INTRODUCTION

This memorandum is directed at artists who wish to make available for digital distribution their rendition, or “cover,” of a copyrighted musical work. The memorandum sets forth the steps artists must take to legally distribute any musical work that has previously been recorded and sold with the consent of the copyright owner.


RELEVANT COPYRIGHT LAW

Under United States Copyright law, the holder of a copyright has the exclusive right to authorize both the reproduction and distribution of the copyrighted work.1 Simply put, a copyright owner can exclude others for using his property.2

The copyright owner’s right to exclude, however, is not absolute. Under the Copyright Act of 1976, once a copyright owner of a musical work authorizes one person to publicly distribute his rendition of the owner’s work within the United States, any other person may, in effect, compel the copyright owner to grant them permission to distribute their own cover of the work.3 This right to distribute a cover song is predicated on meeting statutory requirements.4 Since all that is required is satisfying the statute, permission from the copyright holder is not necessary; permission is compulsory if the statutory requirements are met. Consequently, the right to distribute a cover song is called a “compulsory license.”

The right to obtain a compulsory license is also not absolute. It may only be obtained if the primary purpose in creating the rendition is to distribute it to the public for private use.5 Moreover, while the new rendition may alter the original musical work to the extent necessary to reflect the new interpretation, the rendition may not change the basic melody or fundamental character of the work.6


STEPS TO OBTAIN A COMPULSORY LICENSE

I. Step 1 – Identify the Owner of the Copyright

The first step to obtaining a compulsory license is to identify the copyright owner of the song. This search can be misleading, as the owner is not typically the musical artist, but is rather the songwriter or publisher. There are two methods to identify the copyright owner.

The first method is to contact or visit the United States Copyright Office (“Copyright Office”).7 The Copyright Office staff can research the copyright records for a fee.8 Alternatively, the Copyright Office records may be searched free of charge either in person at the Library of Congress or through the internet.9

The second method is to search one of the many music industry websites that provide songwriter and publisher databases. Some of these resources are: (1) ASCAP; (2) BMI; (3) Harry Fox; and (4) SESAC.


  1. Step 2 – Send a “Notice of Intention”

Any person wishing to obtain a compulsory license must serve or file a “Notice of Intention.”10 The failure to serve or file a Notice of Intention (“Notice”) bars the possibility of obtaining a compulsory license and, in the absence of a negotiated license with the copyright owner, renders the making and distribution of cover songs potential acts of infringement.11 Since the Copyright Office does not provide printed forms for the purpose of serving or filing a Notice, the person seeking a compulsory license is responsible for drafting the Notice.12 The following provides who the Notice should be sent to, when to send it, and what it should include.


A. Where to Send the Notice of Intention

Determining whether the Notice must be served on the copyright owner13 or filed with the Copyright Office depends on whether, during Step 1, the address of the copyright owner was located.


  1. Name and Address Found

If the name and address of the copyright owner were located during Step 1, the notice must be served on the copyright owner (or an authorized agent of the owner)14 by certified mail or reputable courier service. In the case that the work has more than one copyright owner, a Notice of Intention sent to any one of the co-owners (or an authorized agent of one of the co-owners) is sufficient for purposes of Step 2.15 If an address is known, a copy of the Notice does not have to be filed with the Copyright Office.16


  1. Name and Address Not Found

If the name and address were not found, the Notice of Intention must be filed with the Copyright Office. There is a $12.00 filing fee required for each Notice filed.17

B. When to Send the Notice of Intention

The Notice of Intention must be sent via certified mail 30 days before any distribution of the copyrighted work.18


C. Contents of the Notice of Intention

There must be a separate Notice of Intention for each work for which a compulsory license is desired.19 Each Notice of Intention must contain the following:

  1. A clear and prominent heading entitled: "Notice of Intention to Obtain a Compulsory License for Making and Distributing Phonorecords";20


  1. The full legal name of the person or entity intending to obtain the compulsory license;21


  1. Any and all fictitious or assumed names used by the person or entity intending to obtain the compulsory license (i.e. stage name, or band name);22


  1. The business address of the person or entity intending to obtain the compulsory license (e.g. telephone number, the street address of the place of business, and an e-mail address, if available). Post office boxes are unacceptable, unless it is the only option in the geographic area.23


  1. If the entity is a business organization, the name and title of the chief executive officer, managing partner, sole proprietor or other person similarly responsible for the management of such entity, if applicable;24


  1. The nature of the business organization used by the person intending to obtain the license (e.g. corporation, partnership, limited liability corporation, etc.):


    1. If it is a corporation registered with the Securities and Exchange Commission, this should be stated;


    1. If it is a corporation not registered with the SEC, it should list the names and officers and each owner of 25% or more securities (i.e. band members if sales income is split);


    1. In all other cases, the owners of 25% or more of the securities should be listed (i.e. band members if sales income is split);25


  1. The fiscal year of the person or entity intending to obtain the compulsory license (e.g. January 1 – December 31, if operating on a calendar year);26


