Mbu 2520 spring 2018 chapter 5

MBU 2520 Spring 2018 - Eric M. Griffin
The Reproduction Right

The COPYRIGHT Bundle of Rights
.
Under the US Constitution, Copyright guarantees an exclusive “Bundle of Rights” to
Authors/Creators. This essentially creates a ”Limited Duration Monopoly.”
The Bundle of Rights: RDPDDD
1. Reproduction: Right to make copies. Mechanical Royalty
2. Distribution: Sale to the public resulting in transfer of ownership of that copy
3. (public) Performance: Performance Royalty. Collected by PROS, etc.
4. Derivative: Synch Royalty, Sampling.
5. (public) Display. Not as common with music.
6. (public performance of Sound Recording) via DIGITAL AUDIOTRANSMISSION.

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Most Common Licenses for Different Uses of Music
Permission to use a Copyrighted Work is granted by the Licensor to a Licensee.
1. Mechanical License: Right to Reproduce and Distribute.
 Compensation is a statutory royalty.
 Mandatory Grant after First Use
2. Performance License: Right to Perform Publicly
3. Synchronization License: Right to use in connection with audiovisual production
 Compensation is Negotiable at Market Rates
 Completely Discretionary

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Most Common Licenses for Different Uses of Music
3. Print License: Right to Reproduce and Distribute in Printed Form (Sheet Music)
 Compensation is a royalty.
4. Distribution License: Right to Distribute Copyrighted Work
Section 106 of the Copyright Act outlines these rights. Sections 107 – 120
put limitations on these rights and can be complicated.

.
The Reproduction Right
Section 106(1) Give the Copyright owner the exclusive right to reproduce, or authorize
others to reproduce, the copyrighted work.
Reproduction = Producing a material object of some kind which contains or embodies
the copyrighted work. (Can be readable by machine or device)
2 Categories of material objects = 1) Copies & 2) Phonorecords
(A phonorecord does not include those sounds accompanying a motion picture or other
audiovisual work.)

.
Limitations on Reproduction Right:
1. Compulsory Mechanical License: Gives the Licensee the right to
reproduce and distribute a copyrighted musical work in a
phonorecord.
• First use in the U.S. is reserved for the author or for the author to grant.
• Phonorecords only, not copies
• Non-Dramatic Musical Works only
• Primary purpose of the recording MUST be to distribute for public or private
use
* Cannot be primarily for broadcast or BG music ( like Muzak).
.

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Compulsory Mechanical License (cont.)
• Can’t change the basic melody or character, but may
change arrangement
• May change genders or other minor changes, but major
changes create a derivative work.
• Must file a Notice of Intention to Obtain a Compulsory
License no later than 30 Days after making the recording
and before distributing it. If you don’t do this, you need a
negotiated license and that’s not compulsory.

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Compulsory Mechanical License (cont.)
• Must pay royalty for all records made & distributed.
• Current rate set by the Copyright Board = greater of $0.091
or $0.0175/minute
• There are very stringent accounting requirement that must be
met if not using a negotiated license. (Monthly Payments +
Annual Summary) If you fail to pay, you lose the compulsory
license.
• BECAUSE OF ALL THESE RESTRICTIONS, THE
STATUTORY MECHANICAL IS RARELY USED.

USCONSTITUTION - Gives
Congress the power to govern
Copyright Law.
CONGRESS - Enacted the (c)
Act of 1976 which codifies the
laws governing (c)
LIBRARY OF CONGRESS -
Oversees the execution and
functions of the (c) Law.
USCOPYRIGHTOFFICE
COPYRIGHT ROYALTY BOARD
- Board of 3 Copyright Judges
who oversee the setting of
terms and rates for statutory
(c) licenses and make decisions
about distribution of royalties.

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2. Negotiated Mechanical License
• Used far more frequently than the Statutory Mechanical because
it is far more flexible.
• Often the licensee seeks the license from an agency
representing the owner/publisher, like Harry Fox Agency(HFA).
• May still follow many of the same terms. Often royalties are paid
quarterly and on records sold rather than distributed.
• Allows for a reduced rate to be negotiated if the parties so agree.
*Rates may be reduced for discounted records or especially for
writers subject to a “Controlled Composition Clause.”

Controlled Composition Clauses
• A controlled composition is a song that’s written,
owned, or controlled by the artist – in whole or in part.
• It means any song that the artist has an income or other
interest.
• Can apply to songs that producer owns or controls,
too.

• A controlled composition clause puts a limit on the amount of
money that the record company has to pay for each controlled
composition.
• Since record companies don’t recoup any costs out of mechanical
royalties, it’s money going out before they break even.They want
to pay as little as possible.
• Artists should fight for mechanicals because it’s the only money
they’ll see for awhile.

• Artist only gets artist royalties after they’re recouped; if it doesn’t sell
well, that may never happen.
• Touring, especially early-on, can be a money-losing game. (remember
tour support?)
• Mechanical royalties are a very substantial part of the record deal.
Label wants to limit them, artists want to maximize them.
• .

