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D.C. to Re-Examine Safe Harbor and Two Royalty Rates

The music industry has barely caught its breath from its latest episode in Washington D.C and two new issues, both of great importance, have already appeared on the horizon.

The music industry has barely caught its breath from its latest episode in Washington D.C and two new issues, both of great importance, have already appeared on the horizon.

The first is an upcoming public study of the Digital Millennial Copyright Act’s “safe harbor” provisions by the U.S. Copyright Office. Specifically, the Office wants to assess the costs and burdens associated with the notice-and-takedown process of the DMCA on both small and large copyright owners as well as digital services and the public.

This review will expose a raw nerve for both the entertainment and technology industries. The DMCA established rules for how copyright owners and digital services must deal with copyrighted content being hosted and made available without with a rights owner’s consent. Knowing that digital services can’t be responsible for all infringing content uploaded by their users, Congress established safe harbor provisions to protect services from any liability that might arise from their users’ actions. These rules require, among other things, that digital services promptly act on legitimate and properly formatted takedown requests received from copyright holders.

But the safe harbor provisions have constantly created controversy. Entire businesses have been built on user-generated content, depending on safe harbor to protect them from liability. YouTube, for example, wouldn’t be the same without its users uploading everything from lyric videos to cover songs. As seen in its 2013 victory over Viacom in a dispute over the safe harbor provisions, YouTube has been more successful in its legal disputes than, say, Veoh, a competing video streaming site that closed after losing a lawsuit brought by Universal Music Group.

The time, effort and resources required to police all this infringing content has left rights holders feeling exasperated. This is especially true of small and independent labels and publishersm many of whom lack the resources to have their content removed from digital services. Digital services must also put resources into abiding by the DMCA. As noted in the Library of Congress’s “Copyright and the Music Marketplace” report, the number of DMCA takedown requests submitted to Google rose to 345 million in 2014 from 3 million in 2010.

The Copyright Office is accepting public comments until March 21. Expect the entertainment and technology industries to invest heavily into shaping the outcome of this review process.   

Another item to watch is the announcement by the Copyright Royalty Board of rate proceedings that will determine royalties on for mechanical publishing royalties and, on the recorded music side, performance rates for satellite and cable radio from 2018 through 2022. The last group of satellite and cable radio rates, which established a slight increase in payments to labels and performing artists, were announced in early 2013. Mechanical royalties were last set in 2012 in a CRB-approved settlement between music publishers, record labels and digital services. Existing mechanical rates for CDs and downloads were unchanged, while new rates were set for five different digital business models.

The mechanical royalties rate proceeding should be an interesting showdown. The music publishing community has strenuously objected to both the size of the rates and the standard used to set the rates. Publishers and songwriters feel their rates, almost all of which are set by one government body or another, do not reflect the true value of their musical works. Their solution is to adopt standards that would result in the rates that would be established in a free market transaction between buyers and sellers.