Statement of Marybeth Peters
The Register of Copyrights
before the
Subcommittee on Courts, the Internet, and Intellectual Property,
Committee of the Judiciary
United States House of Representatives
110th Congress, 1st Session
March 22, 2007
Reforming Section 115 of the Copyright Act for the Digital Age
Chairman Berman, Ranking Member Coble, and Members of the Subcommittee,
thank you for inviting me to testify before you today on Section 115
of the Copyright Act and how best to reform it. Section 115 provides
a compulsory license for the making and distribution of physical phonorecords
and digital phonorecord deliveries. This Subcommittee has had a number
of hearings over the past three years concerning Section 115 to identify
its problems and explore potential solutions. During this time, industry
groups that were originally divided about the need for reform have now
all agreed that reform is necessary, although they have never been able
to agree on how to accomplish this goal.
Let me say at the beginning of my testimony that I believe
that reform of the digital music licensing system is the most important
music issue currently before Congress. It is an important issue not only
to digital music services who want to offer robust music services utilizing
thousands of legal copies of musical works, but it is also important
to the songwriters and copyright owners who deserve compensation when
others use their works. If music licensing reform is successful, consumers
will be able to access more legal music online, through a variety of
competing services, and be less tempted by piratical services that today
can already offer every song ever written for free.
History of Section 115
Almost a century ago, Congress added to the Copyright Act the right
for copyright owners to make and distribute, or authorize others to make
and distribute, mechanical reproductions (known today as phonorecords)
of their musical compositions. Due to its concern about potential monopolistic
behavior, Congress also created a compulsory license to allow anyone
to make and distribute a mechanical reproduction of a musical composition
without the consent of the copyright owner provided that the person adhered
to the provisions of the license, most notably paying a statutorily established
royalty to the copyright owner. Although originally enacted to address
the reproduction of musical compositions on perforated player piano rolls,
the compulsory license has for most of the past century been used primarily,
when used at all, for the making and distribution of physical phonorecords
and, more recently, for the digital delivery of music online.
Twice since its inception in 1909, Congress has amended
section 115, first in 1976, when Congress enacted the 1976 Copyright
Act—a wholesale revision of the copyright law, and again in 1995,
with the passage of the Digital Performance Right in Sound Recordings
Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (1995), to accommodate
the delivery of music by means of a digital transmission. The changes
adopted in 1976 were implemented to ease the burdens placed on the copyright
owners, clarify ambiguous provisions and establish a mechanism to adjust
the royalty rates over time, whereas the changes made in 1995 were in
response to the emergence of new digital technology that, for the first
time, provided a quick and inexpensive way to deliver music directly
to the consumer's computer. To accommodate these new delivery methods,
Congress modified section 115 to provide expressly for the reproduction
and delivery of a phonorecord by means of a digital transmission. Congress
took these steps in order to reaffirm the mechanical rights of songwriters
and music publishers in on-line environment.
My Office has also updated the regulations that govern
the functioning of the existing statute, most recently in June 2004.
Regulatory changes, however, cannot address the inherent problems with
the statutory license, and the Section 115 compulsory license remains
a dysfunctional option for licensing the reproduction and distribution
of musical works. Hence, its primary purpose today is to provide a ceiling
for the royalty rate used in privately negotiated licenses.
However, that could change and the Section 115 license
could become a useful tool for delivering music in a digital environment,
if changes can be made to transform the license from a historical relic
into a viable mechanism for licensing music on-line. In order for Section
115 to be workable for songwriters, music publishers, online music companies,
and consumers, Congress must take action and make the necessary structural
changes.
The Need for Reform
Recognizing the importance of enabling legal music services to compete
with illegal sources of on-line music, Congress has tried to update our
laws to combat illegal sources of music on several occasions and the
courts have expanded the theory of secondary liability expressly to cover
activities that induce others to infringe.1 Congress
has also held oversight hearings on how to make legal services more able
to compete with illegal sources. A primary focus of Congressional inquiry
has been the reform of Section 115.2
The need for reform became crystal clear during a hearing
on March 11, 2004, before this Subcommittee.3 Interested
parties testified about the difficulties they have encountered in licensing
the use of nondramatic musical works under the antiquated statutory scheme.
