Copyright and Clearance of Content for Audio-Visual Projects, Including Film, Television, Video Games, Apps, and Internet Uses, and Related Issues Concerning Digitally Distributed Content

by Edward (Ned) R. Hearn

TABLE OF CONTENTS

  1. EXCLUSIVE RIGHTS OF COPYRIGHT OWNER WITH RESPECT TO COPYRIGHTABLE WORKS (SECTION 106).
  2. INTELLECTUAL PROPERTY CONTENT TO BE REVIEWED (CONTENT THAT IS PROPRIETARY TO OWNER AND ADDITIONAL CONTRIBUTED ELEMENTS UNDER THIRD PARTY LICENSES).
  3. QUESTIONS TO EXPLORE WITH PARTY FROM WHOM SEEKING RIGHTS (“LICENSOR”).
  4. INTELLECTUAL PROPERTIES TO BE LICENSED AND IDENTITY OF RIGHTS GRANTORS INVOLVED.
  5. SCOPE OF USE RIGHTS REQUEST WITH REGARD TO MEDIA USES.
  6. REVIEW OF COMPULSORY/VOLUNTARY LICENSES WITH RESPECT TO LISTED INTELLECTUAL PROPERTIES AND THEIR USES.
  7. 1995 DIGITAL PERFORMANCE RIGHTS IN SOUND RECORDINGS ACT (“DPRSRA”).
  8. 1998 DIGITAL MILLENNIUM COPYRIGHT ACT (DMCA – SECTION 405).
  9. RATES FOR WEBCASTING MASTERS.
  10. RATES FOR MUSIC ON STREAMING.
  11. RATES FOR MASTERS ON DPDs.
  12. RATES FOR MUSIC ON DPDs.

COPYRIGHT AND CLEARANCE OF CONTENT FOR AUDIO-VISUAL PROJECTS, INCLUDING FILM, TELEVISION, VIDEO GAMES, APPS, AND INTERNET USES, AND RELATED ISSUES CONCERNING DIGITAL DISTRIBUTED CONTENT

