India Finally Bows To US Pressure: Promises Not To Use Compulsory Licensing For Drugs

from the declaration-of-war-on-poor-cancer-patients dept

Techdirt has been covering India's complex relationship with pharma patents since at least 2009. In particular, we've been following for years India's use of compulsory licenses to provide its people with access to life-saving drugs at affordable prices. Naturally, Big Pharma companies in both the US and EU hate that, not least because it might encourage other countries to do the same. As a result, the US pharmaceutical industry in particular has been applying political pressure to get India to stop using compulsory licenses, even though they are a perfectly legitimate policy tool under the WTO TRIPS Agreement. Two years ago, Techdirt noted that India was already becoming more cautious on the compulsory licensing front, and a new report from Reuters suggests it may finally have bowed to US pressure:

India has given private assurances that it will not grant licences allowing local firms to override patents and make cheap copies of drugs by big Western drugmakers, a U.S. business advocacy group said.

The comments were revealed in a submission last month by the U.S.-India Business Council (USIBC) to the U.S. Trade Representative (USTR), which is reviewing global intellectual property laws for an annual report identifying trade barriers to U.S. companies.

There's been no official confirmation from the Indian government of that decision, nor an explanation of why it has decided to give in, assuming it has. The Reuters article mentions the fact that India had been placed for two years in a row on the infamous Special 301 Report's "Priority Watch List". That's one of the favorite ways in which PhRMA, the Pharmaceutical Research and Manufacturers of America, tries to bully countries -- or even entire continents -- into doing its bidding. But giving up compulsory licenses just to stay off the Special 301 naughty step seems an incredibly high price to pay, for reasons explained by Knowledge Ecology International (KEI):

"If such an agreement [between the Indian government and the US drug industry] in fact exists, this is extremely troubling news ... this sort of pressure is basically a declaration of war on poor cancer patients," KEI said in its own submission to the USTR last week.

Given the USIBC document that Reuters says it has seen, it seems likely that the Indian government has indeed given some sort of assurance to the US companies. But the fact that it has been kept quiet shows that the politicians are fully aware of how unpopular the move will be once the Indian public finds out about it. That provides some hope the policy could be reversed if enough people in India start complaining, as happened recently with software patents.

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Filed Under: compulsory licenses, drugs, health, india, pharmaceuticals, trips, wto

Tidal Sued For Unpaid Royalties And Cooking The Streaming Counts

from the welcome-to-the-club dept

It's been no secret that Tidal, Jay-Z's foray into the music streaming business, hasn't exactly had the success it was supposed to have. In the wake of all the angry sentiment about just how much other streaming services were paying musical artists, Tidal positioned itself as artist-friendly, the option for fans that want to make sure musicians get paid. It sounded great, except now Tidal finds itself joining the club of streaming services facing legal action over artist royalties.

Over the weekend, Yesh Music Publishing and John Emanuele (of the duo American Dollar) filed a lawsuit against Tidal for $5 million. The lawsuit claims that Tidal licensed at least 118 songs by American Dollar without the group’s permission and hasn’t paid the royalties it owes for streaming the songs. The complaint also says Tidal is “deliberately miscalculating” its per-stream royalty rates and failing to send reports to the American Dollar about streams of their songs.

If this all sounds incredibly familiar, it should, because these are the same accusations leveled against the other streaming services. This particular action is similar to David Lowery's suit against Spotify, in that it appears to revolve around mechanical licenses for compositions used in streaming music. While Tidal will likely argue that it properly licensed the works via its agreement with the Harry Fox Agency and via Section 115, it's not exactly settled that streaming services are covered by Section 115. Under Section 115, Tidal would serve a "notice of intention", or NOI, in order to get the license if it is unsure of whom it should be paying royalties to for a given composition. Tidal, like many streaming services, works with a third party to manage their licensing and NOIs for them (more on that in a moment). Indeed, the suit directly claims that no NOIs were filed, but sadly doesn't include the Exhibits in that PDF so that the reader could determine exactly which compositions are in question in this case.

Defendants failed to serve NOIs or timely NOIs for Plaintiffs’ and the Putative Class’ Copyrighted Compositions. Defendants’ failure to serve NOIs before the start of distribution precludes the creation of a compulsory license, and it does so both as to copies distributed prior to service and as to copies distributed thereafter. The tremendous power granted to Defendant under Section 115 is balanced by the strict obligations regarding notice. Defendant intentionally failed to adhere to its Section 115 obligations, while enjoying all of the benefits afforded by Section 115.

