by guest blogger Tyler Ochoa
On October 11, 2018, President Trump signed into law H.R. 1551, the Orrin G. Hatch-Bob Goodlatte Music Modernization Act, which became Public Law 115-364, 132 Stat. 3676. The Act contains three titles pertaining to copyright law. Title I is the Musical Works Modernization Act, or MMA Act, which revises the Section 115 compulsory license for musical works and establishes a new “mechanical licensing collective” to administer it. Title II is the Classics Protection and Access Act (formerly known as the “Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act, or CLASSICS Act), which brings pre-1972 sound recordings mostly (but not completely) into the federal copyright system. Title III is the Allocation for Music Producers Act, or AMP Act, which amends the compulsory license for digital public performance rights for sound recordings to allocate a small portion of the proceeds to producers, mixers, and sound engineers.
This blog post summarizes the provisions of Title II, the Classics Protection and Access Act (or CPA Act).
To fully understand the changes made by the CPA Act, some familiarity with existing U.S. copyright law is needed. (Readers who are already intimately familiar with existing U.S. copyright law may skip to the next section.)
Federal copyright law distinguishes between a musical work (the notes and lyrics) and a sound recording of a musical work. A sound recording could be a recording of anything, such as a recorded performance of a literary work (an audio book) or a recording of ambient sounds (such as bird calls); but the most valuable sound recordings are recorded performances of musical works. Each sound recording of a musical work is a derivative work of the underlying musical work. The copyright in a musical work is owned initially by the composer and the lyricist, and is typically assigned to a music publisher. In theory, the copyright in a sound recording is owned by the performers and the sound engineers; in practice, the copyright in a sound recording is owned by a record label under a work-made-for-hire agreement.
While musical works have been protected by federal copyright law since 1831, sound recordings were only added to the federal copyright act on February 15, 1972. Sound recordings fixed on or after February 15, 1972 are protected by federal copyright law. Until the CPA Act, however, sound recordings fixed before February 15, 1972, however, were protected only by state law. In those states that have addressed the issue, copyright owners generally had a right to prevent the reproduction and distribution of such pre-1972 sound recordings.
The exclusive rights in a sound recording are limited in ways that do not apply to other copyrighted works. Copyrighted works usually enjoy five exclusive rights: to reproduce the copyrighted work, to prepare derivative works based upon the copyrighted work, to distribute copies or phonorecords of the copyrighted work to the public, to publicly perform the copyrighted work, and to publicly display the copyrighted work. [17 U.S.C. §106] Sound recordings, however, have never had a general public performance right. As I explained in a previous blog post, in the 1940s sound recording copyright owners tried to establish public performance rights under state law, but largely failed. In 1972, when sound recordings were first added to the Copyright Act, broadcasters had enough lobbying power to stop any public performance right. As a result, in order to get federal copyright protection, sound recording copyright owners had to accept only the rights of reproduction, adaptation, and public distribution, without any public performance right. (The lack of a general public performance right for sound recordings is the primary reason the U.S. has not joined the Rome Convention, the major international treaty concerning sound recordings. The new legislation won’t change this.)
In 1995, Congress added a limited public performance right by means of digital audio transmission only. [17 U.S.C. §106(6)] Congress also divided public performances of sound recordings into three categories. FCC-licensed broadcast transmissions are exempt from having to pay royalties to sound recording copyright owners. [17 U.S.C. §114(d)(1)] Non-interactive subscription transmissions get a compulsory license to publicly perform copyrighted sound recordings [17 U.S.C. §114(d)(2)], meaning they do not have to get permission, but they do have to pay royalties. (In the absence of a negotiated agreement, the royalties are set by the Copyright Royalty Board, a three-judge administrative tribunal, subject to judicial review.) Interactive transmissions, where a user can request a performance of a particular recording, require negotiated licenses from sound recording copyright owners. [17 U.S.C. §114(d)(3)] After some litigation and a Congressional clarification in 1998, “eligible non-subscription transmissions” (i.e., webcasts) were assimilated to the second category. Courts have also held that services which recommend similar recordings based on an algorithm, such as Pandora, fall within the second category rather than the third category.
