Keeping Copyright Relevant in a Crypto-infused Arts and Music Environment

Can the burgeoning crypto and blockchain environment help revitalize copyright laws and related property rights?

The Constitution of the United States grants “Authors and Inventors the exclusive right to their respective writings and discoveries” for a limited time.[i] The importance of this clause cannot be overemphasized as it says much about the Constitution’s drafters who included this right in the body of the Constitution itself. It was not a latent thought requiring an amendment — rather a patent assertion that rights related to authors and inventors were founding principles for a new nation.

Although the United States strives to balance the public’s interest in authors and inventors works, the protective term is frequently lengthened. For example, in 1790, the term for copyright and patents was 14 years from issuance. For copyrights, the term could be renewed for another 14 years. Upon the expiration of either, the patent or copyright entered into the public domain, where anyone could use the work without paying a licensing fee. In 1831, the copyright term was extended to 28 years with another 14-year option to extend. Today, a copyright[ii] held by an individual is protected for life plus 70 years under 17 U.S.C. Section 302.

This trend continues.

The “CLASSICS Act” was introduced on July 19, 2017 by Rep. Darrell Issa and a companion Senate bill was introduced by Sen. Chris Coons on February 7, 2018. This Act became the Music Modernization Act, and after passing the Senate, was renamed the “Orrin G. Hatch Music Modernization Act,” signed into law on October 11, 2018. This Act offers federal copyright protection to sound recordings made before February 15, 1972. In addition to other Copyright Act changes, recordings made from 1957–1972 may be protected until 2067 — up to 90 years, under the Music Modernization Act.[iii]

In my opinion, these extensions go well beyond the original Constitutional intent. In addition to source code copyright protection under the Copyright Act [iv], the arts-related extensions tend to impede the public as well as subsequent innovators from actively engaging and investigating not only new technology, but new contract terms and rights.[v]

This article addresses how artists and other creatives using blockchain-based services may push change in copyright law, re-conceptualize contract drafting and test copyright enforcement alternatives.

Copyright and Technology — Uncomfortable bedfellows

Copyright law has kept technology at bay since at least piano roll days where none other than Mr. Justice Holmes in concurrence to the case, White-Smith Music Publishing v. Apollo Company said “[o]n principle anything that mechanically reproduces … sounds ought to be held a copy, or, if the statute is too narrow, ought to be made so by a further act.”[vi] This 1908 case, was referenced recently in a multi-million dollar case against Spotify where publishing companies and musicians alleged that Spotify infringed upon mechanical rights along White’s similar line.[vii]

With all that blockchain may do, will it help ensure Constitutional promises?

Contracts, contracts, contracts

Blockchain proponents claim that using “smart contracts” will eliminate the need for third parties under many circumstances. A “smart contract” is self-executing computer code that runs without human interference. The “contract” part of a smart contract is of particular interest. Blockchain, often described as a virtual ledger, keeps track of transactions performed on it. For the most part, these transactions are recorded as money transfers, but are increasingly transactions related to digital assets represented by a token. When a smart contract is initiated, related data is sent to nodes which are charged with the obligation of solving a cryptographic puzzle to validate the transaction. [The nodes, by way of comparison, operate in a way similar to a notary public. A notary verifies the identity of a signatory but does not assess the legal sufficiency or substance of the attached document.]

Each node “agrees” to participate in this problem solving exercise. The parties that began the contract’s execution have agreed to the “terms” of the smart contract. The parties are not personally agreeing to every node’s behavior, but the related protocols supporting the code’s execution are baked into the process.

For lack of any commercial code directly applicable to digital assets, like commodity tokens[ix], sellers and buyers have to rely on a legal mish-mash containing elements of the Uniform Commercial Code (“UCC”) in the United States or United Nations Convention on Contracts for the International Sale of Goods (“CISG”) internationally[x] as well as varyingly applicable statutes and case law.[xi]

For copyright protected commodities, blockchain may be an opportunity to correct or maybe direct a more balanced income stream.[xii] Technology enables easy music and image transfers where the artists who created the works are frequently cut out of any income from those transfers. Musicians today make more money from concert performances than music sales and streaming.[xiii] Artists who make their works available online find digital reproductions all over the internet.

Currently, if you download or stream music, you have a license to use that music in the way described by the terms of use or terms of service. This is the same for using digital art representations. The copyright to these works generally is not granted. As opposed to a physical CD or art print, the personal property interest in the license often has limited licensing and transfer permissions. If someone wants to sell a physical CD or art print, absent any other agreement, that physical embodiment comes under the “first sale doctrine” where the copyright owner cannot prevent downstream sales, i.e., the secondary market, of that object.[xiv]

I would like to suggest that to keep copyright relevant for digital asset holders, there should be a digital asset first sale doctrine for commodity tokens. In this way, the purchaser of a commodity token (which either allows access to a unique art piece or music or has unique art or music embedded as a separate file or is represented by the token itself), has the right to resell that specific access or file to another without being in violation of copyright laws. If an artist does that now (if there is not a contract allowing this kind of transaction), it will likely be assumed that the purchaser has the right to “use” the music or art piece digital asset, e.g., license, but not the right to sell.

