A lawyer for the Recording Industry Association of America told a federal appeals court today in Washington that record companies have a tough time sorting out copyright ownership, making it a challenge to pay some royalty payments on time.
Jenner & Block partner Paul Smith, representing the RIAA, urged a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit to vacate a late–fee decision by the Copyright Royalty Board. Smith also argued today that the penny-rate structure for payments involving ringtones should be remanded to the board for further consideration.
Senior Judge A. Raymond Randolph, sitting with Judges Merrick Garland and Brett Kavanaugh, asked Smith what incentive there is to make timely payments if there is no penalty for late-filed payments. Record companies, Smith responded, have a legal obligation to pay on time.
At issue is the Copyright Royalty Board’s 1.5% monthly late fee for compulsory mechanical licenses—which are licenses to record and distribute a musical composition that has already been released to the public.
In court, Smith spoke about the confusion of making payments to copyright holders. Here’s how he put it in a D.C. Circuit brief last month: “Record companies use their best efforts to pay royalties to music publishers and other copyright owners in a timely manner. However, the unique character of the mechanical licensing market makes that challenging. The most important factor causing late payment of mechanical royalties is the failure of publishers and songwriters to advise record companies promptly of the split ownership of songs.”
Smith said in the brief that it can take “months or even years for publishers and songwriters to sort out who made what contributions to a song” and then to negotiate the resulting ownership shares.
Attorney Kelsi Brown Corkran of the Justice Department’s Civil Division dismissed Smith’s argument about confusion. She called it a “non-issue” and “complete fiction.” Record companies, Corkran said, have no obligation to resolve copyright ownership disputes. The expectation is the payment will be made to the registered owner of the copyright, she said.
The RIAA is also challenging the penny-rate structure for ringtones, saying that a 24-cent flat rate should be tossed in favor of a percentage-of-revenue system. Smith said percentage-of-revenue systems are common in the industry because of price and revenue instability. Ringtones, Smith said, are a volatile business. Demand is dropping and piracy threatens the market.