Thus, when a song is played on a traditional AM/FM radio broadcast station or on TV (whether analog or digital), the musical work copyright owner gets royalties (collected though blanket licenses administered by performance rights organizations, such as ASCAP and BMI), but the sound recording copyright owner does not get any royalties. When the same song is played on satellite radio or over the Internet, however, both the musical work copyright owner and the sound recording copyright owner get paid royalties. (The royalties for the musical works are collected by the PROs, and the section 114 compulsory license for digital performances of sound recordings are collected and distributed by SoundExchange, a performance rights organization formed by the Recording Industry Association of America.)
Until now, however, only copyright owners of sound recordings fixed on or after February 15, 1972, were eligible to collect royalties for digital audio performances of those sound recordings pursuant to the statutory license. Owners of pre-1972 sound recordings were not eligible for royalties from the statutory license. As I explained in a previous blog post, owners of pre-1972 sound recordings initially succeeded in establishing a public performance right for pre-1972 sound recordings under state law. Subsequently, however, the highest courts in several states, including New York and Florida, have rejected a public performance right for pre-1972 sound recordings under state law. An appeal is currently pending in the California Supreme Court regarding public performance rights for pre-1972 sound recordings under state law. In the meantime, some digital audio services entered into settlement agreements with the major record labels to pay royalties on public performances of pre-1972 sound recordings. The total amount of royalties is contingent on the outcome of litigation pending in several states.
The Classics Protection and Access Act
Rather than simply providing that pre-1972 sound recordings will hereafter be governed by federal copyright law, the CPA Act adds a new chapter (Chapter 14) to Title 17, consisting of a single section, 17 U.S.C. §1401, titled “Unauthorized Use of Pre-1972 Sound Recordings.” Section 1401 contains 12 lettered subsections, (a) through (l). Section 1401 essentially federalizes protection for pre-1972 sound recordings, but it leaves certain details (including initial ownership) to state law.
The key provision is section 1401(a)(1), which reads as follows:
UNAUTHORIZED ACTS.—Anyone who, on or before the last day of the applicable transition period under paragraph (2), and without the consent of the rights owner, engages in covered activity with respect to a sound recording fixed before February 15, 1972, shall be subject to the remedies provided in sections 502 through 505 and 1203 to the same extent as an infringer of copyright or a person that engages in unauthorized activity under chapter 12.
This section has four elements: term of protection, lack of consent, “covered activity,” and remedies. Considering them in order of importance:
Covered activity: “Covered activity” is defined in subsection 1401(l)(1) as “any activity that the copyright owner of a sound recording would have the exclusive right to do or authorize under section 106 or 602, or that would violate section 1201 or 1202, if the sound recording were fixed on or after February 15, 1972.” Thus, the copyright owner of a pre-1972 sound recording effectively now has the exclusive rights of reproduction, adaptation, and distribution, and public performance by means of digital audio transmission. [17 U.S.C. §106(1),(2),(3) and (6)] Sound recordings lack a general public performance right or a public display right. [17 U.S.C. §106(4)(5)]
The owner also has an exclusive right of importation and exportation right under section 602, but this is relatively unimportant, due to the Supreme Court’s previous rulings in Quality King v. L’Anza Int’l and Kirtsaeng v. John Wiley & Sons, Inc., holding that the first-sale doctrine [17 U.S.C. §109] is a defense to importation, even if the copies were made outside the United States. Thus, the importation and exportation rights only apply to copies that were not “lawfully made.”
Finally, the copyright owner gets the benefit of section 1201, prohibiting circumvention of technological protection measures, and section 1202, prohibiting removal or alteration of copyright management information. (Not surprisingly, the copyright owner of a sound recording does not get the benefit of the moral rights of attribution and integrity in section 106A, which continue to apply only to certain “works of visual art,” narrowly defined.)
