Understanding the Music Modernization Act

On October 11, 2018, prior to hosting the now-(in)famous “meeting of the minds” with rapper Kanye West, President Donald Trump officially signed the Orrin G. Hatch-Bob Goodlatte Music Modernization Act (MMA). The MMA serves three primary purposes: 1) streamline royalty payments for composers and songwriters when digital streaming services (Spotify, Pandora, etc) play their songs; 2) protect sound recordings created prior to February 15, 1972 under federal copyright law; and 3) provide for royalty payments to anyone “part of the creative process that created a sound recording (i.e. sound engineer, producer, etc).”

The first part of the MMA clarifies the requirements to obtain a compulsory license. A compulsory license allows musicians to release their own recordings of existing songs without obtaining permission directly from the original copyright holder. To do so, the prospective license holder must serve a notice of intent on the original copyright holder (if known; otherwise on the U.S. Copyright Office) no later than 30 days prior to distributing their recording. If approved, the license holder may pay royalties at either a reasonable rate established by the Copyright Royalty Judges or a rate negotiated between the parties. For example, if I sought to record a rock and roll version of Bonnie Tyler’s “Total Eclipse of the Heart,” I would not need her permission as long as I obtain a compulsory license and pay her royalties at the rate established by the Copyright Royalty Judges. Compulsory licenses promote creativity by allowing artists to create their own versions of established music while ensuring the original copyright holders are compensated for profits accrued from the subsequent creations.

For digital distributions, the prospective license holder may NOT serve the notice of intent on the U.S. Copyright Office but may apply for a blanket license through the new Mechanical Licensing Collective (MLC). A blanket license covers “all musical works available for compulsory licenses” and allows streaming services to collect and distribute music digitally.  Parties can also enter into a voluntary license and negotiate their own digital distribution terms.

The MLC is a non-profit entity created by copyright owners. Aside from administering the blanket licenses, the MLC will collect and distribute royalties from digital music providers and seek to identify and locate copyright owners of musical works whose works are “embodied in particular sound recordings” to make sure they receive royalties for their contributions. To help streamline that process, the MLC will create a database containing the identity and location of the original copyright owner (if known), names of the sound recording, featured artist, sound recording copyright owner, producer, international standard recording code, and “other information commonly used to assist in associating sound recordings with musical works. The MLC will hold accrued royalties for unidentified copyright owners for at least three years in an interest-bearing account for while attempting to identify and locate the owners.

Blanket license holders must report usage and pay royalties monthly to the MLC. The reports must contain the above information kept in the MLC’s database as well as the number of individual downloads and streams of each recording. The MLC may audit blanket license holders no more than once every three years to ensure compliance.

Next, the MMA incorporates some of the language in the Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society (CLASSICS) Act. Prior to this Act, sound recordings created before February 15, 1972 were not always subject to federal copyright protection and often commercially exploited. The Act protects these recordings for 95 years from their date of creation, through December 31, 2067. Protection for sound recordings created before 1923 or more than 95 years from enactment of the MMA exists through 2021. Protection for sound recordings created between 1923 and 1946 exists for 95 +5 years from the date of creation. For example, a sound recording created in 1950 receives protection through 2050. Protection  for sound recordings created between 1947 and 1956 exists for 95 +15 years from the date of creation. Protections for sound recordings created between 1957 and February 15, 1972 exists through February 15, 2067.

Finally, the MMA authorizes the Copyright Royalty Judges to designate a non-profit collective to distribute a portion of royalties due an artist to those part of the creative process of a sound recording. For sound recordings fixed before November 1, 1995, the portion is 2% of the amount entitled to the featured artist. Eligibility for payment under the Act, requires a “contribution to the creation of a sound recording” and provide written certification and a copy of the contract entered into with the artist or record company allowing for work on the recording and entitlement to subsequent royalties.

What do you think of the MMA? Do you agree with the concept of compulsory licenses or should an original copyright holder have full control of allowing subsequent recordings of their works? Sound off in the comments below, on my Facebook page at facebook.com/michaeltlawohmi, or on Twitter @michaeltlawomi.