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My friend asked me if he could record a cover of a song that I put on SoundCloud called Gratitude (License: All Rights Reserved).

  1. What legal rights does my friend have? Does he need my permission?

  2. What benefits, compensations, acknowledgements, etc. am I legally entitled to? Does my friend have to pay me mechanical royalties if, e.g., he publishes his version of the song to SoundCloud such that anyone can listen to it for free?

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In the United States, when you distribute a recording of a nondramatic musical work, the law grants a compulsory mechanical license allowing anyone to cover the song provided certain formalities are observed, and royalties are paid to the original artist. See 17 U.S.C. sec. 115.

If your song falls under this section, then all that is required for your friend to cover it is to give you notice and to pay royalties as provided by the applicable statutes and regulations.

Of course, you are free to negotiate other terms if you want to. But your song can be covered even if you don't.

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    Minor nit: the royalties go to the composer and/or lyricist; they would only go to the person who performed the first recording (usual meaning of "original artist") if that person also wrote the music or lyrics.
    – supercat
    Commented Oct 20, 2016 at 19:51
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What legal rights does my friend have?

Whatever you choose to give him.

Does he need my permission?

Yes

What benefits, compensations, acknowledgements, etc. am I legally entitled to?

Whatever you negotiate and agree between you

Does my friend have to pay me mechanical royalties if, e.g., he publishes his version of the song to SoundCloud such that anyone can listen to it for free?

If that is what is agreed

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    Good advice generally, but not applicable in this case. Cover artists have rights under the law's mechanical license provisions that do not require the consent of the original artist.
    – chapka
    Commented Aug 19, 2015 at 13:59
  • mostly incorrect. Statutory licensing for covers is a very long-established "thing."
    – dwoz
    Commented Oct 31, 2015 at 22:10

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