In the absence of this doctrine, practitioners should consider adding contract terms to copyright-driven blockchain-built business models that will help put artists on a level playing field. For copyright-based commodity tokens or other copyright-based assets sold, bought or traded using blockchain technology consider:

· Shortening the copyright term during which infringement may be enforced by the creator

· Permitting derivative works, but require compensation upon entering the contract

· Requiring attribution for “free” licenses to use; and

· Capping future royalties for secondary market sales to share the risk the buyer takes in purchasing an art piece or music.

People are buying and using the commodity tokens equivalents right now. It is reasonable for the law to follow use. Art and music related token holders are using digital assets as if they are covered by the first sale doctrine and this kind of commodity token puts art and music at the forefront of an update to the first sale doctrine.[xv] If the right balance is struck between blockchain and copyright law, the tide could be turned in an author’s and inventor’s favor — just as the Constitution promised.

I look forward to comments.

Thank you for reading and have a wonderful holiday season!

This article was first published on LinkedIn on November 21, 2018. Cynthia M. Gayton is an attorney, educator and speaker. She has advised small and medium sized software development companies as well as arts and entertainment businesses and individuals. She has an undergraduate degree in international affairs with a concentration in science and technology as well as a J.D. Nothing in this article is purported to be legal or financial advice. You can contact the author via email at cynthia.gayton@gayton-law.com.

[i] United States Constitution, Article I Section 8, Clause 8.

[ii] Copyright protected works include “(1) literary works; (2) musical works, including any accompanying words; (3) dramatic works, including any accompanying music; (4) pantomimes and choreographic works; (5) pictorial, graphic, and sculptural works; (6) motion pictures and other audiovisual works; (7) sound recordings; and (8) architectural works.” Section 102. Subject matter of copyright: In general.

[iii] See, ”Anyone who, before February 15, 2067, and without the consent of the rights owner, performs publicly, by means of a digital audio transmission, a sound recording fixed on or after January 1, 1923, and before February 15, 1972, shall be subject to the remedies provided in sections 502 through 505 to the same extent as an infringer of copyright. Senate Report 115–339 — Music Modernization Act [https://www.congress.gov/congressional-report/115th-congress/senate-report/339 — last viewed October 4, 2018.]

[iv] Enumerated copyright rights include the right to(1) to reproduce the copyrighted work in copies or phonorecords;(2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending; (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; (5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

[v] It is not without some inside humor for bitcoin enthusiasts and gold standard bearers to note that the U.S. Growth rate has gone down since a high of 2.50 in 1973 to around 1.93 in 2007. In October 1973, the price of gold was raised to $42.22 and by 1976, the United States decoupled its monetary system from gold. The Copyright Act was changed in 1976 where the term of protection increased to the life of the author plus 50 years after the author’s death.

[vi] White-Smith Music Publishing v. Apollo Company, 209 U.S. 1 (1908)

[vii] Ferrick et al. v. Spotify, USA Inc. et al., №1:2016cv08412 (S.D.N.Y. 2018). The case was settled on May 26, 2017 and valued approximately for more than $112.55 million where a separate fund was created to compensate rights holders for past infringement. A notice of appeal was filed on July 3, 2018 relating to class action members who opted out of the settlement and others.[http://www.spotifypublishingsettlement.com/docs/SA/2017-6-23%20Ferrick%20-%20Executed%20Settlement%20Agreement%20(with%20Exhibits)%20(Corrected).pdf — last viewed July 16, 2018]

[viii] For a useful explanation of property rights management systems and smart contract/software systems, see “Blockchain and the Law” by Primavera De Filippi and Aaron Wright, Harvard University Press, 2018, pp. 162–165.

[ix] For purposes of this article, commodity tokens are tokens that represent a personal property interest in an art work or music.

[x] United Nations Convention on Contracts for the International Sale of Goods, Vienna, 11 April 1980, S.Treaty Document Number 98–9 (1984), UN Document Number A/CONF 97/19, 1489 UNTS 3. [http://www.uncitral.org/uncitral/en/uncitral_texts/sale_goods/1980CISG.html — last viewed July 24, 2018.]

[xi] In a recent case involving the Commodity Futures Trading Commission (CFTC), the U.S. District court for the District of Massachusetts sided with the CFTC finding that virtual currencies are commodities. [https://www.cftc.gov/PressRoom/PressReleases/7820-18 — last viewed October 4, 2018]

[xii] The current technology supported legal framework informed by traditional copyright applications actually decreased musicians’ (*.MP3) and visual artists’ (*.JPG) incomes. IFPI Global Music Report 2017, IFPI.org [last viewed July 23, 2018]

[xiii] IFPI Global Music Report 2017, IFPI.org [last viewed July 23, 2018]

[xiv] 17 U.S.C. § 109

[xv] Blockchain music examples: SingularDTV, dotBlockchain, Resonate, BitTunes, Storj, Voise, Choon, JAAK. Blockchain art examples: Verisart, Maecenas, Ascribe, FRESCO, All Public Art, Codex Protocol, Dada, NYC

Attorney, educator, speaker, and published author in the intellectual property, engineering and information technology fields.

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