digital streaming

The Music Modernization Act Passes the House and Includes the CLASSICS Act

MMA House Judiciary Tamera Bennett #createprotect.jpg

Patrick Lewis contributed to this post.

The Music Modernization Act

The Music Modernization Act - HR 5477 (the “MMA Legislation”) unanimously passed the U.S. House of Representatives on April 25, 2018. The MMA legislation now moves to the Senate for review and hearings. 

The MMA Legislation unifies and serves as an umbrella for four previously introduced bills—the Allocation for Music Producers (AMP) Act, the CLASSICS Act, the Fair Play Fair Pay Act, and a songwriter-specific version of the Music Modernization Act. The goal is to overhaul the U.S. Copyright Act in relation to music licensing and fair compensation. It’s a joint effort of music publishers, songwriters, artists, record labels, radio, digital services, producers, and engineers to reach a workable solution for content owners and content users.

The CLASSICS ACT

(Compensating Legacy Artists for their Songs, Service, & Important Contributions to Society Act Title II, Sections 201-203, Chpt. 14)

Most importantly to me, the CLASSICS Act, which I authored, is included in this package. It corrects a decades old injustice through which performers have been arbitrarily deprived of royalties on songs recorded prior to 1972.
— IP Subcommittee Chairman Darrall Issa - House Judiciary Committee Press Release, April 25, 2018

Sound recordings were not protected by Federal Copyright Law in the United States until February 15, 1972 (Pre-72 Sound Recordings). There's a hodge-podge of state copyright laws that artists and record labels use to fight bootleg recordings and piracy of those legacy recordings.

The Problem Pre-72 Sound Recording Artists and Copyright Owners Face:

A new issue arose for artists and sound recording copyright owners when digital services such as Spotify, SiriusXM, and Pandora announced they would not pay digital sound recording public performance royalties for the performance of Pre-72 Sound Recordings. State law litigation related to public performance rights for Pre-72 Sound Recordings has resulted in a split in the courts based on how each state interprets their own common law or statutory laws. Some states find there is a digital public performance right and others not.

Goal of the CLASSICS Act:

If the MMA Legislation becomes law, Title II, Sections 201-203, Chapter 14, which encompasses the CLASSICS Act, will pull Pre-72 Sound Recording copyrights under the protection of federal copyright law for purposes of digital public performance of sound recordings.  Digital music services like Spotify, SiriusXM, and Pandora will have to pay to perform sound recordings fixed on or after January 1, 1923, and before February 15, 1972.

The MMA Legislation applies the same analysis used for Post-72 sound recordings to determine if the performance of a Pre-72 Sound Recording is interactive or non-interactive and whether or not the statutory digital transmission license is applicable to the performance. The MMA Legislation grants Pre-72 Sound Recordings the same safe harbors as post-1972 recordings: protection under the Digital Millennium Copyright Act and section 230 of the Communications Decency Act.

Copyright Filings and Damages for Infringements:

A requirement to open the federal court house doors for a copyright infringement claim is a U.S. Copyright Registration (or in some circuits proof of filing an application). Since Pre-72 Sound Recordings are not currently protected under U.S. Copyright Law, there is no procedure for filing a copyright application or a way to sue for copyright infringement in federal court.

The MMA Legislation does not go so far as to allow or require a copyright registration to be filed for the Pre-72 Sound Recordings.  Infringement remedies found in Sections 502-505 of the Copyright Act may be applicable if “the rights owner [files] with the Copyright Office a schedule that specifies the title, artist, and rights owner of the sound recording and contains such other information, as practicable, as the Register of Copyrights prescribes by regulation; and the transmission is made after the end of the 90-day period beginning on the date on which the information filed under subclause (I) is indexed into the public records of the Copyright Office.”

Questions and Concerns with the CLASSICS Act Portion of the MMA Legislation:

I’m concerned with how the Copyright Office recording provision will be implemented. This could be a very burdensome process on the Pre-72 Sound Recording owners.  And, what about the less sophisticated Pre-72 Sound Recording owners that may not even know that they need to comply with this provision?

The U.S. Register of Copyright will be required to implement the recordation procedure. The U.S. Copyright Office has suffered repeatedly from technology challenges and this seems like one more technology hurdle to overcome.

