BASIC LEGAL TIPS FOR RECORD PRODUCERS

     Producers should be aware of their legal rights when it comes to working with recording artists in the studio. These days the music business, particularly the pop and urban markets, is producer-driven more so than ever before. Producers not only help capture the sound in the studio and use the available technology to mold it to be as commercially acceptable as possible, but more and more producers are finding and discovering new talent and developing the artist’s sound and even co-writing the songs with the artists.

     As a producer there are two copyrights that come into play in your business under the copyright law: one in the sound recording and one in the underlying musical composition or song. I usually suggest to my producer clients that they file a copyright registration with a Form SR covering both copyrights as soon as they begin to circulate a finished track (whether passing it around or posting it on a website or social media). The filing of a copyright registration in Washington D.C. gives you additional protection in so far as it establishes evidence of the existence of such copyright and gives you the presumption of validity in the event of a lawsuit. Registration also allows for lawsuits to be commenced in Federal court and, under Federal law, allows an award of attorneys’ fees to the prevailing party. Forms are available at www.loc.gov.

     Under copyright law, when a producer and an artist work together to create a sound recording in the studio they become co-authors in the work. The producer and the artist become joint owners of the copyright in the sound recording. In urban and hip-hop music, the producer who creates the musical bed or track becomes a collaborator with the artist who writes the lyric and performs the vocals in the recording studio so that the producer and artist become joint owners not only in the copyright in the sound recording but also, by current custom in the industry, in the underlying musical composition. Copyright vests in the creator as soon as the idea is “fixed in a tangible medium”, so as soon as you write it down or record it the copyright is created. Under the copyright law, although a non-exclusive license can be verbal, you can only transfer your right in the copyright by signing a written agreement to transfer them - so be careful what you sign.

    

     Although it is generally standard operating procedure when dealing with the major record labels to be asked to sign contracts to transfer your sound recording copyright to the label in exchange for an advance and royalties, you must be cautious with any agreement you are asked to sign whether by the artist or the record company. In addition, the underlying song copyright and the related “publishing rights” have an important value that the producer should know how to monetize whether through a publishing deal or acting as his own publisher. Producer contracts address numerous issues and the language can be a minefield - it is best to have an experienced entertainment lawyer navigate your way through that minefield.

      Producers earn revenues from advances and royalties paid for the sale of the sound recording, and may also earn mechanical royalties and performance monies (e.g., ASCAP, BMI, SESAC) if the producer is deemed a co-author of the musical composition. In addition, the producer should earn income from all use and exploitation of the record just as the artist does, whether from synchronization licenses for film and TV use, from social media, and from streaming services like YouTube and Spotify. Producer agreements should also provide for payment to the producer of SoundExchange revenues. Most of these issues are dealt with in the producer contact. In the absence of paperwork concerning the producer’s work in the studio and the producer’s share of income, then the producer and artist are joint owners of the sound recording copyright and the issue is then how to divide the revenues that may arise from the use and exploitation of the recording.

     Never sign anything - other than an autograph - without having your entertainment lawyer review it first. Do not rely on anyone else (or even their lawyer) to tell you what your contract says. And never let anyone rush you or pressure you into signing any agreement. There is really no such thing as a standard "form" contract. Any such contract was drafted by that party's attorney to protect that party's interests. Your lawyer can "translate" the deal and explain its terms to you, and then help negotiate more favorable terms for you.

     Keep in mind that it may, in fact, be in your best interest to "get it in writing" if you have an arrangement with someone. This is especially true in collaborative situations. Otherwise, you run the risk of a disagreement later over the actual terms of the oral agreement, and it becomes your word against that of the other party. That is not to say that an oral agreement is not a binding contract, but a contract is easier to prove if the terms of the arrangement are in writing. A simple contract may not necessarily require extensive involvement by lawyers. A contract can be as basic as a letter describing the details of your arrangement which is signed by both parties to the agreement. However, at the end of the day, if you believe in yourself and your talents, give yourself the benefit of the doubt, and invest in good legal representation - all the successful producers do.

Wallace Collins is an entertainment and intellectual property lawyer with more than 30 years of experience based in New York. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com

What Is A Music Publishing Deal? - and Do I Really Need One?

    Sometimes I hear songwriters talk about wanting a "publishing deal" without even really understanding what that means. Depending on the circumstances of each writer and the terms of the particular contract, sometimes no publishing deal is better than the wrong publishing deal.