  1. EXCLUSIVE RIGHTS OF COPYRIGHT OWNER WITH RESPECT TO ALL COPYRIGHTABLE WORKS (SECTION 106):
    1. Exclusive right to reproduce.
    2. Exclusive right to distribute.
    3. Exclusive right to display.
    4. Exclusive right to perform (Section 114 qualifications regarding sound recordings).
    5. Exclusive right to create derivative works (i.e. creating new works incorporating substantial parts of pre-existing work).
    6. Issue of content that is within the public domain.
    7. See Paragraph F1 regarding compulsory license qualifications.
  2. INTELLECTUAL PROPERTY CONTENT TO BE REVIEWED (CONTENT THAT IS PROPRIETARY TO OWNER AND ADDITIONAL CONTRIBUTED ELEMENTS UNDER THIRD PARTY LICENSES):
    1. Music, including lyrics.
    2. Sound recordings.
    3. Films.
    4. Television shows.
    5. Videos.
    6. Text.
    7. Visuals, including:
      1. Photographs.
      2. Fine art.
      3. Illustrations.
      4. Designs.
      5. Sculptures.
      6. Fabrics.
      7. Talent name, likeness, and voice uses.
      8. Trademarks.
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  4. QUESTIONS TO EXPLORE WITH PARTY FROM WHOM SEEKING RIGHTS (“LICENSOR”):
    1. Authority of rights holder, Licensor.
    2. Scope of Licensor’s rights with respect to granting a third party certain rights to use content, including:
      1. Scope of rights Licensor is authorized to grant with respect to uses, territory, media, time, and fees.
      2. Any pre-existing limitations.
      3. Any pre-existing conflicting guarantees to/restrictions with third parties.
      4. Scope of uses and media rights granted to Licensor by its grantors.
      5. Duration of time and territory on rights granted to Licensor by its grantors.
      6. Fees.
  5. INTELLECTUAL PROPERTIES TO BE LICENSED AND IDENTITY OF RIGHTS GRANTORS INVOLVED:
    1. Music:
      1. Music publisher.
      2. Composer/lyricist.
      3. Print publisher with respect to musical notation and lyrics.
      4. Established third party industry representatives, including:
        1. The Harry Fox Agency.
        2. Performing rights societies: BMI/ASCAP/SESAC, plus performing rights societies outside of the United States.
        3. Copyright Office.
    2. Sound Recordings:
      1. Record company/“works made for hire”.
      2. Recording artists (managers/attorneys).
      3. Session musicians.
      4. Producers.
      5. Unions: AFTRA; AF of M; IATSE.
      6. RIAA.
    3. Television/film/videos:
      1. Must determine if Licensor has authority to grant use rights with respect to all elements included within the audio-visual work, not all of which may have been created by or under the direction of the “owner”, but may have been licensed for use in the audio-visual work:
      2. Studio/production company.
      3. Talent/artists (agents, manager, attorneys).
      4. Unions/guilds; WGA; DGA; SAG; AFTRA; AF of M; IATSE.
      5. Composers/publishers of score.
      6. Pre-existing music licensed for soundtrack.
      7. Authors of underlying text/book.
      8. Publishers of text/book and any authorizations to exploit text/book in other media.
      9. Illustrators/other content suppliers.
    4. Text:
      1. Publisher.
      2. Author.
      3. Sublicensed publishers.
      4. Unions: WGA (if text/book done for film or television).
    5. Visuals (including photographs, fine art, illustrations, designs, sculptures, and fabrics):
      1. Photographers/artists/designers.
      2. “Publisher” of the images with regard to reproduction rights.
    6. Name, likeness, and voice.
      1. Talent/artist (agent/manager/attorney).
      2. Exclusive rights holders based on services committed.
      3. Contractual restrictions on uses.
    7. Trademarks, to the extent that the re-purposing and re-publishing of any licensed intellectual property content is coupled with the trademark of Licensor or provider of product and trademarks used within the production, then need trademark license.
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  7. SCOPE OF USE RIGHTS REQUEST WITH REGARD TO MEDIA USES:
    1. Right to reproduce, distribute, perform, display, and to create derivative works.
    2. Scope of defined media, including:
      1. Physical media, such as DVD (open source) and DVD (dedicated hardware).
      2. Internet.
      3. Portals/servers/caching/streaming/downloading/P2P.
      4. Hyperlinking.
      5. Using content in packaging and text inserts.
      6. Using content in all media for marketing, promotion, publicity, distribution, advertising, and sale purposes.
    3. Transmission/delivery modes, including broadcast over the air television, cable, satellite, and the internet, wireless, and wired.
    4. Providing access to consumer:
      1. “Free” access.
      2. “Paid-for” access by unlocking encrypted intellectual property on submission of key/payment or paid-for subscriptions or pay-per-view.
    5. Duration of rights.
    6. Territorial scope of rights.
    7. Issues of bundling and coupling with content licensed or contributed by others.
    8. Fees.

