By Annalisa Choy
Contents
Introduction
According to Paul X McCarthy, an adjunct professor studying the global impacts of technology, Spotify Technology S.A. is on track to become the Google of the music streaming world.[1] The number of Spotify users has grown immensely in recent years. From 2012 to 2016, the number of paid Spotify subscribers increased from 5 million[2] to 17 million.[3] And as of January 2018, Spotify has grown to 70 million paid subscribers, and hosts an additional 70 million free ad-supported users.[4] Overall, the music streaming industry has helped halt 15 years of steadily decreasing music industry revenues.[5] Remarkably, in 2016, streaming revenues increased by 60.4%,[6] which correlated with a 5.9% increase in music industry revenues.[7] Spotify has helped contribute to this growth by returning about 70% of its revenue to the music industry through royalties and license fees.[8]
However, Spotify has recently argued that it is not responsible for mechanical royalties because music streaming does not implicate the right of reproduction under domestic copyright law.[9] This argument unearths a question left unanswered by international copyright law—whether transitory electronic storage, such as the making of random access copies (RAM), qualifies as a “reproduction” under the Berne Convention. Transitory electronic storage includes music streaming through platforms such as Spotify and Pandora. In contrast, permanent electronic storage covers digital downloads from platforms such as Apple iTunes.
Sections II of this article provides an overview of RAM and music royalties. Section III describes three rights of international copyright law: the right to reproduce the work (“reproduction right”), the right to publicly perform the work (“performance right”) and the right to make the work available (“making available right”). Section IV concludes that transitory electronic storage does not fall within the scope of the reproduction right, but proposes that such transitory electronic storage does implicate the “making available right.”
The Basics
Random Access Memory (RAM)
All digital information is physically manifested through either stable representations or volatile representations.[10] Stable representations consist of long-term, persistent forms of storage such as hard drives and USB sticks,[11] which have the capacity to store digital downloads. Volatile representations are short-term forms of storage, typically retaining information as long as the device is powered on.[12] A common example of a volatile representation is a computer’s random access memory (RAM).[13] The information stored in RAM is used for all familiar computer activities, such as browsing the Internet and opening applications.[14] The information in RAM persists until the information is either overwritten by new information or the device is powered off.[15] In general, computers operate by reading stable information, translating it into RAM copies, and then transferring it into the computer’s processing system called the Central Processing Unit (CPU).[16] With regard to music streaming, computers access the music files directly from an external source such as the streaming company’s network. Accordingly, when you stream a song, the media file is performed simultaneously during file transfer, essentially bypassing the hard drive.[17] In contrast, digital downloads are stored on the user’s hard drive.
Music Royalties
In the United States, copyright law distinguishes a song’s musical composition from its sound recording.[18] A musical composition of a song consists of the song’s underlying structure, including the lyrics, melody and arrangement. Songwriters and publishers typically own the copyright to the musical composition.[19] The sound recording of a song is created in the recording studio and typically owned by record labels. [20] Correspondingly, a single musical composition can generate several different sound recordings.
In the United States, a copyright in a musical composition includes the public performance right[21] and the reproduction right.[22] The public performance right generates performance royalties.[23] Performance royalties accumulate each time a song is played in a public venue such as a restaurant, elevator or foreign film.[24] The reproduction right generates mechanical royalties.[25] Mechanical royalties are earned each time the song is transferred to a tangible medium or digitally downloaded.[26] Currently, Spotify pays approximately 58% in sound recording fees, 6% in performance royalties, and 6% in mechanical royalties.[27]
International Copyright Law
The Right of Reproduction
Spotify recently argued that music streaming does not qualify as a “reproduction” as set forth by section 106(1) of the 1976 Copyright Act.[28] The 1976 Act was drafted with a “weather eye” on the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention).[29] Therefore, Spotify’s argument also implicates questions regarding the reproduction right set forth by the Berne Convention and related treaties, which are addressed here.
