Legislative Efforts to Reform Section 115

The Section 115 Reform Act (SIRA)

The Section 115 Reform Act or SIRA was introduced in the House Subcommittee on Courts, the Internet, and Intellectual Property on June 8, 2006. The stated purpose of the bill was “to provide for licensing of digital delivery of musical works”. The bill would have provided a blanket license to digital music providers that would cover all digital deliveries of music including full downloads, limited downloads and on-demand streams, in addition to all incidental copies made in the course of licensed downloads. The act would have also established agents, referred to as the "general designated agent" and "additional designated agents" to issue licenses and collect royalties on behalf of copyright owners. The Copyright Royalty Judges would set the royalty rates and the rights of parties to enter into voluntary licensing agreements would also have been preserved.

Problems with SIRA

While these provisions were positive and would have improved the licensing process for digital music delivery, SIRA contained provisions that would have perpetuated unfair record label contract clauses, and unfairly curtailed the rights of the consumer and artists.

Diverting Licensing Fees From Artists to Labels

For example, provisions of the SIRA would have allowed recording artists to direct designated agents to divert their license fees to record labels, in order to recoup advances that the labels had provided them. While technically, the artist would have had the choice whether or not to divert such payments, the difference in bargaining power between the artists and labels cast doubts on the fairness of the arrangement. Besides, there was arguably no need for copyright legislation to contain provisions that aided record labels in recouping their costs.

In the event that an artist could not be located ("orphan works" ring a bell?), the record label could itself direct the designated agent to make payments directly to the label. As Public Knowledge President Gigi Sohn has pointed out, these provisions would have pre-empted or superseded any state laws that address unclaimed property. Why is this important? It appears that these provisions may have been aimed at New York settlements where record labels and publishers were required to pay back $50 million in royalties that should have been paid to artists. New York state law states that if an owner entitled to funds cannot be found, the property escheats to the government. The government then holds this money until the artist claims it. Despite such provisions, SIRA would have prevented some artists from receiving their publishing royalties.

Unfair to Consumers

SIRA would also have curtailed consumer home recording rights (often referred to as “fair use” right). SIRA would have required a license, albeit a royalty free license, for all incidental reproductions in the course of non-interactive streaming, such as an Internet radio webcast, only if the service in question did not “authorize, enable, cause, or induce” the recording of streams. Thus, SIRA would have prevented consumers from making noncommercial personal recordings and backups—for example, a homemade CD of tracks that were originally purchased online. Additionally, because a license could be denied to a transmitter that allowed the fair use kind of recording, SIRA would have restricted the kinds of music listening devices on which music could be recorded. Finally, the provision, if enacted, would have interfered with outcome of a lawsuit brought against XM Satellite Radio, over the previously mentioned inno player.

SIRA had other problems as well. While it covered all incidental reproductions in the course of a DPD within the scope of a license, it did not exempt incidental reproductions from a license requirement. Requiring licenses for incidental copies, which even the Register of Copyrights acknowledges have no independent economic value, would have unnecessarily and unfairly increased the cost of using music services for consumers. Additionally, while SIRA treated interactive streams as DPDs it did not clarify that such streams were not performances. As a result, the bill would have done nothing to prevent copyright owners from demanding payment for both the mechanical and performance rights for the same stream.