  8. REVIEW OF COMPULSORY/VOLUNTARY LICENSES WITH RESPECT TO LISTED INTELLECTUAL PROPERTIES AND THEIR USES:
    1. Compulsory License: Right of non-owner to use as permitted by statute.
      1. Mechanical license for phonorecords, but applies to audio-only; does not apply to audio-visual projects.
      2. Certain basic cable transmissions.
      3. Digital audio-only transmissions:
        1. Performance or streaming of sound recording as distinct from a digital phonorecord delivery (or digital download)) of sound recordings.
        2. Compulsory right does not apply to audio-visual products even though sound recordings embodied in same.
        3. Compulsory only applies with regard to non-interactive and non-subscription (i.e. not on demand, rather a “webcast”) and must meet a series of specific technical requirements to qualify, even if non-interactive and non-subscription (see attached Schedules 1 and 2); and must file notice of intent to rely on compulsory right.
      4. Ephemeral recording (caching) for transmission from multiple servers.
    2. Voluntary License: All uses not covered by compulsory license are subject to and require a voluntary license, necessitating specific negotiation with and permission of the owner or the authorized Licensor of the content. Uses requiring a voluntary license include, but are not limited to:
      1. Reproduction, distribution, display, and performance of music, sound recordings, film, television programs, and any other intellectual property.
      2. Performance of music requires licenses from the performing rights societies, BMI, ASCAP, and SESAC (and international counterparts), to the extent that the music is performed/streamed, for example, over the Internet; rather than off the disc in the consumer’s home not connected to the Internet, for which the music performance license is not needed.
      3. Sound recording performance license in digital mode for interactive access or subscription (i.e. “on demand”); such access and use not subject to compulsory license and requires record company approval based on negotiations. Applies to a performance over the Internet, but not to performance in the consumer’s home by playing media through hardware not connected to Internet.
      4. Uploading content to servers for access by subscribers:
        1. Mechanical license for music.
        2. Music performance license.
        3. Synchronization license for music if coupled with visuals.
        4. License for sound recording.
        5. License to use other intellectual property content, including film, television, video, text/books, photographs (etc.), talent/artist’s name, likeness, voice, and trademarks.

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  9. 1995 DIGITAL PERFORMANCE RIGHTS IN SOUND RECORDINGS ACT (“DPRSRA”):
    1. 1972 Phonorecord Act Amendment to Copyright Act provided copyright protection for sound recordings, effective as of February 15, 1972, but excluded public performance of the sound recording from the scope of the exclusive protected rights of the copyright owner, although this is a right that has been common for sound recording copyright owners under the relevant laws of most major jurisdictions outside of the United States.
    2. In 1995, the DPRSRA provided a public performance right in the sound recording for the copyright owner for the first time in the United States (amending Section 106 and Section 114 of the Copyright Act). This grant applied, however, only in certain limited circumstances:
      1. Applies only to:
        1. Public performance by means of digital audio interactive and on-demand transmissions for which a voluntary license is required; therefore, it is the exclusive right of the sound recording owner (i.e. the record company) to decide whether to issue a license permitting interactive transmissions.
        2. Public performance by means of subscription non-interactive transmission – for which a compulsory blanket license applies; i.e., a voluntary license is not required from the sound recording owner; for example, DMX, Music Choice, and Sirius XM Satellite. (This legislation fostered a debate on whether the DPRSRA applied to Internet webcasters resulting in a provision being included in the DMCA).
        3. DPRSRA does not apply to digital broadcasters (i.e. transmissions by FCC licensed terrestrial broadcast stations), which are exempt from needing a public performance license (whether voluntary or compulsory) for sound recordings. The Copyright Office has ruled, however, that the DMCA applies to the simulcast of such stations’ programs over the Internet, and they must file for a compulsory license and pay the fee once established under the DMCA. Copyright Office and federal court determine that terrestrial radio stations (e.g., Clear Channel/iHeart Radio) must pay labels for the webcasting of their radio programs using the master records of the labels. This ruling is being challenged.
      2. Compensation for digital performances under compulsory license, which was established by arbitration panel under the auspices of the Copyright Office, currently is set at 10% of gross:
        1. Distribution of proceeds:
          1. 2 1/2% to non-featured musicians.
          2. 2 1/2% to non-featured vocalists.
          3. 45% to featured artist.
          4. 50% to record company.
        2. Conditions to qualify for compulsory license, without which transmission would be an infringement of copyright:
          1. Must not exceed “sound recording performance complement”; i.e., over a three (3) hour period, cannot transmit: more than two (2) consecutive or three (3) total selections from one (1) sound recording; or more than four (4) songs, or three (3) in a row, from same artist.
          2. Must transmit owner encoded copyright information with recordings, i.e., must identify sound recordings, the album, and featured artist.
          3. Prior announcements not permitted, cannot publish a program guide.
          4. Looped or continuous programs may not be less than three (3) hours in duration; and programs of less than one (1) hour and performed at schedule times may be performed only three (3) times in a two (2) week period, or four (4) times in a two (2) week period if one (1) hour or more in duration.
          5. Archived programs may not be less than five (5) hours in duration and may reside on website for no more than a total of two (2) weeks.
        3. DPRSRA also covers music (as distinct from sound recordings) by providing that statutory mechanical royalties, i.e., the reproduction and distribution rights of music owners (publishers), apply to “Digital Phonorecord Deliveries” (DPDs) by any subscription service:
          1. But still need permission of owner of the sound recordings to do a DPD which is a voluntary rather than a compulsory license.
          2. DPRSRA provides that when records are distributed by “digital phonorecord delivery,” the compulsory mechanical license rate for the music on the sound recording must be paid by record companies – rather than the rate set forth in any negotiated controlled composition clause under the contract with the recording artist – except under two (2) circumstances. First, contracts containing controlled composition clauses that were entered into on or before June 22, 1995 will continue to be given effect. And second, contracts containing controlled composition clauses that are entered into by singer-songwriters who retain the right to grant licenses to their songs – that is, who act as their own music publishers – will be given effect, if they are entered into after the songs in question have been recorded. [Section 115(c)(3)(E)].
      3. Current statutory rate is 9.1¢ per song, or 1.75¢ per minute of playing time if recording of song is greater than five (5) minutes.

