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Licensing 101

Please feel free to explore the information below as an educational resource for current and prospective statutory licensees.

 

NOTE: SoundExchange cannot give legal advice to current or prospective service providers, and all information is presented for educational purposes only. If you have questions regarding your service’s eligibility or compliance within statutory licensing, please seek legal counsel.

  • What is a statutory license?

The statutory licenses relevant to service providers can be found in sections 112 and 114 of the Copyright Act, 17 U.S.C. §§ 112 and 114. The rates and terms applicable to the statutory licenses for service providers can be found on our website. Currently, SoundExchange is the only entity authorized by Congress to administer the statutory licenses described in sections 112 and 114.

  • What kinds of services are covered under the statutory licenses administered by SoundExchange?

The section 114 statutory license covers public performances by four classes of digital music services: eligible nonsubscription services (i.e., noninteractive webcasters and simulcasters that charge no fees), preexisting subscription services (i.e., residential subscription services which began providing music over digital cable or satellite television before July 1998), new subscription services (i.e., noninteractive webcasters and simulcasters that charge a fee, as well as residential subscription services providing music over digital cable or satellite television since July 1998), and preexisting satellite digital audio radio services (i.e., SiriusXM Radio). The section 112 statutory license covers ephemeral reproductions (i.e., temporary server copies) made by all digital music services covered by section 114. Additionally, business establishment services (services streaming background music into bars, restaurants, retail stores, etc.) are exempt from paying public performance royalties under section 114, but must still be otherwise eligible for section 114, as well as operate under section 112.

  • How do I know if my service is “noninteractive?”

Noninteractive services are very generally defined as those in which the user experience mimics a radio broadcast. That is, the users may not choose the specific track or artist they wish to hear, but are provided a pre-programmed or semi-random combination of tracks, the specific selection and order of which remain unknown to the listener (i.e. no pre-published playlist). For services which provide an interactive service or on-demand access to certain tracks or artists (e.g., YouTube), the statutory license does not apply, and a direct license must be obtained from the copyright holder.

  • How do I obtain a statutory license as described in section 112 or 114?

To obtain a statutory license, you must first notify sound recording copyright owners by filing a Notice of Use of Sound Recordings Under Statutory License (“Notice of Use”) with the Copyright Office. All services must file a Notice of Use prior to making the first ephemeral copy or first digital transmission of a sound recording to avoid being subject to liability for copyright infringement. An original Notice of Use with a $40 filing fee should be sent to the Copyright Royalty Board at the U.S. Copyright Office (address located on the form). The Copyright Office will not provide you with any confirmation that it has received your Notice of Use. Once a service files its Notice of Use, it may commence making digital audio transmissions, provided that it complies with all of the terms and conditions of the statutory license, makes all payments, and files all statements of account and reports of use when due. Services providing a Notice of Use are subject to the default rates and terms of the statutory license as set by the Copyright Royalty Board. Services wishing to operate under alternative rates or terms (e.g., pursuant to the Webcaster Settlement Act, etc.) should follow the instructions prescribed in those rates and terms.

  • How do I qualify for a statutory license?

All statutory licensees must be eligible to operate under section 114, and the specific eligibility requirements are listed there. To be eligible, a service must be (in most cases):

  1. a noninteractive service,
  2. creating transmissions adherent to the sound recording performance complement,
  3. not allowing the listener a reasonable foreknowledge of the transmission of a specific sound recording at a specific date and time (e.g., by the use of a published advanced program, playlist, announcement, etc.),
  4. not creating transmissions as part of an “archived program” (a) less than 5 hours in duration, or (b) available for a period exceeding 2 weeks,
  5. not creating transmissions as part of a continuous program less than 3 hours in duration,
  6. creating audio-only transmissions (i.e. without the use of video imagery synchronized with the audio transmission),
  7. reasonably cooperating to prevent certain kinds of selective transmitting and/or illegal copying of the transmission by the listener,
  8. using an ephemeral phonorecord created from a copy of a sound recording that was authorized by the sound recording copyright owner for commercial release,
  9. reasonably not interfering with technical copyright protection techniques, and
  10. identifying on the receiving device, in textual data, simultaneous to the transmission, the following identifying elements related to the sound recording being transmitted: (a) the name of the featured artist, (b) the title of the sound recording, and, to the extent that one exists, (c) the title of the phonorecord embodying such recording.
  • What is the “performance complement?”

