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Voluntary vs. Statutory Licensing

Pursuant to U.S. copyright law, copyright owners are guaranteed certain exclusive rights in their copyrighted material, including the right to:

  • Reproduce the work
  • Distribute copies
  • Perform the work publicly (in the case of a sound recording by means of a digital audio transmission)
  • Create a derivative work
  • Display the work publicly

These exclusive rights are intended to strike a delicate balance between encouraging the dissemination of information to the public and ensuring that copyright owners are fairly compensated, and thus provided the incentive to continue to create. As part of this balance, copyright owners are free to permit others to exercise some of the copyright owner’s rights through the means of a license.

Voluntary License

Most of the time, licenses are granted voluntarily by copyright owners for a negotiated fee and pursuant to agreed upon terms and conditions. These are called voluntary (or direct) licenses. Licenses usually take the form of a written contract that specifies the owner of the copyright, what rights are being granted, the term of the license, and the royalties, if any, to be paid the copyright owner.

For example, an individual or business that wishes to offer sound recordings for download, to synch with a video, or for on demand streaming, must, in most situations, obtain a license from the sound recording copyright owner. Such a license would be between the sound recording copyright owner (usually a record company) and the individual or business that wants to use the sound recording, and would state each party’s rights and obligations. If at any point the individual or business desired to use the sound recording for a purpose not covered in the license, they first would need to enter into a new license agreement with the sound recording copyright owner that covered this new use.

Common examples of when you need a voluntary license include:

  • Using a sound recording in a movie, music video, video clip, commercial, or other audiovisual work. If you want to use a sound recording in an audiovisual work, you need a synchronization license, so called because the music is “synched” to the visual images. This is true whether you’ve already created your visual work and want to put some music under it or you just want the music for your movie, commercial, music video, music clip, documentary, sitcom, or any kind of audio/visual presentation, no matter where it is aired, even the Internet. Synchronization licenses are granted by individual sound recording copyright owners.
  • Offering music videos to view or copy. Music videos are called “audiovisual works” and are licensed by the creator of the video. Often times the record company that produced the sound recording in the video owns the music video itself. Look for the © on the video for the copyright owner. Music videos are licensed for streaming or downloading by individual copyright owners.
  • Using a 30 second clip. Rumors abound that using 30 seconds or less of a song does not require a license. Not true. Although some uses of small amounts of music are considered fair use and do not require a license (see copyright section for a definition of fair use), generally speaking, the use of any part of a song requires a license, even if the use is less than 30 seconds. So, if you perform, reproduce or distribute clips, you should contact the sound recording copyright owner for a license. Note that offering clips on-demand does not qualify for a statutory license.
  • Selling compilation CDs. Some businesses are offering consumers the ability to choose recordings and combine them on one CD. In order to do that, the business needs a license to reproduce and distribute those recordings. These licenses are granted by individual copyright owners.
  • To offer digital downloads. If you want to offer digital downloads of music (whether they are for sale or not), you need a license. This includes services that “rip” or copy and download the music from a music video.  Those licenses are granted by individual copyright owners.
  • Offering a jukebox or on-demand streaming service on the Internet. Interactive services do not qualify for a statutory license. Instead, such operators must obtain performance licenses from individual copyright owners. According to the Copyright Act, interactive services include those that permit a listener to choose a particular song and those that create a personalized program for the listener. If copies were being made into the computer server, operators would need to negotiate reproduction rights also.
  • To offer a download or performance to someone outside the United States. Copyright law is territorial. In other words, U.S. law covers only reproductions, distributions and performances that occur in the United States. So for any uses of copyrighted sound recordings outside the United States you would need a separate license from the owner of the recording that covers the territory in question.
    • When operating abroad, check local copyright law on two issues. 1) What are the rights of the copyright owner in that country? 2) Who do you contact to negotiate rights? If you are dealing with a major company it is likely to have an affiliate overseas, otherwise look to collecting societies.

Statutory Licenses

The U.S. Congress has determined that, in certain limited circumstances and for public policy reasons, the government should determine the terms, conditions, and rates for a limited class of copyright licenses. Such licenses are called statutory (or compulsory) licenses, and generally the fee in such situations is paid according to a rate set by law, called a “statutory rate.”

In the music world, some types of performance and reproductions of sound recordings qualify for a statutory license. The most common type of use covered by these statutory licenses is for non-interactive webcasting or Internet radio. The sound recordings that you might hear through a satellite system in your car, or at home over your digital cable service, also are provided pursuant to a statutory license.