On 11 October 2018, the Music Modernization Act (“MMA”) was signed into law. It effects a sweeping overhaul of the compulsory mechanical license mechanism set forth in 17 U.S.C. §115—among other significant changes. While many in the industry have been closely following the bill as it worked its way through the legislature, the following provides an overview of key terms regarding the mechanical licensing procedures under the new law that every digital music service provider should know. Importantly, though many aspects of the new system require further regulation and many months (or even years) before they are effective, certain licensee obligations will begin as early as next month.
The Blanket License
A primary feature of the new law is the creation of a blanket license for the mechanical rights implicated in interactive digital streaming and a mechanical licensing collective to administer the license and the associated royalties and administrative fees to be paid by the digital music service licensees. The blanket license eliminates the need for digital services to obtain licenses on a song-by-song basis through the Notice of Intent procedure under section 115 of the Copyright Act.
The blanket license covers all musical works (or shares of such works) available for compulsory licensing for purposes of covered activities, including interactive streaming and all copies/distributions made in connection therewith.
On the License Availability Date (which will likely be 1 January 2021), the blanket license will be automatically substituted in place of any preexisting compulsory license—and all compulsory licenses under the prior statute will expire.
“Covered Activities”
The blanket license under the MMA applies to “covered activities,” which is defined as “making a digital phonorecord delivery of a musical work, including in the form of a permanent download, limited download, or interactive stream, where such activity is subject to compulsory licensing under this section.”
Before the MMA, streaming activity did not necessarily require a mechanical license as a matter of law. While the bill removes this defensive argument, it also significantly limits infringement liability and the threat of litigation in which such an argument might have been advanced. A digital music provider that obtains and complies with the blanket license will not be subject to infringement actions based on the distribution of musical compositions.
Copyright Infringement Litigation
Moreover, for any copyright infringement action commenced against a digital music provider after 1 January 2018, for unlicensed use prior to the License Availability Date (i.e., within the next two years, roughly), the copyright owner plaintiff will only be able to recover royalties owed, and no other damages—removing the specter of (arguably draconian) statutory damages that has driven copyright infringement litigation over the past several years.
In order to be protected by the limitation of liability, existing digital service licensees must comply with certain conditions during the time period commencing 30 days after enactment and running through the period 90 days after the License Availability Date (which will be April 2021). These requirements include certain specified matching efforts.
For further information on the MMA, please read the full legal update.
This article was originally published on AllAboutIP – Mayer Brown’s blog on relevant developments in the fields of intellectual property and unfair competition law. For intellectual property-themed videos, Mayer Brown has launched a dedicated YouTube channel.