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As Clock Ticks, New Hurdles Mount Against the Music Modernization Act

The revised and amended Music Modernization Act that got the okay from the Senate Judiciary Committee June 28 was still garnering accolades from all sides of the music business days after its passing. Yet, the proposed amendments to the bill — some that were added in the Senate and some that are still under consideration by lawmakers — are also raising new questions and concerns, including how to pay for the proposals.

Meanwhile, the clock is ticking: the Senate needs to act on the bill before this Congressional term ends; otherwise lawmakers and music industry lobbyists must start the legislative process again next year after the fall midterm elections bring new officials into Congress.

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Source: As Clock Ticks, New Hurdles Mount Against the Music Modernization Act

YouTube to Launch Tool to Detect Re-Uploaded Videos Automatically

YouTube could be about to make a big step toward solving a longtime irritation for creators: It’s about to roll out a tool that will identify videos that are stolen and reposted by someone else — and let the original creator pull the ripoffs down.

After almost a year in beta-testing, YouTube’s new Copyright Match tool is scheduled to launch next week for creators with more than 100,000 subscribers. With the new system, after a user uploads a video — and YouTube verifies it as the first iteration of the video — YouTube will scan other videos uploaded to the service to see if any of them are the same (or very similar).

Source: YouTube to Launch Tool to Detect Re-Uploaded Videos Automatically

Will Supreme Court Nominee Brett Kavanaugh Gut TV Broadcasting As We Know It?

What Trump’s nominee said last year during a hearing could send shivers down the spines of broadcasters and other copyright holders. One of the best examples of how Kavanaugh might act on the Supreme Court is a case that never actually resulted in an opinion. It was also a case that held enormous significance to the television industry. That’s Fox Television Stations v. FilmOn.TV Networks, which was heard at the D.C. Circuit Court of Appeals in March 2017.

After the hearing, Neal Katyal, the attorney for the broadcasters not to mention the former Acting Solicitor General, called the two-hour event the “longest oral argument of my life.” This might explain why the broadcasters then chose to settle the case rather than risk a disastrous ruling.

Source: Will Supreme Court Nominee Brett Kavanaugh Gut Television Broadcasting As We Know It?

Castbox turns to blockchain to help podcasters get paid

Late last month, Castbox introduced Contentbox, an attempt help podcast hosts and producers make some actual money off their product. It’s been something of an on-going struggle since the dawn of the medium. During a fireside interview at TechCrunch’s event in Hangzhou, China this week, Castbox CEO Renee Wang outlined her company’s plans to offer podcasters a micropayment plan built around blockchain technology.

“Contentbox is a blockchain-based infrastructure for the digital content industry,” Wang told me. “The existing model is broken. Creators are not getting what they deserve and consumers are not getting a reward for engaging with content.”

Source: Castbox turns to blockchain to help podcasters get paid

Artificial Intelligence Could One Day Determine Which Films Get Made

Many see in ScriptBook and similar AI systems the potential to destroy a major part of the film production and distribution ecosystem, displacing script readers and saving much of the money studios spend on test screenings, focus groups and market research.

At its most basic, ScriptBook, founded in 2015 and based in Antwerp, Belgium, has created a tool that analyzes the text of screenplays to produce financial forecasting, or as Azermai grandly puts it, “Our mission is to revolutionize the business of storytelling by using AI to help producers, distributors, sales agents and financiers assess their risk.”

Source: Artificial Intelligence Could One Day Determine Which Films Get Made

EU Poised to Rewrite Rules on Uploaded Content, Aggregation

The European Union’s controversial Copyright Reform Directive took a major step toward becoming law across the continent Wednesday as the European Parliament’s Legal Affairs Committee voted narrowly to approve the measure. The vote establishes the Parliament’s official position on the proposed new rules ahead of final negotiations with the European Commission and the member states, although opponents of the measure on the committee could still force a vote by the full Parliament before those negotiations could begin.

