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Leveling Up Your Business: What’s the Deal with Music Copyrights?

Your Mind Is Your Best Assets

Intellectual Property (IP), also known as the intangibles or creative ideas, is a highly protected area by law. Though intangible, it is treated as any other tangible asset: no one can use someone else’s IP without permission. In business, the three types of IP are Trademarks, Patents, and Copyrights. Whether the owner is a solo entrepreneur or the CEO of a growing company, protecting creative works from public use is always recommended. 

IP protections secure the owner’s exclusive right to their original concept or handiwork. Anyone who infringes or uses IP without authorization can be penalized or sued for damages incurred by the IP owner. The public can exploit and monetize an original product or idea without ownership rights. It is equivalent to stealing property and selling it to another for monetary gains. Full ownership of business assets is always in the business’s best interest to prevent any damages (i.e., loss of recognition, profits, customers, etc.) to the company.  

Out of all IPs, the most common are copyrights. Books, photographs, paintings, music, websites, and instruments conveying a person’s artistic expressions are protected under the Copyright Act. Though it seems as if music or artworks are highly publicized, it does not mean its artists or composers do not have ownership. Due to Licensing, art forms are available for the public to enjoy but not to profit from. 

Licenses:

A license simply means permission. An IP owner may grant other parties rights to use their products/ideas without relinquishing ownership. Owners can profit from licensing through royalties, similar to renting a home or an instrument, or through a usage fee. For instance, Spotify – a music streaming application – pays artists on a per-play basis. 

IP owners enter into license agreements to enable a third party to use their product based on the terms of those agreements. Last Year, Pfizer decided to grant licenses for multiple labs to produce anti-viral pills in the hopes of ending the pandemic as soon as possible. License Agreements are just like any other contract. They contain restrictions of a product’s use based on the owner’s wishes. In many cases, the overall goal of a license agreement is to benefit both parties, mostly financially, without surrendering ownership of the product. 

The Music Industry

The most significant part of copyrights and, arguably, one of the most complex areas in licensing is the music industry. The Copyright Act of 1976 governs and protects musical notes, lyrics, compositions, and their use in performances through licensing. Music licensing is required whether played at a karaoke bar or during aerobics class in a fitness club. 

The Copyright Act encourages the production of original works and rewards the creators the exclusive right to profit from their originality. With the emergence of streaming and broadcast services like Apple Music, Spotify, and even video streaming like Netflix and HBO, copyright laws are relentless in protecting artists from parties who may want to use their music without permission. The law makes sure that artists continue to generate revenue, even as the music industry and technology continue to evolve through music licensing requirements.

A music license is a specific permission that enables a third party to play/perform music in public. “Public use” means any place open to the public or where a number of persons (not only family or friends) may gather. A bar with live performers, a DJ, karaoke, or a retail store that plays purchased songs requires permission from copyright holders or representative agencies. According to Copyright laws, business owners must acquire a music license to broadcast performance or music to their customers.

Music and Fitness Facilities

Public and commercial settings are subject to copyright laws. If a business plans to play music in its facilities that are open for public use, music licensing is required. The licensing agreement varies depending on the venue, the type of business, and the intended use for the music. Specifically, commercial venues must acquire music licensing, where music or composition is played in the background.

Because fitness facilities are considered commercial settings, they must acquire music licensing to broadcast music throughout the gym, as do retail stores, restaurants, or bars. Business owners may obtain music licensing from any or all of the four performing rights organizations (PROs): American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music, Inc. (BMI), The Harry Fox Agency, and Global Music Rights (GMR).

For instance, the ASCAP lists license categories required depending on how a business uses the music. Restaurants with live performers would have a different type of license compared to a restaurant that plays recorded music only for its ambiance. Many businesses typically request a PROs Blanket License, which authorizes the business to use all of the songs in a PRO’s catalog. It is best to check ASCAP’s list to determine which license category would apply to the business facility.

