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Lovett, Vivendi, Real, MP3.com Testify on Compulsory Licensing
Pages: 1, 2, 3

Robin Richards, president, MP3.com:

Last year, MP3.com introduced an innovative music storage and playback service that enables consumers to use the Internet to store and listen to the CDs that they buy from their local record stores or from online retail establishments. Although our service is not a file sharing service like Napster and poses no threat to the sale of recorded music, we were sued for copyright infringement by the major record labels and music publishers. Those lawsuits forced us to shut down our service and to pay over $150 million to copyright owners and their representatives; yet, even after paying out all of that money, we not only are unable to get our service fully up and running, but we also continue to face new lawsuits!

In order to fully address the problems faced by MP3.com and other online music providers, Congress will have to act to bring rationality back into the Copyright Act. Different types of music transmission services are subject to a hodge-podge of licensing and payment obligations that are unrelated to their relative economic impact on the record labels and music publishers. Some services only have to make one payment; others, including ours, have to make FIVE separate payments. This isn't right.

We have millions and millions of dollars worth of licensing agreements with the record labels. But we still can't give consumers access to all of their music - and this is a problem that will be faced by every Internet music provider - because right now there is no practical way to contact all of the music publishers with copyright ownership claims in the more than 900,000 songs in our digital library.

The Harry Fox Agency, which represents over 25,000 music publishers says that they want to work with us to overcome the practical problems in clearing the hundreds of thousands of songs in their inventory and that they won't participate in legal action against MP3.com for using those songs. We don't dispute their sincerity. But the fact is that HFA doesn't represent all of the publishers of all of the songs for which we need clearance and that means that we remain vulnerable to lawsuits, even with respect to songs that HFA claims to have given us a license.

Indeed, just last week Randy Newman, Tom Waits and Ann and Nancy Wilson of the band "Heart" sued MP3.com for 40 million dollars. This suit makes real many of the issues that MP3.com has been discussing over the last several months. The complaint in this lawsuit cites song titles that we haven't been able to clear because the publishers aren't represented by HFA as well as song titles that were previously settled and licensed to MP3.com via HFA-represented publishers.

...Although Section 115 [of the Copyright Act] was amended in 1995 to extend it to certain on-line activities, the Copyright Office has "deferred" establishing the rates and terms for the "incidental" reproduction of songs that occurs as a necessary part of technologies such as ours. Moreover, the procedures that traditionally have been imposed on statutory licensees under Section 115 are cumbersome, time-consuming and expensive. For example, those procedures not only would require MP3.com to manually search the Copyright Office's records for the names and addresses of the copyright owners of each of the hundreds of thousands of song titles on the CDs that our consumers have purchased and stored on-line, but also would require us to submit a separate application to the Copyright Office for each song whose current owners couldn't be located.

... The Copyright Office, at the request of the recording industry and with MP3.com's support, currently is considering whether to conduct a rulemaking to clarify the application of Section 115 to streaming audio services such as MP3.com. In our comments in that proceeding, we have urged the Office to look to the model of the satellite and cable compulsory licenses, which permit copyright users to submit periodic royalty payments into a pool that is then distributed among copyright owner claimants.

... Even more importantly, the Copyright Office can and should immediately act to establish "interim" Section 115 licensing procedures for online services that engage in "incidental" copying. Adoption of such "interim" licensing procedures will create a "safe harbor" against infringement actions. Both RIAA and MP3.com have endorsed the interim licensing procedures concept and we hope that the members of this Committee will join us in urging the Copyright Office to take this clarifying action as a means of dealing with the untenable situation that now exists.

My.MP3.com - An Online Tool For Storing and Listening To Purchased Music. In January 2000, MP3.com launched a new service called My.MP3.com. My.MP3.com is a digital music storage "locker" service that uses MP3 compression technology to enable people to use Internet connected devices to listen to the CDs that they purchase at their local record store or from on-line retailers such as junglejeff.com and, in the near future, towerrecords.com.

...The way the My.MP3.com service works is as follows: with respect to a CD that a consumer already has purchased, the consumer takes the CD and places it in the CD-ROM tray of his or her computer; our "Beam-It" software then "reads" the CD and, having established that it is a real, legitimate CD release, adds the CD to a secure, personalized "locker" which can be accessed by that consumer - and only by that consumer. With respect to CDs purchased on-line from one of our retail partners, the consumer can use our "Instant Listening" software to add a CD in MP3 format to his or her personal locker at the same time the consumer pays one of our on-line retail partners for the CD, thereby allowing access to the songs on the CD even before the disc is physically delivered. I want to emphasize that My.MP3.com differs from music file-sharing or "swapping" services that allow users to download, save, and trade music that they have not purchased. CDs can be accessed on My.MP3.com only for a real-time listening experience, not for downloading and copying. And before any CD can be accessed on our service that CD will have been purchased twice: once by the listener and, as discussed below, once by us.

Litigation, Shutdown, and Settlement. Not long after launching the My.MP3.com service, we were sued for copyright infringement both by the major record labels and by certain music publishers. ...Because Congress never foresaw the development of a personal purchased music "locker" service like My.MP3.com, the door was left open for record labels and music publishers to argue that My.MP3.com was infringing their copyrights by allowing consumers to access their purchased CDs in MP3 format.