The proposal has been the object of intense lobbying over the past two years both by copyright owners and technology companies, particularly regarding the directive’s Article 13, Article 11, and Article 3.

Article 13 requires “online content sharing service provider[s]” to obtain a license for any copyrighted material uploaded by their users or face liability for copyright infringement. As a practical matter, critics of the measure argue, online platforms would be forced to implement sophisticated and expensive content recognition and filtering technologies, similar to YouTube’s Content ID system, as it would be impossible to obtain all of the licenses they might potentially need.

Supporters counter that the provision is tailored to target platforms such as YouTube and Facebook, whose business models are based in part on profiting directly from the presence of unlicensed copyright content, such as by selling advertising against it. Online services operating in a non-commercial capacity, “such as online encyclopaedia, and providers of online services where the content is uploaded with the authorisation of all concerned rightholders, such as educational or scientific repositories,” are exempt from the new requirements, as are services providing cloud-based hosting of content that is not made directly available to the public.

Article 11 creates a new neighboring right for news publishers that would require search engines and aggregators to obtain a license before displaying snippets of articles. Unlike similar “link tax” laws in Germany and Spain, which failed to boost the profits of publishers, the new rules would apply EU-wide, making it difficult for aggregators to circumvent them by obtaining the content from other countries.

Article 3 would put limits on the use of text and data-mining software where the content being mined is not owned or licensed by whoever is doing the mining (The Next Web has a useful summary of the arguments for and against the three provisions).

This week’s vote comes on the heels of the EU’s General Data Protection Regulation (GDPR) taking effect, which was similarly targeted at reigning in the power of major online platforms. Although GDPR rules legally apply only within the EU, their imposition has had a global effect since many non-EU based services collect data on and from EU citizens, forcing millions of websites around the world to retrofit their data collection and privacy policies or face exclusion from EU countries, making the EU the de facto global standard-setter for data collection and privacy practices (see our updated policy here).

The new Copyright Directive, if fully enacted, could have a similar global effect. The new EU rules could give impetus to investment in and development of more sophisticated content recognition technologies, as well as more efficient, automated systems for obtaining licenses and paying rights owners.

In addition to being a boon for rights-tech companies, the development and successful deployment of such technologies could give rights owners outside the EU much stronger grounds to argue that the means to effectively police user-uploaded content and obtain licenses are available and should be deployed globally.

That could shift the terms of the debates currently underway in the U.S. and elsewhere over the proper scope of the copyright safe harbors afforded online services and platforms.

The potential impact of the EU Copyright Reform Directive, as well as the Music Modernization and Copyright Alternative in Small-Claims Enforcement (CASE) acts in the U.S. will be among the topics of discussion at the RightsTech Summit on October 5th in New York. Click here for information on to register for the conference.

 

Face Off: Studios Battle SAG-AFTRA Over ‘Digital Replicas’

Digital technology has given rise to a host of novel questions concerning the authorship, ownership, and exploitation of creative works, from the right to re-sell digital copies to the copyright status of works produced by artificial-intelligence agents. But a new legislative skirmish in New York State could take the debate beyond the realm of copyright into the realm of privacy and the right of publicity.

Cage, Nick Cage

Assembly bill A.8155B would create a new right of publicity for individuals concerning the use of their likeness in a “digital replica.” In what is believed to be the first such legislative effort by a state, the bill is meant to prohibit the use of “face-swapping” artificial intelligence technology to overlay an individual’s face onto another actor’s body without the individual’s consent, particularly for pornographic purposes.

According to the bill, “Use of a digital replica of an individual shall constitute a violation if done without the consent of the individual if the use is in an audiovisual pornographic work in a manner that is intended to create and that does create the impression that the individual represented by the digital replica is performing.”

The bill is strongly backed by the Screen Actors Guild-American Federation of TV and Radio Actors (SAG-AFTRA), which claims it is necessary to combat the growing scourge of “deep fake” videos, in which well-known individual are made to appear to be performing pornographic scenes.