    The term "publishing", most simply, means the business of song copyrights.  Under US copyright law, a songwriter owns 100% of his song copyright and all the related publishing rights until the songwriter signs those rights away. Under the law, a copyright (literally, the right to make and sell copies) automatically vests in the author or creator of a work the moment the expression of an idea is "fixed in a tangible medium." (i.e., the moment it is written down or recorded on tape.)  With respect to recorded music, there are really two copyrights: the copyright in the musical composition owned by the songwriter and the copyright in the sound of the recording owned by the recording artist (but usually transferred to the record company when a record deal is signed).

     A writer owns the copyright in his or her work the moment he or she writes it down or records it, and by law can only transfer those rights by signing a written agreement to transfer them. Therefore, a songwriter must be wary of any agreement he or she is asked to sign. Although it is not necessary, it is advisable to place a notice of copyright on all copies of the work. This consists of the symbol "c" or the word "copyright", the author's name, and the year in which the work was created, for example: "(c) John Doe 2020."

     The filing of a copyright registration form in Washington D.C. provides additional protection in so far as it establishes a record of the existence of such copyright and gives the creator the presumption of validity in the event of a lawsuit. Registration also allows for lawsuits to be commenced in Federal court and, under Federal law, allows an award of attorneys fees to the prevailing party.  To order forms and for additional information on copyright registration go to www.loc.gov\copyrights. These days, a songwriter can register for a copyright on line.

     As defined by the copyright law, the word "publish" most simply means "distribution of copies of a work to the public by sale or other transfer of ownership, or by rental lease, or lending". As a practical matter, the music publishing business consists primarily of all administrative duties, exploitation of copyrights, and collection of monies generated from the exploitation of those copyrights. If a writer makes a publishing deal and a publisher takes on these responsibilities then that publisher "administers" the compositions. Administrative duties range from filing all the necessary registrations (i.e., copyright forms) to answering inquiries regarding the musical compositions.

     One important function of a music publisher is exploitation of a composition or "plugging" a song. Exploitation simply means seeking out different uses for musical compositions. Sometimes a music publisher will have professional quality demos prepared and send them to artists and producers to try to secure recordings of the songs. They may also use these tapes to secure usage in the television, film and advertising industries (known as a "synchronization" use).

     Equally important as exploitation is the collection of monies earned by these musical usages. Particularly in in the digital age, when transactions amount to billions and payments to fractions of pennies, the administration of song copyrights and the collection of revenues can be a complicated and massive undertaking. There are two primary sources of income for a music publisher: earnings that come from record sales (i.e., mechanical royalties from both physical and digital copies) and revenues that come from broadcast performances (i.e., performance royalties).  Mechanical royalties are collected directly from the record companies and paid to the publisher. Performance royalties are collected by performing rights organizations (e.g., ASCAP, BMI, and SESAC in the United States and different entities in each other country) and then distributed proportionately to the publisher and to the songwriter. In addition to plugging and administrative functions, it is also important to know that there is a creative side to music publishing. Since producing hit songs is in the best interest of both the writer and the publisher, good music publishers have whole departments devoted to helping writers grow and develop. The creative staff finds and signs new writers, works with them to improve their songs, pairs them up creatively with co-writers and hopes the outcome will be hit records.

     A publishing deal concerns rights and revenues. If a writer decides to do a publishing deal then the main issue for negotiation is going to be the language pertaining to the calculation and division of the rights in the copyright and division of the monies earned. In the old days, most deals were 100% copyright to the publisher and 50/50 share of the revenues because there was a concept that the "writer's share" was 50% and the "publisher's share" was 50%. This, of course, was an invention of the publishers. Legally, these terms have no such inherent meaning but their calculation is defined in each individual agreement. Most modern publishing deals, however, are referred to as "co-publishing" deals where the copyrights are co-owned 50/50 and the monies are usually calculated at around 75/25 meaning the writer gets 100% of the 50% writer's share and 50% of the publisher's 50% share for a total of 75%. It is best for the writer to insist that all calculations be made "at source" so that there are not too many charges and fees deducted off-the-top before the 75% calculation is made. Keep in mind, however, that the advance paid to the writer by the publisher is later recouped by the publisher out of the writer's share of income from the song. So, the net business effect is that the publisher pays the writer with the writer's own money to buy a share of the copyright (and the right to future income) from the writer.