Next Steps For the MMA Legislation:

The MMA Legislation, which includes the AMP Act, the CLASSICS Act, the Fair Play Fair Pay Act, and a songwriter-specific version of the Music Modernization Act, is in the hands of the U.S. Senate.  Hopefully the bi-partisan treatment in the House will continue as the Senate committee starts its review.

What's The Impact of SESAC Buying Harry Fox (HFA)?

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It's been almost two months since SESAC, Inc. announced its acquisition of the Harry Fox Agency (HFA). The deal, which merges the largest U.S. mechanical rights licensing association with the smallest U.S. performance rights organization, still needs approval by the membership of the National Music Publisher Association.

HFA has always been in the business of licensing and collecting mechanical royalties for each time a record is sold, downloaded or streamed. At one time, that meant when a physical record album was sold. Today, we usually think in terms of when a track is downloaded.

SESAC is the smallest of three public performance rights organizations in the United States. Songwriters and music publishers are members of SESAC. When you hear a song played on the radio or in a club, a public performance royalty is paid to SESAC (or ASCAP or BMI - the two other performance rights organizations).  In turn, SESAC pays a performance royalty to the songwriter and music publisher.

In the U.S., the mechanical rights collection agencies and the public performance organizations have always been separate, until now. SESAC's acquisition of HFA begins to replicate they way mechanical and performance rights have been licensed for years throughout most of Europe.

New media companies that provide streaming and locker services should be rejoicing. The merger should streamline some of the right's clearance processes. Services like Spotify, and the now defunct Grooveshark, provide music to consumers in a way that triggers both a mechanical royalty and a public performance royalty. The merger would allow for some one-stop shopping when it comes to music clearance.

We may also see an uptick in music publishers joining SESAC so the publisher can benefit from centralized licensing. The publisher would still be responsible for issuing other licenses, such as synchronization and print.

Copyright Update Part 4: Digital Music Streaming

 Image Ryan McGuire

Image Ryan McGuire

This paper was written and presented by Tamera H. Bennett at the 28th Annual Technology Law seminar hosted by UTLaw CLE. It has been edited into multiple blog posts. Enjoy Part 4 below, Part 3, Part 2, and Part 1.

While music publishers and record labels are fighting their own issues on getting paid (and sometimes against each other), this series of posts focuses on new media recent legal issues facing sound recording copyright owners.

ARE PRE-72 SOUND RECORDINGS PROTECTED?

Sound recordings are the fixation of a series of musical, spoken, or other sounds capturing a particular performance of an underlying musical composition. Congress acted in 1971 to grant federal copyright protection to sound recordings by extending federal protection prospectively to recordings created on or after February 15, 1972 (“Post-72” sound recordings). Sound Recording Act of 1971, 85 Stat. at 392. Sound recordings fixed before February 15, 1972 are protected by a patchwork of differing state laws (“Pre-72” sound recordings). (Bringing Pre-72 recordings under Federal Copyright Protection is outside the scope of this paper. Learn more by reading the December 2011 Copyright office report: Federal Copyright Protection for Pre-1972 Recordings).

One of the current hot litigation topics is whether or not Pre-72 recordings include a digital “public performance” right. Sound recording copyright owners for Post-72 works enjoy the exclusive right to control the public performance of their works by means of a digital audio transmission and be paid for such performances. 17 U.S.C. §106 (6). This means when you listen to a Post-72 sound recording on a non-interactive streaming services such as Sirius XM or Pandora, a payment should be made by the streaming service to Sound Exchange  - the entity that collects the payments and distributes the royalties to the sound recording copyright owners and recording artists. See Webcaster Settlement Act of 2008 and 2009.  As discussed in Part 3, interactive streaming services such as Spotify and Grooveshark must secure direct licenses with the sound recording copyright owner.

Sirius XM plays music of all genres and all decades. Sirius XM has never paid public performance royalties for digital streams of Pre-72 recordings. In 2014, three courts—two in California and one in New York—held that Sirius XM’s unauthorized public performance of Pre‐72 sound recordings violates applicable state law. Because there’s no federal copyright protection for Pre-72 sound recordings, the Pre-72 copyright owners must rely on statutory or common law rights that vary from state-to-state.