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  10. 1998 DIGITAL MILLENNIUM COPYRIGHT ACT (DMCA – SECTION 405):
    1. The DMCA (further amending Section 114 of the Copyright Act) grants a public performance license for digital transmission or streaming of music sound recordings by webcasters, i.e. playing or performing (as distinct from a digital download) of audio musical sound recordings over the Internet. This activity does not fall directly within the three (3) categories addressed by the DPRSRA, and Section 405 of the DMCA amended the DPRSRA to expand the statutory (compulsory) license for non-subscription transmission to include webasting as a new category of eligible transmission, and therefore subject to a compulsory license. As such, the sound recording copyright owner cannot prevent the webcasting provided that all of the criteria required by the statute are satisfied by the webcaster and it has timely filed for a compulsory license.
    2. Webcasters took the position that the DPRSRA did not apply to them as their conduct was a “non-subscription transmission” and non-interactive, and therefore exempt from requiring the permission of sound recording copyright owners.
    3. RIAA’s position was that webcasters were required to get licenses from the sound recording copyright owners (i.e. the DPRSRA’s exemptions were only available to FCC terrestrial licensed broadcasters).
    4. The DMCA confirmed that a license, either compulsory or voluntary, was required, by providing that the sound recording copyright owners have the exclusive right to control on-line or Internet delivery of their sound recordings.
    5. The statutory license applies, however, only to certain non-interactive subscription and non-subscription transmissions. “Interactive service” is defined in the DMCA to exclude transmission of songs specifically requested by and for a particular user, and programming that is specifically designed for a particular user.
    6. To be eligible for the statutory license, a webcaster’s service and programming must meet several criteria. Services that do not meet the criteria need to obtain (i.e. negotiate) voluntary licenses directly from the recording companies or through the RIAA clearinghouse. Some webcaster/streaming companies (such as Yahoo! and Music Match) to eliminate any doubt have secured voluntary licenses even though they might have qualified for a compulsory license.
    7. The eligibility criteria for the compulsory license includes the following:
      1. Programming must comply with limitations designed to assure the sound recording copyright owner that webcasting (which generally occurs as uninterrupted programming) does not displace sales. As a condition for eligibility:
        1. programming should comply with the “sound recording performance complement”, which is defined under current law (basically as provided in the DPRSRA), to provide that over a three-hour period, a service should not intentionally program more than three songs or more than two in a row from the same recording, or four songs or more than three in a row from the same recording artist or anthology;
        2. archived programs that, when accessed, always start in the same place and play in the same order should be at least five hours long, and should not be available for more than two weeks at a time;
        3. continuous “looped” programs that always perform in the same order, but are accessed in a continuous play stream should be at least three hours long; and,
        4. rebroadcasts of programs can be performed at scheduled times three times in a two-week period for programs of less than an hour and four times for programs of an hour or more.
      2. The webcaster is not permitted to publish advance program guides or use other means to pre-announce when particular sound recordings will be played.
      3. The webcaster must use only sound recordings that are authorized for performance in the United States (e.g., do not play bootleg recordings).
      4. The webcaster must provide some means for the end user to identify the song, artist, and album title of the recording as it is being played.
      5. Any identification or technological protection information included in the sound recording must be passed through, as long as it does not impose substantial costs or burdens on the webcaster, or create any audible or visible effects for the end user.
      6. The webcaster must not deploy or support technological means to evade these requirements.
      7. To the extent it is technologically available, the webcaster must set transmissions so that receiving software will inhibit the end user from doing any direct digital copying of the transmitted data, and must not explicitly encourage home taping.