They voiced complaints about the notice requirements, lack of clarity
over what activities are covered by the license, which rights are implicated,
and problems with use of a per-unit penny-rate royalty. A key issue identified
by the music services involved the use of business models, e.g., streaming,
that required the user to pay one agent for the publishers and songwriters
to clear the reproduction and distribution rights (often referred to
as the mechanical right) and then to pay a second agent for the same
copyright owners to clear the public performance right for use of the
same musical works. While it was widely recognized that the performance
right could be cleared easily with blanket performance licenses from
the three performing rights societies, it became apparent that no similar
mechanism existed to clear the reproduction and distribution rights with
equal ease.
Recognizing the need to explore these issues further,
the leadership of this Committee asked me in July of 2004 to bring together
representatives of the National Music Publishers' Association, Inc. (“NMPA”)
and its subsidiary The Harry Fox Agency, Inc. (“HFA”); the
Recording Industry Association of America (“RIAA”), and the
Digital Music Association (“DiMA”) to see if agreement could be
reached on a general framework of reform. Although the parties willingly
participated and agreed to consider a blanket licensing approach, reaching
consensus on the details proved impossible.
Subsequently, at the request of this Subcommittee, I
prepared model legislation for reform of Section 115 that was centered
around the creation of Music Rights Organizations (“MROs”).
The hallmark of the proposal was the creation of licensing organizations
that would offer blanket licenses covering both the mechanical and the
performance rights needed to transmit digitally the musical works in
the MRO's repertoire. Essentially, the MROs would offer “one-stop
shopping” to the extent the licensee could get a single license covering
a multitude of musical works even when the performance, reproduction
and distribution all take place in the course of a single transmission.
The proposal, however, was not embraced by the affected
parties. Instead, they returned to the drawing board and, in late 2005
and early 2006, they participated in a broader series of discussions
on how to reform Section 115 hosted by the Subcommittee. From these discussions,
a number of issues were resolved through various compromises that resulted
in the introduction of H.R. 5553, the Section 115 Reform Act of 2006
(“SIRA”) on June 8, 2006 by Mr. Smith and Mr. Berman. This
legislation was marked up in this Subcommittee on the same date, and
was incorporated into a larger package of bills that was originally scheduled
for full Committee markup last September.
Key Issues
In reviewing the possible options for reform of Section 115, there are
four key issues that must be addressed in any legislation: 1) Scope of
the license and clarification of rights; 2) Collection and distribution
of royalty fees; 3) Efficiency of the licensing process; and 4) Rate
setting procedures.
1. Scope of the Statutory License and Clarification of
the Rights
One of the major frustrations facing online music services today, and
what I believe to be the most important policy issue that Congress must
address, is the lack of clarity regarding which licenses are required
for the transmission of music. Let me explain why I believe this to be
the case.
Today consumers can listen to music streamed over the
Internet or, rather than purchase a physical CD, they can order a digital
copy from iTunes or a similar service for about 99¢. While a stream
of music can be viewed primarily as a public performance, it is necessary
to make server, cache, and other intermediate copies4 of
the sound recording and the musical work5 embodied
therein in order to facilitate the delivery of the performance. Similarly,
the purchase of a digital phonorecord delivery of the same recording
can be viewed primarily as a mere reproduction and delivery of a copy
for private use, but this is not a settled area of the law. Publishers
maintain that any transmission of a sound recording involves a public
performance of the musical work embodied therein and the issue is now
being considered by the rate court in the Southern District of New York.
But why is this important? If both the mechanical and
the performance rights are implicated and the money goes to the same
copyright holders, why not make a single payment to one agent for the
digital transmission of the work? The answer is that the current music
licensing structure does not allow for that option. In the United States,
the performance right is licensed by three performing rights organizations:
the American Society of Composers, Authors and Publishers (“ASCAP”),
Broadcast Music, Inc. (“BMI”), and SESAC, Inc. Collectively,
the repertoires administered by these three performing rights organizations
account for virtually all musical compositions in the marketplace. However,
consent decrees have limited some of these organizations abilities to
license both the performance and the mechanical rights. As a result,
the mechanical right is licensed under the provisions of the Section
115 statutory license, or directly through the publisher or an agent
acting on behalf of the publisher. The largest agent acting in this capacity
is The Harry Fox Agency, which has authority to issue mechanical licenses
for more than 1.6 million songs on behalf of more than 31,000 publishers
worldwide.6
The reality of digital transmissions, though, is that
in many situations today it is difficult to determine which rights are
implicated, and to what extent. Hence, there is a need to clarify the
rights involved with different types of digital transmissions in order
to determine whether a royalty is owed and at what rate. For example,
do the intermediate copies made by routers and computer caches during
the delivery of a work to a consumer qualify as “digital phonorecord
deliveries?” Moreover, would such copies be compensable under a Section
115 license or should such copies be exempted under the law because they
have no inherent value except to facilitate the already-licensed transmission
of a public performance of a musical work? Finally, clarification of
whether the delivery of a reproduction of a musical work for use by the
consumer is also a public performance is needed to determine whether
a separate license fee must be paid to the performing rights organizations.