  1. The title of the musical work;27


  1. The name(s) of the author(s) of the musical work, if known;28


  1. The types of all recordings under the compulsory license (Note: a digital music file distributed via the internet is called a “digital phonorecord delivery” or “DPD” );29


  1. The anticipated date of initial distribution of DPDs already made (if any) or expected to be made under the compulsory license;30


  1. The name of the performer/artist/band actually engaged in performing the cover song to be recorded on the DPD;31


  1. The catalog number or numbers, and label name or names, used or expected to be used on DPDs already made (if any) or expected to be made under the compulsory license;32


  1. In the case of DPDs already made (if any) under the compulsory license, the date(s) such manufacture;33


  1. A copyright owner of the work, if known;34 if the copyright search did not yield the name and address of the copyright owner, include a statement indicating that the registration records or other public records of the Copyright Office were searched, but did not identify the name and address of the copyright owner of such work;35 and


  1. The signature of the person or entity intending to obtain the compulsory license (or a duly authorized agent of such person or entity), along with the printed or typewritten name of the person signing, as well as the date of signature.36



  1. Step 3 – Make Royalty Payments

  1. Steps for Submitting a Monthly Statement of Account

The compulsory licensee must pay royalties to the copyright owner on or before the 20th day of each month, and the payments must be accompanied by a “Monthly Statement of Account.” 37 If the address of the copyright owner is not known, the Annual Statement may be filed in the Copyright Office.38 Since the Copyright Office does not provide a form for the Monthly Statement of Account,39 the compulsory licensee is responsible for drafting and submitting, via mail or reputable courier,40 a statement that includes the following:


















I certify that I have examined this Monthly Statement of Account and that all statements of fact contained herein are true, complete, and correct to the best of my knowledge, information, and belief, and are made in good faith. 58



  1. Royalty Payment Rate

The terms and rates of royalty payments may be negotiated.59 In the absence of such negotiation, however, the payment rate is set by statute. The current (January 1, 2006 – December 31, 2007) statutory rate for royalties depends on the playing time of the recording. The rate is as follows:

  1. Calculating the Monthly Royalty Payment

The Copyright Office provides a detailed explanation of how to calculate the total monthly royalty payment.61 The amount of payment, however, is simply the total number of DPDs downloaded, not including the number of retransmissions, multiplied by the statutory rate.


IV. Step 4 – File an Annual Statement of Total Sales of the Recording

The compulsory licensee must serve on the copyright holder (or authorized agent) an Annual Statement of Account62 on or before the 20th day of the third month following the end of the fiscal year covered by the Annual Statement.63 It is not necessary to file an Annual Statement in the Copyright Office.64 If the address of the copyright owner is not known, the Annual Statement may be filed in the Copyright Office.65 Since the Copyright Office does not provide a form for the Annual Statement of Account,66 the compulsory licensee is responsible for drafting and submitting, via mail or reputable courier,67 a statement that includes the following:

  1. A clear and prominent heading entitled: “Annual Statement of Account Under Compulsory License for Making and Distributing Phonorecords”;68


  1. The fiscal year covered by the Annual Statement;69


  1. The full legal name of the compulsory licensee;70


  1. Any and all fictitious or assumed names used by the compulsory licensee (i.e. stage name, or band name);71


  1. If the compulsory licensee is a business organization, the name and title of the chief executive officer, managing partner, sole proprietor or other person responsible for the management of such entity;72


  1. The business address of the compulsory licensee. Post office boxes are unacceptable, unless it is the only option in the geographic area;73


  1. The title(s) of the musical work(s) created under the compulsory license by the licensee;74


  1. The name of the author of each musical work, if known;75


  1. The playing time of each musical work (minutes and seconds);76


  1. The catalog number(s) and label name(s) used on the DPD;77


  1. The name of the performer/artist/band engaged in recording the musical work;78


  1. The total royalty payment for the fiscal year covered by the Annual Statement, along with the arithmetical calculations involved;79


  1. The total sum paid under Monthly Statements of Account by the compulsory licensee to the copyright owner being served with the Annual Statement during the fiscal year covered by the Annual Statement;80


  1. The type of phonorecord configuration (i.e. DPD);81


  1. The number of DPDs made through the end of the fiscal year covered by the Annual Statement (i.e. how many times the DPD was downloaded);82


  1. The number of DPDs which have never been relinquished from the possession of the compulsory licensee through the end of the fiscal year covered by the Annual Statement;83


  1. The number of DPDs involuntarily relinquished from possession (e.g. fire or theft) of the compulsory licensee during the fiscal year covered by the Annual Statement and any earlier years, along with a description of the facts of such involuntary relinquishment;84


  1. The number of DPDs distributed by the compulsory licensee during all years before the fiscal year covered by the Annual Statement (i.e. how many times the DPD was downloaded);85


  1. The number of phonorecords relinquished from possession of the compulsory licensee for purposes of sale during the fiscal year covered by the Annual Statement accompanied by a privilege of returning unsold records for credit or exchange, but not permanently relinquished by the end of that year;86 87