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  11. RATES FOR WEBCASTING MASTERS:
    For streaming their masters under compulsory licenses in a non-interactive environment (interactive use requires a negotiated license with record company), the Copyright Office has issued a schedule of fees currently as follows:
    1. Commercial Webcaster 2015 Rates:
      1. Commercial Webcasters (CRB):
        1. Annual minimum fee: $500 per station or channel. Services with greater than 100 stations or channels pay $50,000.
        2. 2015 Monthly liability: $0.0023 per performance.
      2. Commercial Webcasters (WSA):
        1. Annual minimum fee: $500 per station or channel. Services with greater than 100 stations or channels pay $50,000.
        2. 2015 Monthly liability: $0.0024 per performance.
      3. Broadcasters:
        1. Annual minimum fee: $500 per station or channel. Services with greater than 100 stations or channels pay $50,000.
        2. 2015 Monthly liability: $0.0025 per performance.
      4. Small Broadcasters:
        1. Annual minimum fee: $500 per station or channel. Services with greater than 100 stations or channels pay $50,000.
        2. 2015 Monthly liability: $0.0025 per performance.
        3. Reporting waiver fee: $100 per station or channel.
      5. Pureplay Webcasters:
        1. Annual minimum fee: $25,000.
        2. Nonsubscription transmissions: A greater of 25% of Gross Revenues, or $0.00140 per performance.
        3. Subscription/syndicated/bundled transmissions: $0.0025 per performance
      6. Small Pureplay Webcasters: Discontinued in 2015.
      7. Small Webcasters:
        1. Annual minimum fee: $5,000. If the service is reasonably expecting annual Gross Revenues below $50,000, then the annual minimum fee is $2,000.
        2. A “greater of” 10% of the first $250,000 of Gross Revenues (and 12% of all additional Gross Revenues), or 7% of Expenses.
      8. Microcasters:
        1. Annual minimum fee: $500.
        2. Annual reporting waiver: $100.
    2. Non-Commercial Webasters 2015 Rates (all non-commercial webcasters pay an annual minimum fee of $500 per station or channel):
      1. Noncommercial Webcasters (CRB): Excess listenership (greater than 159,140 aggregate tuning hours monthly): $0.0023 per performance.
      2. Non-commercial Webcasters (WSA): Excess listenership (greater than 159,140 aggregate tuning hours monthly): $0.00083 per performance.
      3. Non-commercial Microcaster: Reporting waiver fee: $100.
      4. Non-commercial Educational Webcasters:
        1. Excess listenership (greater than 159,140 aggregate tuning hours monthly): $0.0025 per performance.
        2. Reporting waiver fee (optional): $100.
    3. Other Service Providers 2015 Rates:
      1. Business Establishment Services:
        1. Annual minimum fee: $10,000.
        2. Monthly liability: 12.5% of annual Gross Proceeds.
      2. New Subscription Services (CABSAT):
        1. Annual minimum fee: $100,000.
        2. Monthly liability:

