Normally, to use a copyrighted work, the user has to seek permission of the copyright owner. In many instances such permission is given in exchange for a license fee paid to the owner. However, in some situations the law permits the user to use the work without the owner’s permission provided the user pays a statutory fee or a “compulsory license” to the copyright owner. Composers and performers are affected by different types of compulsory licenses.
The mechanical license affects composers’ exclusive right to reproduce and distribute their musical works. Once a composer has recorded and distributed his composition in America, the law permits others to make and distribute a recording of the same composition, subject to payment of prescribed fees to the copyright owner. In order to receive the benefit of the license the person making the recording has to serve a notice of intention on the copyright owner within 30 days of making the recording and before distributing it. If the owner’s name and address cannot be found in copyright office records, the notice can be filed in the copyright office. A copyright owner is entitled only to royalties collected after the copyright owner is identified in the copyright office records. This is another good reason to register your copyrights.
The mechanical license was introduced in 1909 because Congress feared that record companies could monopolize songs. It applies only to non-dramatic musical works. Thus it excludes the score of an opera or a musical ballet.
It is important to remember that a person who wants to record a musical composition cannot simply copy an earlier recording. That would violate the rights of the owner of copyright in the sound recordings. Also, he cannot “change the basic melody or the fundamental character of the song”.
Royalty rates for the license can be negotiated between the copyright owner and the record company. If the parties fail to come to an agreement, the rates will be determined by the Copyright Royalty Board. In practice, resort to arbitration proceedings is rare.
In 1995, an amendment to the law called the Digital Performance Right in Sound Recordings Act clarified that the mechanical license also extended to digital deliveries of sound recordings.
Many composers license their mechanical rights through an organization called the Harry Fox Agency. As a condition for granting membership to composers or music publishers, the Harry Fox Agency requires that the musician have at least one song commercially released through another party during the preceding 12 months.
Non commercial or public broadcasting entities can transmit copyrighted musical works if they negotiate a license agreement with the copyright owners. If they fail to reach such agreement, the law provides that the license will be set by the Copyright Royalty Board.
Performers are affected by compulsory licenses governing the use of sound recording. Sound recordings do not have general performance rights. So when an over-the-air radio station plays a song, performers cannot expect any compensation much less prevent the station from playing it.
In 1995, the Digital Performance Right in Sound Recordings Act (DPRSRA) introduced a performance right for sound recordings transmitted digitally. The concern behind this legislation was that digital technologies would enable consumers to substitute digital subscriptions for record purchases and this would deplete the stream of revenue for copyright owners of sound recordings. Purchase of records would further go down because of increased home taping.
The DPRSRA creates three classes of users. The first class of users, mainly terrestrial broadcasters of free radio and television programming, are completely exempt from the right. The second class, consisting of non-interactive subscription services such as XM and Sirius radio and Internet radio are subjected to a compulsory license. The third class, consisting of interactive services such as limited downloads, does not get the benefit of the license. They have to negotiate directly with the copyright owners.
The compulsory license discriminates between non-interactive subscriptions services established before July 31, 1998 and those established later. It requires all services to satisfy the following conditions to qualify for the license:
Services will not play more than two consecutive selections from single album in a 3 hour period.
Services will not give advance notice to consumers about selection that will be played.
New services have to meet following additional conditions:
Avoid giving advance notice of names of featured artists.
Limitations on retransmitting archived programs.
Do not abet consumer copying.
Take reasonable steps to assure that technological protection measures will function.
SoundExchange is the designated entity that collects royalties on behalf of labels and artists when their music is transmitted digitally i.e through digital cable and satellite television, digital radio such as satellite radio and Internet radio. Royalty is collected on a per performance basis and is distributed evenly between the artist and the label.
The royalty rate can be determined either by negotiations between the parties or by a rate setting proceeding before a statutory body called the Copyright Royalty Board. The Copyright Royalty Board periodically convenes to determine royalty rates.