YouTube Purchases RightsFlow to Address Complex Licensing and Royalty Payment Management Issues

YouTube announced its purchase of RightsFlow on its blog last Friday.  RightsFlow works with labels and distributors, artists and music services to simplify copyright licensing.  Mechanical licensing and royalty reporting are RightsFlow’s core services.  A mechanical license (also known as a “compulsory license”) gives anyone the right to make and distribute a recording of a musical work once the copyright owner has distributed a recording of the work to the public in the U.S.  The copyright owner cannot refuse permission for someone else to record the work, but whoever records the work must pay a preset compulsory license royalty.  17 U.S.C. §115 is the applicable statute.  RightsFlow boasts a database of over 10.5 million songs, economies of scale, and flexible, scalable data systems that are integrated with thousands of publishers and societies throughout the world.

The compensation issue was at the heart of the 2010 Viacom v. YouTube case.  Viacom and other content owners accused YouTube of harming their interests by allowing YouTube users to watch a massive library of unlicensed infringing copyrighted works.  They argued that YouTube was not entitled to the DMCA 17 U.S.C. § 512(c) safe harbor and that YouTube knew of infringing activity, but failed to stop it.  The §512(c) safe harbor provides that an online service or network access provider will not be liable for infringing content stored at the direction of a user if the provider meets certain conditions.   Although the district court ruled in YouTube’s favor, YouTube’s copyright protection procedures were scrutinized and criticized.  Since the Viacom case was filed, YouTube has taken steps to improve its protection of the copyrighted works posted on its site.

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