The filing goes on to acknowledge that Tidal has a third-party administrator managing the royalty payments and serving NOIs for them. That third-party is the Harry Fox Agency, the same company that was involved in Lowery's Spotify suit, along with a company called Music Reports. The suit claims that Tidal's ownership is named on the suit because those ownership entities "know full well that Harry Fox and Music Reports do not even try to serve NOIs...or calculate proper mechanical royalty rates unless expressly directed."

On top of this, the suit claims that Tidal is being shifty with how royalties are both calculated and reported.

Defendants’ systematic underpayment of royalties was done in several ways. First Defendants deliberately miscalculating the per-stream royalty rates by including millions of streams Defendants do not pay royalties in the calculation. This diluted the paid per-stream rate for royalty payments by up to 35%. Next Defendants systematically undercut the calculation of mechanical royalties to Plaintiff and the Putative Class by illegal deals with equity investor partners 65. Finally, Defendants failed to serve monthly detailed reports as required by the statute.

Tidal, as expected, is pointing back to the third-parties as being responsible.

TIDAL is up to date on all royalties for the rights to the music stated in Yesh Music, LLC and John Emanuele’s claim and they are misinformed as to who, if anyone, owes royalty payments to them. As Yesh Music, LLC admits in their claim, TIDAL has the rights to the Master Recordings through its distributor TuneCore and have paid TuneCore in full for such exploitations. Their dispute appears to be over the mechanical licenses, which we are also up to date on payments via Harry Fox Agency our administrator of mechanical royalties.

The entire catalogue in question streamed fewer than 13,000 times on TIDAL and its predecessor over the past year. We have now removed all music associated with Yesh Music, LLC and John Emanuele from the service. This is the first we have heard of this dispute and Yesh Music, LLC should be engaging Harry Fox Agency if they believe they are owed the royalties claimed.

Except, again, nobody seems to agree on whether or not Section 115, the basis for the compulsory license, applies to streaming sites like Tidal.

But the larger lesson in all of this is just how certain a thing it is that any new service that is in any way disrupting will be targeted and vilified. Keep in mind that Tidal was supposed to be the artist-friendly streaming service for music -- the one that artists would be excited to work with, rather than those other guys. And here we are, not terribly far from the birth of the service, finding the same attacks from artists on it as were levied against the incumbent streaming services. Either the artist-owned Tidal tried to be artist-friendly but couldn't because of the insane nature of music licensing, or the artist-owned Tidal found being so-called "artist-friendly" to be impossible in the modern era of music services. Either way, the cure for this isn't more vilification of streaming services, it's getting copyright and licensing on sane, stable ground.

Filed Under: american dollar, compositions, compulsory licenses, copyright, john emanuele, mechanical licenses, noi, section 115, streaming
Companies: harry fox agency, tidal, yesh music publishing

Killing The Golden Goose: Copyright Holders Demand More Cash Even As Streaming Music Services Struggle To Be Profitable

from the because-that's-how-it-always-works dept

For years, we've pointed to the legacy entertainment industry's history of trying to kill the golden goose any time a new and successful service has come along that actually helped drive them into the modern era. These services never actually come out of the industry itself, and thus are almost always hated (often with a passion) by the legacy players who failed to innovate, and now fear the potential alternative power in their industry. It's no secret that the legacy record labels and studios maintain their position by trying to control every aspect of their market, rather than by innovating to what the public wants.

In the music space, there have been a growing number of complaints from industry insiders about just how unfair it is that companies like Pandora and Spotify are successful. You see complaints that these services don't pay enough and a search for regulatory changes to demand more cash from these companies. And yet, Pandora and Spotify are both having tremendous difficulty reaching anything approximating profitability -- in large part because the existing costs of the music they stream is so ridiculously high.

John McDuling at Quartz has a good overview of the state of the streaming music space, which (among many other points) highlights this problem:

Spotify, by contrast, needs to negotiate directly with content owners (record labels and publishers) and maintain a huge library to satisfy all of its users’ different tastes, even though a large proportion of those songs are apparently never played. So its royalty costs are fixed at a high proportion of its revenues.

Ultimately, this means Pandora has a much leaner cost base than other services do. It paid out around 50% of its revenue in royalties last year. For Spotify, that figure is closer to 70%.

And yet, Pandora is still not really making money. Since its IPO in mid-2011, the company has eked out a quarterly profit just twice (Wall Street is expecting another small profit when it reports earnings on Thursday, July 24). Over the last two financial years it has racked up more than $75 million in losses. And despite these losses, content owners (record labels and publishing companies), perhaps envious of its growing user base and elevated share price, have been aggressively trying to squeeze more out of it in royalties. For some, this offers evidence of structural flaws in the Pandora business model.