Term of protection: Before the CPA Act, the term of protection for pre-1972 sound recordings was governed by state law, and state law was not preempted by federal law until February 15, 2067 (95 years after the date that sound recordings were first added to the federal Copyright Act). Former 17 U.S.C. §301(c). While states could have chosen to provide more limited terms of protection, few states ever considered the issue. In California, sound recordings are protected by statute [Cal. Civ. Code §980(a)(2)] until February 15, 2047 (the original date of federal preemption prior to enactment of the Sonny Bono Copyright Term Extension Act of 1998). In New York, however, the New York Court of Appeals had previously held that common-law protection for pre-1972 sound recordings was perpetual, unless and until divested by federal law, even if the sound recording had entered the public domain in its country of origin. Capitol Records, Inc. v. Naxos of America, Inc., 4 N.Y.3d 540 (2005).
In providing federal protection for pre-1972 sound recordings, Congress could have applied the existing (somewhat complicated) rules of duration for copyrighted works to pre-1972 sound recordings. As originally proposed, however, the CLASSICS Act would have given all sound recordings, no matter how old, federal protection until February 15, 2067. Even Edison cylinders recorded in the 19th Century would have been protected until 2067, almost 200 years later. This is the major reason that I joined a group of 42 law professors in opposing enactment of the CLASSICS Act in its original form.
The CPA Act, as enacted, provides to sound recordings a term of 95 years of protection from the date of first publication (the maximum term allowed to pre-1978 works under existing law), plus a “transition period” of between 3 and 15 years. [17 U.S.C. §1401(a)(2)(A)] As with other copyrighted works, all terms are extended to December 31 of the year in which they otherwise would expire; except that no protection is provided to pre-1972 sound recordings after February 15, 2067. The “transition period” is 3 years after the date of enactment for sound recordings published before 1923; 5 years for sound recordings first published in 1923-1946; and 15 years for sound recordings first published in 1947-1956. All other sound recordings get a transition period that expires on February 15, 2067. [17 U.S.C. 1401(a)(2)(B)]
Thus, all sound recordings first published before 1923 will enter the public domain on January 1, 2022. Sound recordings first published between 1923 and 1946 will get 100 years of protection. Sound recordings first published between 1947 and 1956 will get 110 years of protection. Sound recordings first published between 1957 and 1972 will get protection until February 15, 2067, resulting in a variable terms of protection of between 110 years and 95 years. Finally, previously unpublished sound recordings will be protected until February 15, 2067 (even if they are published by the rights owner in the meantime). Due to the preemption provisions (described below), these terms preempt any state laws to the contrary, even where state law would provide shorter protection.
What does it mean for a sound recording to be “published”? Before 1978, courts had held that a musical work was “published” only when sheet music was distributed to the public. Distribution of a sound recording of a musical work was not considered a “publication” of the musical work within the meaning of copyright law. (The distinction dates back to a 1908 Supreme Court decision, White-Smith Music Publishing Co. v. Apollo Co.,which held that piano rolls for player pianos were not “copies” of a musical work within the meaning of copyright law. Essentially, a “copy” had to be visible to the eye.) Indeed, when the Ninth Circuit later held that distribution of a phonorecord was a “publication” of the musical work, Congress overturned the decision by enacting 17 U.S.C. §303(b): “The distribution before January 1, 1978, of a phonorecord shall not for any purpose constitute a publication of any musical work, dramatic work, or literary work embodied therein.” Of course, this statute (and the rationale underlying it) did not apply to the sound recordings themselves, which (unlike musical works) could only be distributed in the form of phonorecords. Nonetheless, the New York Court of Appeals relied on this statute in holding (in the Capitol Records v. Naxos case) that pre-1972 sound recordings had never been “published” at all, even when phonorecords of the recordings had been distributed to the public. If this restricted definition of “publication” were used, then Congress’s transition periods would have been rendered meaningless, as all pre-1972 sound recordings would have been “unpublished” and therefore protected until February 15, 2067.