The Central District of California Court ruled that sound recordings published prior to February 15, 1972 include a public performance right under common law and codified under Cal. Civ. Code § 980

A California federal district court ruled that Sirius XM infringed rights guaranteed to plaintiffs by California state statute. See Flo & Eddie Inc. v. Sirius XM, No. 13‐cv‐5693, 2014 U.S. Dist. LEXIS 139053, at *22‐23 (C.D. Cal. Sept. 22, 2014). Flo & Eddie of the musical group The Turtles sued Sirius XM in August 2013 for infringement of sound recording copyrights because Sirius XM was not paying public performance royalties, yet performed the sound recordings owned by Flo & Eddie, Inc.  The Central District of California Court ruled that sound recordings published prior to February 15, 1972 include a public performance right under common law and codified under Cal. Civ. Code § 980  and such right may be infringed if permission is not secured before the sound recording is played on satellite radio. The Flo & Eddie No. 13cv5693 Fed. Cal. case continues on other grounds with the assumption the summary judgment ruling will be appealed by Sirius XM. 

In Flo & Eddie litigation in federal court in New York, the district court indicated that the public performance of Pre-72 sound recordings constitutes common law copyright infringement and unfair competition under New York law. See Flo & Eddie Inc. v. Sirius XM, No. 13‐cv‐5784, 2014 U.S. Dist. LEXIS 166492, at *40‐44, *50‐52 (S.D.N.Y. Nov. 14, 2014) (denying Sirius XM’s motion for summary judgment, and asking Sirius XM to show cause why judgment should not be entered on behalf of plaintiffs), reconsideration denied, 2014 U.S. Dist. LEXIS 174907 (Dec. 12, 2014).  The court held:

the New York Court of Appeals would recognize the exclusive right to public performance of a sound recording as one of the rights appurtenant to common law copyright in such a recording.

Id.  An interlocutory appeal in the case was granted on April 15, 2015.

A settlement was reached in June 2015 in similar pending litigation in a California state court case brought by major record labels against Sirius XM.   Capitol Records, LLC v. Sirius XM, No. BC520981 (Cal. Super. Ct. Oct. 14, 2014) (order regarding jury instructions).  Arguably many of the plaintiffs that settled out with Sirius XM would have joined the Turtles class action which was certified in May 2015. How does that impact the Turtles and their ability to reach a settlement?

Taking cases coast-to-coast, Flo & Eddie, Inc. also sued Sirius XM in Florida.  Flo & Eddie, Inc, v. Sirius XM Radio, Inc., No. 1:13-CV-23182 (S.D. Fla. filed Sept. 3, 2013).  

Conclusion:

New media always brings about new questions on how far copyright protection extends.  When looking at interactive and non-interactive digital services, the courts may be applying federal or state law depending on what year the sound recording was “fixed.”  In addition the courts have to look at the DMCA to determine how far the Safe Harbor provisions reach to protect the services providing the digital content.

Again, this article does not address the concerns of the music composition copyright owner.  That side of the equation has its own issues, some similar and some different, that are also being addressed via the court system and the Copyright Royalty Board.  In addition to the cases discussed, there’s plenty of pending litigation to keep an eye on for the future. 

To find links to most of the cases and articles cited herein (and bonus materials) visit https://delicious.com/tamerabennett/utlaw15.

Other cases to watch:

Flo & Eddie, Inc. v. Pandora Media, Inc., No. 2:14-cv-07648-PSG-RZ (C.A.C.D. filed Oct. 2, 2014).

Capitol Records, LLC v Pandora Media, Inc., No. 651195/2014 (N.Y. Sup. Ct. filed Apr. 17, 2014).

Zenbu Magazines LLC v. Escape Media Group, Inc., No. 1:15-cv-00349-MKB-RER (N.Y.E.D. filed Jan. 22, 2015).

Zenbu Magazines LLC v. Sony Computer Entertainment America LLC, No. 3:15-cv-00310-VC (C.A.N.D. filed Jan. 22, 2015).

UMG Recs., Inc. v. Escape Media Group, Inc., No. 1:2011cv08407 (N.Y.S.D. filed Nov. 18, 2011).

Copyright Update Part 3: Digital Music Streaming Issues.

