On October 11, 2018, President Trump signed into law the long-anticipated Music Modernization Act (“MMA”), legislation focused on shepherding the existing music licensing system into the digital age.  Among the highlights, the MMA provides for blanket mechanical licensing and a licensing collective charged with managing mechanical license royalty payments to composers and publishers. The MMA is divided into three major titles, each focused on addressing certain perceived gaps in the existing structure.  Some highlights are discussed below.

Title I of the MMA (Music Licensing Modernization) establishes a blanket, statutory mechanical license for digital music providers to be administered by a non-profit organization called the Mechanical Licensing Collective (the “MLC”).  The MLC is charged with establishing  a publicly accessible database of copyright ownership information for musical compositions.  A digital music provider wishing to obtain a blanket mechanical license must file a notice of license with the MLC specifying, among other things, the covered activities.  The MLC will have 30 calendar days to review that notice, and a provider whose application for a license is rejected will have an opportunity to cure or seek further review in federal district court

Title II of the MMA (Classics Protection and Access) extends federal copyright protection to pre-1972 sound recordings previously excluded from the copyright protection.  The duration of protection for such works is set as follows:

  • For recordings published before 1923, the term of protection ends on December 31, 2021;
  • For recordings published between 1923 and 1946, the term of protection continues until December 31 of the year 100 years after publication;
  • For recordings published between 1947 and 1956, the term of protection continues until December 31 of the year 110 years after publication; and
  • For all other recordings (including unpublished recordings and ones published after 1956), the term of protection ends on February 15, 2067.

Title III of the MMA (Allocation for Music Producers) grants music producers a share of royalties collected when their sound recordings are played through online and satellite radio providers.  Such producer payments are to be allocated from the share of streaming royalties allocated to recording artists under the current statutory scheme.

The U.S. Copyright Act permits, but does not require, registration of copyright-protected works with the U.S. Copyright Office.  Nevertheless, under the U.S. Copyright Act, registration by the Copyright Office (or ruling by the Copyright Office refusing to register) is, among other things, a prerequisite to bringing a copyright infringement action.  The federal courts have long disagreed about whether an application for registration satisfies the rule.  In other words, does the copyright owner have to wait for the Copyright Office to rule on the registration application before suing?

The United States Supreme Court has now agreed to hear a case that could resolve this long-disputed issue.  Fourth Estate Public Benefit Corporation v. Wall-Street.com, LLC., Case No. 17-571.  The appeal is from the Eleventh Circuit Court of Appeals, which held – recognizing the disagreement among the courts – that a registration application is insufficient to sue.

Whichever way the Supreme Court rules, early registration has distinct advantages for the copyright owner.  Advantages includes easier proofs at trial on liability and damages and the possibility of collecting attorneys’ fees for registration applications filed before infringement begins or, for published works, within three months of publication.

Animal selfie enthusiasts rejoice – your pet cannot sue you for copyright infringement for reproducing their pictures online under the Copyright Act of 1976.  The United States Court of Appeals for the Ninth Circuit (“Ninth Circuit”) has now answered the concern that has (obviously) been at the forefront of every legal professional’s mind – whether a selfie-taking monkey can sue humans, corporations, and companies for copyright infringement.  The answer – (deep breath) – is no.

The copyright case at issue, Naruto, a crested macaque v. David John Slater, et al., Case No. 15-cv-4324, centered on the allegation that Naruto (a seven-year old Indonesian crested macaque) was the true author of a series of “selfies” allegedly taken by Naruto in 2011 with a camera owned by photographer David Slater and thereafter reproduced by Mr. Slater and certain companies.  The People for the Ethical Treatment of Animals (“PETA”), who brought the lawsuit on Naruto’s behalf, claimed that Mr. Slater and others violated the Copyright Act by falsely claiming to be the author of the “monkey selfies” and reproducing those images for profit.  In response, Mr. Slater argued that Naruto lacked constitutional “standing” to sue and that animals cannot sue under the Copyright Act.  The district court dismissed the action, agreeing that Naruto could not sue under the Copyright Act, but declining to assess whether Naruto has the constitutional “standing” to sue.  PETA appealed but settled the lawsuit with Mr. Slater while the appeal was pending.