The performance complement (which limits the amount of times a service may transmit sound recordings from a specific artist or album during a specific period of time) is one qualification to which all webcasters must adhere in order to be eligible under the statutory license. The performance complement may only be violated if the service has received specific waivers from the owner of the sound recording copyright, and unintended violation of these limitations (if corrected) will not cause a service to be ineligible for statutory licensing. The limitations are, specifically:

  1. No more than 4 tracks by the same featured artist (or from a compilation album) may be transmitted to the same listener within a 3 hour period (and no more than 3 of those tracks may be transmitted consecutively).
  2. No more than 3 tracks from the same album may be transmitted to the same listener within a 3 hour period (and no more than 2 of those tracks may be transmitted consecutively).
  • How are the rates and terms determined?

The Copyright Royalty and Distribution Reform Act of 2004 created a board of Copyright Royalty Judges (also known as the Copyright Royalty Board) to determine the rates and terms for the statutory license. Under the Copyright Royalty and Distribution Reform Act, “statutory rates” are set through either voluntary negotiations or trial-type hearings before the panel of three Copyright Royalty Judges. In negotiated cases, interested services negotiate rates and terms with SoundExchange and present those to the Copyright Royalty Judges for adoption. If the agreement is adopted by the Judges, it will be available for opt-in by any similarly situated parties. (In fact, the Webcaster Settlement Acts of 2008 and 2009 facilitated the adoption of several such negotiated agreements.) Any parties who have not negotiated agreements may present to the Copyright Royalty Judges, who will conduct a rate setting arbitration to establish royalty rates.

  • I already pay royalties to ASCAP, BMI, and/or SESAC. Why do I have to pay SoundExchange, too?

Every musical recording embodies two distinct copyrighted works. The first is the underlying musical composition, comprised of the written notes and lyrics (a “musical work”). The songwriter and/or his or her music publisher usually own the copyright in the musical work. The second copyrighted work is the actual recording itself – the sounds, including the recording artist’s interpretation of the musical composition, and the creative efforts of the producer, sound engineers and background musicians (a “sound recording”). A copyright holder, whether a label or an independent musician, owns the copyright or  “master” to the sound recording. SoundExchange collects and distributes royalties associated with the sound recordings made by services operating under one of the statutory licenses. By contrast, ASCAP, BMI and SESAC collect and distribute royalties associated with the public performance of musical works. A digital audio transmission of a musical recording will usually require a license for both the sound recording and the underlying musical work.

  • What happens if it turns out I’m not eligible, but I’ve been operating anyway?

It is the responsibility of each service provider to be confident about its eligibility and ability to be compliant with rates and terms before beginning operation under statutory licensing. Ultimately, SoundExchange does not confirm such eligibility or compliance: we accept payments, Statements of Account and Reports of Use, and distribute those payments to artists and copyright owners as instructed by those forms and reports, without waiving the rights of anyone we pay, or of anyone whose recordings were transmitted under such intended statutory licensing. Since artists and copyright owners are always free to protect their legal interests, we encourage service providers with any questions in these regards to review our website for more information, and to contact us and/or legal counsel.

Non-Waiver of Rights

Important! SoundExchange does not confirm that a service is eligible or compliant with the law by accepting payments, Statements of Account and/or Reports of Use. Also, artists and rights owners do not waive any legal rights by accepting payments from SoundExchange based upon those submissions. Please read on for more detail.>READ MORE


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