It doesn't seem like a structural flaw in the business model, so much as the legal regime that assumes that it's the content alone that is the value, and that the service has no value at all. The legacy content guys see any profits at all as a sign that they're somehow being screwed over and underpaid, and thus they have to angrily demand more and more. It's happened over and over again. Remember how popular ringtones were? Part of the reason they went out of style was that the industry desperately saw it as a place to get ever more money from. Ditto for music video games.

The industry systematically overvalues the content and undervalues the service. That's not to say that the content shouldn't be paid for. But it's incredible how long a history we have of the legacy recording industry consistently smothering innovative new services with oppressive costs, frequently driving them out of business. They consistently kill the golden goose because they hate the idea of any outsider having success, even as they fail to innovate.

Filed Under: compulsory licenses, cost of goods, golden goose, music industry, overvalue content, profitability, streaming, undervalue service
Companies: pandora, spotify

Outdated Compulsory Licensing Means Australian Schools Must Pay Millions To Use Free Internet Materials

from the it's-broken,-let's-fix-it dept

Recently we wrote about how copyright rules designed for an analog age were causing problems when transposed without modification to the digital world. Here's another example, this time from Australia, where the Brisbane Times' site reports on an increasingly difficult situation in education as a result of outdated copyright approaches:

Schools spend almost [AU]$56 million [US$59 million] a year under a compulsory licence to copy material such as books and journals without permission from the copyright owner. But an unintended consequence of the licence means schools also pay millions for internet material that the website owners never intended to charge for

The problem is that there are strict rules that schools must follow when teachers duplicate material -- rules that were designed for a world where practically every page copied had to be paid for. However, the inflexibilities of the scheme mean that these are now being applied even when teachers print or save freely-available materials from the Internet, or ask students to do the same for homework.

A "best estimate" for the scale of the problem is around $8 million, and as the Internet becomes an increasingly important resource for schools, things are only going to get worse:

These costs were likely to increase as the national broadband network was rolled out and might ''eventually become prohibitive'', [the National Copyright Unit's director] said.

Fortunately, the Australian Law Reform Commission is holding an inquiry into copyright and the digital economy currently, so there is hope that its recommendations will include a radical overhaul of the compulsory licensing system for schools. Given copyright's three-hundred-year-old machinery, it's unlikely to be the only area that requires such action.

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Filed Under: australia, compulsory licenses, copyright, education

Why Compulsory Licenses Are Bad: A Look At The Sausage Making Process

from the get-rid-of-'em dept

When discussing things like patents and copyright, oftentimes someone suggests that "compulsory licensing" is a solution that solves all the problems. I tend to have serious problems with compulsory licensing plans (even those pushed by the EFF), because they don't seem necessary. There's no actual evidence of a market failure given that would require a compulsory license -- so any such license is effectively an unnecessary tax to prop up a failed business model. However, it's even worse than that.

William Patry has a guest blog post by Josh Wattles, a lawyer in the copyright and entertainment law world that goes into just how awful compulsory licensing systems really are. Basically, rather than coming up with a reasonable solution, it simply becomes a political battle where those with the stronger position craft the language in a ridiculously favorable manner:

The compulsory licenses from the recent past were drafted by skilled lobbyists and lawyers and the result suffers from a lack of simplicity and economy. Finding out what the license covers or how it can be triggered is like tracing a tan-colored line through the Pismo dunes.

The end result is a whole series of byzantine rules that no one can reasonable follow:

Compulsory licenses are apparently haphazard: there is a compulsory license you can use to carry some broadcast signals on cable, but not all; or there is a compulsory license to use the underlying music in a recording but not to use another recording; or there is a statutory license for non-interactive webcasting if the service doesn't repeat songs too often or play albums in sequence; and so forth. This happens because compulsory licenses are designed not as market solutions but as small nips and tucks that ease other commercial uses of copyrighted content without anyone losing out on important parallel interests.

Why does this happen? Well, if you're basically guaranteeing a particular business model with a particular market rate, of course commercial interests are going to step in and lawyer them into a way in which they're most profitable, with no interest at all towards the actual market:

There is no mystery in how the process became so over-wrought. It is a result of serial manipulations by well funded commercial interests seeking wholly appropriate advantages over competitors, suppliers or customers.

Unfortunately, rather than advocating just getting rid of them altogether, Wattles tries to craft a compromise, which is to basically get the government involved in any compulsory license agreement, having the Justice Department step in and deal with the fact that any compulsory license, by its nature, is anti-competitive. Of course, in reality this would just lead to more political pressure on the Justice Department. It still seems like an easier, and more effective, solution, is to forget compulsory licensing altogether, and recognize that the supposed "market failures" that required them in the first place don't really exist.

Filed Under: compulsory licenses, copyright, josh wattles, market failure