        3. “Stand-Alone” contracts: the “greater of” 15% of Revenue, or $0.0174 per Subscriber.
        4. “Bundled” contracts: the “greater of” 15% of Revenues allocated to reflect the objective value of the Service, or $0.0290 per Subscriber.
      3. Pre-existing Subscription Services: 8% of Gross Revenues.
      4. Pre-existing Satellite Digital Audio Radio Services: 10.0% of Gross Revenues.
    4. Allocation of fees collected and direct payment to artists and labels for their share of the fees:
      1. 50% record label.
      2. 45% featured artist.
      3. 2.5% session musician (AFM)
      4. 2.5% session vocalist (AFTRA).
    5. Sound Exchange (www.soundexchange.com): Under auspices of RIAA established to collect fees under compulsory licenses (and voluntarily negotiated licenses (e.g., Yahoo!)) for webcasting masters:
      1. Sound Exchange authorized by Copyright Office as collecting agency.
      2. Controversy regarding RIAA, a record company trade association representing interest of artists. Sound Exchange authorized by record companies to pay artists share directly. Sound Exchange now a separate “independent” non-profit with a Board equally divided between representatives of record companies and artists.
      3. AFTRA, AFM, and AFIM support Sound Exchange.
      4. Sound Exchange is the sole collector for DMX and Music Choice under the DPRSRA for cable and satellite subscription services, which includes Sirius XM Satellite.
    6. In the United States, non-interactive webcasting rates are set by negotiations the labels, webcasters, and Sound Exchange. In the United States, interactive webcasting rates set by negotiation between the record companies and the webcasters.
    7. IFPI and collection societies in 24 countries provide a one-stop shop approach for licensing use of masters on the Internet. A single international license from one source for entire repertoire. Participating countries include Austria, Denmark, Germany, Greece, Ireland, Netherlands, Portugal, Sweden, U.K., Czech Republic, Hungary, Poland, Slovak Republic, Canada, Hong Kong, Malaysia, Singapore, New Zealand, Taiwan, South Africa, Argentina, Mexico, Peru, and Venezuela.

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  12. RATES FOR MUSIC ON STREAMING:
    The Copyright Office also has adopted the industry negotiated mechanical royalty rates for streams and “conditional downloads” or “incidental” DPDs, e.g., digital phonorecord deliveries that time out or that are streamed on demand and temporarily buffered or cached in that process. Those rates are 10.5% of revenue less music performance fees (if applicable) retroactive to January 1, 2008, with an 8.5% rate less music performance fees to apply to the prior 7 years, subject to minimal royalties which are described in detail in the Schedule for these fees released by The Harry Fox Agency (see www.harryfox.com for the formula on the computation of these minimum rates).
  13. RATES FOR MASTERS ON DPDs:
    Record companies can establish their own voluntary rates for digital downloads of the master sound recordings as Copyright Act provisions do not apply to digital phonorecord deliveries of masters:
    1. Agency model through retailers, with label selling the copy and keeping on average 80% to 90% of digital phonorecord delivery sales to consumers and the retailer as agent keeping the balance.
    2. Gross Margin model with retailer “buying” the title from the label (as at a wholesale price) and setting its own resale price to the consumer downloading the master.
    3. Most download companies, for example, iTunes, will keep 30% of the consumers’ purchase price, and pay the balance to the label, a net effective wholesale price or PPD.

  14. RATES FOR MUSIC ON DPDs:
    Digital phonorecord delivery requires a mechanical license and a performance license with the royalty rates set at the compulsory mechanical license rate of 9.1¢ per song per download or 1.75¢ per minute for music recordings in excess of 5 minutes and 0 seconds, with the multiple moved up to the next full minute.
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