 Image Ryan McQuire

Image Ryan McQuire

This paper was written and presented by Tamera H. Bennett at the 28th Annual Technology Law seminar hosted by UTLaw CLE. It has been edited into multiple blog posts. Enjoy Part 3 below, Part 2 here and Part 1.

While music publishers and record labels are fighting their own issues on getting paid (and sometimes against each other), this series of posts focuses on new media recent legal issues facing sound recording copyright owners.

What Are Interactive Locker Services?

If we are not consuming music via non-interactive services like Pandora and Sirius XM or interactive services like Spotify, we are probably listening to the tunes we’ve stored in a music “Cloud.” iTunes Match, Amazon Cloud and Google Play are the leading providers of Cloud storage of music – locker services.

Locker services are either 1) free cloud storage for purchased music such as Apple, Google, and Amazon; or 2) paid locker services which are subscription-based music lockers providing on-demand streaming and downloads and include Spotify, Amazon Cloud Drive, Apple’s iTunes Match, Grooveshark, or the music component of Google Play.

Issues begin to arise with locker services when the services allow someone who did not upload a track the ability to stream and/or download that track. Because a specific track can be selected, the service is “interactive” and direct licenses are required. The paid locker services can attract greater numbers of consumers if they offer varied and larger quantity of tracks for streaming and downloads.

Locker services, when sued for online copyright infringement can always assert the defense known as the DMCA “Safe Harbor.” The Safe Harbor protects online service providers, which include locker and streaming services, from liability for songs posted or transmitted by subscribers to the service if, after receiving what is called a “take down notice,” the locker service promptly removes or disables access to material identified in a copyright holder's complaint.  See 17 U.S.C. § 512.


MP3Tunes

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The courts continue to make it clear that intentional actions by employees or owners of locker services in uploading unlicensed content will not be tolerated.  A U.S. District Court judge in New York ruled in August 2011 that online music locker service MP3Tunes and its founder Michael Robertson were liable for copyright infringement for content they uploaded.  Capitol Records, Inc. v. MP3Tunes, LLC, 2011 WL 5104616 *14 (S.D.N.Y. Oct. 25, 2011). The court also held MP3Tunes was not entitled to DMCA safe harbor protection for infringing content that was readily identifiable in DMCA take-down notices from the plaintiff but not removed from MP3tunes after notice was received. 

The damage phase continues in the MP3Tunes case into 2015.  An original jury award of 48 million was modified by the Judge on September 29, 2014 and on April 14, 2015 the court reduced the judgment to a little more than 23 million. Capitol Records, Inc. v. MP3Tunes, LLC, No. 1:07-cv-09931-WHP-FM, Doc 692 (S.D.N.Y., filed Apr. 14, 2015).


Grooveshark

Locker service Grooveshark was embroiled in litigation battles over the unlicensed songs and sound recordings stored, streamed and downloaded via its locker service. See Capitol Records, LLC v. Escape Media Group, Inc., No. 1:12-cv-06646-AJN-SN, (S.D.N.Y, filed Aug. 30, 2012).   Grooveshark let users upload songs that can then be streamed or downloaded by anyone.  This is in contrast to locker services such as Google Play, iTunesMatch and Amazon Cloud Player which restrict a third-party from streaming or downloading songs from somebody else’s locker unless a license has been secured with the label and publisher for that specific use.  Because Grooveshark is an interactive service, similar to a music-only YouTube, compulsory licenses are not an option and negotiated licenses must be secured. 

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The only major label that entered into a license with Grooveshark was EMI.  Three lawsuits later, EMI terminated their deal with Grooveshark.  Id. The labels and publishers have multiple arguments why Grooveshark’s actions constitute copyright infringement and Grooveshark is not protected by the DMCA Safe Harbor provisions. The labels accuse Grooveshark of uploading roughly 100,000 recordings to the online music service, without payment or licenses.  Id. In light of the MP3tunes decision, the labels/publishers asserted the employees of Grooveshark were baiting Grooveshark by uploading unlicensed content.  Arguably, intentional actions of the employees and/or executives should not be protected by the DMCA. 