In particular, the copyright owners cited the fact that instead of developing a system that requires consumers to convert their own CDs into the MP3 format, My.MP3.com went out into the marketplace and bought those same CDs and converted them for the consumer. According to the record labels and music publishers, the act of converting these CDs to MP3 format, so that consumers who had separately purchased those same CDs could listen them to in that format, constituted an act of infringement. In addition, the music publishers took note of the fact that when a consumer listens to a song from his or her My.MP3.com locker, that song is delivered to the consumer by means of a "streaming" audio technology that automatically makes a temporary or "buffer" copy of a portion of the song as a necessary and integral part of the transmission process. Although this buffer copy lasts only a few seconds and is eliminated once the playback of the song begins, the music publishers asserted that, in order to use this technology to playback a CD to a consumer who has purchased that CD, My.MP3.com needed a separate license to make and distribute copies of the song.

In response to these lawsuits, we "shut down" the My.MP3.com service and entered into settlement negotiations with various copyright owners and their representatives. ...There is a certain irony in the fact that when our site was shut down, many of our customers were driven to services such as Napster, where they not only could find and play the CDs that they already had bought, but also could (and probably did) obtain access to a vast array of music selections without ever having to purchase them.

We have agreed to pay for converting the CDs that we purchase into MP3 format. We have agreed to pay for performing both the sound recordings and the songs contained on those CDs. And we even have agreed to pay the publishers for the temporary, momentary "buffer" copy that automatically is made (and deleted) each time someone listens to their own music out of their My.MP3.com locker. Yet, today, nearly six months after signing the last of these agreements, we haven't been able to effectively process any of the licenses that the copyright owners insist we must have before we can fully relaunch the My.MP3.com service because of the overly-burdensome process required to locate and get agreement from every rights-holder.

Incidental digital phonorecord deliveries - IDPDs for short - are a type of "mechanical" reproduction and distribution requiring licenses from the owners of the publishing rights in the songs contained on a CD. Our licensing agreement was made with the Harry Fox Agency ("HFA"), an arm of the National Music Publishers Association that, for nearly 75 years, has served as the music publishing industry's principal clearinghouse for the administration of mechanical rights licenses. According to its website, HFA issues licenses, collects and distributes royalty payments, and audits the books and records of licensees on behalf of more than 25,000 music publishers who, in turn, represent the interests of over 150,000 songwriters.

When MP3.com and HFA announced their licensing agreement last October, the joint press release proclaimed that the deal was intended to give us licenses for over a million songs. And, in fact, we immediately provided HFA with a list of over 900,000 song titles, along with information identifying the CD on which each song appeared and the name of the artist performing the song. More than six months later, however, HFA still has not been able to issue licenses to us for over two-thirds of these songs.

We are not suggesting that HFA hasn't tried to clear the rights to more songs. Rather, the problem appears to be that HFA's system for issuing mechanical rights licenses for its publisher members simply cannot handle the demands of the digital marketplace. In order for us to obtain a license for a particular song from HFA, we not only have to provide them with the song title, CD and artist, but we also have to know who owns the publishing rights for the song. This information, which may change several times over the life of a song, is not readily available to the public.

A good illustration is our experience with the new Jennifer Lopez CD, "J-Lo." Shortly after Epic/Sony records released this CD, we attempted to make it available on My.MP3.com. We had obtained the necessary rights from the record labels with respect to the sound recording copyright and we had agreements with the appropriate Performance Rights Organizations (i.e. ASCAP and BMI) giving us the right to "publicly perform" the songs on the CD. However, we couldn't get HFA to give us the required (by them) license for any of the songs. When we asked HFA why the songs on this new CD were not in their database and, thus, licensable, we were told that HFA would be able to issue licenses covering some - but not necessarily all - of the songs, but that it would take 6-8 weeks after receipt of a license request for HFA to locate the publishers associated with each song and get clearance. That's 6 to 8 weeks for just one CD. Consequently, we have been unable to offer consumers who buy the J-Lo CD the ability to add this CD to their locker.

Apart from the problem of obtaining information matching up the songs we want to play with the songs owned by the publishers represented by HFA, the difficulties we face in getting the My.MP3.com service back up and running are exacerbated by the fact that HFA does not represent every publisher and by the fact that the publishing rights in many, if not most song titles are held by multiple owners in varying percentages. For example, if you look at the liner notes of a "rap" CD - one of the most popular genres of music on-line, you will see as many as ten publishers on any given song. Many of these publishers may be impossible to locate or are otherwise unreachable.

Related Articles:

Music Industry Faces Off at DC Conference

Are We Promoting Piracy?


In short, there is no marketplace mechanism that will allow us to fully relaunch My.MP3.com - thereby giving consumers access to all of the songs on all of the CDs that they have purchased and stored on their My.MP3.com lockers - without running a significant risk that we will be sued by publishers or songwriters claiming ownership rights in some of those songs. And this is exactly what has recently happened with the new suits from Randy Newman, Tom Waits, and Ann and Nancy Wilson of the band "Heart."

In the long run, Congress must reform the underlying statutory provisions that have led to the current licensing dilemma. In particular, Congress must address the rights of music purchasers. The public, quite frankly, is confused. At every turn the courts, applying statutory provisions that never contemplated the services to which they are being addressed, are telling consumers what they cannot do. It is time for government to step in and clarify what someone who purchases a CD can do. Specifically, Congress needs to address the following questions:

1. Can and should consumers be able to listen to their own purchased CDs on any digital device?

2) Can and should music buyers be allowed to store their music in places where they can most easily access it?

3) Should CD buyers be subject to additional fees when they store and playback their purchased music collections?

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