What the MLC Can Learn from Orphan Works

As you may be aware, The MLC recently received $424 million as payment of the “inception to date” unmatched mechanical royalties held at a number of streaming platforms, sometimes called the “black box.” Why do we have a black box at all? For the same reason you have “pending and unmatched” at record companies–somebody decided to exploit the recording without clearing the song.

Streaming services will, no doubt, try to blame the labels for this missing data, but that dog don’t hunt. First, the streaming service has an independent obligation to obtain a license and therefore to know who they are licensing from. Just because the labels do, too, doesn’t diminish the service’s obligation. It must also be said that for years, services did not accept delivery of publishing metadata even if a label wanted to give it to them. So that helps explain how we get to $424 million. Although the money was paid around mid-February, it’s clearly grown because The MLC is to hold the funds in an interest bearing account. Although The MLC has yet to disclose the current balance. Maybe someday.

This payment is, rough justice, a quid pro quo for the new “reach back” safe harbor that the drafters of Title I came up with that denies songwriters the right to sue for statutory damages if a platform complies with their rules including paying this money. That’s correct–songwriters gave up a valuable right to get paid with their own money.

The MLC has not released details about these funds as yet, but one would expect that the vast majority of the unmatched would be for accounting periods prior to the enactment of Title I of the Music Modernization Act (Oct. 11, 2018). One reason that expectation would be justified is that Title I requires services to try hard(er) to match song royalties with song owners. The statute states “…a digital music provider shall engage in good-faith, commercially reasonable efforts to identify and locate each copyright owner of such musical work (or share thereof)” as a condition of being granted the safe harbor.

The statute then goes on to list some examples of “good faith commercially reasonable efforts”. This search, or lack thereof, is at the heart of Eight Mile Style and Martin Affiliated’s lawsuit against Spotify and the Harry Fox Agency. (As the amended complaint states, “Nowhere does the MMA limitation of liability section suggest that it lets a DMP off the hook for copyright infringement liability for matched works where the DMP simply committed copyright infringement. The same should also be true where the DMP had the information, or the means, to match, but simply ignored all remedies and requirements and committed copyright infringement instead. Spotify does not therefore meet the requirements for the liability limitations of the MMA with respect to Eight Mile for this reason alone.”)

The MMA language is similar to “reasonably diligent search” obligations for orphan works, which are typically works of copyright where the owner cannot be identified by the user after trying to find them. This may be the only aspect of orphan works practice that is relevant to the black box under MMA. Since considerable effort has been put into coming up with what constitutes a proper search particularly in Europe it might be a good idea to review those standards.

We may be able to learn somethng about what we expect the services to have already done before transferring the matching problem to the MLC and what we can expect the MLC to do now that they have the hot potato. The MMA provides non-exclusive examples of what would comprise a good search, so it is relevant what other best practices may be out there.

Establishing reference points for what constitutes “good faith commercially reasonable efforts” under MMA is important to answer the threshold question: Is the $424 million payment really all there is? How did the services arrive at this number? While we are impressed by the size of the payment, that’s exactly the reason why we should inquire further about how it was arrived at, what periods it is for and whether any deductions were made. Otherwise it’s a bit like buying the proverbial pig in the proverbial poke.

One method lawmakers have arrived at for determining reasonableness is whether the work could be identified by consulting readily available databases identified by experts (or common sense). For example, if a songwriter has all their metadata correct with the PROs, it’s going to be a bit hard to stomach that either the service or the MLC can’t find them.

Fortunately, we have the Memorandum of Understanding from the European Digital Libraries initiative which brought together a number of working groups to develop best practices to search for different copyright categories of orphan works. The Music/Sound Working Group was represented by Véronique Desbrosses of GESAC and Shira Perlmutter, then of IFPI and now Register of Copyrights (head of the U.S. Copyright Office). The Music/Sound Working Group established these reasonable search guidelines:

DUE DILIGENCE GUIDELINES

The [Music/Sound] Working Group further discussed what constituted appropriate due diligence in dealing with the interests of the groups represented at the table—i.e., what a responsible [user] should, and does, do to find the relevant right holders. We agreed that at least the following searches should be undertaken:

1. Check credits and other information appearing on the work’s packaging (including names, titles, date and place of recording) and follow up through those leads to find additional right holders (e.g., contacting a record [company] to find the performers).

2. Check the databases/membership lists of relevant associations or institutions representing the relevant category of right holder (including collecting societies, unions, and membership or trade associations). In the area of music/sound, such resources are extensive although not always exhaustive.

3. Utilise public search engines to locate right holders by following up on whatever names and facts are available.

4. Review online copyright registration lists maintained by government agencies, such as the U.S. Copyright Office.

Perhaps when the MLC audits the inception to date payments we’ll have some idea of whether the services complied with these simple guidelines.