On March 24, 2015 the judge granted EMI's motion for summary judgement on claims that Grooveshark's parent company Escape Media Group, Inc. infringed its copyrights.  See id. at Doc. No 104.   Relying on the MP3tunes decision, the court found Escape's repeat infringer policy did not meet the conditions of the DMCA Safe Harbor, Escape had an insufficient record keeping system, failed to terminate repeat infringers, and "actively" prevented copyright holders from collecting information needed for the takedown requests required by the DMCA.  See id.  Total damages could amount to $420 million based on the court's finding that 2,807 EMI-copyrighted sound recordings existed on Grooveshark's servers. 

Until May 1, 2015, music locker service Grooveshark was embroiled in litigation battles over the unlicensed songs and sound recordings stored, streamed and downloaded via its locker service. See Capitol Records, LLC v. Escape Media Group, Inc., No. 1:12-cv-06646-AJN-SN, (S.D.N.Y, filed Aug. 30, 2012).

Grooveshark reached a settlement with labels and the Grooveshark website is down after eight years

Copyright Update: Part 2 Digital Music Streaming Issues

copyright-part2-digital-streaming-tamera-bennett

This paper was written and presented by Tamera H. Bennett at the 28th Annual Technology Law seminar hosted by UTLaw CLE. It has been edited into multiple blog posts. Enjoy Part 2 below and Part 1 here, Part 3 at this link and Part 4.

While music publishers and record labels are fighting their own issues on getting paid (and sometimes against each other), this series of posts focuses on new media recent legal issues facing sound recording copyright owners.

II.         Types of Digital Music Consumption

The music industry is no longer focused on consumers owning physical product, but rather focused on how consumers consume music. 

A.        Streaming:

The fastest growing area of music consumption is streaming. Billboard 200 Makeover: Album Chart to Incorporate Streams & Track Sales, BILLBOARD, Nov. 19, 2014. This area is growing so fast that for the first time in 23 years, BILLBOARD revamped its algorithms to calculate the weekly Top 200 albums chart to include digital streams and individual digital tracks.

Internet radio is non-interactive streaming - meaning the user cannot choose the track or artist they wish to hear.

Streaming means listening to music (or watching a video) in real time, instead of downloading a file to your computer or mobile device and listening to it later. There are two types of streaming: interactive and non-interactive. Both are defined below and are treated differently when it comes to licensing and royalty amounts.  Prior to the Digital Performance in Sound Recordings Act of 1995 (“DPRA”), recording artists and sound recording copyright owners in the U.S. did not have a performance right in digital transmissions such as internet radio, webcasting or satellite radio.   

i.          Non-interactive – Internet Radio/Webcasting/Satellite Radio: 

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Internet radio is non-interactive streaming - meaning the user cannot choose the track or artist they wish to hear. The DPRA created a statutory license for subscription-based, non-interactive digital audio transmissions.  17 U.S.C. § 114. In 1998, Congress passed the Digital Millennium Copyright Act (“DMCA”), which expanded the statutory license to include non-subscription, non-interactive digital audio transmissions. License fees, predetermined by the Copyright Royalty Board, are non-negotiable and paid by the internet radio stations, webcasters and satellite radio stations to Sound Exchange (the entity designated to collect the royalties) as a digital performance royalty. 37 C.F.R. Part 380.

Sound Exchange reported digital performance royalty payments to artists and labels of $773 million in 2014 (up 31 percent from $590 million the prior year). These numbers include satellite radio as well as webcaster and internet radio. SoundExchange Wraps Record-Setting Year with $773 Million in Payments to Recording Artists and Record Labels, Sound Exchange, (Jan. 28, 2015).

Pandora and iHeartRadio are the two leading internet radio services in the US.  New players in the Internet radio space include Spotify, Rdio, and iTunes Radio.  Remember some of these providers offer multiple services which may include non-interactive streaming and interactive streaming. Satellite radio, such as Sirius XM, is also treated as a non-interactive service with fees predetermined by the Copyright Royalty Board.  17 U.S.C. § 114.

ii.         Interactive - On-Demand Streaming:

Streaming of content is considered interactive, or on-demand, when the listener can request the specific recording they wish to hear and the digital file is transmitted electronically to a computer or other device contemporaneously with the user's request.  17 U.S.C. § 114(j)(7).  The major on-demand streaming services include Spotify, Beats Music, Google Play Music All Access and Xbox Music.  The latest entry into the market is Tidal launched in March 2015 by artist and entrepreneur Jay Z.  Other offerings include Rdio and Slacker.

