Part 2: Even More Of The Failure Of The MLC/HFA, Its Breaking Of The Law And Songwriters Not Getting Paid
Below is the second letter we sent to the The MLC and the US Copyright office listing even more illegal activities and lack of payments from the MLC.
The headlines are:
THE MLC IS GROSSLY UNDERPAYING ALL MUSIC PUBLISHERS AND SONGWRITERS IN DIRECT VIOLATION OF THE COPYRIGHT ACT AND RELATED REGULATORY REQUIREMENTS
THE MLC/HFA ARE ENGAGING IN UNAUTHORIZED LICENSING ACTIVITY FOR LITERARY AND DRAMATIC WORKS IN VIOLATION OF THE COPYRIGHT ACT
THE MLC/HFA ARE UNLAWFULLY ADDING INELIGIBLE ROYALTIES TO THE UNPAID ROYALTY POOL
WITH NO LEGAL BASIS, THE MLC REFUSED TO RECOGNIZE A MUSIC PUBLISHER’S LEGAL POSITION THAT THEIR WORKS ARE NOT LICENSABLE UNCER THE BLANKET LICENSE DUE TO LEGAL FORECLOSURE. IN DOING SO THE MLC BREACHED ITS REGULATORY OBLIGATIONS AND DEMONSTRATED A FAILURE TO REMAIN IMPARTIAL DESPITE NOTICE OF A BONA FIDE DISPUTE BETWEEN A RIGHTS OWNER AND A DIGITAL SERVICE PROVIDER
MLC/HFA DATA INTEGRITY ISSUES
And with that, see the below letter with the detail to each section:
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I am following up on our previous conversation in regard to a number of issues causing material harm to Word Collections and its songwriters (and all songwriters and music publishers globally).
THE MLC IS GROSSLY UNDERPAYING ALL MUSIC PUBLISHERS AND SONGWRITERS IN DIRECT VIOLATION OF THE COPYRIGHT ACT AND RELATED REGULATORY REQUIREMENTS
The MLC/HFA are materially harming Word Collections, its songwriters, and all other music publishers and songwriters by incorrectly calculating the streaming mechanical royalty rate resulting in a gross underpayment of royalties. Specifically, The MLC/HFA are including the streams of sound recordings embodying works that are ineligible for compulsory licensing under the MMA blanket license as they are not § 115 non-dramatic musical works. The estimated number of streams of these ineligible recordings is in the tens of billions; and incorporating these ineligible streams in the calculations renders every statement issued to date grossly inaccurate and in breach of The MLC’s mandated payment obligations under 17 USC §115(d) and 37 CFR §210.29.
THE MLC/HFA ARE ENGAGING IN UNAUTHORIZED LICENSING ACTIVITY FOR LITERARY AND DRAMATIC WORKS IN VIOLATION OF THE COPYRIGHT ACT
The Copyright Act provides in no uncertain terms that “a person may by complying with the provisions of [§ 115] obtain a compulsory license to make and distribute phonorecords of a nondramatic musical work…” 17 USC § 115(a)(1)(A) (emphasis added). Thus, dramatic works, by definition, are ineligible for compulsory licensing via The MLC blanket license. A non-dramatic musical work is defined by the US Copyright Office as “…an original work of authorship consisting of music — the succession of pitches and rhythm — and any accompanying lyrics not created for use in a motion picture or dramatic work.” See Copyright Office Circular №73.
The Copyright Office Compendium at § 802.2(A) distinguishes between nondramatic musical works and dramatic musical works as follows:
“A dramatic musical work is a musical work created for use in a motion picture or a dramatic work, including musical plays and operas…By contrast, a nondramatic musical work is a musical work that was not created for use in a motion picture or a dramatic work, such as a ballad intended for distribution solely on an album or an advertising jingle intended solely for performance on the radio.”
Based on this definition, dramatic works include, but are not limited to, every soundtrack of a Broadway or off-Broadway show (Hair, Grease, Cats, West Side Story, Wicked, etc.), songs written for films (Lose Yourself, Let it Go, etc.), and countless others.