As we have seen, licensors have rarely turned down the
opportunity in the digital age to seek royalties, even when the basis
for their requests is weak at best. Online music companies rightly complain
that they need certainty over what rights are implicated and what royalties
are payable so that they can operate without fear of being sued for copyright
infringement. Although the term “rights clarity” may sound obscure,
the issue is at the heart of any music licensing reform effort. Moreover,
if the statutory license is to be functional, it is important to identify
which reproductions are covered by a Section 115 license and to insure
that all necessary reproductions for making a digital transmission can
be easily licensed either under Section 115 or under a separate statutory
license.
Yet today, music services have forged ahead and have
begun offering legitimate music services to everyone's benefit even though
the rights questions remain unresolved. In doing so, they are exposed
to demands from the agents for both the mechanical and the performance
rights and are threatened with lawsuits if they do not acquiesce. And,
in fact, music services and the performing rights organizations are engaged
in active litigation in the Southern District of New York. In that case,
the parties are seeking a determination as to whether a digital phonorecord
delivery is also a public performance. Common sense and sound policy
counsel that the transmission of a reproduction of a musical work without
any rendering of the recording at the time of delivery should implicate
only the reproduction and distribution rights. But the law is ambiguous
on this point and the parties are at odds, so they turn to the courts
for an answer.
In the meantime, music services operate under the threat
of further suits and without any guidance on how to proceed. A far simpler
and more direct approach to the problem would be for Congress to amend
the law to clarify which rights are implicated in the digital transmission
of a musical work. For example, it may well be advisable to amend the
law to clarify what constitutes a public performance in the context of
digital transmissions, or to provide that when a digital transmission
is predominantly a public performance, any reproductions made in the
course of transmitting that performance will not give rise to liability.
By the same token, it may well be advisable to clarify that when a digital
transmission results in the receipt of a copy that may be performed on
more than one occasion after its receipt, there is no liability for any
public performance that might be embodied in the transmission (because
the transmission is a reproduction and distribution for which the copyright
owner is being compensated). Alternatively, you should consider creating
a licensing structure that covers all the rights involved in the digital
transmission of music. While either solution would bring stability to
the marketplace and set the stage for the development of more and varied
on-line music services, it is critical that the question be addressed
as an initial matter before attempting to resolve the other issues associated
with music licensing.
2. Collection and Distribution of Royalties
Under the current Section 115 license, licensees must serve notice upon
and pay each copyright owner or his or her designated agent directly
for the use of his or her musical works. The need for each licensee to
identify, serve notice, and pay the individual copyright owners creates
major inefficiencies for the licensee especially when the identity of
the copyright owner is not readily known or ascertainable. One way to
eliminate these inefficiencies is to specify one or perhaps more agents
whose responsibility it would be to collect and distribute royalties.
Such a system has already been established under the Section 114 statutory
license. Royalties under the Section 114 license, which are owed to the
copyright owners of sound recordings rather than that of musical works,
are paid to SoundExchange, an agent appointed by the rate setting body
to receive the royalties and then disburse them to the copyright owners.
Adoption of this collecting model would, however, give rise to important
administrative issues that would need to be addressed. First is the question
of administrative costs and what these costs cover. Ideally, an agent
should be allowed to deduct only those costs associated with the collection
and distribution functions accorded to it by law. Such organizations
should not have wide discretion to tap the royalty pools to fund lobbying
efforts, lawsuits not directly associated with the collection and distribution
of the royalties or tangential licensing practices not associated with
the statutory license. Second, the law should include authority for the
appointing body to oversee the activities of the agent, including rulemaking
authority to establish regulations governing the type and amount of information
that must be submitted to determine the extent of use of specific musical
works. Third, the law should include guidance on how the royalties will
be distributed among the beneficiaries. The agent should not have discretion
on how to allocate the funds to copyright owners who have not actively
chosen the agent to represent their interests. And finally, provision
should be made to govern the retention and use of royalties for works
of copyright owners who cannot be identified or located and to insure
transparency of all activities.