Fortunately, Congress anticipated this ambiguity and resolved it. Section 1401(f)(6) provides that “Any term used in this section that is defined in section 101 shall have the meaning given that term in section 101.” Section 101 defines “publication” as “the distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership, or by rental, lease, or lending” (emphasis added). Thus, for purposes of term of protection, a sound recording was first “published” when phonorecords were first sold to the public— an eminently sensible result.
I have a harder time making sense of the “transition periods” themselves. Sound recordings were already protected against reproduction, adaptation, and distribution under state law; so for these rights, the only “transition” is from state-law protection to federal protection. Why should sound recordings get longer terms of protection than those enjoyed by any other copyrighted works of similar vintage? One could argue that ownership of some of these recordings had changed hands with the expectation that they would receive protection until February 15, 2067, regardless of their age; so that restricting them to a 95-year term would deprive the new owners of part of the benefit of their bargain. But if that was the rationale, one would expect the “transition periods” would be longer for older works, rather than shorter, in proportion to the alleged deprivation. For public performance rights, owners are getting a new right that they never had before (unless you count the Erie-based predictions of two federal district courts, one of which has already been overruled (in New York), with the California appeal still pending). For most of the recordings, the royalties from the new public performance right might be expected to roughly compensate for the new term limits. A “transition period” for older sound recordings might be justified on the ground that the owners of those recordings never previously had any opportunity to get public performance royalties at all. (That is strictly a “natural right” rationale, rather than a utilitarian one, as giving owners of existing works any additional term cannot incentivize them to create new works.) But again, if that was the rationale, one would expect the “transition periods” would be longer for older works, rather than shorter. Under a fixed 95-year term, newer works will already get more time to earn royalties from public performances than will older ones. Moreover, because of the settlement agreements made with the major record labels, the vast majority of rights owners have already received some compensation for public performances of their recordings. The “transition periods” seem designed simply to give the owners of popular sound recordings from the “golden age” a few extra years of royalties at the expense of the public domain. (Nonetheless, one must acknowledge that the “transition periods” are a vast improvement over the original version of the CLASSICS Act.)
Lack of consent: Section 1401(d)(1) defines consent as one would expect: a digital audio transmission of a pre-1972 sound recording shall “be considered to be authorized and made with the consent of the rights owner if the transmission is made pursuant to a license agreement voluntarily negotiated at any time between the rights owner and the entity performing the sound recording.” In addition, section 1401(b) provides in the alternative for a statutory license: a digital audio transmission of a pre-1972 sound recording shall “be considered to be authorized and made with the consent of the rights owner if” the transmission would be exempt under section 114(d)(1), or would be subject to the statutory license in section 114(d)(2), provided the applicable royalties are paid. Likewise, an ephemeral reproduction is considered authorized if it meets the conditions of the statutory license in section 112(e) and the applicable royalty is paid.
Remedies: Section 1401(a)(1), quoted above, subjects unauthorized “covered activity” to the usual civil remedies in section 502 (temporary and permanent injunctions), section 503 (impoundment and disposition), section 504 (actual damages and defendant’s profits, or statutory damages), and section 505 (costs and attorney’s fees), and (for violations of anti-circumvention or CMI), in section 1203. Significantly, section 506 is omitted from the list, so there are no criminal penalties for the unauthorized use of a pre-1972 sound recording. (Moreover, under the preemption provisions, described below, it appears that state-law anti-bootlegging laws are preempted as well.)