Also note that under the Copyright Act, musical works (both dramatic and non-dramatic) are distinct from non-musical, spoken word “literary works”. Specifically, “musical works” are referenced at 17 USC § 102(a)(1) as one category of work eligible for copyright and “literary works” are separately referenced at § 102(a)(2).
There is no ambiguity as the plain text of the Copyright Act could not be any clearer. Only nondramatic musical works are eligible for compulsory licensing under § 115. Consequently, the Copyright Act, viewed in its entirety and as amended by the MMA, does not allow The MLC/HFA to license, administer, collect, or distribute royalties under the § 115 compulsory blanket license in connection with any other type work. It can only license and collect for nondramatic musical works. However, despite this prohibition, The MLC/HFA are engaged in illegal licensing activity and wrongly incorporating tens of billions of streams of ineligible sound recordings of ineligible literary and dramatic works in the calculation of compulsory mechanical royalties, illegally decreasing the mechanical royalty rate owed to songwriters and publishers. In addition, it then sends out inaccurate royalty statements and payments for the ineligible works in breach of The MLC’s mandated payment obligations under 17 USC §115(d) and 37 CFR §210.29. The end result is that The MLC is paying all music publishers and songwriters incorrectly calculated mechanical royalties that are lower than what The MLC/HFA should be paying while creating illegal piles of “accrued but unpaid” royalties for ineligible works and sending out inaccurate (if not fraudulent) royalty statements for works ineligible to be licensed under the compulsory license.
In addition, in almost all cases for the literary works, the works are not licensed for public performance. Therefore, The MLC cannot do a public performance deduction for the literary work streams, but it is doing so anyway further reducing the mechanical royalty rate to the detriment of all music publishers affiliated with the MLC which simultaneously increases the amount of accrued but unpaid royalties even more.
THE MLC/HFA ARE UNLAWFULLY ADDING INELIGIBLE ROYALTIES TO THE UNPAID ROYALTY POOL
As detailed above, The MLC/HFA are engaged in unauthorized and unlawful licensing activity by acting as if they are licensing and collecting royalties from tens of billions of digital streams of ineligible literary and dramatic works in violation of 17 USC § 115(a)(1)(A), § 115(d), and 37 CFR §210.29. Given that literary work authors and, in some cases, dramatic work songwriters are not entitled to the receipt of compulsory mechanical royalties, they cannot register with The MLC.
The result is The MLC is channeling money into the accrued but unpaid royalty pool becoming eligible for liquidation to music publishers by market share (and potentially to pay for The MLC’s overhead) who have no statutory, regulatory or any other legal right to the receipt of those funds. The MLC’s accumulation of accrued royalties for these literary and dramatic works violates the law. In addition to potently enriching the MLC, HFA and/or other music publishers, it also works to the detriment of every MLC eligible songwriter and music publisher whose royalties are being artificially diluted by The MLC/HFA’s including the tens of billions of ineligible sound recording.
If The MLC’s position is that the DSPs should have filtered out the ineligible sound recordings prior to remitting the usage logs to The MLC, then The MLC has identified that the DSPs are providing deficient usage logs thereby allowing The MLC to terminate the DSPs’ blanket license. If not, then The MLC is acknowledging HFA’s and The MLC’s inability to perform the job they are required to do under the law. Taking no action to date has triggered The MLC’s violation of the law.
WITH NO LEGAL BASIS, THE MLC REFUSED TO RECOGNIZE A MUSIC PUBLISHER’S LEGAL POSITION THAT THEIR WORKS ARE NOT LICENSABLE UNCER THE BLANKET LICENSE DUE TO LEGAL FORECLOSURE. IN DOING SO THE MLC BREACHED ITS REGULATORY OBLIGATIONS AND DEMONSTRATED A FAILURE TO REMAIN IMPARTIAL DESPITE NOTICE OF A BONA FIDE DISPUTE BETWEEN A RIGHTS OWNER AND A DIGITAL SERVICE PROVIDER
A publisher recently notified The MLC in writing that The MLC did not have the authority to license, administer, or collect royalties for certain scheduled catalogs of works under Spotify’s blanket license as the scheduled works are not available for compulsory licensing. The publisher requested that The MLC refrain from making any royalty payments for Spotify’s exploitation of the scheduled works to ensure that Spotify could not claim, as it had in the past, that there was an implied license pending the publisher’s dispute with Spotify as to the licensing status of the works at issue. Despite the publisher’s written notification to The MLC, The MLC, with no basis under the MMA or regulations, stated to Word Collections in writing and via phone that it will ignore the publisher, continue to treat the scheduled works as licensed under the blanket license, and unilaterally deposit royalty payments owing to Spotify’s reportedly unlicensed exploitation of the works into the administrator’s designated account — despite the scheduled works not being available for compulsory licensing, and therefore, not within The MLC’s authority or jurisdiction to license, collect, or administer.
