Spoonfeed: Public Consultation regarding Collective Management Organisations (Copyright Reform)

Note: I am writing this post in my personal capacity, and not in my capacity as an employee of One Legal LLC or as a member of the Copyright Sub-Committee of the Intellectual Property Committee of the Law Society of Singapore.

1. The Singapore Ministry of Law ("MinLaw") recently released a public consultation relating to proposed licence conditions and code of conduct for Collective Management Organisations ("CMO"), which is accessible at this link. The consultation period is from 3 June 2020 to 30 June 2020. 

2. The actual consultation paper can be accessed via this link.

3. The public consultation is part of MinLaw's comprehensive overhaul of the Copyright Act. I will attempt as best as I can to present the key proposals and my views on the same.

Introduction

4. Generally, a CMO is an organisation which negotiates, grants or otherwise collectively administers licences in respect of a repertoire of works and which collect and distribute the royalties (see point 3.13.1), regardless of the organisational structure, profit status or ownership of the CMO. 

5. MinLaw is of the view that there is a need for external oversight of CMOs. The proposed solution is to implement a class licensing scheme which would automatically apply to all CMOs (see points 2.9, 3.4, 3.13.1), which would then need to comply with the licence conditions.

6. The proposed licensing scheme would cover a variety of areas (including but not limited to) the rights of members, distribution of licence fees, information to be provided by a CMO to users, and dispute resolution. 

7. I will explore the areas of greater interest (in my view), as set out below:

A. Rights of Members

8. MinLaw has proposed that CMOs must, as a minimum standard, have a membership agreement with their members (i.e. the rights holders of copyrighted materials who enter into an agreement with the CMO for the CMO to manage their rights), which must at the minimum explain:

• (a) the nature and type of the rights granted to the CMO (e.g. whether the rights are public performance and/or reproduction rights, etc);

• (b) the scope of the rights of administration granted by the members to the CMO (e.g. whether the CMO has authority to sue on behalf of the member, whether the CMO can waive collection of licence fees, etc);

• (c) the arrangements for terminating membership;

• (d) the frequency of distribution of royalties to the members;

• (e) the rights that members have in the CMO (e.g. the right to call for an extraordinary general meeting, the right to attend and vote at annual and extraordinary general meetings, the right to be informed to changes to the CMO's management appointments, governance structure, and class licence status, the right to vary and terminate the scope of rights granted to the CMO).

My opinion: I believe that this requirement is welcome as it would introduce much needed transparency and certainty, both to users of copyright works as well as to owners of copyright works. Any disputes relating to whether a CMO has the right to do something on behalf of a member can then be traced back to the membership agreement, for example, and I would go so far as to say that perhaps some portion of the agreement should be available to users of copyright material so that they would be fully alive as to whether a CMO has a particular right in respect to a work.

B. Distribution of royalties

9. The distribution of royalties has been a recurring and prevalent concern - members and users raised concerns as to whether the distribution accurately reflected the usage of copyright works while CMOs raised the difficulty of obtaining accurate usage records which led to a reliance on sampling. 

10. Considering that this was a key focus raised during the 2017 consultation, MinLaw has proposed to be more prescriptive in this area and has proposed the following:

11. MinLaw has proposed that CMOs must maintain and make available to members a distribution policy with certain prescribed minimum features i.e.:

• (a) The CMO must clearly set out the basis for calculating the quantum of licence fees due to members;

• (b) The CMO must clearly set out the manner and frequency of payment to members;

• (c) The CMO must clearly set out the general nature of amounts that will be deducted before distribution;

• (d) The CMO must clearly state its policy on undistributed monies;

• (e) The CMO must make diligent effort to collect accurate and timely information on the usage of works and must make available to members information on their data collection efforts;

• (f) The CMO must base their distributions on actual usage of works or if not practicable on the basis of a statistically valid sample approximating actual usage of works, and all this information must be made available to members;

• (g) The CMO must regularly, diligently and accurately distribute and pay amounts due to their members in accordance with their distribution policy;

• (h) Such payments must be made no later than 6 months after the end of the financial year in which the licence fee was collected unless there are good grounds preventing the CMO from meeting this deadline;

• (i) For each distribution, the CMO must provide sufficient information for their members to understand the source of the revenue and the calculations done to arrive at the distribution amount;

• (j) After each distribution has been made, the CMOs must give their members an opportunity to point out any error or raise any queries for each distribution cycle.