Those familiar with copyright law know that a plaintiff cannot recover statutory damages or attorney’s fees unless it has registered the copyright before the infringement commenced (or, for infringement of a published work, within 90 days of first publication). [17 U.S.C. §412 Because pre-1972 sound recordings are not being given a full federal copyright, they cannot be registered in the usual manner. Thus, the new statute provides that section 412 does not apply. [§1401(f)(5)(C)] Instead, the Act provides for a “filing requirement” to permit a rights owner to recover statutory damages and attorney’s fees. Under section 1401(f)(5)(A)(i), “an award of statutory damages or of attorneys’ fees … may be made with respect to an unauthorized use of a [pre-1972] sound recording … only if (I) the rights owner has filed with the Copyright Office a schedule that specifies the title, artist, and rights owner of the sound recording,” as provided in regulations that the Register of Copyrights is required to adopt within 180 days; and (II) the use occurs more than 90 days after that information “is indexed into the public records of the Copyright Office.”
The statute also provides an alternative limitation on statutory damages and attorney’s fees that depends both on action by the transmitting entity and inaction by the rights owner. Under section 1401(f)(5)(B)(i), “any entity that, as of the date of enactment of this section, performs a [pre-1972] sound recording … by means of a digital audio transmission” may file its contact information with the Copyright Office, pursuant to regulations that must be adopted within 30 days of enactment. “The Register of Copyrights may accept [such] filings … only until the 180th day after the date of enactment.” §1401(f)(5)(B)(ii). If the defendant does so, no award of statutory damages or attorney’s fees may be made against it, “if the use occurs before the end of the 90-day period beginning on the date on which the entity receives a notice” from the rights owner that “identifies the sound recording in a schedule conforming to the requirements prescribed by the regulations issued under subparagraph (A).” (This overlooks the fact that “the regulations issued under subparagraph (A)” won’t exist until 180 days after enactment. Apparently the rights owner will have to guess in advance what the regulations will require.) If the notice is undeliverable, the 90-day period begins on the date of the attempted delivery.
What is the relationship between the two limitations on statutory damages and attorney’s fees? Because contact information can only be filed until 180 days after enactment, and only for entities that are already performing a sound recording, it appears that subsection 1401(f)(5)(B) was intended to be a transitional measure. (This is confirmed by the legislative history: Senate Report 115-339 says (at p. 19): “This contact information database will operate up to 180 days after enactment after which the database of works by copyright owners will control whether statutory damages and attorneys’ fees are available.”) But subsection 1401(f)(5)(A) begins with the proviso “Except in the case of a transmitting entity that has filed contact information for that transmitting entity under subparagraph (B), …”. Thus, if a transmitting entity files contact information within 180 days, subsection (f)(5)(B) applies (notwithstanding the apparent intent that it operate only as a transitional measure), and rights owners can recover statutory damages or attorney’s fees against that transmitting entity only by sending them a notice identifying its sound recordings. For transmitting entities that do not file contact information, subsection (f)(5)(A) applies, and rights owners can recover statutory damages or attorney’s fees only if they file a schedule with the Copyright Office identifying its sound recordings. In either case, statutory damages and attorney’s fees can only be recovered for acts that occur more than 90 days after the notice is sent or the filing is made. To preserve the right to recover statutory damages and attorney’s fees, therefore, rights owners will have to send a notice to all transmitting entities that file contact information and they will have to file a schedule with the Copyright Office. (Why Congress chose this baroque procedure, instead of simply granting a regular copyright to pre-1972 sound recordings and allowing or requiring them to be registered in the usual manner, is unexplained.)
Remedies are subject to the usual three-year statute of limitations in section 507 [§1401(f)(2)] and to the usual equitable defenses [§1401(f)(4)]. Section 230 of the Communications Decency Act (47 U.S.C. §230) does not apply as a defense, as the Act specifies that section 1401 is a “law pertaining to intellectual property,” to which section 230 does not apply. [§1401(g)] [Eric’s comment: compare how Congress handled the Defend Trade Secrets Act differently.]
