Statutory royalties prevent monopolies, not “takings”

In a recent post on The Trichordist, user “thetrichordist” (it’s not clear who that actually is) posted an article called Pre-72 Red Herrings from Pandora’s Chris Harrison (and that’s not the IPO kind). There are several things that are ridiculous about that article, but I’d like to focus on one thing in particular.

In the article, the writer says:

a statutory royalty […] is actually fair compensation for rights the law takes away from artists and copyright owners in the compulsory license that is necessary to avoid a “taking” under the 5th Amendment[.]

To be blunt, this is utter and complete horseshit. Statutory royalties are not there to prevent “takings,” because the statutory royalties were a condition of granting the rights in the first place. There was literally nothing to “take.”

In fact, when copyrights in public performances were originally granted, statutory royalties were created specifically to prevent monopolies, and Congress did so in explicit recognition that the sole purpose of copyright is to benefit the general public.

Here are the relevant parts from the record of the 1909 Congress:

The enactment of copyright legislation by Congress under the terms of the Constitution is not based upon any natural right that the author has in his writings, for the Supreme court has held that such rights as he has are purely statutory rights, but upon the ground that the welfare of the public will be served and progress of science and useful arts will be promoted by securing to authors for limited periods the exclusive rights to their writings. The Constitution does not establish copyrights, but provides that Congress shall have the power to grant such rights if it thinks best. Not primarily for the benefit of the author, but primarily for the benefit of the public, such rights are given. Not that any particular class of citizens, however worthy, may benefit, but because the policy is believed to be for the benefit of the great body of people, in that it will stimulate writing and invention, to give some bonus to authors and investors.

In enacting a copyright law Congress must consider, as has been already stated, two questions: First, how much will the legislation stimulate the producer and so beneit the public; and, second, how much will the monopoly granted be detrimental to the public? The granting of such exclusive rights, under the proper terms and conditions, confers a benefit upon the public that outweighs the evils of the temporary monopoly.

It was at first thought be the committee that the copyright proprietors of musical compositions should be given the exclusive right to do what they pleased with the rights it was proposed to give them to control and dispose of all rights of mechanical reproduction, but the hearings disclosed that the probable effect of this would be the establishment of a mechanical-music trust. It became evident that there would be serious danger that if the grant of right was made to broad, the progress of science and useful arts would not be promoted, but rather hindered, and that powerul and dangerous monopolies might be fostered which would be prejudicial to the public interests. This danger lies in the possibility that some one company might secure, by purchase or otherwise, a large number of copyrights of the most popular music, and by controlling these copyrights monopolize the business of manufacturing the selling music-producing machines, otherwise free to the world.[…]

A suggestion has been made that a compulsory license in copyright legislation would be unconstitutional. The great weight of opinion, however, is the other way. It is true that Congress could not legislate a man’s existing rights out of existence, for thereby it would impair the obligation of a contract; but in this case Congress is creating a new property right, and in creating new rights Congress has the power to annex to them such conditions as it deems wise and expedient.

Well, maybe “thetrichordist” was specifically about the statutory royalties for performing artists, the ones created by Congress in the 1990’s. Nope: the Congressional record shows absolutely no concern for the takings clause there, either. The House and Senate reports about statutory royalties contain nearly identical language:

In deciding to grant a new exclusive right to perform copyrighted sound recordings publicly by means of digital audio transmission, the Committee was mindful of the need to strike a balance among all of the interests affected thereby. That balance is reflected in various limitations on the new performance right that are set forth in the bill’s amendments to section 114 of title 17 and described in detail later in this report. […]

[C]oncern was expressed that granting a performance right in sound recordings would make it economically infeasible for some transmitters to continue certain current uses of sound recordings. This concern is addressed by various limitations on the exclusive right: […]

Nonexempt, noninteractive subscription transmissions are eligible for statutory licensing.

Now, here’s an interesting question. Is it even possible for Congress to violate the “takings clause” when they change copyright laws? After all, copyrights are not natural rights under U.S. law – as the 1908 Congressional record (and all Supreme Court cases) makes quite clear. Private property rights, however, are natural rights. Does that make a difference? Would the “takings clause” be implicated, even with property rights that are purely statutory?

Probably not. That was the question that had to be decided, but about patents, in Zoltek v. United States, a 3rd Circuit decision. The Court based its opinion on Schillinger v. United States, a Supreme Court case from 1894. Zoltek was very clear in its reasoning:

We turn to the trial court’s takings analysis. The Court of Federal Claims held that Zoltek could bring its action against the government under the Tucker Act, by alleging that the infringement was a taking of private property for public use under the Fifth Amendment. We reverse.

In Schillinger v. United States, the Supreme Court rejected an argument that a patentee could sue the government for patent infringement as a Fifth Amendment taking under the Tucker Act. Schillinger remains the law. […]

As the Supreme Court has clearly recognized when considering Fifth Amendment taking allegations, “property interests… are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law.” Here, the patent rights are a creature of federal law. […]

We reverse the trial court’s ruling that Zoltek can allege patent infringement as a Fifth Amendment taking under the Tucker Act.

Copyrights are exactly as much a creature of federal law as patents are – the exact same clause grants Congress the power to grant patents and copyrights. So, it is likely that it’s not even possible for Congress to run afoul of the takings clause by changing copyright law.

This is not an academic exercise. It matters for a bunch of reasons:

  1. Orphan works legislation. If copyright was subject to the takings clause, then orphan works would forever remain unavailable, since making them “un-orphaned” would violate the takings clause.
  2. Federalization of pre-1972 sound recordings. A takings clause claim would make it nearly impossible to bring pre-1972 sound recordings under federal jurisdiction. Both partial federalization (as promoted by Trichordist and the major labels) and full federalization (as promoted by, well, everyone else) would be a practical impossibility.
  3. Copyright termination rights. The 1976 Act gave artists the right to terminate copyright transfers, and reclaim the copyrights in their works. The date where this can happen is very, very soon, and labels have been fighting them tooth an nail. Expect them to raise the takings clause to claim that the termination rights are, in fact, unconstitutional.

So, not only is “thetrichordist” wrong on this point. The fact that he’s wrong is a good thing for artists.


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