The MLC has blatantly overstepped its authority by refusing to recognize the publisher’s legally supported position, and instead continuing to treat ineligible works as being available for compulsory licensing when the plain and unambiguous language of § 115 mandates that the possibility of a compulsory license was foreclosed. There is nothing in the MMA or regulations that purports to restore a statutorily foreclosed right to a compulsory license. The publisher did not ask The MLC to take sides; only to suspend payments and hold the funds in escrow or return the money to Spotify pending the publisher’s resolution of the issue with Spotify. The MLC, with no basis, insists that it must continue to act as if the compositions are licensable under the compulsory blanket license and therefore it remains obligated to make the payments. However, The MLC cannot be obliged to administer compulsory mechanical royalties for works that are claimed to be statutorily ineligible for compulsory licensing. The merits of the publisher’s claim are not for The MLC to decide. The MLC must stand aside and refrain from taking action that could inure to the publisher’s detriment. Spotify has nothing to lose by The MLC holding the payments in escrow, but the publisher has everything to lose if payments foisted upon it by The MLC are construed as giving rise to an implied license that the publisher (and the administrator) denies. Indeed, the very issue at the heart of the publisher’s dispute with Spotify is currently being litigated in the Eight Mile Style litigation. The MLC must remain neutral. It is not. By forcing the publisher to accept payment of royalties for the exploitation of works the publisher contends are unlicensed, The MLC appears to be colluding with Spotify to create the illusion of a license when the publisher contends none exists and risks creating liability in the form of contributory or willful infringement.
Ironically, at the same time The MLC insists on paying royalties for works claimed by a publisher to be ineligible for compulsory licensing, The MLC is not, and refused, to pay Word Collections royalties as required under the regulations that are undeniably required to be paid under the law. We previously documented that The MLC breached its statutory obligations by failing to timely pay certain royalties that were due for the month of March 2022. When we asked to be paid in the month when the royalties were due in compliance with its obligations, The MLC said “no” without citation to any statutory or regulatory basis authorizing deferral. It is ironic to say the least that The MLC apparently sees fit to both withhold payment and force payment as may be convenient to suit its needs. If The MLC can choose to defer royalty payments admittedly due, it can suspend and hold payments the publisher contends are not earned from licensed activity. Indeed, the MLC will hold payments in escrow when presented with a bona fide dispute between rights owners. In doing so, The MLC takes no side in the dispute and awaits the outcome.
MLC/HFA DATA INTEGRITY ISSUES
The attached screen shot is from a current MLC/HFA statement. Note that the there are two different sound recordings of two different songs that The MLC/HFA have indicated have the same ISRC.
The ISRC in The MLC/HFA public works database for one of the two recordings is different demonstrating that The MLC/HFA have the data.
This means The MLC/HFA failed to implement checks and balances needed to identify when the same ISRC is being attached to two different musical compositions in a royalty statement, particularly glaring when The MLC/HFA public works database has record of the two ISRCs. The assignment of the same ISRC to two recordings of different songs, when there is an existing ISRC of each recording in The MLC/HFA database should be an impossibility or at the very least flagged for manual review prior to sending royalty statements. The fact that this check and balance clearly does not exist calls into question every ISRC linkage.
Under the circumstances, this type of glaring failure is extraordinary, and calls into question the integrity of all the data within The MLC/HFA statements.
Can you explain to us how this occurred and how all recipients of royalty statements from The MLC can be assured that the data in the statements is correct?
Thank you.
