Could Lawsuit Settlements Be the Best Way to Solve Rights Data Problems?

Copyright owners have long been at odds with tech companies and service providers over copyright-related issues. We’ve seen various different attempts to solve these problems across industries since the start of the “copyright wars” in the late 1990s, enough to have some idea of what works and what doesn’t. In rough terms, there are four types of solutions: private agreements, multi-stakeholder agreements, open standards initiatives, and government intervention (regulation or legislation). But now a fourth way has emerged in certain copyright situations: court-enforced lawsuit settlements. In some cases, these are turning out to be the most effective of all.

The first of these was the settlement proposed in the huge book publisher/author lawsuits against Google that began in 2005. That called for the establishment of a Book Rights Registry, an openly accessible online database of book rights information. Google would have paid over $34 million to build it but wouldn’t have had any particular say over its operation or governance. The parties in the case even hired someone to run it who was highly qualified.

But in 2011, the judge rejected the proposed settlement, for reasons that had little to do with the Book Rights Registry. This was a huge missed opportunity — and not just for the participating book publishers and authors, or even for book publishing as a whole. It would have been an exemplar of an online rights registry that other media industry segments could have learned from and followed.

Meanwhile, in Canada that same year, a settlement agreement was agreed in a class action lawsuit by songwriters and music publishers against the major record labels’ Canadian divisions and the Canadian licensing agencies CMRRA and SODRAC. The settlement agreement required the two licensing agencies to build an online database that facilitates proper payment of mechanical (reproduction) royalties for certain uses of musical compositions, such as in online music services.

When a music service delivers a track to a user, it owes not only a royalty to a record label for the sound recording but also royalties to the track’s composers and their music publishers for the musical composition embodied in the recording. The problem is that record labels feed music and metadata to services, so they know whom to pay royalties on sound recordings; but sometimes they don’t get information about the underlying musical compositions, and as a result, the songwriters and music publishers don’t get paid properly in those cases.

The database stipulated in the Canadian settlement agreement was a framework for solving this problem for sound recordings starting in 2013 after the settlement took effect. The agreement requires the record labels to supply complete and accurate information about sound recordings to the database, along with digital copies of each sound recording. Then it requires the settlement administrator (CSI Music Services, a joint venture of the two licensing agencies) to identify the underlying composition via techniques such as acoustic fingerprinting. That technology works well but not perfectly, so the administrator has to maintain a mechanism for rights holders to supply information about tracks that it can’t identify.

Under the agreement, the licensing agencies have to use the data from the licensing database to issue mechanical licenses in the music industry standard DDEX format. The court in Toronto approved the settlement, and the database is up and running today.

In other words, the settlement sets out a scheme that does much more than settle differences among the parties in the lawsuit. Although it’s focused specifically on mechanical licensing and the major labels, the mechanism it specifies benefits a wide swath of the Canadian music industry, and it’s set up so that multiple stakeholders share responsibility in maintaining it properly.

Settlements in U.S. litigations over unpaid music royalties are starting to get similar treatment. The music publishing industry hasn’t been accustomed to dealing in the kind of precise, complete data that’s necessary to track royalties from today’s streaming music services, but it’s now admitting the problem instead of trying to paper over it with blanket licenses and other blunt-instrument schemes. And it’s starting to use lawsuit settlements with major digital music services to create solutions to these problems in addition to payments for songwriters.

In March of last year, the National Music Publishers Association (NMPA) announced a settlement between major music publishers and Spotify over unpaid royalties resulting from unmatched compositions. The settlement called for Spotify to create a website that enables music publishers to claim their content and get paid. It was designed so that both music publishers and Spotify will “implement practices that will allow Spotify to match works more accurately and efficiently” – in other words, to divide responsibility for that instead of perpetuating finger-pointing.

similar settlement was announced last December by the NMPA and YouTube. That one called for an annual process of music publishers claiming unmatched works through a website through 2019. This has more impact than a 2011 settlement that YouTube made with independent music publishers, in which the process for matching compositions and managing payments was entrusted to a third party, the Harry Fox Agency (HFA).

The latest iteration takes this type of settlement agreement a step further. It’s a  settlement proposed this May in a purported class action against Spotify led by singer-songwriter Melissa Ferrick. That lawsuit also alleged unpaid mechanical royalties. The settlement agreement requires Spotify to set up an online database that rights holders can use to claim payments from a $43 million fund. It also calls for the plaintiffs to set up a mechanism for identifying compositions through a third-party service provider that they will select. Once again, this is a sensible division of responsibilities for solving problems related to content licensing data.

