The Hatch-Goodlatte Musical Works Modernization Act was signed into law on October 11, 2018. The Act is Congress’ attempt to bring some semblance of peace to the various factions within the music industry. These groups have been waging legal warfare against one another since the invention of music streaming technologies and the advent of its earliest proponents like Napster, Slacker, Rhapsody and Pandora. Roughly 20 years. The Roses had nothing on the music industry. The provisions in the Act are designed to address years of contentious litigation and find some compromise among music streaming technology companies, artists, producers, and record labels.
The Act unanimously passed the United States House of Representatives and U.S. Senate in early 2018. President Trump signed the Act into law in October 2018. The Act is quite lengthy, but in essence it contains three main provisions.
Mechanical Licensing Collective
First, it establishes an organization called the Mechanical Licensing Collective that will create and operate a public database containing all relevant information about a songwriter’s work. In exchange for a blanket mechanical license, music streaming services will pay royalties to the Collective, which will then distribute the money to the applicable songwriter or owner. Songwriters and other copyright holders have the right to periodically audit the Collective to ensure royalty payments are accurate. As long as the music streaming service pays the Collective, it will receive a blanket mechanical license for performing the work and the confidence that it will not be sued by song writers and owners so long as it follows the proper procedures.
The Act shortens the statute of limitations for bringing copyright infringement claims against music streaming services who otherwise comply with the provisions of the new Act. The Act’s provisions appear aimed more at reducing the potential for imposing latent liability for copyright infringement on music streaming services than assuring the distribution of reasonable royalties to songwriters and copyright owners in an accurate and timely manner.
Private enterprises may still handle other kinds of music licensing rights including synchronization rights, lyrics, and performance rights. The Collective is meant to address the current lack of a central database for songs. The absence of such a database makes it difficult for music streaming services to find a song’s author, which, in turn has resulted in years of litigation brought by artists and their representatives against music streaming services for using works without paying licensing royalties for the copyrighted works.
Protection for Older Songs
Second, the Act protects sound recordings fixed on or after January 1, 1923, and before February 15, 1972. It requires the music streaming services to start paying royalties for pre-1972 songs, which are not currently protected under U.S. copyright laws. The protection for pre-1972 recordings preempts state laws and incorporates the normal limitations that apply to other copyrighted works, such as fair use and use by libraries, archives, and educational institutions. The Act protects songs from this period of time for 95 to 110 years from the date of recording, depending on when each song was first recorded. Recordings made prior to 1923 will enter the public domain in three years.
Management of Royalty Splits
Third, the Act requires the Collective to adopt and implement a policy that allows a songwriter or owner to instruct the Collective to distribute a portion of the payments that the writer or owner would otherwise be entitled to receive to another party. This makes it easier for the owner to share royalty proceeds with a producer, mixer or sound engineer who was part of the creative process that created the song in the first place. A long time in the making, the Act represents a significant step forward for artists and music streaming companies that have been fighting a battle since the early days of the music streaming and peer-to-peer sharing services. It brings the U.S. music licensing scheme for digital services into the modern age, but there is no doubt more to come before all of the legal issues surrounding music streaming and peer-to-peer music sharing services are resolved. That will no doubt require resolution by the courts.