The World is not Flat: @CISACNews and BIEM Focus on Vendor Lock-in at the MLC

One of the many U.S.-centric shortcomings of Title I of the Music Modernization Act (that created the Mechanical Licensing Collective, the safe harbor giveaway and the blanket license) is that it pretty much ignores the entire complex system of content management organizations outside the U.S. As they describe themselves, “CISAC and BIEM are international organisations representing Collective Management Organisations (“CMOs”) worldwide that are entrusted with the management of creators’ rights and, as such, have a direct interest in the Regulations governing the functioning of the Database and the transparency of MLC’s operations. CISAC and BIEM would like to thank the Office for highlighting the existence and particularity of entities such as CMOs that are not referred to in the MMA.”

I have to say at the outset that as someone who lived outside the U.S. for a big chunk of time, it’s rather embarrassing but sadly unsurprising that so little attention has been paid to the global system of CMOs and the cold fact that we are now weeks away from the January 1, 2021 deadline.

You would not be aware of this unless you read the many comments to the Copyright Office on the MLC oversight rule makings. Aside from the fact that these organizations have decades of experience with blanket mechanical licensing (which the MLC might benefit from), CISAC and BIEM should have been included in the MLC itself, particularly since the MLC promoters appear to have been handing out non-voting directorships to themselves. It is embarrassing, kind of like those Americans who think the best way to speak French is to speak English louder.

CISAC and BIEM raise excellent issues in their comments, which often are accompanied by gentle hint language indicating the points have been raised before and ignored, or at least not responded to. According to a recently posted “ex parte” letter, CISAC and BIEM have focused in on a critical issue–where is the MLC’s statutorily required database and what benefits accrue to its vendor–principally HFA which was recently reunited in the MLC with its former owners.

You can read the CISAC and BIEM ex parte letter here. (Ex parte letters essentially document private discussions by the Copyright Office on matters they are currently regulating. Ex parte letters help to build a full record on matters placed before the Copyright Office by interested parties that may or may not be addressed in regulations.)

Here’s a key excerpt that I think deserves more attention (and is not going to be covered by the trade press until the system collapses in all likelihood).

CISAC/BIEM also raised further concerns regarding potential competitive advantages that The MLC or its vendors’ access to information may have and risks that such information could potentially be used for purposes outside of Section 115 mechanicals. The USCO assured the CMOs that they were perfectly aware of this issue, which had also been raised by other parties, and considered that these concerns were being addressed in the Confidentiality Rulemaking, and that the Statute requires Regulations to prevent the disclosure or improper use of information or MLC records. The proposed Rule establishes that MLC vendors cannot use the data obtained for processing for other purposes. The USCO further confirmed that it was very much aware of the need to ensure the necessary balance and that it was still contemplating how best to resolve this, including whether there should be more regulation.

I have to say that this is not the impression I got from the first panel of “MLC week” rather that the panel seemed to think that at least any member of the public could use the data provided to the MLC for any purpose. Since the MLC’s vendors would also be members of the public ostensibly, it does seem that disconnect needs to be cleared up.

The ex parte letter continues:

The CMOs CISAC/BIEM considered that some of these concerns were based on the January 1 deadline and whether The MLC would be operating with HFA’s database or with its’ own DQI processed separate database.

This depends on the antecedent of “its” in the last clause. If you take The MLC as the antecedent, the meaning would be “or with The MLC’s own DQI processed separate database.” If you take HFA as the antecedent, the meaning would be “whether The MLC would be operating with HFA’s database or with HFA’s own DQI processed separate database.”

While I think that CISAC and BIEM meant the former, the reality appears to be the latter however nonsensical it may seem. This is because there do not appear to be two separate databases, just the HFA database that The MLC accesses through an API. The DQI operation is designed to improve the data quality of the HFA database which benefits both The MLC and HFA.

There seems to be more than a little confusion about this:


USCO noted that there are still open questions regarding this issue, as it seemed that the HFA database would be used as a starting point, but through programmes like DQI data was being updated, so it did not seem as if both databases were identical.

I would argue with this (and have). This idea that DQI was updating a database other than the HFA database sounds like there is a stand-alone musical works database as required by the statute. If so, where is it? Why does the DQI produce search results like this:

HFA DQI

The USCO reiterated that the proposed Confidentiality Rulemaking specifies the limitations imposed on proposed vendors and that The MLC had in writing acknowledged that neither The MLC nor its vendor owned the data. The USCO acknowledged that there was a lot of concern expressed about this issue and ensured the CMOs it was going to address this issue.

Ownership alone is not the only issue and misdirects attention. On the one hand, The MLC says it does not own the database (another example of drafting oversights in Title I of the MMA–ownership is one of those issues you would think would be clearly spelled out but was only referenced indirectly).

I come away from reading the ex parte letter more concerned than ever that the core issue that The MLC was tasked with by the Congress is simply not being addressed–where is the Congress’s musical works database? Remember the words of the legislative history:

“Music metadata has more often been seen as a competitive advantage for the party that controls the database, rather than as a resource for building an industry on.”