  1. The number of DPDs distributed by the compulsory licensee during the fiscal year covered by the Annual Statement;88


  1. If the information given under paragraphs 15-17 of this section does not reconcile, the Annual Statement shall also include a clear and detailed explanation of the difference. The information shall be considered not to reconcile if, after the number of DPDs given under paragraphs (16), (17), (18), and (19) are added together and that sum is deducted from the number of DPDs given under paragraph (15), the result is different from the amount given under paragraph (20);89


  1. The compulsory licensee’s signature (duly authorized officer if a corporation, partner if partnership), along with the printed or typewritten name of the signatory, date of signature, title of signatory (if a corporation or partnership), and a certification of the signatory’s capacity.90


  1. Each Annual Statement of Account must be certified by a licensed Certified Public Accountant,91 and signed by an individual, or in the name of a partnership or a professional corporation.92 The certification must consist of a specific statement specified within the statute.93














1 17 U.S.C. § 106 (2000).


2 eBay Inc. v. MercExchange, L.L.C., 126 S. Ct. 1837, 1840 (2006).


3 17 U.S.C. § 115(a)(1).

4 Id.


5 Id.


6 Id. § 115(a)(2).


7 U.S. Copyright Office, Circular 22, How to Investigate the Copyright Status of a Work 2 (2006), http://www.copyright.gov/circs/circ22.pdf.


8 Id.


9 Id.


10 17 U.S.C. § 115(b)(1).


11 Id. § 115(b)(2).


12 37 C.F.R. § 201.18(c) (2006).


13 Id. § 201.18(a)(3) (“the term copyright owner, in the case of any work having more than one copyright owner, means any one of the co-owners”).


14 37 C.F.R. § 201.18(a)(4).


15 Id.


16 Id. § 201.18(f)(1).


17 U.S. Copyright Office, Current Fees, http://www.copyright.gov/docs/fees.html (last visited Jul. 19, 2007).


18 17 U.S.C. § 115(b)(1).


19 Section 201.18(a)(2) of Title 37 of the Code of Federal Regulation also provides details on how multiple works may be included in the same Notice of Intention, so long as they are all by the same original performer. Section 201.18(a)(2) reads in pertinent part:


A Notice of Intention may designate any number of nondramatic musical works, provided that the copyright owner of each designated work or, in the case of any work having more than one copyright owner, any one of the copyright owners is the same and that the information required under paragraphs (d)(1)(i) through (iv) of this section does not vary. For purposes of this section, a Notice which lists multiple works shall be considered a composite filing of multiple Notices and fees shall be paid accordingly if filed in the Copyright Office under paragraph (f) of this section ( i.e. , a separate fee, in the amount set forth in §201.3(e)(1), shall be paid for each work listed in the Notice).


20 37 C.F.R. § 201.18(d)(1).


21 Id. § 201.18(d)(1)(i).


22 Id.


23 Id. § 201.18(d)(1)(ii).


24 Id.


25 U.S. Copyright Office, Checklists 1 (2002), http://www.copyright.gov/carp/m-200.pdf.


26 37 C.F.R. § 201.18(d)(1)(iv).


27 Id. § 201.18(d)(1)(v)(A).


28 Id. § 201.18(d)(1)(v)(B).


29 Id. § 201.18(d)(1)(v)(D).


30 Id. § 201.18(d)(1)(v)(E).


31 Id. § 201.18(d)(1)(v)(F).


32 Id. § 201.18(d)(1)(v)(G).


33 Id. § 201.18(d)(1)(v)(H).


34 Id. § 201.18(d)(1)(v)(C).


35 Id. § 201.18(d)(1)(vi).


36 Id. § 201.18(e).


37 17 U.S.C. § 115(c)(5).


38 37 C.F.R. § 201.19(e)(7)(ii).


39 Id. § 201.19(e)(1).


40 Id. § 201.19(e)(7).


41 Id. § 201.19(e)(2).


42 Id. § 201.19(e)(2)(i).


43 Id. § 201.19(e)(2)(ii).


44 Id.


45 Id. § 201.19(e)(2)(iii).


46 Id. § 201.19(e)(2)(iv).


47 Id.


48 Id. § 201.19(e)(3)(ii)(A).


49 Id. § 201.19(e)(3)(ii)(B).


50 Id. § 201.19(e)(3)(ii)(C).


51 Id. § 201.19(e)(3)(ii)(D).


52 Id. § 201.19(e)(3)(i)(A).


53 Id. § 201.19(e)(3)(i)(B).


54 Id.


55 Id. § 201.19(e)(3)(ii)(E).


56 Id. § 201.19(e)(2)(vi).


57 Id. § 201.19(e)(4)(iii).


58 Id. § 201.19(e)(6).


59 17 U.S.C. § 115(c)(3)(B).


60 U.S. Copyright Office, Copyright Royalty Rates, Section 115, the Mechanical License, http://www.copyright.gov/carp/m200a.html (last visited Jul. 19, 2007).


61 37 C.F.R. § 201.19(e)(4)(ii).


62 17 U.S.C. § 115(c)(5).


63 37 C.F.R. § 201.19(f)(7).


64 Id. § 201.19(f)(7).


65 Id. § 201.19(f)(7)(iii).