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The U.S. Copyright Office is quietly proposing a new rule to make sure that songwriters who invoke their termination rights actually get paid their streaming royalties, overturning a previous “erroneous” policy that could potentially have kept sending money to former owners in perpetuity. 

Starting in 2020, groups like the Recording Academy raised alarm bells that a policy adopted by the Mechanical Licensing Collective (the entity that collects and distributes streaming royalties) might lead to a bizarre outcome: Even after a writer takes back control of their songs, royalties might still flow to the old publishers that no longer own them — forever.

In a new rule proposed last month, the agency said the MLC’s policy was based on an “erroneous understanding and application of current law.” Ordering the group to “immediately repeal its policy in full,” the Copyright Office’s says that when a songwriter gets their rights back, they should obviously start getting the royalties, too. 

“It is not clear why the statute or the case law should be read as making one particular copyright owner the permanent recipient [of royalties] because it happened to be the owner immediately before termination occurred,” the agency wrote in the proposed rule, issued Oct. 19. 

The proposed rule change was quickly hailed as a win for songwriters. In a statement to Billboard, Michelle Lewis of the Songwriters of North America said the ambiguity over termination had “created stress and uncertainty for many songwriters.” Todd Dupler, vp for advocacy & public policy at the Recording Academy, says the rule change is “big news” for songwriters. 

“We’re very grateful to the Copyright Office for stepping in to do this,” Dupler says. “We think the reasoning is very clear and I think they’ve reached the correct outcome.” 

The MLC did not return a request for comment on the Copyright Office’s proposed rule. 

Termination empowers an author to reclaim the rights to their copyrighted work decades after selling them away. In the music business, if a songwriter sold a publisher the rights to a song that later became a smash hit, termination allows them to automatically to get those rights back years later (the rule kicks in between 35 and 56 years later, depending on when the song was sold). Created by Congress when it updated federal copyright law in 1976, termination was designed to level the playing field for creators, who usually lack leverage in negotiations with big companies and are often forced to fork over rights before they know they’re valuable. 

But termination comes with an important exception. Even though a publisher must hand back the rights to the original song, they’re entitled to keep selling any existing “derivative works” they created when they owned it. That means that even after a songwriter wins back ownership of their song, they can’t suddenly send cease-and-desists over a famous sample, or sue over a movie that featured the song under a synch license. Those continue to be fair game, and any fees under existing licenses keep flowing back to their old publisher. 

That exception makes sense; it would be unfair to let a terminating songwriter suddenly revoke existing licenses that were legal when they were granted. But it also creates difficult ambiguity for the MLC and its so-called blanket license — the streamlined system created by Music Modernization Act in 2018 to make it easier for digital services to get mechanical royalties to the right songwriters. 

Say a songwriter terminates their publisher’s control of their music. The writer is now the owner of those songs — that’s easy to figure out. But by paying the MLC for access to the blanket license, Spotify arguably already has an existing license in place with the old publisher. So, isn’t the copy of the song on Spotify an existing derivative work? And shouldn’t the royalties from it continue to go to the old publisher under that license? 

Under the MLC’s termination dispute resolution policy issued in 2021, it appeared that was the case. The rules seemed to choose who to pay based on when a song was uploaded to a digital streamer’s servers; if it was uploaded prior to when a songwriter invoked their termination right, the royalties would keep going to the old owner — seemingly forever. 

The MLC’s approach was not intended as a scheme to hurt songwriters. According to the Copyright Office’s filing, the MLC saw it as a “middle ground,” aimed at preventing drawn-out disputes that would lock up royalty payments “to the disadvantage of both songwriters and publishers.”  

But for the Recording Academy’s Dupler, the ultimate outcome still seemed at odds with the spirit of the Music Modernization Act, which he says was designed to “help songwriters get compensated fairly for their work.” 

“It raised concerns for us that this ambiguity was going to have a negative impact on songwriters,” says Dupler. “We feel pretty confident that it was never the intent of Congress that songwriters wouldn’t be receiving those royalties after termination.” 

In the new rule issued last month, the Copyright Office agreed with that sentiment. In a detailed legal analysis, the agency explained that services like Spotify and Apple Music were not creating “derivative works” when they uploaded songs to their servers, meaning there was no caveats that should be imposed on a songwriter’s termination. And even if there were, the office made clear that it did not matter anyhow, stating simply: “a terminated publisher is not entitled to post-termination blanket license royalties.” 

 “The Office concludes that the MLC’s termination dispute policy is inconsistent with the law,” the agency wrote. “The statute entitles the current copyright owner to the royalties under the blanket license.” 

Under the new rule, it won’t matter who owned a song when it was first uploaded to a digital service. Instead, it would “make clear that the copyright owner of the musical work as of the end of the monthly reporting period is the one who is entitled to the royalties.” 

The text of the Copyright Office’s proposed rule is available in its entirety on the agency’s website. The rule is now open to public comments, in which interested parties can either support the changes or offer opposition. Such groups have until Nov. 25 to weigh in.