12. MinLaw has asked whether there is additional information which CMOs should provide in their distribution policy, how CMOs and users can work together in order to achieve a higher reporting rate of actual usage records, whether 6 months is a feasible timeframe, whether the Code of Conduct should prescribe the information which CMOs must provide to members during the distribution, and whether the proposals are sufficient to engender greater transparency, trust and accountability in the distribution of licence fees.

My opinion: All of the above are welcome guidelines. In fact, technological solutions are already there which can assist CMOs. However, I am skeptical if the CMOs would be willing to adopt these measures unless forced by legislation. Certainly what MinLaw can do is to prescribe the necessary information that the CMOs must provide which would then make it necessary for the CMOs to obtain the information. 

In this regard, the information that should be provided during each distribution for a copyright work should include:

(a) the total amounts collected from users in respect of that copyright work;

(b) out of the above, the amount attributable to that copyright work alone which should be paid as royalties to the copyright owner;

(c) the methodology for calculating (b) (e.g. the percentage of airtime on the radio, for example);

(d) the CMO's administration fees.

C. Information to be provided by a CMO to users

13. It is important that a user must know the portfolio of copyrighted materials he is entitled to use upon the grant of a licence. The lack of transparency on the CMO's portfolio of works was raised in the 2017 consultation by many stakeholders. MinLaw has therefore proposed that CMO make public the portfolio of copyrighted works that they manage allowing users to assess whether a copyright licence is required form the particular CMO (which could come in, e.g., the form of a searchable updated database of the CMO's full portfolio of copyright materials). 

14. Therefore, Minlaw has proposed that:

• (a) CMOs must allow the public to determine from their websites the portfolio of copyrighted works that they manage and administer.

• (b) Where a CMO receives a request regarding information on the copyrighted works it administers including whether a work is part of the CMO's portfolio, or the rights the CMO manages directly or under representation agreements, the CMO must provide a written reply within 3 weeks.

My opinion:

This is well overdue. I have had various clients and friends tell me that they were unable to ascertain whether a CMO administered the rights for a particular work in question, and even after enquiring, did not obtain an answer. This transparency is very much needed since the user needs to have certainty as to the portfolio of works administered by a CMO.

D. Facilitation of an efficient market

15. MinLaw is also keen to encourage competition while seeking to minimise the possibility of a fragmented market, to prevent suboptimal solutions (such as a licence which is far broader than the user's needs but is obtained due to a lack of choice). 

16. As such, they are proposing that members grant their rights to a CMO to manage on a non-exclusive basis which can be done in one of the following two ways:

• Option A: All contracts between CMOs and members must only be on a non-exclusive basis;

• Option B: CMOs must offer members the option of granting the CMO the right to manage on a non-exclusive basis.

17. MinLaw has also raised a concern with Option B in that there may be situations where a member has granted exclusive rights to a CMO and now seeks to do something that they have no right to do.

18. MinLaw is also looking into the amendment of the Copyright Act to allow CMOs to sue in its own name even though it owns a non-exclusive licence.

My opinion:

I believe that Option A would be preferable as it would prevent confusion in the marketplace (the concern raised above). This would also assist in facilitating competitive behaviour among CMOs which would increase market efficiency and potentially lead to lower prices for users and increased payout to members. I would also say that the Copyright Act should allow CMOs to sue in its own name if this is provided for in the membership agreement, or else it defeats the purpose of a CMO.

Conclusion

As a creative individual myself (a composer/songwriter in my own right), these developments are certainly interesting and welcome to assist the creative arts scene in Singapore. Leave me your comments!