Can music publishers/agents demand service fees for compulsory copyright licenses

Question

By my reading of the compulsory copyright licensing rules, if I want to record a cover of a song and sell one copy of it, I would need to obtain a license, but if I send in a proper notice along with a payment of $0.10, the copyright holders would be required to grant me that license. Many publishers license their works through the Harry Fox Agency, whose web site claims that a license must be obtained to make and distribute covers of a work in any quantity.

On the other hand, that web site will not license less than 25 copies, and once service fees are added in would charge over $16 for that.

Although I can understand that the paperwork necessary to handle a license would cost a publisher a lot more than $0.10, and that a company might reasonably request that performers not submit licensing-intent notices until the payment would reach a certain amount, and otherwise simply keep track of the copies they produce and include royalties for those copies in any payment they make once that threshold is reached, I am aware of nothing in the law that would entitle HFA to simultaneously demand that people acquire licenses even when distributing less than 25 copies, but then insist that someone making ten copies pay an amount more than 20 times larger than the $0.91 royalty specified by that law.

Is there any legal basis for HFA's demands? If not, what would one need to do to legally obtain e.g. a license to produce ten copies of a work without having to pay HFA anything beyond what they would be legally entitled to receive? I understand that it's perfectly legal for web sites to charge a 'convenience fee' for submitting credit-card payments on line rather than by mailing a check or money order, but find reprehensible the idea that a company should demand $16 for something whose price would be legally set at under a dollar.

Answer 1

The law recently changed this way less than 2 years ago, so there may be some disconnect between the law and opinions about older law. I would recommend reading the notes section to the statute. Para (c)(1)(B) informs the applicant that

the royalty shall be the royalty prescribed under subparagraphs (D) through (F), paragraph (2)(A), and chapter 8.

The gist of that part of the law is that

The schedule of reasonable rates and terms determined by the Copyright Royalty Judges shall, subject to paragraph
(2)(A), be binding on all copyright owners of nondramatic musical works and persons entitled to obtain a compulsory license under subsection (a) during the period specified in subparagraph (E), such other period as may be determined pursuant to subparagraphs (D) and (E), or such other period as the parties may agree.

The rate is not directly set by statute, instead, the CRB has statutory authority to make rules setting the rate. 347 CFR Subchapter B is the substance of the rules, esp. part 351. There is no specific general rule, instead there is a statement of how they will conduct hearings. I cannot find any authoritative indication that CRB has currently set a general 9.1 cent royalty per song (Federal Register publication, CRB posting, Copyright office notice, or CFR).

One requirement of para (b)(1) is that you must serve notice of intention to make and distribute phonorecords on the copyright owner, which "notice shall comply, in form, content, and manner of service, with requirements that the Register of Copyrights shall prescribe by regulation". This is the relevant link leading to the Copyright Office regulations, specifically you would follow these instructions. The fee calculation is explained here. They say "The current fee is $75 per NOI plus $10 per group of 1-100 additional titles".

Part of the law (17 USC 115(c)(1)(D)) also says

Notwithstanding any provision of the antitrust laws, any copyright owners of nondramatic musical works and any persons entitled to obtain a compulsory license under subsection (a) may negotiate and agree upon the terms and rates of royalty payments under this section and the proportionate division of fees paid among copyright owners, and may designate common agents on a nonexclusive basis to negotiate, agree to, pay or receive such royalty payments. Such authority to negotiate the terms and rates of royalty payments includes, but is not limited to, the authority to negotiate the year during which the royalty rates prescribed under this subparagraph, subparagraphs (E) and (F), paragraph (2)(A), and chapter 8 shall next be determined.

A copyright holder can pick an agreeable licensing scheme with e.g. HFA, and HFA may serve as their agent – thus HFA can decide to only charge $16. As the "recipient" of compulsory literary license royalties, I can attest that it is pennies on the dollar: most of the user charge is agency fees.

You could, alternatively, hire an attorney specializing in copyright law to research the possibility of mailing the copyright owner some small amount (perhaps a dime, rounding up) plus the NOI, but there is a non-trivial chance that the attorney fees would be more than $16. Another alternative is that you hire an attorney to research the matter and say how likely it is that you could run into legal problems if you serve notice pro se and mess up on the NOI or the fees. This aspect of copyright law is unquestionably confusing.

Answer 2

When something is subject to a compulsory licensing requirement, as covers of songs are under U.S. copyright law, then you have to options to use it legally:

1. Negotiate a deal with the copyright holder.

2. Pay the administratively determined compulsory license amount. I believe that the compulsory license amount administratively determined can include a minimum price of a license or an administrative fee.

As a practical matter, it isn't feasible to litigate individually over $16 v. 10 cents, and the penalty for an infringement damages award, if they sued, to you, would be immense, if you just used it without a license, and they then sued you. They are unlikely to sue you, but it would be a catastrophe for you if they did.