Should Congress choose to adopt such a licensing scheme,
interested parties will have more to say about the organizational structure
of the governing board. While this is indeed an important issue, suffice
it to say that the law should require the governing body to include representatives
of all stakeholders—that is, music publisherse and songwriters—in such proportions that a reasonable balance can be maintained among
the varied interests of the respective stakeholders.
3. Efficiency of the Licensing Process
In addition to delineating the rights involved in a digital transmission,
creation of a blanket licensing scheme predicated on the filing of a
single notice would be a workable model to create efficiencies for all
stakeholders. Licensees would be able to minimize their transactions
to clear the rights to use the music, copyright owners would receive
full compensation for use of their works, and consumers would benefit
from the development of new and robust legitimate music services that
offer not only current hits but virtually any music that consumers want.
I have suggested this approach on a number of occasions and still believe
that it is an approach worth pursuing. Users have also suggested amending
Section 115 to allow for quarterly payment of royalty fees in place of
the current requirement to make monthly payments as a way to streamline
the payment process. Given that most licensees in the marketplace appear
to operate on a quarterly basis, a simple change to the accounting period
would be make the statutory license more workable for those who cannot
negotiate licenses in the marketplace. Undoubtedly there are other measures
that can be adopted to minimize the costs associated with the administration
of a statutory license and careful consideration should be given to any
such proposal.
4. Rate Setting Procedures
Currently, rates set pursuant to Section 115 reflect a unit price for
each reproduction and distribution, a pricing structure which suits the
making of physical phonorecords. However, it should be noted that certain
music services offer a variety of options for enjoying music at a fixed
monthly subscription rate, rather than charging a per stream or per download
rate. Such services have stated that it will have difficulty in utilizing
a statutory license that requires payment on a per unit rate and would
prefer a percentage of revenue option.
While I have testified that the current Section 115 does
not specifically require a per unit rate, parties have expressed concern
that the rate setting body would continue to set a per unit rate as has
been the practice throughout the history of the license. Consequently,
it may be advisable to adopt amendments that would clarify that the rate
setting body has the flexibility to set a schedule of rates depending
upon the services offered by the business and the manner in which it
prices its offerings, while ensuring that copyright owners are fairly
compensated. In any event, authority to set rates for a modified Section
115 license should remain with the Copyright Royalty Judges, the entity
created by Congress to establish rates and terms for the statutory licenses
in the copyright law, and they should have some discretion to establish
interim rates when new services become operational.
Legislative Options
The fundamental question is how to structure an effective and efficient
licensing system. First, because there are inherent difficulties in crafting
an entirely new licensing system, you should start by asking what is
the minimal amount that needs to be done to alleviate the problems that
face the music services under the current licensing structure and focus
on making these changes. No doubt interested parties will use this opportunity
to approach this Subcommittee and ask that it include a number of issues
marginally related to the reform of Section 115. That appears to have
been the case last year with respect to the Section 115 Reform Act. However,
I would urge this Subcommittee to focus on a narrow bill that addresses
only the most important core issues. Consideration of other issues will
only delay this important reform effort.
To reach this objective, I suggest two substantively
different options: either create a Section 114 style blanket license
or provide for wholesale sublicensing with a safe harbor provision for
the sublicensors. Both approaches would create a workable licensing system
that would allow music services to make digital transmissions of all
available musical works. The first, however, requires a substantial restructuring
of the Section 115 license whereas the second sublicensing option requires
only minimal modifications to achieve its objective.
Option 1: A Section 114 Style Licensing System for Digital Transmissions
Section 115 provides a statutory license to utilize a nondramatic musical
work to make and distribute phonorecords of sound recordings, but it
does so on a song-by-song basis. Section 114, on the other hand, offers
a blanket license covering the public performance right for sound recordings
embodied in digital transmissions. Moreover, the Section 114 license
is simpler to administer. It requires the filing of a single notice of
use with the Copyright Office, and it authorizes the Copyright Royalty
Judges (“CRJs”) to set rates and terms of payment for use of the
license, one of which is the designation of an agent to collect and distribute
royalty fees. Rights owners, artists, and online companies have been
supportive of this model since the agent designated by the CRJs, SoundExchange,
strives to identify and pay all rightholders, and it is my understanding
that its actions are generally regarded as transparent.