Limitations and Exceptions: The Act provides that the exclusive rights protected by section 1401 are subject to the exceptions and limitations contained in section 107 (fair use), section 108 (uses by libraries and archives), section 109 (first-sale doctrine), section 110 (specified public performances), and section 112(f) (ephemeral recordings). [§1401(f)(1)(A)] Section 108(h), which allows libraries and archives to reproduce, distribute, perform or display a published work “in facsimile or digital form” during the last 20 years of its term, for purposes of preservation, scholarship, or research, unless “the work is subject to normal commercial exploitation” or “a copy or phonorecord can be obtained at a reasonable price,” applies to pre-1972 sound recordings for the entire remaining term of protection. [§1401(f)(1)(B)]
Congress also resolved a split in the lower courts by expressly making uses of pre-1972 sound recordings subject to the four “safe harbors” for Internet service providers in section 512. [§1401(f)(3)]
Noncommercial Use of Orphan Works: Under subsection 1401(c), a person may make a noncommercial use of a pre-1972 sound recording that “is not being commercially exploited by or under the authority of the rights owner,” if three additional conditions are met: (A) the person “makes a good faith, reasonable search for, but does not find, the sound recording” either in the records of the Copyright Office (as provided below), or “on services offering a comprehensive set of sound recordings for sale or streaming”; (B) the person files a notice identifying the sound recordings and the nature of the use in the Copyright Office; and (C) within 90 days after the notice “is indexed into the public records of the Copyright Office,” the rights owner does not file a notice opting out of the noncommercial use. [§1401(c)(1)]
The statute does not define “noncommercial use,” but it does exclude two possible definitions. First, “merely recovering costs of production and distribution of a sound recording resulting from a use otherwise permitted under this subsection does not itself necessarily constitute a commercial use of the sound recording.” [§1401(c)(2)(A)] Second, “the fact that a person engaging in the use of a sound recording also engages in commercial activities does not itself necessarily render the use commercial.” [§1401(c)(2)(B)] (The word “necessarily” in those two sentences could be grammatically redundant, but it might also be used to negate the meaning of those sentences, because it implies that “merely recovering costs” or “engag[ing] in [other] commercial activities” might “constitute a commercial use” in some circumstances.) The statute also provides that filing a notice of noncommercial use “does not itself affect any limitation” in sections 107, 108, 109, 110, or 112(f). [§1401(c)(2)(C)]
Subsection 1401(c)(3) requires the Register of Copyrights to adopt regulations within 180 days of enactment to provide “the form, content, and procedures” for filing notices of noncommercial use; and to “provide specific, reasonable steps that, if taken by a filer, are sufficient to constitute a good faith, reasonable search … to determine whether a recording is being commercially exploited.” Subsection 1401(c)(4) provides compliance with the latter “shall be sufficient, but not necessary,” to satisfy the requirement of a good faith, reasonable search; and it provides a safe harbor for a person who makes a noncommercial use of a pre-1972 sound recording, and who “made a good faith, reasonable search … without finding commercial exploitation of the sound recording by or under the authority of the rights holder.”
Subsection 1401(c)(5) requires the Register of Copyrights to adopt regulations within 180 days of enactment, to provide “the form, content, and procedures” for the rights owner of a sound recording to “file notice opting out of the covered activity described in the notice.” Such notices must be filed within 90 days of the date a notice of noncommercial use “is indexed into the public records of the Copyright Office.” Filing an opt-out notice does not itself enlarge or diminish any limitation contained in sections 107, 108, 109, 110, or 112(f). [§1401(c)(5)(B)]
Subsection 1401(c)(6)(A) provides a civil penalty of between $250 and $1,000 per notice for “[a]ny person who willfully engages in a pattern or practice of filing a notice of noncommercial use of a sound recording … fraudulently describing the use proposed, or knowing that the use proposed is not permitted under this subsection.” Subsection 1401(c)(6)(B) provides a civil penalty of between $250 and $1,000 per notice for “[a]ny person who files an opt-out notice … knowing that the person is not the rights owner or authorized to act on behalf of the rights owner.” A person who makes a pattern or practice of filing fraudulent opt-out notices shall be fined at least $10,000 for each such notice. “Knowing” is defined to mean actual knowledge, “deliberate ignorance” (i.e., willful blindness), or “grossly negligent disregard of the truth or falsity of the information.” [§1401(c)(6)(C)]
Ownership: The initial rights owner is determined by state law, as it existed before the date of enactment. [§1401(l)(2)(A)] Transfers occurring after the date of enactment are governed by sections 201(d) and (e) and section 204 of the Copyright Act. [§1401(h)(1)(A) and (l)(2)(B)] (Section 204 requires that any transfers of an exclusive right must be made in a writing signed by the transferor.) Rights owners are exempted from the requirement that they register the work before filing an action for a violation of section 1401. [§1401(h)(1)(B)]
Collection and Distribution of Royalties: Subsection 1401(b)(2) provides for the collection of royalties under the statutory license in accordance with section 112(e) and section 114(f).