“Individuals turn to image rights to sue corporations that use social media accounts or publicly available images to promote products or services without consent or compensation. These rights will also provide individuals, often women, relief if they are inserted into commercialized Deepfake sex scenes.,” SAG-AFTRA said in a statement supporting the measure.

With time in the legislative session running out, however, the major studios and the Motion Picture Association of America (MPAA) have mounted an all-hands effort to block the bill, according to the Hollywood Reporter, claiming the bill’s imprecise language could limit the production of biographical films of real-life individuals and chill technology innovation.

“If adopted, this legislation would interfere with the right and ability of companies like ours to tell stories about real people and events,” the Walt Disney Co. wrote in a letter the bill’s author. “Unfortunately, the proposed bill would transform New York from a jurisdiction that is friendly to and protective of such expressive endeavors to one in which they become encumbered by uncertainty and risk.”

In a separate memorandum, NBCUniversal warned, “The bill creates an unprecedented new category of protection for “digital replicas” of
living or deceased individuals. These provisions have potentially far-reaching implications, yet there is scant time left in the session for New York’s legislators to explore and consider them.”

The bill is still pending and it’s fate is uncertain at this point. Either way, though, it’s unlikely to be the last word in the debate over the uses (and misuses) of face-swapping technology and other forms of artificial intelligence in the creation of media content.

We’ll tackle some of those questions at the upcoming RightsTech Summit , at a panel titled What to Make of Machine-Made Art? Click here for more information on the summit, and for information on how to register.

 

SEC Chief on ICOs: Come See Us First

Securities and Exchange Commission chairman Jay Clayton on Wednesday offered some of his most definitive comments to date on whether the sort of crypto-tokens offered by many blockchain-based startups to fund initial development of their technology represent securities akin to stocks and bonds, and therefore subject to regulation by the SEC and other government agencies.

“A token, a digital asset, where I give you my money and you go off and make a venture, — you have some company you want to start or something –and in return for me giving you my money you say, I’m going to give you a return, or you can get a return in the secondary market by selling your token to someone, that is a security. And we regulate that,” he said in an interview on CNBC. “We regulate the offering of that security and we regulate the trading of that security.”

Asked whether that meant that, in his view, “most” initial coin offerings (ICOs) being marketed today are in fact securities Clayton replied, “correct.”

Clayton distinguished ICO tokens from cryptocurrencies like Bitcoin, which he said do not fit the legal definition of a security.

“Cryptocurrencies, these are replacements for sovereign currencies — replace the dollar, replace the yen, replace the euro with Bitcoin — these are not securities,” he said.

He was less definitive regarding crypto assets like Ether and Ripple, which can serve multiple functions, saying the determination of their status would be fact and circumstance dependent, but added “We are not going to do any violence to the traditional definition of a security that has worked well for a long time.”

Clayton’s comments hold obvious implications for many startups, including many rights-tech startups, that have issued virtual tokens in connection with their launch and initial capitalization strategy. In most cases, those tokens are offered via self-published “white paper,” which typically includes far less information about the issuer and the risk factors in the offering than in the registration statements companies issuing conventional securities are required to file with the SEC.

Token issuers also generally do not follow SEC rules regarding quarterly and annual financial disclosures.

Most crypto startups have sought to side-step the question of SEC registration by claiming their tokens are functional elements of their platform or application, such as by limiting access to their networks to token holders, or giving token holders a rule in network governance, and are therefore not equivalent to equity ownership in the venture. But many ICOs also carry at least an implicit promise of appreciation in value as network usage increases, which could bring them within Clayton’s definition of a security.

The SEC and the Commodity Futures Trading Commission (CFTC) have been wrestling with whether and how to regulate the issuing and trading of crypto assets, and the uncertainty around their status has both roiled markets and led to a mini-gold rush among ICO issuers looking to cash in before regulators come knocking.