Streaming of content is considered interactive, or on-demand, when the listener can request the specific recording they wish to hear.

Because of the interactive nature of on-demand services, there is no statutory scheme or Copyright Royalty Board determining licensing rates.  The on-demand services must secure direct sound recording licenses from the owners of the sound recording copyrights in order to stream.  Royalty rates for on-demand services are negotiated between the sound recording copyright owner and the service provider.

How Do You Define Interactive?

There’s not been much litigation exploring the precise definition of “interactive.” We do know allowing users to create music playlists and access to listen to particular audio visual works and their accompanying sounds fit directly into the definition of an interactive service found at 17 U.S.C. § 114(j)(7).  See Capitol Records, LLC v. BlueBeat, Inc., 765 F. Supp. 2d 1198 (C.D. Cal 2010).

Compare the facts to a situation where a webcasting service provides users with individualized internet radio stations and the user rates the songs, artists, and albums.  The Second Circuit affirmed the lower court’s decision finding that voting up or down a song, artist or album on a service is not interactive so long as the user 1) cannot control precisely what song plays, and 2) cannot determine the next song with some amount of predictability. Arista Records, LLC v. Launch Media, Inc., 578 F.3d 148 (2d Cir. 2009).

In Part 3 we will discuss cloud/locker services and the demise of Grooveshark and Mp3Tunes.  You can read Part 1 here.

Copyright Update: Digital Music Streaming Issues

digital-music-streaming-issues-tamera-bennett

This paper was written and presented by Tamera H. Bennett at the 28th Annual Technology Law seminar hosted by UTLaw CLE. It has been edited into multiple blog posts. Enjoy part 1 below, Part 2 here, Part 3 at this link and Part 4.

I.          Streaming Pennies Are Hard to Divide

While most songwriters and artists thrive on the creative process of crafting their next song or production, the creative process by itself often does not put money in the bank.  The songs and sound recordings need to be commercially exploited with the hope and goal of securing licensing fees.

Whether you’re a label, artist, music publisher or songwriter, you either know or are quickly realizing the music business is a business of pennies. Those pennies are often so sliced and diced the music business has become a business of percentages of pennies.  Copyright owners often spend as much time tracking down payment for licensed uses as they do tracking down unlicensed content on the web. 

In 2014, for the first time revenues from digital channels equaled revenues of physical format sales with both accounting for forty-six percent of global revenues.

The new media – or digital space is huge and growing. In 2014, the music industry’s global digital revenues increased by 6.9 per cent to US$6.85 billion. IFPI DIGITAL MUSIC REPORT 2015 at 6. For the first time, revenues from digital channels equaled revenues of physical format sales with both accounting for forty-six percent of global revenues.

Thirty-two percent of digital revenues are from subscription and ad-supported streaming services, up from 27 per cent in 2013. Digital downloads still account for the majority of digital income coming in at 52 percent of global digital revenue. An estimated 41 million people paid for music subscription services in 2014, five times the level of eight million people in 2010. Once the royalties for digital downloads and streams are collected, they have to be distributed to the copyright owners.

When discussing the music business and who owns what rights, it's important to note that there are two copyrights involved in each musical recording. 17 U.S.C. § 102. The copyright that attaches to the song covers the words, music, and the arrangement. Sound recordings are defined as “works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work.” 17 U.S.C. § 101. The song copyright is owned by the song writer or a music publisher who was assigned the copyright. The copyright in a particular version of a recording is owned by the artist or record label. 

As an example of the difference between owning the song copyright and the master/sound recording copyright, recall that Dolly Parton is the songwriter of the hit “I Will Always Love You.” Neither Dolly Parton nor the music publishing company that owns the song copyright for “I Will Always Love You,” have any ownership in the sound recording copyright for the version of the song recorded by Whitney Houston for the movie “The Bodyguard.” Nor does the record label or Whitney Houston’s estate have any ownership in the song copyright. 

While music publishers and record labels are fighting their own issues on getting paid (and sometimes against each other), this article focuses on new media recent legal issues facing sound recording copyright owners.

Stay tuned for additional posts in this series.