Artist and songwriter groups have welcomed a final ruling by the US Copyright Office over how collecting society the MLC should handle payments when a songwriter regains ownership of their songs through the termination right under American copyright law.
Previously, due to a technicality in the way the termination right works, the MLC continued paying streaming royalties to the original publishers even after termination. The Copyright Office has now confirmed that that approach is incorrect.
Jordan Bromley, a board member of the US Music Artists Coalition, praised the decision, saying that it “not only ensures fair compensation for songwriters who reclaim their rights, but also sets a precedent that strengthens the very foundation of copyright law in the digital age. It’s a clear message that in the evolving landscape of music streaming and licensing, the rights of creators must be protected and respected”.
Jack Kugell, of Songwriters Of North America, adds, “This much-anticipated decision is a huge victory and affirms existing copyright laws can be interpreted fairly and correctly. As an advocacy group led by and for songwriters, we sincerely thank the US Copyright Office for not only listening to, but for hearing songwriters”.
While initially critical of the provisional ruling by the Copyright Office in 2022, David Israelite, CEO of the National Music Publishers Association, welcomed the clarity the final ruling provides saying, “having clear guidance will make the MLC and larger industry even more efficient as it gives a clear roadmap to those who have decided to reclaim their copyrights”.
The termination right in American law allows songwriters who assigned their copyrights to a third party to reclaim those rights after 35 years. This means that if a songwriter has assigned works to a music publisher, by invoking the termination right they can take back control of those works, allowing them to negotiate a revised deal with their existing publisher, or enter into a new deal with a different publisher.
However, the termination right has some limitations, particularly in relation to derivative works. That means if a song is sampled or placed in a film or TV programme as part of a sync deal, then the publisher’s right to receive royalties from that specific use continues even after termination.
The MLC was established by the 2018 Music Modernization Act to manage the compulsory blanket licence utilised by streaming services in the US.
It initially applied the derivative works exception to all streaming use, which meant if a publisher owned a song when a recording of that song was first distributed to streaming platforms it would continue to be paid the publishing royalties generated from those streaming platforms, even after a songwriter had exercised the termination right.
To many that seemed like an odd approach. In a 2022 paper, the Authors Alliance called the MLC’s approach “bizarre”, noting that the society was applying an exception meant for derivative works to “any of the sound recordings used by digital music providers that incorporate music from songwriters”.
Which meant that, “even when a creator terminates rights, the appropriate payee would be whomever held rights in the work at the time when it happened to have been saved on a digital music provider’s server”. This would “conveniently mean”, it added, “that the publishers would almost always be entitled to all future mechanical licence royalties”.
However, the NMPA argued that the MLC was simply following industry convention. In its final ruling, the Copyright Office said that it didn’t dispute the NMPA’s assertion that some publishers have employed the MLC’s original approach in the past, but “this approach is not supported by the law in the context of the blanket licence”.
It also stressed that it is “not adopting a new position or changing the law as it relates to termination or the exception”, but was “merely stating what the law is and has always been”.
As a result, says the Copyright Office, the MLC must start paying royalties to the songwriter rather than the publisher whenever a songwriter exercises their termination right.
In addition, the ruling says that the MLC should adjust past royalty payments where that “odd” policy meant that streaming royalties were still being paid to a publisher even after a termination right had been exercised.
However, the impact of that part of the ruling is expected to be limited because the MLC had already paused payments pending a decision on the matter. In a previous filing the MLC disclosed that it anticipates the total amount of money involved in any single retroactive adjustment to be under $2 million.