that the just man would not be tempted by this cloak of invisibility to commit crimes.  Rather, the just man understands that crime itself makes a person unhappy and that he is better off to remain just.   I frequently discuss this issue with my college students at Belmont University when teaching a course on Copyright Law.  One of my students made the following observation, which confirms Plato’s conclusion.  She said:

I do not follow the rules because I am scared of the RIAA busting me for illegal downloading. I follow the rules because I have respect for the people who wrote and recorded the songs, and even more, because I want to work in the music industry.

Another relevant opinion is offered in the excellent blog article found on arbiteronline entitled Illegal downloading: The real cost of ‘free’ music.” In that article, a student at Boise state, Ammon Roberts, is quoted as saying:

“I don’t do it because I don’t feel it’s right.  If I were making the music, I’d be upset if people were downloading it for free.”

For these two students, following the rules is not about whether or not they’ll be caught, it’s about doing the right thing.  It’s about honoring, i.e. compensating, the people who created the music. 03-20-invisible_full_600 This illustrates Plato’s point precisely:  a just person understands that even with a cloak of invisibility, doing the right thing makes a person happy or, in the words of Roberts, makes the person “feel right.”

The Internet is also very much the Land of Oz.  In addition to this cloak of invisibility endowed on us by the Internet, it also deceives us with illusions of anonymity – not so much that the user is anonymous, as that’s merely another form of invisibility – but in the sense that it’s difficult to know who’s behind the curtain.   As Trent Reznor said in an interview, “there is a perception that you don’t pay for music when your hear it . . . on MySpace.”  Because of its sheer vastness and its mysteriousness, Cyberspace gives people false perceptions that their actions on the Internet do not affect real people.   This, in turn, creates an illusion that “resistance is futile.”  Everyone is doing it, so I can too.  In other words, Cyberspace alters our reality in that it makes the real people behind the music an amorphous, anonymous entity.  The result is that it’s much easier to steal from an amorphous, anonymous entity – the man behind the curtain – than it is from a struggling songwriter, particularly when all your friends are doing it.

I truly believe that most of the people who are illegally downloading music from the Internet have no idea who they are affecting or how widespread the effect is.  Most of these people would not even think about walking up on stage after a singer/songwriter in a nightclub takes a break and stealing his guitar, but that very same person doesn’t think twice of taking that same singer/songwriter’s song from the Internet.  They wouldn’t steal the filmmaker’s camera, but downloading the movie doesn’t phase their consciousness.  In fact, many who contribute to the  dialog would argue that these two thefts are not analogous.  But one analysis conducted by the Institute for Policy Innovation states otherwise.  The report indicated that music piracy causes $12.5 billion of economic losses every year.  It further concluded that 71,060 U.S. jobs are lost, with a total loss of $2.7 billion in workers’ earnings.  Such reports abound throughout the industry, yet many of the people guilty of illegal download continue to view these reports as industry-driven and, therefore, skewed.  Take this comment by blogger Michael Arrington as an example:

Eventually the reality of the Internet will force the laws to change, too. One way or another the music labels will eventually surrender, and recorded music will be free.  Until it is, I refuse to feel guilty for downloading and sharing music. Every time I listen to a song, or share it with a friend, I’m doing the labels a favor. One that eventually I should be paid for. Until that day comes, don’t even think about trying to tell me that I’m doing something ethically wrong when it’s considered quite legal, with the labels’ blessing, in China.

resistanceBut what this illusion of anonymity, and such misguided opinions, miss is the fact that very real people – not amorphous masses – are being affected.  And the effect is devastating.  I have clients who are songwriters who are no longer creating art because they are forced to take odd jobs to support their families.  The performance royalties they used to receive from ASCAP, BMI or SESAC are down by half or more from a few years ago.  Their mechanical royalty checks are virtually non-existent.  They simply cannot afford to create simply for the sake of creation.  And now, working sometimes two jobs, they don’t have the time to create.  What will become of the art of songwriting if Mr. Arrington has his way and all recorded music is free?  I believe we will not have the quality of music in this country that we have enjoyed throughout the last millennium.  In this instance, I do not believe that resistance is futile.

Now, getting back to Plato and the Ring of Gyges, in answer to Glaucon, Plato would say that the root of all trouble is unlimited desire.   How true is that in this world of Cyberspace, in this world of rampant illegal downloading.  The wheels really fell off the wagon when the RIAA sued Diamond Multimedia, bringing the MP3 into society’s field of view.  Then, Napster exploded and almost everyone found that almost every song they ever loved was available for free.  It’s as if they were Harrison Ford and discovered the treasure room in an unknown, ancient tomb: everything your heart desires is within your grasp.  It’s yours for the taking.  With its cloak of invisibility and its illusion of anonymity, what the Internet has done, in short, is to return the power – i.e., the control – back to the people.  Everyone is now a creater, a publisher, and distributor.  No one needs the conglomerates anymore – the people have the power.  But, as Lord Acton said, beware:  “Power tends to corrupt, and absolute power corrupts absolutely.”  With power, therefore, comes responsibility.   Unfortunately for the music industry, the power is currently being abused and will, ultimately, mean the end of the recording industry as it existed through the 20th century unless the creators regain that power.