Currently, royalties from the statutory license for digital audio transmissions are distributed according to section 114(g), which allocates 50 percent to the sound recording copyright owner, 45 percent to featured artists, 2.5 percent to non-featured musicians, and 2.5 percent to non-featured vocalists. [17 U.S.C. §114(g)] (Under Title III of the new legislation, the AMP Act, a portion of the amount due to the sound recording copyright owner or to the featured artists are to be paid to producers, mixers, and sound engineers.)
Under the CPA Act, for voluntary agreements entered into on or after the date of enactment, subsection 1401(d)(2) provides that the licensee shall pay “50 percent of the performance royalties for that transmission due under the license” to “the collective designated to distribute receipts from” the §114(f) statutory license (currently SoundExchange); and those payments “shall be fully credited as payments due under the license.” [§1401(d)(2)(A)] These royalties are to be distributed to featured artists and non-featured musicians and vocalists in the same proportions as under §114(g). [§1401(d)(3)] This accomplishes the same split of royalties that governs digital audio transmissions for post-1972 sound recordings, but it avoids calling the rights owner of a pre-1972 sound recording a “copyright owner.”
For certain agreements entered into before the date of enactment (voluntary agreements made in 2018, or settlement agreements made with “a preexisting satellite digital audio radio service,” i.e., Sirius XM Radio, Inc., in 2015 or later), the rights owner must pay to the collective “50 percent of the difference between … the right’s owner’s total gross performance royalty fee receipts or settlement monies received” and “the right’s owners total payments for outside legal expenses … directly attributable to the license or settlement agreement.” [§1401(d)(2)(B)] As with the above royalties, these funds are to be distributed to featured artists and non-featured musicians and vocalists in the same proportions as under §114(g). [§1401(d)(3)]
For any other voluntary agreements entered into before the date of enactment, the licensee is not required to make any payments other than those provided in the license. [17 U.S.C. §1401(d)(4)]
Preemption: There are two preemption provisions in the legislation. Section 1401(e) preempts certain causes of action that arose before the date of enactment; while an amended version of section 301(c) preempts certain causes of action that arise on or after the date of enactment.
Subsection 1401(e)(1) says: “This section preempts any claim of common law copyright or equivalent right under the laws of any State arising from a digital audio transmission or reproduction that is made before the date of enactment of this section of a sound recording fixed before February 15, 1972, if” two conditions are met: (A) the transmission would have been exempt under section 114(d)(1), or would have satisfied the requirements for the statutory license in section 114(d)(2), if the sound recording had been fixed after February 15, 1972; and (B) either (i) the transmitting entity pays any statutory royalty due within 270 days of enactment (about nine months), OR (ii) the transmitting entity pays the royalty due under a voluntary agreement (including a settlement agreement) with the rights holder.
Subsection 1401(e)(2) provides that a “claim of common law copyright or equivalent right” includes “a claim that characterizes conduct … as an unlawful distribution, act of record piracy, or similar violation.” So, the label doesn’t matter, as long as the claim arises from a digital audio transmission or reproduction.
