Month: June 2019

New Copyright Office Regulations Regarding Pre-72 Recordings

Title II of the Music Modernization Act (“MMA”), (also known by its own bill title the Classics Protection and Access Act or the “CLASSICS Act) is self-executing legislation that gives certain federal copyright protections to recordings released prior to February 15, 1972.  One of the new protections is the right to recover the customary statutory damages for infringements of those pre-72 recordings available to copyright owners in the normal course.

However, in order to be eligible to recover statutory damages, copyright owners of pre-72 recordings must file Excel spreadsheets of schedules listing their pre-1972 recordings and contact information with the U.S. Copyright Office to be indexed by the Copyright Office into the Office’s public records.  This formality is in lieu of filing the customary copyright registrations.  Statutory damages are only available for infringements occurring more than 90 days after indexing.   The index is available at https://www.copyright.gov/music-modernization/pre1972-soundrecordings/search-soundrecordings.html.

In addition to imposing this formality on copyright owners, the MMA creates a new safe harbor for infringers.  That safe harbor was just coincidentally added at the insistence of Senator Ron Wyden under threat of a Senate hold on the entire bill.  If the infringer is making a noncommercial use of a sound recording that is not being commercially exploited, statutory damages are not available provided that the infringer has made a ‘‘good faith, reasonable search for’’ the infringed work in the indexed schedules before determining that the recording is not being commercially exploited.

The MMA creates an additional and separate safe harbor for entities that were transmitting pre-72 recordings at the time the MMA was enacted.  Rights owners must provide specific notice to such entities before pursuing remedies against them.  In order to provide such notice, that transmitting entity must register their contact information with the Copyright Office within 180 days from enactment (which expired April 9, 2019) (available at https://www.copyright.gov/music-modernization/pre1972-soundrecordings/notices-contact-information.html).

For those reading along at home, the Final Rule is found in 37 C.F.R. §201.35 (available at https://www.copyright.gov/title37/201/37cfr201-35.html) and was published at 84 Fed. Reg. 10679 (March 22, 2019) https://www.govinfo.gov/content/pkg/FR-2019-03-22/pdf/2019-05549.pdf.

@musically: Spotify CEO says Libra currency could help listeners ‘pay artists directly’ — Artist Rights Watch

Earlier this week, Facebook announced a new blockchain-powered currency called Libra, and a digital wallet for it called Calibra. Spotify was among the companies backing the plans by becoming a founder member of the independent Libra Association.

Now Spotify CEO Daniel Ek has been talking about his hopes for Libra, including the suggestion that it could one day facilitate direct payments to musicians from fans.

“I think like cryptocurrencies and blockchain are obviously two of the biggest buzzwords you can have today. And for me, I don’t think technology in itself is that interesting· What I do think is interesting is what we can do with that technology,” said Ek, in an interview for Spotify’s own Culture: Now Streaming podcast.

“What everyone who’s a part of Libra is trying to accomplish is: it’s interesting that we have all these different currencies, all of these different ways of doing things. But the reality is, there’s several billion people around the world that don’t even have access to a bank account,” he continued….(Whatever you think of Libra, the fact that Spotify is, right up to CEO level, even thinking about direct payments from fans to artists is a significant talking point for anyone mulling how the streaming service will evolve in the coming years.)

Read the post on MusicAlly

Because the fight is never done: Support the CASE Act #myskillspaymybills

The arc of justice may be long, but it only bends when you will it.  Support the CASE Act because the fight is never done.

Chris Castle

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Betting on the House: Five Issues that House Judiciary Should Investigate Against Google–End Supervoting Shares for Publicly Traded Companies

The House Judiciary Committee announced yesterday that it was opening an antitrust investigation into “tech giants” including Google.  Chairman Jerry Nadler said:

[T]here is growing evidence that a handful of gatekeepers have come to capture control over key arteries of online commerce, content, and communications…Given the growing tide of concentration and consolidation across our economy, it is vital that we investigate the current state of competition in digital markets and the health of the antitrust laws.

