Intangible assets are non-physical assets such as trade names, customer lists, brands, patents, and copyrights. Unlike physical assets, intangible assets derive their value from intellectual property and creativity. However, among these assets, copyrights stand out as the frequently targeted by thieves and misunderstood by well-intentioned individuals who lack awareness of the stringent legal protections afforded by copyright law.
Intangible assets have grown considerably in value in recent years. The total value of intangible assets held by firms globally has seen a significant increase from 1996 to 2023 (Brand Finance, 2024). This growth underscores the importance of protecting these assets, particularly copyrights, which are frequently at risk of infringement.
Eric Neumann, trained in accounting 35 years ago, has encountered copyright issues multiple times throughout his career. He gained a fair amount of knowledge about copyright law from working in the radio industry for ten years and developing a music platform that was subject to a lawsuit for copyright infringement by all the major record labels. Although SCOTUS eventually vindicated Eric’s position, validating his technology did not infringe, the experience yielded a deep understanding of copyright law. Eventually, all the major record labels signed off on his technology as acceptable using its original design. All this was done without hiring a copyright attorney, showing that direct knowledge has benefits.
The Nuances of Music Copyright Theft
Photo Courtesy: Eric Neumann / DepositPhotos.com
The outright theft of music, commonly known as piracy, is generally condemned today, but this was not always the case. Technologies such as CD-burning and cassette recording once enabled individuals to make personal copies of albums, but selling or distributing these copies remains illegal. The same applies to mixtapes and mix CDs, which, although common, technically violate copyright laws.
Many are unaware that publicly performing copyrighted music without proper licensing is illegal. This includes busking and cover band performances. Venues typically obtain blanket licenses from Professional Rights Organizations (PROs) to allow these performances legally. However, individual artists must also secure licenses to cover songs in concerts.
Sampling and creating derivative works from existing music have led to numerous lawsuits. Notable cases include Funkadelic’s lawsuit against N.W.A. and the high-profile case of “Blurred Lines” replicating Marvin Gaye’s “Got to Give It Up.” These cases underscore the importance of respecting copyrights and the legal repercussions of infringement.
Fair Use Doctrine and AI
The Fair Use Doctrine permits some exceptions for using copyrighted material, primarily for educational purposes. However, the advent of AI has introduced new challenges. AI platforms, designed to educate themselves, argue for the right to use copyrighted music for training purposes under the Fair Use Doctrine. This contention raises significant concerns among copyright holders.
A notable venture capital firm, Andreessen Horowitz (AH), has lobbied for AI’s right to train on vast music catalogs for free. They argue that AI models need extensive data to function effectively and that Fair Use should extend to AI training. However, this poses a significant threat to the value of music copyrights, as unrestricted access could create AI-generated music that devalues the original works.
The Business Perspective on Copyright Protection
From a business standpoint, allowing free use of copyrighted music for AI training could drastically reduce the value of these intangible assets. Copyright holders, often major record labels, would likely diminish their revenues as AI-generated music becomes prevalent. This scenario mirrors past battles over music piracy, where copyright holders fought to protect their assets from unauthorized use.
The Role of Licensing and Legal Protections
Licensing agreements are essential for protecting music copyrights. Companies like MediaNet, MusicBrainz, and PROs provide frameworks for legally using music while ensuring copyright holders are compensated. These licenses are crucial for maintaining the value of music catalogs, which remain valuable assets in the digital age.
The ongoing debate over AI’s access to copyrighted music highlights the need for a balanced approach. “While innovation should be encouraged, it must not come at the expense of intellectual property rights,” says Eric. Companies like Musiio and Jen Music AI, which work within the existing legal framework, demonstrate that it is possible to innovate responsibly. Both of these companies license music catalogs for their training models to work. Musiio, a recently acquired subsidiary of SoundCloud, led by CEO Hazel Savage, worked for Pandora, Shazam, and Universal. Jen Music AI’s CEO, Shara Senderoff, previously worked with Raised in Space and Something Gold – both CEOs are passionate about not infringing copyrights yet delivering AI-driven answers to solving vexing problems. There is no place for the swashbuckling pirate mentality in their culture that was present 20-25 years ago by nearly every music start-up.
The Resilience of Music Copyrights
Music copyrights are resilient intangible assets that have withstood numerous challenges over the years. Despite ongoing attempts to circumvent copyright laws, these protections remain vital for ensuring that creators and copyright holders are fairly compensated. As the digital landscape evolves, maintaining robust legal protections for music copyrights will be essential for preserving the value of these intangible assets.
In summary, understanding and respecting music copyrights is crucial in today’s digital age. The lessons from Eric Neumann’s career and the ongoing debates over AI and Fair Use highlight the complexities and importance of protecting these valuable intangible assets.
Eric is a Fractional CFO at NewLife CFO of Dallas.
Published By: Aize Perez