The problems associated with clearing the mechanical
rights for musical works are fundamentally the same as those associated
with clearing the performance rights for sound recordings. Hence, adoption
of a Section 114 style license for Section 115 would solve most of the
difficulties associated with clearing the rights to make and distribute
the musical works needed to facilitate a digital transmission or to make
a digital phonorecord delivery. It would provide one-stop shopping to
the music services both for the license and for the payment of the royalty
fees. In addition, it would eliminate uncertainty with respect to the
rates that apply to the use of music, provided that the license allows
the CRJs to set rates for new business models as they emerge. The system
would also offer substantial advantages to the rightsholders. Under a
blanket license system, there are economies of scale that reduce the
administrative costs associated with the collection and distribution
of the royalties. Moreover, a blanket license increases the possibility
that a creator=s works will be used because the works are readily available
and no special effort is required to locate the rights holder and clear
the license.
Option 2: Sublicensing
Currently, record labels may sublicense the mechanical rights to musical
works under a privately negotiated license, provided that it is a term
of the license, or apparently through Section 115.7 It
appears that this sublicensing can work efficiently since it conveys
all of the rights necessary for download services to operate legally.
Moreover, record companies have presumably cleared the rights to use
the underlying musical work in their sound recordings either through
private licenses or use of Section 115. For this reason, it makes sense
for music services to look to the record companies to clear the rights
to use both the sound recording and the musical work embodied therein.
Record companies, however, have been unwilling to sublicense
all music services because of the exposure they assume under such arrangements.
Record companies are concerned that should a sublicensee fail to make
timely payments for use of a musical work, the record company may be
responsible for those payments. Nevertheless, sublicensing is an efficient
way for online music services to obtain all the rights needed to make
and distribute phonorecords in today=s digital marketplace and some thought
should be given to creating incentives for the record companies to increase
their willingness to sublicense more services. For example, the sublicensing
provision could be amended to create a safe harbor for those companies
that sublicense the mechanical rights to a digital music service and
the safe harbor should cover sublicenses negotiated in the marketplace
as well as those obtained under Section 115. Under such a provision,
which would require minimal amendments to existing law, record companies
would be responsible for clearing the rights and administering the sublicense,
including the collection and distribution of the royalties for the reproduction
and distribution of the musical works. However, the record companies
would not be legally responsible to copyright owners in the event of
a music service’s failure to make the required payments. Rather,
the music service would retain responsibility for making the appropriate
royalty payments in a timely manner and would be the subject of any infringement
action arising from an uncompensated use.
Should such an approach be considered, the law would
also have to impose certain requirements upon the record company to govern
whether (and if so, to what extent) record companies would be permitted
to make any deductions for administrative costs involved in sublicensing,
and whether the royalties for the statutory license should reflect those
costs so that they are borne by the licensees rather than the copyright
owners or the record companies.
Each of these two options could resolve one of the two key problems
I have identified with music licensing today: the difficulty online music
services have in clearing the rights to very very large numbers of musical
works in a system which currently requires licensing on a work-by-work
basis. However, neither option addresses the other key problem: the sometimes
apparently duplicative claims by two different agents of the same copyright
owner—that two different licenses–one for public performance
and one for reproduction and distribution—must be obtained in order
to make a digital transmission of a musical work. I have already suggested
some ways to resolve this problem, but further thought needs to be given
to how to correct what has become a dysfunctional model for licensing
music rights.
Other Options for Consideration
Over the past three years, I have offered and commented on a number
of different options in addition to the two identified above, ranging
from an outright repeal of Section 115 to the creation of a Music Rights
Organization (“MRO”) system which would combine all necessary
rights for digital transmissions into a single blanket license issued
by the entity authorized to license the public performance right of the
musical work. However, there was an outcry from all sections of the music
industry over the disruption they believed would occur under these two
options. Nevertheless, I continue to believe an MRO option is worth considering.
While music publishers have historically been well-served by the allocation
of licensing authority to performance rights organizations for performance
rights and to publishers and other agents for reproduction and distribution
rights, that division of labor is archaic, inefficient and unfair (at
least to licensee) in this age of digital transmission of music. As the
lines between performance and distribution have become blurred, the opportunities
for confusion and even abuse have become intolerable. It is noteworthy
that music publishing is the only industry in which this has become a
problem, and the reason clearly is that music publishing is the only
copyright industry in which such a division of licensing authority has
predominated. However, I recognize that the political difficulties that
the proposal faced in 2005 are likely to reappear should the Subcommittee
revisit my MRO proposal.