Undeterred by the settlement, the Ninth Circuit affirmed the lower court’s dismissal.  Sharply criticizing PETA for bringing the lawsuit and then settling it without Naruto’s participation, the Ninth Circuit found that binding circuit precedent forced the court to accept that animals have constitutional standing to assert claims in the federal courts.  The Ninth Circuit, however, was not about to throw open the courthouse doors to all animal-plaintiffs.  The Ninth Circuit found that under the plain text of the Copyright Act Naruto (and all other nonhumans) could not file copyright infringement lawsuits.  In fact, the Ninth Circuit was so adamant about this conclusion that it awarded Mr. Slater his attorneys’ fees incurred in opposing the appeal.

Thus ended the saga of the monkey selfie seen ‘round the world – not with new, ground-breaking animal rights law, but with the strict interpretation of a federal statute, adherence to the doctrine of stare decisis, and a plea that the prior Ninth Circuit law on an animal’s constitutional standing be reexamined.

One little-publicized part of the new tax law (Tax Cuts and Jobs Act of 2017) may negatively affect the value of some patents and other intellectual property.  It does so by changing the tax treatment of income from sales of “patents, models and secret formulas or processes” from capital gains to ordinary income.

Prior to the amendment of Tax Code Section 1221(a)(3), income from sales of (1) “patents, models and secret formulas or processes,” (2) held by the IP creator, (3) for more than one year, was taxed at the capital gains rate.  This resulted in lower tax than the ordinary income tax rate that applied to other types of IP, such as copyrights, literary, musical, and artistic compositions.  Congress has now taken this tax advantage away.

The change in the law affects those that sell or license IP in the “primary market” only —in other words, the original creators of the IP.  It generally does not affect those that have paid to own the IP, including the IP creators’ employers.

There still remains an exception under Tax Code Section 1235 providing for lower tax on sales and licensing of all rights to patents, secret formulas and trade names (but only these types of IP).  For other types of IP, adjustments in sale prices and license royalties will need to compensate for the higher tax under the new law.

Our tax and IP groups can help you assess the new law’s impact on these valuable assets.

In 2015, a California jury decided that the mega-hit “Blurred Lines” by Pharrell Williams, Robin Thicke, and Clifford Harris (a/k/a “T.I.”) infringed the copyright in Marvin Gaye’s song, “Got To Give It Up.”  The jury awarded Gaye’s heirs $7.4 million.  Last week, a panel of the federal court of appeals in San Francisco affirmed the judgment in 2-1 split decision.  Williams v. Gaye, No. 15-56880 (9th Cir. March 21, 2018).

The appeals court decision confirmed what this blog argued just after the 2015 jury verdict:  that the most significant part of the “Blurred Lines” case is that a jury – not a judge – made the call.

That is somewhat unusual in a copyright case, especially a case involving music.  In copyright law, the question whether one work infringes another often turns on whether the allegedly infringing work is “substantially similar” to the previous work.  Courts often view the “substantial similarity” question as so clear or one-sided that there is no need for a jury to decide the issue (for our lawyer-readers:  i.e., summary judgment).  The main question in Williams v. Gaye was whether “Blurred Lines” was “substantially similar” to “Got To Give It Up.”  Unusually, the trial judge held a jury trial where the jury was presented with audio and expert testimony concerning the purported similarities/dissimilarities between the two works.  The jury ruled for the Gayes.

Courts hesitate to overturn jury verdicts, and this case proved no exception: the appeals court deferred to the jury’s findings without stating its own opinion whether “Blurred Lines” actually infringed Gaye’s composition, while providing little new legal guidance on the question of infringement of musical works.

This decision may not be the end of the case.  A strident dissenting opinion believed the case never should have gone to a jury and that the Gayes’ claim should have been rejected as a legal matter, and it is possible the entire court of appeals or the Supreme Court could review the case.  Failing further review, however, the “Blurred Lines” case heralds more jury decision-making in these “blurry” disputes.