Copyright Royalty Board Reform Is Urgently Necessary (Guest Column)

The Copyright Royalty Board plays a vital role in the music industry and there is a growing consensus that the process by which it operates is in dire need of reform. Unfortunately, the harms of the current process fall disproportionately on the independent creators that are the lifeblood of the industry.

To ensure independent rights owners and creators can have a real voice, I believe CRB reform must address the following three main areas.

First, as I wrote last year, any reform should encourage early settlements that represent a broad industry consensus, as this benefits everyone. Currently, however, the enormous expense associated with a CRB proceeding prohibits independents from participating. Most small businesses, such as the majority of our members, simply cannot afford this expense. As a result, crucial, broad-sweeping changes have been determined by the major record companies and music publishers without providing independents with an opportunity to present how these decisions would impact their business. The initial phonorecords IV settlement, for example, was reached early in the process, but it clearly did not reflect a broad consensus among publishers; the second settlement, reached late in the process, left independent labels in a disadvantageous position, and did not reflect their greater dependence on physical goods and downloads. Clearly, CRB reform should provide an early and inexpensive forum to encourage settlements that reflect input and participation from across the industry – including independents.

Second, when settlements are not possible, it’s essential to lower the costs and bring CRB litigation procedures back in line with Congress’s original intentions. When Congress established the CRB, it intended to create a relatively streamlined judicial process that minimized the costs traditionally associated with large trials. In practice, however, discovery in these proceedings has grown far beyond the original boundaries anticipated by Congress, creating enormous burdens for participants and non-participants alike. Congress did not intend for discovery in these proceedings to be as far-reaching and expensive as federal litigation but that, unfortunately, is what has come to pass. For independents, discovery is the key factor that puts the cost of formal participation in proceedings out of reach.

Similarly, there should be procedural mechanisms to ensure the CRB acts promptly on pending motions and other disputes, and issues determinations in a timely way. Just to take one current example, the CRB only recently issued its post-appeal determination in the Phonorecords III decision – nearly three years after the decision was sent back to the CRB for new proceedings after the appeal. Prolonged delay drives up the costs of proceedings and introduces unnecessary uncertainty – burdens that, again, fall disproportionately on independent businesses.

Third, there should be a procedure to ensure that important questions are not left hanging by the CRB in the course of a proceeding, even if they ultimately become moot. Otherwise, erroneous CRB actions become “precedent” as a practical matter simply because the case ends without the issue being addressed. One stark example is the question that emerged in Phonorecords IV, when the CRB rejected the first mechanicals settlement based on a single participant’s objection and a raft of comments by non-participants. Immediately afterwards, the RIAA recognized that the law was unclear on how this rejection should apply and raised an important question – namely, whether the rejection applied to all participants or only those participants that objected to the settlement. Given, however, that the RIAA and NMPA subsequently reached a second settlement that was accepted by the CRB before this critical question was addressed, it remains unanswered. As a result, this lack of clarity destabilizes the entire process and makes settlements much less likely.

Clearly, we need to address these issues to ensure that all industry participants are heard and treated fairly by the CRB process. To that end, I look forward to working with the entire industry to reach a sensible set of solutions, with a particular focus on protecting independent businesses and creators whose perspectives are too often ignored.

Dr. Richard James Burgess MBE is president and CEO of the American Association of Independent Music (A2IM).