Article 9(1) of the Berne Convention gives an artist the right to authorize the “reproduction of [their work], in any manner or form.”[30] However, the scope of a “reproduction” is ambiguous because the Berne Convention did not define the term “reproduction.”[31] This omission became particularly important during the digital era. Thus, in an attempt to clarify the issue, the World Intellectual Property Organization (WIPO) adopted the WIPO Copyright Treaty (WCT)[32] and the WIPO Performances and Phonograms Treaty (WPPT).[33] The WCT and WPPT were adopted under the Berne Convention and are collectively known as the WIPO Internet Treaties.[34]
During WCT negotiations, delegates could not reach a consensus regarding a proposed Article 7, which extended the reproduction right to transient copies created during Internet transmissions.[35] Ultimately, the delegates deleted proposed Article 7 and added an “agreed statement concerning Article 1(4)” instead.[36] This agreed statement extends the reproduction right to the digital environment and states that “the storage of a protected work in digital form in an electronic medium constitutes a reproduction within the meaning of Article 9 of the Berne Convention.”[37] The agreed statement concerning Article 1(4) surreptitiously avoids defining the term “storage.”[38] The WPPT contains an “agreed statement concerning Articles 7, 11 and 16,” which largely parallels the text of the agreed statement concerning Article 1(4). However, both agreed statements are exempt from providing context during treaty interpretation because the delegates did not unanimously adopt the agreed statements.[39] Accordingly, the WIPO Internet Treaties do not definitively clarify the scope of the reproduction right.
The Right to Publicly Perform
Article 11 of the Berne Convention gives rights-holders the right to authorize the public performance of their works, including broadcasting.[40] Under the Berne Convention, the scope of this is rather narrow because it technically encompasses live performances before an audience gathered in a public place.[41] Other notions of public performances fall under different terminology under the Berne Convention.[42] In contrast, the United States has a broad notion of the scope of a public performance.[43] In the United States, the right of public performance includes both traditional and advanced technological means of performance.[44]
The Right to “Make Available”
The WIPO Internet Treaties grant rights-holders the exclusive right to make their works available to the public “in a way” that allows the public to choose when to access the works.[45] The United States, however, does not explicitly set forth such a right.[46] When the United States implemented the WIPO Internet Treaties through the Digital Millennium Copyright Act (DMCA), Congress omitted an explicit “making available right” because it determined that the existing exclusive rights in the Copyright Act were sufficient to protect the substance of the “making available right.”[47] For instance, it is generally settled in the United States that the exclusive right of distribution in § 106(3) of the Copyright Act extends to digital transmissions.[48]
Music Streaming & International Copyright Law
Scholars are divided on the question of whether transitory electronic storage qualifies as a “reproduction,” particularly regarding random access memory (RAM) copies.[49] As Pamela Samuelson notes, “[t]he most honest thing that can be said about the temporary copying of works in computer memory is that there is no international consensus on this subject.”[50] European copyright scholars primarily take a maximalist approach, which includes all conceivable forms of reproduction within the scope of the Berne Convention, including transitory electronic storage.[51] American scholars generally take a minimalist approach, which would exclude transitory electronic storage from the scope of the Berne Convention.[52]
The minimalist view is likely the better view because the maximalist view would reach an undesirable result. Under the maximalist view, if the reproduction right encompassed every conceivable form of transient electronic storage, the reproduction right would be indistinguishable from the performance right. To illustrate, imagine it is 1990 and you own a restaurant that features a jukebox CD player. Furthermore, you want to add a CD to the jukebox, so you buy one at your local store. This sale implicates the reproduction right. Back in your restaurant, you add the CD to the jukebox and play one of it is songs 10 times during normal business hours. This implicates the performance right 10 times, one for each “play” of the song. Nevertheless, each time you played the song, the jukebox created a form of transitory electronic storage by converting the information from the physical CD into electronic signals and translating those signals into sounds. This activity, however, does not implicate the reproduction right 10 times. If transitory electronic storage qualified as a reproduction, the 10 plays would implicate the reproduction right 10 times. This would require companies to pay mechanical royalties any time the physical form of a song was translated by electronic means.
The transitory copy created by the jukebox is analogous to a RAM copy created by a computer. When a user wants to stream a song, the computer generally retrieves the file from the streaming company’s network, similar to how the jukebox selects the CD from its collection. The computer then converts the music file into RAM, comparable to how the jukebox converted physical CD information into electronic signals. Ultimately, the computer plays audible music by using the CPU to processes the RAM copy, like how the juke box played audible music by processing the electronic signals. Therefore, the computer’s “playing” of audible music does not implicate the reproduction right, just as the “playing” of restaurant music from the jukebox does not implicate the reproduction right. The alternative would necessitate that every performance involving technology would implicate the reproduction right. Therefore, the creation of RAM copies does not qualify as a “reproduction” for copyright purposes.