In addition, the proposed settlement calls for Spotify to convene a cross-industry Copyright Data Sharing Committee to help improve mechanical licensing for everyone in the future. This committee will include stakeholders beyond the immediate parties in the litigation – including Spotify’s competitors such as Apple, Google, Amazon, and Pandora, and the recorded music industry (through the RIAA). The settlement has to be approved by the judge in the case — a decision is expected in the coming months — but even beyond the previous examples, it could help solve longstanding (and worsening) problems for the entire media industry segment, not just the parties in the case.

Mechanisms like those specified in these settlement agreements have significant advantages over the other ways of solving cross-industry problems mentioned above. Private agreements are the traditional way of settling these matters; they’re efficient but usually confidential. Their impact is limited to the parties involved, and no one else can benefit from knowledge of how the problems were solved.

Then there’s open standards. They involve much larger groups of stakeholders, their processes are bureaucratic and deliberate, and they can fail for many reasons: They often succumb to ocean-boiling scope creep; they can fail to solve current, real-world problems; their specs can be too complex or difficult to implement; they can attempt to privilege one set of stakeholders’ interests over others, who then have no incentive to participate; and they don’t come with funding for implementation.

More particularly, content rights are a tricky area for standardization because they span so many different situations and have to cover so many arcane details. Many rights related standards have failed for one or more of these reasons over the years, such as the Internet and Content Exchange (ICE) in the late 1990s, the Digital Media Project (DMP) in the mid 2000s, the Automated Content Access Protocol (ACAP) and Creative Commons CC+ (CCPlus) in the late 2000s, and the Global Repertoire Database (GRD) which imploded three years ago.

Government intervention through legislation or regulation is problematic for any technology-related issue, but it’s particularly so for content rights. Currently no government agency (anywhere in the world) has much oversight on those issues. The legislative process is so long and tortuous that any legislation on this type of issue that does make it through stands a good chance of being obsolete and/or irrelevant before it’s enacted.

The bill that was just proposed in Congress two months ago – the Transparency in Music Licensing and Ownership Act, introduced in July by Rep. Jim Sensenbrenner of Wisconsin – would give the U.S. Copyright Office responsibility for an maintaining authoritative online music rights database. But as I discussed recently, that has major issues and a long way to go.

Finally, there’s multi-stakeholder agreements, when groups of companies get together and decide to do something in a way that’s relatively public and inclusive but isn’t an open standard. Recent examples of this include the Copyright Alert System (for monitoring ISP traffic for alleged infringements and issuing alerts to ISP subscribers) and the Best Practice Guidelines for Ad Networks to Address Piracy and Counterfeiting. (for removing ads from alleged pirate websites). These initiatives are often primarily attempts to stave off threatened government intervention, and they tend to stop short of actual effectiveness.

Of course, lawsuit settlements are far from ideal.  There has to be a lawsuit in the first place, and it can’t end with a jury verdict (which wouldn’t have impact beyond the parties in the suit). They can also take years (not to mention major legal fees) to reach. The settlements most likely to have broad impact are those of class actions, which are rare in the copyright context. And under antitrust law, the plaintiffs’ facilitators (e.g., trade associations like the NMPA) can’t force everyone in their constituencies to adhere to the settlement terms.

But otherwise, settlement agreements avoid many of the disadvantages of other ways of solving this kind of cross-industry problem. They have the force of law: even if all stakeholders aren’t forced to comply with the terms, many are – possibly enough to create a critical mass of participation in the solutions specified in the agreement and attract others to do it voluntarily. They have funding: at least one party to the settlement is forced to pay for its implementation. They solve specific problems rather than attempt to boil the ocean or create technology for its own sake. And because they have the force of law, there’s no question of ensuring that all parties have enough incentives to participate.

And unlike in private agreements, the mechanism that a settlement agreement specifies to solve the problems in the future – such as rights databases and settlement administrators in these music publishing cases – can be described publicly in sufficient detail that others can emulate it, further contributing to progress. In fact, willingness to make such details public could help convince judges that settlements are good for everyone and therefore that they ought to be approved. That’s a process that could feed on itself and — for better or worse — make lawsuit settlements the preferred way of solving content rights-related problems across industries in the foreseeable future.



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