So what does this mean for those of us who have chosen to make our living in the world of creation?  Does it mean the end of our industry?  Does it mean an end to copyright law as it exists?  If we examine the origins of copyright – i.e., the protection of an original idea expressed in a tangible format – as passed down to us from our forefathers, we find a concept on which we can continue to build.  In the now famous Radiohead experiment in which Reznor and crew allowed consumers to pay what and only if they wanted to, 18% of the consumers chose to do so!  That to me, is an encouraging statistic, and one that confirms a believe in the viability of creating art.  At least one in five people, even with the cloak of anonymity provided by the Ring of Gyges of this era, i.e., Cyberspace, chose to pay the creators for their creation.  Take that Glaucon!  Take that Arrington!  What does that say for our society?  It says that there are people who still chose to do the right thing, even when the tide of conformity rises above their heads.

The bottom line is that it really doesn’t matter what laws are passed by society, there will always be a certain percentage of people who will chose to steal, take and plunder, whether it be because they are more powerful or because they are cloaked with invisibility or shielded by anonymity.  But – and here is the important thing – there will also always be a segment of society that recognizes the idea that Thomas Hobbes first advanced hundreds of years ago, i.e., the idea of “giving to every man his own.”    If a man bakes a loaf of bread, is it not his right to trade that to the artist for whose painting he wishes to barter?  This idea was later incorporated by our Forefathers into Article I, Section 8, Clause 8 of the U.S. Constitution, which gives Congress the authority “[to] promote the progress of science and useful arts, by securing for limited times to Authors and Inventors the exclusive rights to their respective Writings and Discoveries.”  Without this Constitutional right, a creator has no hope of protecting his or her property against plunder.  And as long as a segment of society believes this proposition to be beneficial to society as a whole, it will hopefully continue to motivate creators to create, and so profit from their creations, despite the efforts of those who choose to destroy it under a cloak of invisibility and unjustly take for themselves the kingdom of Lydia.

Quotations from Republic are taken from the W.H.D. Rouse translation, Great Dialogues of Plato, Mentor Books, 1956, a quoted in this fine article on the topic.

 


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The U. S. District Court for the Southern District of New York ruled against LimeWire and its parent company, Lime Group, finding them liable for inducement of copyright infringement based on the use of their service by subscribers.

U.S. District Judge Kimba Wood issued the 59-page decision Wednesday, siding with the 13 record companies that sued Lime Wire LLC and founder and Chairman Mark Gorton through the RIAA claiming copyright infringement and unfair competition.lime_220x147

In finding the company liable, Wood opined that LimeWire had optimized its application to “ensure that users can download digital recordings, the majority of which are protected by copyright,” and that the company actively “assists users in committing infringement.”  Wood also found that the defendants knew their technology was being used to download copyrighted tunes and took no “meaningful steps” to prevent the infringement. In addition, Lime Wire marketed its software to people “predisposed to committing infringement” and assisted those people, the judge ruled.

Major labels, as represented by the RIAA, were predictably thrilled with the outcome.  “This definitive ruling is an extraordinary victory for the entire creative community.  The court made clear that LimeWire was liable for inducing widespread copyright theft,” RIAA chairman and CEO Mitch Bainwol relayed.

Lime Wire Chief Executive George Searle issued a statement saying the company “strongly opposed the court’s recent decision.”  The statement continued:

“Lime Wire remains committed to developing innovative products and services for the end-user and to working with the entire music industry, including the major labels, to achieve this mission,” Searle said.

Searle did not say whether Limewire would appeal the ruling.

The Recording Industry Association of America proclaimed the decision was “an important milestone” in the battle against online copyright infringement, because Gorton was found personally liable, in addition to the company of which mitch-bainwol-riaa he was the chairman.  Personal liability against a corporate director is rare.

“The court has sent a clear signal to those who think they can devise and profit from a piracy scheme that will escape accountability,” Mitch Bainwol, chairman and chief executive of the RIAA, said in a statement.

LimeWire, launched in 2000, is one of the largest remaining commercial peer-to-peer services left on the Web. The company claims to have more than 50 million monthly users.  The company has managed to defend itself against major label legal action for years.

In issuing her opinion, Wood relied heavily on the 2005 Grokster ruling, in which the Supreme Court said that a file-sharing service was liable when customers were induced to use it for swapping songs and movies illegally.  The test established by the Supreme Court in MGM v. Grokster for provider liability is whether the company actively induced users to commit infringing activities.  While LimeWire argued that it did not, Judge Wood noted that the company actively  “markets LimeWire to users predisposed to committing infringement.”

The record companies that sued Lime Wire included Arista, Atlantic, BMG Music, Capital, Elektra, Interscope, LaFace, Motown, Priority, Sony BMG, UMG, Virgin and Warner Brothers.