100 Percent Licensing: U.S. Copyright Office Argues New Proposal Threatens Song Owners' Rights

Mark Davis/Getty Images for AFM
US Copyright Office Director Maria Pallante attends the U.S. Germanic Copyright Summit at the American Film Market  at the Loews Santa Monica Beach Hotel on Nov. 5, 2013 in Santa Monica, Calif.  

The Dept. of Justice is reportedly on the verge of imposing a drastic change to how performance rights organizations (PROs) are required to treat the licensing of songs with multiple co-writers. The change would require the PROs, namely ASCAP and BMI, to allow "100 percent licensing," which would give the partial owner of a song -- regardless of whether their share of the work is five percent or fifty -- the ability to license the entire work to a user such as Pandora. The move would be a major shift in how U.S. publishing currently operates. Now, in the 23rd hour of this rule, the U.S. Copyright Office has weighed with a strong opposition to the DoJ’s stance.

While such a change as contemplated by the DoJ is welcomed by most who license music (like Pandora), the move away from the customary practice of fractional licensing -- where each songwriter and/or its representative can only green light the use of their portion of a song -- would cause a huge disruption in the industry, according to music publishers and songwriters, who express deep concern over the DoJ’s interpretation.

Beyond that, the Copyright Office appears to argue that a 100 percent licensing requirement would be contrary to U.S. Copyright law.

In a 33-page paper posted on its website yesterday, the Copyright Office said it "believes that an interpretation of the consent decrees that would require these PROs to engage in 100-percent licensing presents a host of legal and policy concerns. Such an approach would seemingly vitiate important principles of copyright law, interfere with creative collaborations among songwriters, negate private contracts, and impermissibly expand the reach of the consent decrees."

Moreover, the Copyright Office said that by forcing the PROs to implement 100 percent licensing, DoJ "could also severely undermine the efficacy of ASCAP and BMI, which today are able to grant blanket licenses covering the vast majority of performances of musical works -- a practice that is considered highly efficient by copyright owners and users alike."

The issue of 100 percent licensing came into play as part of a review of the consent decrees requested by the major music publishers, the National Music Publishers’ Assn. and ASCAP and BMI. Music publishers and PROs wanted the ability to partially withdraw digital rights from the blanket license, but still be covered in the blanket licenses for other music users. While the DoJ is said to be about to grant partial withdrawals for publishing, that ruling is now a moot point since Pandora -- the main reason publishers wanted to withdraw digital rights -- is now moving away from using the compulsory license, striking direct deals with publishers (and paying a higher rate, too).

For that reason, music publishers were shocked when their request for a consent degree amendment allowing for partial withdrawal was said to also come with the new requirement that the PROs adopt 100 percent licensing. Currently, the industry operates under fractionalized licensing, with each copyright owner in a song licensing their share of the song.

The U.S. Copyright Office's position on the topic appears to have come about at the behest of U.S. House of Representative member Doug Collins, who serves as vice chairman of the Intellectual Property Subcommittee of the House Judiciary Committee. On Jan. 12 Collins wrote to U.S. Register of Copyrights Maria Pallante asking her to formalize the Copyright Office’s view on the subject of licensing jointly-owned works from the PROs, according to documents on the Copyright Office website.

In its response to the request, the Copyright Office explains that each co-owner may grant a non-exclusive license to use the entire work provided the licensor account and pay the pro-rata share to the other co-owners. A song co-owner could also unilaterally assign or exclusively license their ownership stake in the copyright, but the co-owner "may not transfer the entire copyright, or grant an exclusive license to the entire work, as that would impair the rights of the other co-owners... thus, a transfer of ownership or grant of an exclusive license can occur only through the signed, written agreement of all co-owners."

The Copyright Office also pointed out that 100 percent licensing may violate the rights of foreign writers."It is important to recognize that the United States’ rules on joint authorship differ from those of many other countries that require the consent of all co-owners for any license, not only an exclusive license," the document states.

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The Copyright Office pointed back to the 1976 revision of the Copyright Act, "where Congress made clear its intent that copyright interests could be divided and separately owned," Pallante's office writes. "The decrees must be interpreted to respect this fundamental principle, and indeed, as implemented, have accommodated the industry practice of fractional licensing for many decades." The Office points out that in the early '70s ASCAP and BMI changed their rules to allow for individual songs to be registered with PROs in order to accommodate writers, allowing them to collaborate writers represented by another society.

"An interpretation of the ASCAP and BMI consent decrees that would require those PROs to issue 100-percent licenses … would run afoul of the Copyright Act and the rights of foreign authors as well," the Copyright Office states. "The Office believes that the consent decrees should not be construed in a manner that annuls essential elements of copyright law."

The document further states that the Copyright Office "is aware of no authority by which the antitrust consent decrees governing ASCAP and BMI could operate to supplant Congress’ constitutional prerogative to establish the nation’s copyright law, or to override exclusive rights granted under that law or by foreign law.

Beyond the law, the  Copyright Office agreed with publishers and songwriters that implementation of 100 percent licensing could chill the collaborative atmosphere that characterizes the modern songwriting marketplace and also expose ASCAP and BMI and licensors to claims of copyright infringement. 

It also noted that ASCAP and BMI predict a 100-percent licensing rule would lead major publishers to wholly withdraw from those organizations in order to preserve their ability to license works on a fractional basis -- the very thing that ASCAP and BMI sought to avoid when asking for the consent decree to be amended in order to allow partial withdrawal from their blanket licenses.

Finally, the Copyright Office said that 100 percent licensing could hamper the ability of the smaller PROs such as SESAC and Irving Azoff's Global Music Rights to compete in the marketplace.

"In sum, an interpretation of the consent decrees that would require 100-percent licensing or removal of a work from the ASCAP or BMI repertoire would appear to be fraught with legal and logistical problems, and might well result in a sharp decrease in repertoire available through these PROs’ blanket licenses," the Copyright Office concludes.