We’re going to look at five issues Chairman Nadler should consider that relate both to Google and to some others, too.  Let’s start with reforming corporate governance and bring eyesight to the willfully blind.

1.   One Share, One Vote, Not Ten:  Anyone in the music business has had just about enough of government oversight, so I don’t recommend it as a solution in general.  But–in the absence of marketplace transparency, the government is about the only place to go to bring reforms to well-heeled corporations.  So rather than ask the government to fix specific problems on an ad hoc basis, the government would do well to ask what causes the market to fail as it clearly has with Google.

The first question to ask is where was the board?  In Google’s case, the core problem is both easy to find and easy to fix.  It lies in the voting structure of the shareholders.  Shareholder rights and corporate charters are state law matters and don’t relate to the federal government, but–the federal government does have a say about who gets to sell shares to the public and has an interest in protecting the shareholders of publicly traded corporations.  It is this nexus that gives the House Judiciary Committee clear oversight authority over the corporate structure of publicly traded corporations.

While anti-coup d’etat provisions might make sense for private companies whose investors are sophisticated financiers, or newspapers seeking to retain editorial independence, once that company is publicly traded a bald discrepancy that simply mandates voting power to the insiders forever seems like it has to go.  And as we have seen with Google, the lack of corporate oversight has resulted in unbelievable arrogance and a complete failure of corporate responsibility.  And worse yet, because Google got away with it, lots of other tech companies follow essentially the same model (including Facebook, Spotify and Linkedin).

It must also be said that stock buybacks approved by a board where insiders who benefit from the buyback have supervoting shares and control the board is a practice that reeks to high heaven.  Buybacks and dual class supervoting shares have been widely criticized including by Securities and Exchange Commission Commissioner Robert Jackson who is also a critic of supervoting shares.

So how did this happen to Google?  The supervoting structure started when Google was a private company as a way for the founders to preserve control and avoid venture capital investors pushing them around.  OK, fine, I understand that.

Google (which is really its parent company, Alphabet) trades under two ticker symbols on the  NASDAQ: GOOGL Class A and GOOG Class C.

Oops.  What happened to Class B?  Ay, there’s the rub.

Class B shares are not publicly traded and are held by insiders only.  But as you will see, they control every aspect of the company.  So why would Google’s insiders want this share structure?  There’s actually a simple answer.  Class A shares (GOOGL) get one vote per share, Class B shares get 10 votes per share and Class C shares (GOOG) get no votes.

That’s right–Class B shares cannot be purchased and their holders get 10 times the voting power of the Class A holders, often called “supervoting” shares, because their super power is…well…voting.

The Class C shares were created as part of a 1:1 stock split that doubled the number of shares, halted the price per share, but resulted in no change of the voting power of the Class A and C shareholders.

When the dust settled, the Google/Alphabet voting capitalization table looked something like this:

Class A: 298 million shares and 298 million votes, or roughly 40% of the voting power with votes counting 1:1.

Class B: 47 million shares and 470 million votes, or roughly 60% of the voting power with votes counting 10:1.

What this also means is that the holders of Class B shares voting as a bloc will never–and I mean never–be outvoted at a shareholder meeting, their board of directors will never be challenged much less replaced and shareholder meetings are a sham.

Who controls the Class B shares?  The people that Commissioner Jackson might call the “corporate royalty“:

Larry Page: 20 million shares (as of 2017)

Sergey Brin: 35,300 Class B shares plus 35,300 Class A shares (as of 2018)

Eric Schmidt: 1.19 million Class B shares, 40,934 Class A shares, and 10,983 Class A Google shares, plus 2.91 million Class B shares through family trusts.

Sundar Pichai: 6,317 Class A shares and no Class B shares.

The House Judiciary Committee has a chance to correct the supervoting system as bad policy and implement a long-term fix across the board for all dual-class companies that want to trade on the public exchanges.