Subsection 1401(e)(3) says that “Nothing in this section may be construed to recognize or negate the existence of public performance rights in sound recordings under the laws of any State.” In other words, whether a public performance right exists under State law (as a default matter) is still up to the individual states. I don’t think “the laws of any State” is limited to state statutes; but it is curious that the general preemption provision (below) uses the slightly different phrase “under the common law or statutes of any State.”
To summarize, subsection 1401(e) only preempts claims that arise before the date of enactment, only for digital audio transmissions or reproductions, and only if royalties are or were paid (or the transmission would have been exempt). (As a result, the CPA Act does not moot the appeal currently pending in the California Supreme Court, although the parties may decide to settle in light of the Act.) One ambiguity is whether this section covers all reproductions or only those that are incidental to a digital audio transmission. Given that the statutory license only covers incidental reproductions, that is the better interpretation.
The Act also amends the general preemption provision, 17 U.S.C. §301. Former section 301(c) provided an exception, specific to sound recordings, to the general preemption provision of section 301(a), that read: “With respect to sound recordings fixed before February 15, 1972, any rights or remedies under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2067. The preemptive provisions of subsection (a) shall apply to any such rights and remedies pertaining to any cause of action arising from undertakings commenced on and after February 15, 2067. Notwithstanding the provisions of section 303, no sound recording fixed before February 15, 1972, shall be subject to copyright under this title before, on, or after February 15, 2067.” That provision left all pre-1972 sound recordings to state law and allowed all of them to be protected until 95 years after February 15, 1972.
The first sentence of amended section 301(c) is essentially the same as the third sentence of former section 301(c): “Notwithstanding the provisions of section 303, and in accordance with chapter 14, no sound recording fixed before February 15, 1972, shall be subject to copyright under this title.” In other words, the Act provides neighboring rights under section 1401, not full federal copyright. (But section 1401 includes exclusive rights of reproduction, adaptation, and distribution, in addition to digital audio transmission, so the neighboring right is essentially the same as a full federal copyright.)
The second sentence of amended section 301(c) preempts broadly: “With respect to sound recordings fixed before February 15, 1972, the preemptive provisions of subsection (a) shall apply to activities that are commenced on and after the date of enactment of the Classics Protection and Access Act.” So, henceforth, all future activities with respect to pre-1972 sound recordings are preempted, except that the next two sentences contain a reservation:
Nothing in this subsection may be construed to affirm or negate the preemption of rights and remedies pertaining to any cause of action arising from the nonsubscription broadcast transmission of sound recordings under the common law or statutes of any State for activities that do not qualify as covered activities under chapter 14 undertaken during the [term of protection]. Any potential preemption of rights and remedies related to such activities undertaken during that period shall apply in all respects as it did the day before the date of enactment of the Classics Protection and Access Act.
As explained above, “covered activities” include reproduction, adaptation, distribution, and digital audio transmission. The only “activities” I can think of that “do not qualify as covered activities” are public performances by means other than digital audio transmission, such as analog transmissions and audiovisual transmissions. If any state-law causes of action for those transmissions exist, the reservation potentially preserves them, but only if they also “aris[e] from the nonsubscription broadcast transmission of sound recordings” during the term of protection. “Broadcast transmission” is likely limited to over-the-air broadcasting, and “nonsubscription” does not include pay services (such as cable TV). So, only causes of action arising from “free” (or advertiser-supported) over-the-air transmissions are reserved.
To summarize: the CPA Act preempts state-law causes of action arising before the date of enactment from digital audio transmission or reproduction of pre-1972 sound recordings, but only if they otherwise would be exempt or covered by the statutory royalty. The CPA Act preempts all state-law causes of action arising on or after the date of enactment for any use of pre-1972 sound recordings, including digital audio transmissions, except that it stays neutral with regard to state-law actions (if any) for public performances, based on non-subscription broadcast transmissions of sound recordings that are not digital audio transmissions.