Monday, February 11, 2013

Starting "Vinyl Vault" in Japan

A recent article by Glenn Fleishman on a new digital music service called Vinyl Vault is interesting to those interested in copyright issues. Amoeba launched the new service on which it claimed to have spent six years and around $11 million. Fleishman claims that although Amoeba pretends that orphan works can be digitized without a license as long as Amoeba retains the profit at an escrow, "[t]here's no such provision in copyright law for such an exemption, and Amoeba could find itself in real trouble." 

This blog article will not discuss whether Mr. Fleishman's argument is correct. Rather, I want to explain what Amoeba or another company should do if it wants to establish a similar business in Japan. 

Curiously, in Japan, there is such a provision in Copyright Law. 

Article 67 (1) Where a work has been made public, or where it is clear that it has been offered to or made available to the public for a considerable period of time, the work may be exploited under the authority of a compulsory license issued by the Commissioner of the Agency for Cultural Affairs and upon depositing on behalf of the copyright owner compensation the amount of which is fixed by the Commissioner as corresponding to an ordinary rate of royalty, in the case, designated by Cabinet Order, where, after the due diligence, the copyright owner cannot be found for the reason that he is unknown or for other reasons. 

Article 67(1) introduces the compulsory license system in which an orphan work can be licensed by the Commissioner of the Agency for Cultural Affairs. Of course, this happens only if the copyright owner cannot be found "after the due diligence." In such case the license fee is designated by the Commissioner as corresponding to an ordinary rate of royalty.

As of January 26, 2011, there have been 82 cases where the Commissioner granted a license. Some of the most notable usage is by the National Diet Library ("NDL"), where the Commissioner granted the license of 67,193 works for NDL's project called "Digital Archive from Meiji Era" on December 2010.
Currently, to meet the due diligence requirement, the Agency for Cultural Affairs requires five kinds of research: (1) research by the name of the author, (2) research on the publishers, (3) post a request for information on your website and obtain a link from CRIC's website for searching for the rights holder, (4) inquiry to the academy or author's guild, and (5) inquiry to the entities conducting copyright management business. (In the case of music, JASRAC is the Japanese equivalent to Harry Fox Agency, BMI, ASCAP, SESAC, and Sound Exchange.)

The due diligence requirement is actually burdensome. For example, Mr. Tanaka from NDL explained that for the Digital Archive from Meiji Era, NDL made inquiries to around 3,000 organizations and the cost was 260,000,000 yen (about $2,600,000) which is about several thousand yen (around thirty to fifty dollars) for one book. 

However, the due diligence requirement is nevertheless essential, because the law does not want the unjust situation where a person who knows the existence of the rights holder (or who can easily know the rights holder) ask for the compulsory licensing and obtain the license against the will of the rights holder. 

I think that a business similar to Vinyl Vault can be launched in Japan based on the compulsory licensing by the Commissioner. But because of the burden of due diligence as explained above, there is a question of profitability. However, as Amoeba paid $11 million to launch the Vinyl Vault, the cost for the due diligence might be trifle. 

DISCLAIMER: "IT Law issues in Japan" only provides general information about Japanese information technology law and does not, under any circumstances, constitute legal advice. You should first obtain the advice of professional legal counsel who is qualified in Japan before acting or refraining from acting based on this blog.

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