The largely unregulated ICO market has produced a high failure rate even by the standards of startup enterprises, as well as instances of outright fraud. According to a tally by Bitcoin.com, 46 percent of ICO crowdsales in 2017 had already failed or vanished by February 2018.

That may start to change.

“If you have an ICO, or a stock, and you want to sell it in a private placement, follow the private placement rules,” Clayton said. “If you want to do an IPO with a token, come see us.”

 

Sony Bets on Music Publishing Market Share

Sony Corp. this week announced it will purchase an additional 60 percent stake in EMI Music Publishing from Mubadala Investment Company for $2.3 billion in cash, giving the Japanese conglomerate a 90 percent share of EMI’s portfolio of music copyrights, which includes works by Kanye West, Alicia Keys, Drake, , Pharrell Williams, Queen, and much of the Motown catalog.

The move comes as part of a broader strategy mapped out by Sony CEO Kenichiro Yoshida to shift the venerable hardware maker’s focus away from low-margin consumer electronics toward building a stable of diverse and stable revenue streams.

“In the entertainment space, we are focusing on building a strong IP portfolio, and I believe this acquisition will be a particularly significant milestone for our long-term growth,” Yoshida said in a statement announcing the EMI deal.

Beyond its strategic value to Sony, however, the deal also clearly has a clear financial predicate: As growth in paid streaming continues to revive the recorded music business, the value of music publishing rights is also growing. The $2.3 billion Sony is paying for 60 percent of EMI values the full EMI catalog at $4.75 billion, more than double its price in 2012 when Mubadala and Sony first invested in the company.

The deal will also make Sony ATV the world’s largest music publisher by far, with a roughly 30 percent  share of the market

Number two publisher, Universal Music Group, with just under 20 percent of the market according to IFPI data, is also feeling bullish about the value of its portfolio. UMG’s parent company Vivendi has been teasing the possibility of a sale or spin-out of the music company, which includes a record label group in addition to its publishing assets to cash in on the growing value of its catalog.

EMI’s financial value to Sony, however, could be even larger than the raw calculation of its increased market share. The music industry’s still-chaotic data environment results in a vast but unaccounted pool of publishing royalties generated by streaming and other uses that are never attributed to the proper rights owners. Those moneys are eventually distributed by the performance rights organizations to music publishers based on the publishers’ market shares.

Since larger publishers are in the best position to negotiate with the PROs, they almost certainly end up collecting a disproportionate share of the kitty. For Sony, a bigger market share will likely mean an even bigger share of the unattributed royalties.

With the Music Modernization Act poised to pass the Senate and head to the president’s desk, moreover, a new pool of unattributed publishing royalties created by the MMA’s new blanket license for mechanical rights is also slated to be distributed on the basis of market share, yielding another windfall for the largest publishers.

The MMA itself, however, could contain the seeds of the unraveling of the “black box” premium currently enjoyed by the largest publishers. The bill calls for creation of a new open music rights database, to be maintained by the U.S. Copyright Office, intended to reduce the amount of unattributable royalty revenue collected by better matching sound recordings to the rights owners of the underlying compositions.

In fact, the music industry is currently bubbling with similar initiatives, such as the pilot program recently launched by rights-tech startup JAAK in partnership with Warner/Chapel Music Publishing in BMG. Both Warner/Chapel and BMG are far smaller than Sony ATV and UMG and so benefit proportionately less from the market share based spoils system.

Both the efforts to tackle music’s “black box” problem, and the investment environment for rights portfolios and rights management generally will be hot topics at the 2018 RightsTech Summit in October. For information on how to register for the conference click here.

The Copyright Turing Test

As a formal matter, the litigation in People for the Ethical Treatment of Animals v. David Slater, the “monkey-selfie case” is now over. Although the parties nominally settled the lawsuit last year, the U.S. Ninth Circuit Court of Appeals put an exclamation point on it last month by issuing a formal ruling and opinion anyway upholding the district court’s ruling in favor of the human photographer Slater that was under appeal at the time of the settlement.