However, licensing isn’t necessary for personal trainers who privately train clients within their own homes or space. As long as the music is not broadcasted online for the public and the premises are exclusive and not open to the public, music licensing is not required. Also, music used through a subscription application like Spotify or any purchased music for private enjoyment does not need a license. 

For businesses that use sound and/or composition, acquiring a blanket license or a specific license in accordance with Copyright laws is recommended. Multiple music publishers may sue a business for each copyrighted song used without permission.  Businesses only open themselves up for potential lawsuits and hefty monetary penalties if they do not comply with copyright licensing.

Music and Music Instructors

The copyright owner of a musical work has the exclusive right to perform their music in a public setting. Therefore, any general performance broadcasted from a radio station, television, digital streaming like YouTube, or live performance at performance venues needs a Public Performance License. Depending on the range of music to be performed publicly, the performer may need a Blanket License – the permission to use any songs in a publisher’s catalog – from the applicable performing rights organizations listed above.

However, music performed in a private residence, studio, or private recitals is an exception because it is not public. Therefore, performances by music instructors for their students or a group of family and friends are not required to have a license.

Navigating in copyright law is complicated as it depends on the details (i.e., type of music, venue, audience, event, etc.). A general rule is that copyright law pertains to public and commercial settings, performances, and events. As a business owner, music licensing is almost always required to avoid potential lawsuits from copyright owners, publishers, or composers. Copyright infringement cases tend to be very expensive. For instance, National Music Publishers Association (NMPA) sued Peloton for allegedly violating music copyright law for $150 million. Businesses should reduce liability risks and legally acquire the proper copyright music license to avert unnecessary legal costs. 

Collaboration License and Joint Partnerships

Joint or collaboration agreements allow businesses to form partnerships to achieve common goals or projects. Also known as strategic alliances, collaboration contracts permit businesses to combine their technological or intellectual resources and bolster their geographical and networking engagements. Businesses under the terms and conditions of the agreement co-operate a project for a specified amount of time. The partnership’s sole objective is to increase the benefits (i.e., profits, popularity, improved products, etc.) for both companies while sharing the cost of production, resources, and liability.

Typically, the businesses involved in partnership agreements have different but complementary backgrounds. Partners may join forces and create new and more progressive products through licensing the use of IP. For instance, a software development company that owns the patented health-related software may partner with a sports apparel entity. Though unrelated, the partnership may develop high-tech sports apparel connected to a software application to track an athlete’s training and fitness progress. 

Collaboration is beneficial, specifically for small businesses. Small businesses can access additional resources and gain popularity in different demographics through partnership agreements. However, as with any other contract agreement, the terms and conditions must be carefully laid out for each party concerning contribution, responsibilities, costs, and profit. 

Small Businesses with Strategic Alliances

Collaborations can range from goods, services, or marketing to achieve a specific outcome or accomplish particular projects. The best part is that both parties are engaged as a team while operating as separate business entities. There are numerous advantages to strategic partnerships, including but not limited to:

  1. Access to new resources and skillsets

Small business owners can combine limited resources like capital, staff, and wealth of information. 

  1. Network and consumer expansion

The best thing about collaboration is that the parties do not have to be in the same industry. If each party has a specific niche in an industry, both may access each other’s clientele or customers. This is an opportunity to introduce your products and learn how to develop them.

  1. Geographical reach in influence and exposure

With combined capital, experience, and efforts, both entities can expand their reach through joint campaigns and advertising. 

  1. New Products 

One of the most exciting aspects of collaboration is developing new or advanced products. One entity may specialize in technology while the other manufactures sportswear. Together, both parties can create advanced apparel specifically for training or sports. In addition, each business has its approach and creativity. A fresh operational approach to production will add value to the product or project the partnership is creating. 

An Attorney You Can Trust

All other benefits derived from license agreements and strategic alliances are a win-win for both parties. Though benefits may be limitless, the partnerships and license agreements substantially rely on the terms and conditions in the contracts themselves. Forming a business, let alone expanding one, is a tedious job complicated by the laws and regulations surrounding Intellectual Property and Contracts. 

If you think you have an idea that you want to protect, give us a call.