Sunday, May 06, 2007

Compulsory Mechanical Licenses and Accounting Under the Copyright Act (part 1)

Cover songs. I often hear musicians, lawyers, and others involved in the music business speak about the compulsory mechanical license in very simple terms. "Anybody can record a cover song so long as the musical work has been previously published with authority of the copyright owner, and the statutory license fee is paid." And usually it is simple. The legal basis for the compulsory mechanical license is Section 115 of the Copyright Act.

The process is fairly straightforward if the publisher uses the Harry Fox Agency as a mechanical license agent. The musician desiring the compulsory license can go to the Harry Fox site, follow the instructions, and they are good to go. In many cases the whole process can be done online.

So what happens when a publisher does not use Harry Fox? Well, you contact the publisher. Many of the publishers that do not use Harry Fox to administer the compulsory license simply don't want to pay Harry Fox an administration fee. In this case, the publisher usually has a form license agreement which, importantly, specifically exempts the artist recording the cover from complying with the accounting provisions in the Copyright Act. The agreement will have it's own payment terms.

But what happens when the publisher, for whatever reason, does not want anybody recording covers? Time to turn to Section 115. Unfortunately, complying with the letter of the law is not all that easy, especially for artists who don't have accountants and business managers.

Section 115 is fairly straightforward. 115(a) sets forth the scope and availability of the license. 115(b) discusses the Notice of Intention to Obtain Compulsory License which is necessary to take advantage of the compulsory. 115(c) gets interesting. 115(c)5 discuss how the royalty payments are made. 115(c)5 references monthly payments and annual statements that must be made in compliance with regulations prescribed by the Register of Copyrights. 115(c)6 covers what happens in the event the accounting rules are not followed:

If the copyright owner does not receive the monthly payment and the monthly and annual statements of account when due, the owner may give written notice to the licensee that, unless the default is remedied within thirty days from the date of the notice, the compulsory license will be automatically terminated. Such termination renders either the making or the distribution, or both, of all phonorecords for which the royalty has not been paid, actionable as acts of infringement under section 501 and fully subject to the remedies provided by sections 502 through 506 and 509.

Stay tuned for part 2, which will be an examination of 37 CFR § 201.18 which covers the Notice of Intention to Obtain a Compulsory License, and 37 CFR § 201.19 which covers the requirements for royalties and statements of account under the compulsory license.

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