Naruto

While the court conceded that, under the Ninth Circuit’s peculiar precedent in Cetacean Community v. Bush, animals like Naruto, the crested macaque who took the famous photos and on whose behalf PETA nominally had brought the case, may have standing to bring a lawsuit in human courts, they do not have statutory standing under the Copyright Act to bring an action for infringement:

We must determine whether a monkey may sue humans, corporations, and companies for damages and injunctive relief arising from claims of copyright infringement…Our court’s precedent requires us to conclude that the monkey’s claim has standing under Article III of the United States Constitution. Nonetheless, we conclude that this monkey — and all animals, since they are not human — lacks statutory standing under the Copyright Act. We but therefore affirm the judgment of the district court.

So, case closed.

Yet as some legal experts have pointed out, the Ninth Circuit didn’t really settle the question of who does own the copyright in the photos at issue if not the monkey. Under the settlement between the parties, Slater, whose camera Naruto borrowed for his self-portrait, is free to license their use on the stipulation that he donate a portion of the earnings to a fund to protect crested macaque habitat — a sort of professional tip of the hat to Naruto — neither the district court nor the Ninth Circuit explicitly determined the copyright to be his. Each ruled on the issue of standing, but neither reached ruling reached the merits of the infringement claim.

Slater set up his equipment in the Indonesian forest where Naruto and his fellow macaques live and left it unattended to see how the monkeys might respond to it. But beyond that, he didn’t have any particular creative input to the photos they took. So on what basis would his copyright in them rest? Is mere ownership of the equipment sufficient? Was providing the opportunity for the monkeys to take the photos by leaving the camera unattended a necessary step? We don’t really know.

Another question not directly addressed by the litigation is what made the monkey selfie so compelling in the first place? Had Naruto managed merely to take a random photo of his foot, or the sky, it’s doubtful anyone would have bothered litigating its authorship.

What made the monkey selfie so compelling, I think, was its seemingly human-like intention. Serendipitously well-framed in the shot, Naruto seems to exhibit human-like self-awareness as he appears to smile into the camera, an effect Slater himself recognized  in titling the book in which it first appear Wildlife Personalities.

The whole case, in effect, functioned as a sort of photographic Turing test: Was the photo a creative act of original expression if perceived that way by humans, even if the law does not recognize its proximate creator? If so, how should the law regard it? Who, if anyone, should have an exclusive right to exploit it commercially, and on what would that claim rest?

While the issue may appear abstract and theoretical, those questions are getting less theoretical by the day, as researchers develop ever more machine-based systems capable of producing Turing-sufficient works of expression. Like monkeys, machines would likely lack standing to bring a claim under copyright law. But that doesn’t mean they can’t produce works that humans perceive as expressive.

In a paper published last month, researchers from Microsoft and Kyoto University describe how they trained a neural net to produce original poems, one of which was accepted for publication by the human editors of a literary journal based on a blind, online submission.

Last year, researchers from Google published a paper describing how they taught a neural net to recognize the aesthetic elements of photography. The artificial intelligence system then produced original works of landscape photography that professional photographers had trouble distinguishing from similar works produced by humans (take that, Naruto!).

Computer scientists as Italy’s Politecnico di Milano, last month submitted a paper describing how they used a two-stage artificial intelligence system to create new levels of video game play on the fly that even other A.I. systems could not distinguish from human-created levels.

Copyright law is designed to incentive creativity by giving legal force to the author’s claim on its economic value. Our systems of commercial licensing of creative works rest on exploiting the exclusive rights of authors spelled out in the Copyright Act.

But as the monkey selfie case has shown, works can have considerable economic value even where there is no obvious or legally recognized author.

How that value is to be realized through our existing author-based licensing systems, and how disputes over that value are to be adjudicated within our author-centric copyright law are questions we’re only beginning to grapple with. We’ll be grappling with some of them at the 2018 RightsTech Summit in New York.

Anyone interested in addressing them can contact me at paul@concurrentmedia.com.

 

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