Similarly, last year's Section 115 Reform Act tackled
most of the difficult core issues associated with music licensing in
today's world and offered workable answers, e.g., blanket licensing,
coverage of the intermediate copies and hybrid offerings, a rate setting
mechanism, and a means to administer the license with the authorization
of the creation of designated agents.8 Nevertheless,
controversy over tangential issues and the details concerning implementation
resulted in lack of consensus. For this reason, I have suggested a narrower
and more focused approach to reforming Section 115 to deal only with
the specific problems identified with the functionality of the license.
Regardless of which option you chose to pursue and whether
it is one I have identified, Congress must solve the rights clarity issue
in order for any legislation to succeed in creating a viable licensing
structure for the music industry.
I look forward to working with this Subcommittee to see
that Section 115 reform legislation is enacted into law as soon as possible.
Thank you again for the opportunity to appear before you today.
1. MGM Studios, Inc. v. Grokster, Ltd., 243 F. Supp.
2d 1073 (C.D.Cal. 2003), aff’d, 380 F. 3d 1154 (9th Cir. 2004),
cert. Granted, 545 U.S. 1032 (2004), vacated and remanded by, 545 U.S.
913 (2005).
2. See Oversight Hearing on “Copyright Office
Views on Music Licensing Reform”: Hearing Before the Subcomm.
On Courts, the Internet, and Intellectual Property of the House Comm.
on the Judiciary,
109th Cong. (2005)(statement of Marybeth Peters, Register of Copyrights)
(available at http://www.copyright.gov/docs/regstat062105.html).
See also Music Licensing Reform: Hearing Before the Subcomm. On Intellectual
Property of the Senate Comm. on the Judiciary, 109th Cong. (2005)
(statement of Marybeth Peters, Register of Copyrights) (available at http://www.copyright.gov/docs/regstat071205.html),
Section 115 Reform Act (SIRA) of 2006: Hearing Before the Subcomm.
On Courts, the Internet, and Intellectual Property of the House Comm.
on the Judiciary, 109th Cong. (2005)(statement of Marybeth Peters,
Register of Copyrights) (available at http://www.copyright.gov/doc/regstat051606.html).
3. Section 115 of the Copyright Act: In Need of
an Update?: Hearing Before the Subcomm. On Courts, the Internet, and
Intellectual Property of the House Comm. on the Judiciary, 108th Cong. (2004)(statement
of Marybeth Peters, Register of Copyrights) (available at http://www.copyright.gov/docs/regstat031104.html).
The difficulties involved in licensing musical works have been apparent
since before the hearing in 2004. For example, in December 2001, I testified
before you on a report I had delivered to you pursuant to Section 104
of the Digital Millennium Copyright Act, Pub. L. 105-304 (1998), in which
I addressed some of the issues involved in music licensing that you and
I have been grappling with over the subsequent years. Digital Millennium
Copyright Act Section 104 Report: Hearing Before the Subcomm. On Courts,
the Internet, and Intellectual Property of the House Comm. on the Judiciary,
107th Cong. (2001)(statement of Marybeth Peters, Register of Copyrights)
(available at http://www.copyright.gov/docs/regstat121201.html). See
also Digital Millennium Copyright Act Section 104 Report (2001) (available
at http://www.copyright.gov/reports/studies/dmca/dmca_study.html).
4. Technically, these are phonorecords rather than copies,
see 17 U.S.C. § 101 (definitions of “copies” and “phonorecords”),
but terms such as “buffer copy” and “server copy” are
commonly used to refer to these reproductions.
5. A “musical work” refers to a composition
(e.g., the specification of notes and lyrics, such as a written page
of music) while a “sound recording” refers to the fixation of a
particular performance of a composition such as on an audio compact disc.
6. HFA Reports 2006 Collections, Susan Butler, N.Y. Billboard Magazine
Online (March 16, 2007).
7. See 17 U.S.C. § 115(c)(3)(I) and S. Rep. 104-128 at 43 (1995).
The Senate report language makes clear that the purpose of this provision
was to allow record companies to sublicense the mechanical rights. Specifically,
it states that “[t]he changes to S. 227 are intended to allow record
companies to license not only there own rights, but also, if they choose
to do so, the rights of writers and music publishers to authorize digital
phonorecord deliveries. If a record company grants a digital transmission
service a license under both the record company’s rights in a sound
recording and the musical work copyright owner’s rights, the record
company may be liable to the extent determined in accordance with applicable
law.”
8. It did not, however, address claims by performance rights organizations
that the performance right must be licensed by services that offer downloads
of music.
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