Bustos Law Firm

Bob Dylan and Pink Floyd vs. The Machine: Artists and Record Labels Prepare to Do Battle Over Copyright Termination Rights.

In Uncategorized on December 17, 2012 at 4:59 PM

People have had 2013 circled on their calendar for a while now, and that’s because a battle is currently brewing in the music business that could  get quite ugly before it’s all over. On January 1, 2013, musicians who recorded hit songs in the late 1970s will once again have the right to reclaim ownership of those songs.  The book publishing industry, already reeling from competition by Amazon and  e-books, also  faces the loss of their back lists as authors begin using the Copyright Act to reclaim works they assigned years ago.

songwriting pic

Copyright Termination: A Powerful Tool

This powerful “re-valuation mechanism” found in the 1976 Copyright Act,  also known as “termination,” “recapture” rights or even “contract bumping,” gives authors and songwriters a second bite at the apple by allowing them and their heirs to break contracts 35 years after the fact.  This termination right trumps written agreements, even agreements which state that they last  in perpetuity.

And, while the world may not actually be ending in 2012, you could forgive some record labels and music publishers for feeling this way considering the very real possibility they may be losing ownership of some of the most massive-selling records that came out in 1978. Some of these records, by artists like the Eagles and Pink Floyd, have brought in untold millions, if not billions of dollars in revenue for labels over the last 35 years.

“In terms of all those big acts you name, the recording industry has made a gazillion dollars on those masters, more than the artists have,” said Don Henley, a founder both of the Eagles and the Recording Artists Coalition, which seeks to protect performers’ legal rights. “So there’s an issue of parity here, of fairness. This is a bone of contention, and it’s going to get more contentious in the next couple of years.”

Why Did Congress Create Copyright Termination Rights?

Congress created the copyright termination rights to allow authors and their heirs the opportunity to renegotiate their deals once the true value of the work became known; thus protecting authors of older works from having to live with a bad deal they entered into when they had little negotiating skills or leverage. This often overlooked, but powerful right, serves as an “insurance policy” for authors who initially signed away their rights for less than adequate compensation.

Termination rights are not a new idea, however, and have been the subject of famous court cases involving John Steinbeck, Lassie and Superman. The difference is that these older cases are based on a pre-1978 law that often required an author to exercise renewal rights which, in many cases, the author had signed away.

 What are the Potential Consequences to the Record Industry?

With the book and recording industry already reeling from plummeting sales, termination rights claims could be another serious financial blow. Music sales plunged to about $6.3 billion from $14.6 billion over the decade ending in 2009, in large part because of unauthorized downloading of music on the Internet, especially of new releases, which has left record labels disproportionately dependent on sales of older recordings in their catalogs.

“This is a life-threatening change for them, the legal equivalent of Internet technology,” said Kenneth J. Abdo, a lawyer who leads a termination rights working group for the National Academy of Recording Arts and Sciences and has filed claims for some of his clients, who include Kool and the Gang. As a result, the three remaining record companies — Universal, Sony, and Warner — have made it clear that they will not relinquish recordings they consider their property without a fight.

Do Record Companies Have Any Defense Against Copyright Termination Lawsuits?

The record labels’ first line of defense in fighting back against termination notices has been to argue that the musician, whose songs are in dispute, made the “work for hire.” However, whether or not that designation can apply to sound recordings has never been legally resolved.

The record industry has also taken the position that sound recordings fall into two main categories of works that the law identifies as per se works for hire: compilations or contributions to collective works. Artists, however, maintain that neither of those categories apply to albums by most musicians and so a copyright termination suit may be needed to set precedent on this issue.

“We believe the termination right doesn’t apply to most sound recordings,” said Steven Marks, general counsel for the Recording Industry Association of America, a lobbying group in Washington that represents the interests of record labels. As the record companies see it, the master recordings belong to them in perpetuity, rather than to the artists who wrote and recorded the songs, because, the labels argue, the records are “works for hire,” compilations created not by independent performers but by musicians who are, in essence, their employees.

Independent copyright experts, however, find that argument unconvincing. Not only have recording artists traditionally paid for the making of their records themselves, with advances from the record companies that are then charged against royalties, they are also exempted from both the obligations and benefits that an employee typically expects.

And, so while artists would prefer a court ruling declaring that sound recordings can never be considered a “work for hire,” it will likely have to be resolved on a case-by-case basis.  Also,  work for hire cases can be so fact-specific that it is unlikely one decision will serve as precedent for all cases.