One counterargument to the jukebox analogy is that RAM differs from the jukebox’s internal processing because RAM continues to store the files until they are overwritten or the device is powered off. However, this difference does not change the fact that the user cannot directly control whether information is accessed from RAM or whether the information is accessed from the computer’s permanent storage system. Like the jukebox’s CD processor, computers use RAM as an internal mechanism that helps it perform its functions. RAM helps the computer access the information quicker, as the alternative would require the computer to undergo the lengthy process of accessing the information from its original source.
Even though RAM copies do not qualify as “reproduction,” this exclusion reaches an unjust result in the context of music streaming. Spotify would only be responsible for one “reproduction”—the purchase of its “master copy” of the song. Spotify’s single reproduction would then supply the entire country with the song. Nonetheless, Spotify makes songs available to the public, which should implicate some form of copyright protection. Thus, the “making available” right set forth by the WIPO Internet Treaties should apply. This right is independent of the form of fixation, whether permanent or transitory because the work needs to be available “in a way that allows the public to choose when to access the works.” This broad language likely encompasses both permanent and transitory forms of electronic storage. Accordingly, the “making available” right should supplant the reproduction right with respect to music streaming because it is more suitable to transitory electronic storage.
Conclusion
Music streaming has provided a means of legally accessing vast amounts of music and has helped halt the steadily declining music industry revenues. Notwithstanding these advances and the promise music streaming holds, international copyright law has not clearly specified whether the transitory electronic storage involved in music streaming implicates the reproduction right. Transitory electronic storage does not qualify as a reproduction because the alternative would make reproductions indistinguishable from performances. However, in the context of music streaming, excluding transient copies from the reproduction right reaches an unjust result because rights holders would only be compensated for the reproduction of the single “master copy” held by the music streaming company. Because the WIPO Internet Treaties use broad language to describe the “making available” right, this right likely covers electronic storage irrespective of whether that storage is permanent or transitory. Therefore, the “making available” right should supplant the reproduction right with respect to music streaming.
[1] Johanna Nicholson, If Spotify Is So Huge, Why Is It Losing Money?, ABC News (Sept. 6, 2017), http://www.abc.net.au/news/2017-09-06/digital-music-streaming-rising-but-spotify-losing-money/8875188 (citing the opinion of an adjunct professor at the University of New South Wales who studies technology and its global impacts).
[2] Ingrid Lunden, Spotify By the Numbers: Now 5M Paying Subscribers, With 1M in the U.S. Alone; 20M Users Overall, Techcrunch (Dec. 6, 2012), https://techcrunch.com/2012/12/06/spotify-by-the-numbers-now-5m-paying-subscribers-with-1m-in-the-u-s-alone-20m-users-overall/.
[3] Juli Clover, Spotify Now has 70 Million Paid Subscribers, MacRumors (Jan. 4, 2018), https://www.macrumors.com/2018/01/04/spotify-now-has-70-million-paid-subscribers/.
[4] Id.; Spotify (@Spotify), Twitter (Jan. 4, 2018, 4:41 PM), https://twitter.com/Spotify/status/949017854145425409.
[5] See Frances Moore, Global Music Report 2017: Annual State of the Industry, 10 (2017), http://www.ifpi.org/downloads/GMR2017.pdf.
[6] Id.
[7] Id.
[8] Manatt, Phelps & Phillips, LLP, U.S. Music Streaming Royalties Explained (2016), https://www.manatt.com/Manatt/media/Media/PDF/US-Streaming-Royalties-Explained.pdf [hereinafter Manatt Report].
[9] Defendant’s Memorandum in Support of Motion for a More Definitive Statement at 2, Gaudio v. Spotify, No. 3:17-cv-01052 (M.D. Tenn. 2017) [hereinafter Spotify Memorandum].
[10] Zohar Efroni, Access-Right: The Future of Digital Copyright Law 208 (2011).