Two Ways to Limit Mechanicals
1. Controlled Composition Clause = Rate per song – record companies
pay 75% of the statutory rate on controlled compositions for most
artists.
*The label “requires” the artist to license the controlled
composition for 75% of the statutory rate.
2. SONG Caps / Rate per album – typically 10 times the single song
rate for each album. (All songs treated as under 5 minutes)
For either of these, New artists can’t do anything, mid-level and superstars can get a little
better rate or an escalation on later albums.

Two Ways to Limit Mechanicals
• Noncontrolled Songs - rate limits can be applied to all songs on the
record – not just controlled compositions!
• “Outside songs” – songs that the artist didn’t write; therefore not
controlled compositions. Artist must get publisher to go for the
reduced rate; many times this is impossible.
• Record company takes excess mechanical royalties due outside
writer/publishers out of the artist’s mechanical rates.

Effects on Outside Songs
4 Outside Songs on an 8 song album might look like this:
If not enough controlled comp songs to cover it, difference may come
from artist’s record royalties!

Song Caps
• Ex. If artist is limited to 10 times 75% of
the statutory rate, to pay outside
publishers the full statutory rate:
• Artist has to take a reduced rate on their
own songs or put less than 10 songs on the
album
• Ex- 5 outside songs and 5 controlled
comps. Remember max per album rate
applies to all songs on the record; not just
controlled comps

Multiple Albums / Box Sets
• Multiple Albums – double albums don’t pay double the
allowance on controlled comps. Can get the ten-times
limit raised but it won’t be to twenty.
• Typically, companies only increase the mechanical
royalties in proportion that the wholesale price increases
over that of a single disc album.
• Box set mechanicals are negotiated beforehand.

Controlled Comps and Videos
• Promotional usage – record company should get a free promotional
video license. It’s being used to promote the artist’s records.
• Commercial Usage – for home videos, independent publishers not
subject to controlled comp typically get 8 to 15¢ per song.
• Hard for Artists to get anything for home video use.

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3. Mechanical Licensing Agencies
• Harry Fox Agency – issues mechanical licenses for publishers;
largest in U.S.
• CMRRA – Canadian counterpart to Harry Fox Agency
• These act as publisher’s agent for mechanicals. They issue
mechanical licenses, police them, and report to the publisher
• Harry Fox charges 11.5% of gross monies collected for the
license. (Updated from book. Raised in 2015.)
• CMRRA charges 8%

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Mechanical Licensing Agencies (cont.)
• Harry Fox Agency Limitations:
• 1. Only covers the U.S.A.
• 2. Does not give right to publish lyrics on album liner notes.
Must receive that from publisher.

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4. Foreign Mechanical Licensing Agencies
• In many foreign countries the Mechanical is based on the MSRP
or the DPD. How does that change the way copyright owners
are paid for the mechanical right?

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5. Digital Phonorecord Deliveries
• Downloading still involves reproduction of the musical file.
• The Digital Performance Right Act of 1995 clarified that a digital download
was treated the same as any other phonorecord.
• No royalties required for promotional DPDs of under 30 seconds.
• Ringtones and full song are treated differently. Ringtone mechanical is
$.0.24.

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Reproduction of Sound Recordings
• SR not protected until 1972 and still recieve lesser protections than other
copyrightable works.
Limitations:
1. Dubbing Limitation: It’s OK to make a cover version that sounds just like a SR as
long as you don’t use the original SR as the source.
2. Home Taping: Accepted though never ruled on definitively by courts.
*Audio Home Recording Act of 1992
A) Awarded a royalty from all blank recording media in order to compensate SR
owners.
B) Set up copy protection standards.
C) Exempts consumers from infringement actions for home copies
*Unintended consequence, AHRA exempt computer hard drives!
(Diamond Rio case)

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Limitations:
3. Sampling: Creating a Derivative Work using part of an Original Work.
Requires permission from both the owner of the Composition & the
Sound Recording.
*If not using the sound recording, it’s a “Replay.”

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Limitations:
Sampling:
MARK RONSON: TED Talk: https://youtu.be/H3TF-hI7zKc (16min)
https://youtu.be/kk6NhjD3Dbg https://youtu.be/YrMmCOaydaM

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Limitations: Sampling (cont).
Possible Defenses:
1. Fair Use: Still infringement, but allowed based on public policy fair use
exceptions like parody, education, etc.
2. De Minimis Use – “too small to be important”
Courts may use a few different approaches.
a) Is it even recognizable? (Rarely successful because, isn’t the point of
a sample for it to be recognizable?
a) Is it “substantially similar? (Generally used test for infringement.)
.

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Limitations: Sampling (cont).
Always best to try to get clearances. Labels often say
in their contracts that the Artist must deliver the music
with all samples cleared. This doesn’t always happen
and a smart label makes sure they are done
themselves.

Mbu 2520 spring 2018 chapter 5

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Mbu 2520 spring 2018 chapter 5