 Have There Been Any Copyright Termination Cases Filed Yet?

One of the first public challenges has already taken place in the United States District Court for the Southern District of California  in San Diego.  In  this instance, the artist won for a change. In January 2011, the Village People’s original lead singer, Victor Willis, filed his termination notices with respect to 33 musical compositions, including hit songs like “YMCA,” “In the Navy,” and “Go West.” On July 14, 2011, French music publisher Scorpio Music S.A, and its administrator in the United States, Can’t Stop Productions, Inc., filed suit challenging the validity of Willis’s terminations.

Scorpio argued Willis’s terminations were invalid because the works were joint works (meaning written by more than one author) and thus a termination was required by ALL the authors, not just one. Since a majority of the authors in the case of a joint work are required to file a termination, Scorpio argued Willis’s sole termination was not good enough. (Interestingly, Scorpio initially attempted to use the work-for-hire argument, but withdrew that claim for undisclosed reasons.)

In matters of litigation  – sometimes it comes down to a single fact; and in this case, it was the method of execution. Here, each author had executed his own transfer to his respective copyright interest as opposed to a single document, signed by all authors and transferring the total interest.

Hence, Scorpio posed a significant question for the court to answer: in a case where joint authors of a work transfer their respective copyright interests through separate agreements, can a single author terminate his separate grant of his copyright interest? . . . Or are a majority of the authors still necessary for a termination to be valid?

Willis, with the assistance of the Songwriter’s Guild of America, argued that he granted his copyright interests in the compositions separately from the other co-authors, and thus may unilaterally terminate them. The court agreed with Willis, and dismissed the case, while making it clear that Willis’s termination affects only the copyright interests transferred by Willis and does not affect the other co-authors’ interest in the joint work. However, this is the decision of just one court, and others, including the federal Ninth Circuit Court of Appeals, and possibly even the United States Supreme Court, may see it differently.

Should I Be in a Rush to File My Copyright Termination Notice?

In spite of this important case, it’s important to remember that this 35-year mark for copyright termination is less like a deadline than an opening bell.  The termination window lasts five years, so a copyright grant made in 1978 can be terminated any time between 2013 and 2018, giving artists who have not yet served a termination notice plenty of time to do so. With that much time in hand, it is unlikely that all, or even most, of the 1978 grants will be terminated in 2013. A gradual stream of increased termination activity is the more likely outcome.  Moreover, the copyright termination statute requires artists to notify the label two years in advance of their intent to terminate the rights, so labels have been aware since at least 2011 of any potential terminations next year, providing time to reach a new deal.

So, although termination rights give artists the potentially valuable ability to control distribution of their works — which labels will seek to curtail as much as possible — the cost of litigation and other factors, however, will mean a court battle over the issue may not arise for some time. Moreover, there are very few albums that are worth so much money where it even remotely makes sense to fight with the label. So any copyright termination disputes that lead to litigation will likely involve an album that is still selling well enough today for it to be worthwhile for the artist to invest in the legal cost of reclaiming it. But rest assured, if it’s valuable enough, there’s going to be an artist who will fight it.

In addition, it would likely have to be filed by an artist who is no longer releasing music, such as the former Village People singer, since anyone from the 1970s who is still popular today probably has enough pull to secure a new deal without going to court, and thus may not want to antagonize their label.

What’s the Bottom Line?

Book publishers, and the few record companies that are left, have been reluctant to discuss termination rights as they understandably want to deflect attention from the issue. However, that may not be possible anymore.  Nonetheless, there is so much uncertainty around how copyright termination for sound recordings will work in the near future, that disputes will likely be resolved without litigation whenever possible. So contrary to common opinion, I don’t think this copyright termination will create a massive upheaval in the industry………at least with respect to hugely popular works by artists such as Pink Floyd, The Eagles, Stephen King, Mario Puzo, etc.  However, it could end up realigning the revenue-sharing balance between record companies and the artists.  So if nothing else, even if most artists never actually reclaim the rights to their work, but simply use the threat of termination to leverage a better recording or book deal for themselves, the copyright termination provision will have served its purpose of improving the bargaining power of both musicians and authors

The aforementioned notwithstanding, it goes without saying, that any artist or author who has a valuable recording or book from the late 1970s should file a notice to reclaim those rights, and if nothing else, use that notice as a basis to negotiate a more lucrative record contract or book deal for themselves.

 

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