The Future of Cover Versions of Songs Could be Dim

With advancements in technology, the United States Copyright Office has recognized the need to revise provisions of the Copyright Act. Recently, the Office completed its review of the music licensing regime. Among other recommendations, such as ensuring that music creators are fairly compensated and that the licensing process is efficient, the Copyright Office suggested that artists should have the right to preclude musicians from recording cover versions of their songs and posting them on YouTube and selling them on iTunes. Presently, many indie artists perform and record cover songs in order to showcase their musical talents and build their fan base by playing songs that are recognizable. 

Presently, Section 115 of the United States Copyright Act governs compulsory licensing. Per Section 115(a)(2), an individual can make a cover version of a work as long as the individual has obtained a compulsory license. Per Section 115(a)(1), a person may distribute phonorecords of musical works to the public if the person obtains a compulsory license.

In its study, the Copyright Office recommended revising Section 115 to afford songwriters and publishers the right to stop people from posting cover versions of songs on interactive and download sites. Publishers would have the option to negotiate interactive streaming and digital phonorecord delivery (DPD) rights for their song catalogs, which would include the ability to authorize the distribution of cover versions of songs. If a publisher elects to not negotiate interactive streaming and DPD rights for their songs, then a musician who wants to produce a cover version of a song will need to obtain a voluntary license if the musician wants to post the song on a streaming or download site.  The Copyright Office maintains that persons should still be able to record cover versions of songs on physical cds and to play covers on broadcast radio and in live concerts. 

While these are just recommendations at this time, the Copyright Office’s position demonstrates that it is attempting to balance the rights of musicians seeking to record cover versions and publishers who own the copyrights to popular songs. Nevertheless, many indie musicians may not have the resources necessary to obtain voluntary licenses in order to post their cover versions on streaming sites, which may lead the musicians to receive limited exposure.

Bill in Connecticut Legislature Strives to Decrease Marketing on Social Media Sites

When you are using social media sites, are you frustrated by the number of advertisements that ask you to allow the site or application to access your contacts list? Connecticut legislator, Representative Mitch Bolinksy, recently introduced a bill that would limit how often a site could request access to a user’s contacts list in order to send unsolicited email marketing messages to a user’s contacts.

The bill is the first of its kind in the nation and is designed to protect Connecticut’s consumers from deceptive marketing practices. Presently, upon gaining access to a user’s contacts list, social media sites and applications can send unsolicited marketing messages to third parties without the user’s permission. If this bill passes, social media websites and applications that operate in the state and presently request access to customers’ contacts lists will undoubtedly need to revise their marketing approaches.  

Connecticut Bill Could Provide Student-Athletes at Public Colleges and Universities with State Employee Status

Representative Matthew Lesser recently introduced a bill in the Connecticut legislature that would amend the Connecticut General Statutes so that student-athletes attending public universities and colleges would be considered employees for the purposes of entering into and negotiating collective bargaining agreements. As the bill is presently drafted, to be considered an employee, a student would need to receive a scholarship for at least 900% of the cost of tuition; the scholarship would need to be materially related to the student’s expected participation in intercollegiate athletics; and the revenues generated by the institution for the athletic program that the student would be participating in would need to meet a certain threshold. Per the Hartford Courant, UConn football and basketball players would be the only college athletes in the state who would be considered employees if the bill is passed as-is.

 

Connecticut General Statutes Section 5-271(a) provides that employees are protected in the exercise of their right to self-organize by forming, joining, or assisting any employee organization in collectively bargaining to resolve concerns related to wages, hours, and employment conditions. While being able to participate in collective bargaining may be advantageous for student-athletes, there are concerns that the costs associated with supporting unionization could decrease the funding that universities are able to allocate to other sports that do not generate revenue. The NCAA has taken the position that student-athletes should not be considered employees, and in December, Michigan Governor Rick Snyder signed a Public Act banning student-athletes enrolled in public universities and colleges from unionizing.  

What Must the Government Prove to Sustain the Conviction of a Tippee in an Insider Trading Case?

In its recent decision in United States v. Newman, the Second Circuit held that, in an  insider trading case, the government must prove that the tippee, the individual who received nonpublic, material information from an inside source, knew that the corporate insider received a personal benefit in exchange for disclosing confidential company information. This holding will require the government to prove that the tippee was aware that the tipper, who provided the inside information, received a personal benefit for the disclosure. This holding will also likely limit the scope of liability for individuals, such as financial analysts and portfolio managers, who trade on information that is not publicly accessible but who have no direct relationship with the individuals who provided the inside information.

Todd Newman and Anthony Chiasson made millions of dollars for their hedge funds in 2008 by trading on inside information about the earnings for Dell and NVIDIA.  Newman and Chiasson did not personally know the individual who had originally provided the nonpublic information about Dell and NVIDIA, and they had received information from various sources. Nevertheless, the trial court convicted Newman and Chiasson of securities fraud. The Second Circuit vacated Newman and Chiasson’s convictions because the court found that there was not enough evidence to prove beyond a reasonable doubt that Newman and Chiasson knew that the tipper had received a personal benefit for providing the inside information and that they were trading on information that the tipper had obtained by breaching his or her fiduciary duties to his or her employer.

An individual is not liable for insider trading simply because he or she traded on information that the individual knew was confidential and nonpublic. To be held liable, an individual must know or should have known that the individual who provided the insider information, who is known as the tipper, breached his or her fiduciary duty by providing the inside information and received a personal benefit for the disclosure. Thus, in light of the Newman decision, to convict a tippee of insider trading, the government must prove, beyond a reasonable doubt, that:

(1)  The corporate insider or tipper owed a fiduciary duty to the company that he or she is disclosing nonpublic information about;

(2)  The corporate insider breached his or her duty by disclosing confidential information to the tippee in exchange for a personal benefit;

(3)  The tippee knew of the tipper’s breach, knew that the information was confidential and knew that the tippee shared the confidential information for a personal benefit; and

(4)  The tippee used the information to trade in a security or provided the information to another individual for personal benefit.

Preet Bharara, United States Attorney for the Southern District of New York, has petitioned the Second Circuit for a rehearing in this case and argues that the court’s decision reflects a departure from precedent and may impede enforcement of securities laws.