[11] Id.
[12] Id.
[13] Id.
[14] U.S. Copyright Office, Section 104 DMCA Report 107-09 (2001).
[15]See id.
[16] Efroni, supra note 10, at 208.
[17] Id.
[18] 17 U.S.C.A. § 106 (West 2018).
[19] See id. § 201(a).
[20] See Lee Ann Obringer, How Music Royalties Work, HowStuffWorks, (last visited Mar. 27, 2018) https://entertainment.howstuffworks.com/music-royalties3.htm.
[21] 17 U.S.C.A. § 106(4) (West 2018).
[22] See id. § 106(1).
[23] Tuneen E. Chisolm, Whose Song Is That? Searching for Equity and Inspiration for Music Vocalists Under the Copyright Act, 19 Yale J.L. & Tech. 274, 277 (2017).
[24] Id.
[25] 17 U.S.C.A. § 106 (West 2018); see also Molly Hogan, The Upstream Effects of the Streaming Revolution: A Look Into the Law and Economics of a Spotify-Dominated Music Industry, 14 Colo. Tech. L.J. 131, 145 (2015).
[26] Id.
[27] Manatt Report, supra note 8.
[28] Spotify Memorandum, supra note 9, at 2.
[29] Eric J. Schwartz, Golan v. Holder: Copyright “Restoration”, 5 Landslide 37, 38 (2012).
[30] Berne Convention for the Protection of Literary and Artistic Works, opened for signature Sept. 9, 1886, S. Treaty Doc. No. 99-27, 828 U.N.T.S. 221 (1886), http://www.wipo.int/wipolex/en/treaties/text.jsp?file_id=283693 [hereinafter Berne Convention].
[31] See id. art. 9(1).
[32] WIPO Copyright Treaty, adopted Dec. 20, 1996, S. Treaty Doc. No. 105-17, 36 I.L.M 65 (1997), http://www.wipo.int/wipolex/en/treaties/text.jsp?file_id=295157 [hereinafter WCT].
[33] WIPO Performances and Phonograms Treaty, adopted Dec. 20, 1996, S. Treaty Doc. No. 105-17, 36 I.L.M. 76 (1996), http://www.wipo.int/wipolex/en/treaties/text.jsp?file_id=295477 [hereinafter WPPT].
[34] See Lauri Rechardt, Streaming and Copyright: a Recording Industry Perspective, WIPO (May 2015), http://www.wipo.int/wipo_magazine/en/2015/02/article_0001.html.
[35] Jane C. Ginsburg, Achieving Balance in International Copyright Law, 26 Colum. J. L. & Arts 201, 205 (2003).
[36] Id.
[37] WCT, supra note 32, agreed statement concerning art. 1(4).
[38] See id.
[39] Vienna Convention of the Law of Treaties, May 23, 1969, art. 31(2)(a), 1155 U.N.T.S. 331, 340; see World Intellectual Property Organization [WIPO], Records of the Diplomatic Conference on Certain Copyright and Neighboring Rights Questions, at 628, 629 WIPO Doc. 348(E) (1996), ftp://ftp.wipo.int/pub/library/ebooks/wipopublications/wipo_pub_348e_v2.pdf (stating that agreed statement concerning Article 1(4) passed with 51 votes in favor and 5 votes against and that agreed statement concerning Article 7, 11 and 16 passed with 47 votes in favor and 4 votes against).
[40] Berne Convention, supra note 29, at art. 11.
[41] Ralph Oman, The United States and the Berne Union: An Extended Courtship, 3 J.L. & Tech. 71, 95 (1988).
[42] Id.
[43] Id.
[44] Id.
[45] WCT, supra note 32, art. 8; WPPT, supra note 33, arts. 10 & 14.
[46] U.S. Copyright Office, Report on the Making Available Right in the United States, at 2 (Feb. 2016) http://www.copyright.gov/docs/making_available/making-available-right.pdf.
[47] Id.
[48] Id. at 20.
[49] Efroni, supra note 10, at 203–08.
[50] Pamela Samuelson, The U.S. Digital Agenda at WIPO, 37 Va. J. Int’l L. 369, 380–92 (1997).
[51] Ginsburg, supra note 35, at 206.
[52] Id.