     Although a writer can be his own publisher and retain 100% of the money, the larger publishers in the music business usually pay substantial advance payments to writers in order to induce them to sign a portion of their publishing rights to the publisher - and this can be a good thing for the writer. Although a deal for a single song may be done with little or no advance payment (provided there is a reversion of the song to the writer if no recording is released within a year or two), there should be a substantial advance paid ($5,000-$100,000+) to a writer for any publishing deal with a longer term (e.g., 3-5 years or more). Moreover, sometimes the length of an agreement is more than just a function of time, it might also be determined based on the number of songs delivered by the writer or, even more difficult to calculate, based on the number of songs that get recorded and released on a major label (something neither the writer nor the publisher may have any control over). 

     Publishing deals have to do with more than just the money though. Since every music publisher is different, it is important for the songwriter to assess both the business and the creative sides of a music publisher before signing any deal. Ultimately, the songwriter is trading a share of something the writer already owns 100% of (the song copyright) so it is important to be mindful of what it is exchanged for by way of services and money.

Wallace Collins is an entertainment and intellectual property lawyer. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com 

PREDICTIONS FROM 1993 BILLBOARD ARTICLE: "WARNING SIGNS ON THE SUPERHIGHWAY"

Ramifications of New Technology  [*ORIGINALLY PUBLISHED IN BILLBOARD 1993 AS  "WARNING SIGNS ON THE SUPERHIGHWAY"]

The future in home entertainment technology is ever more rapidly approaching as headlines herald "mega-mergers" between and among cable, computer, electronics, telecommunications and entertainment conglomerates. The rapid development of interactive computer technology and the imminent availability of an infinite number of cable channels means that the electronic information superhighway is just over the horizon. The entertainment marketplace of the future could consist solely of a wall of interactive computer catalogues; consumers will go shopping with a compact disc and a credit card. With the addition of computer modems and/or fiber optic cable hook-ups, the consumer would not even have to leave home to choose music, video games, and movies stored in a central databank, and with the "virtual reality" apparatus, viewers may be able to experience the sensation of actually being in a film and partaking in a gunfight with Clint Eastwood or experience the sensation of sex with Marilyn Monroe. The ramifications of this global computerized information network, and other related technological developments, will be enormous for the entertainment industry, the legal community, and the world.

Telephone software already exists which will allow a consumer to listen to 90-second samples of a favorite recording artist's new album, and then, by touch-tone selection, order it shipped to him and have it charged to his telephone bill. Not only does this software facilitate sale of product, it compiles a consumer profile on the purchaser which can then be provided to record label marketing departments. This software has the capability, once appropriate fiber optic cable is in place, to transmit the product directly to the consumer at the push of a button.

For better or for worse, the arrival of computer driven consumption is eventually going to reshape the way business is conducted, from the way product is packaged, shipped and marketed to the way radio is programmed. Businessmen and lawyers in the entertainment industry will be confronted by new concepts in copyright and contract law not currently addressed in existing contracts. These delivery systems also raise new concerns regarding privacy and free speech.
Entertainment companies will soon be able to transmit their wares digitally instead of trucking them, dealing in the transfer of information rather than the shipment of product. Given the entertainment industry's investments in pressing plants, warehouse facilities, and distribution networks, this transition may not be an easy one. However, such a system will ultimately economize on packaging and transportation expenses. It will also eliminate the ecological issues surrounding the wasted plastic and paper used to package CDs and videocassettes.

With the advent of electronic distribution of music, the most basic concepts that govern contractual relationships will be effected. Fundamental movie and record contract issues could be completely eliminated from recording contracts.
With the coming of the one-world, global marketplace, transfer could be instantaneous and worldwide, and the issue of reduced "foreign" royalty rates payable to actors, artists and performers could be abolished. Sales figures for product could be compiled with absolute accuracy, and sales charts released on a daily rather than a weekly basis. Whether retail record stores and video outlets will disappear completely or continue to survive (the way radio continued to endure despite the advent of television, or people continue to go to the movies even after the arrival of home video) remains to be seen.

A particularly troublesome issue with respect to direct computer driven consumption is how to prevent the consumer from copying the transmission and circulating it (the way some computer software programs are currently copied from PC to PC in any given business office). An anti-copying code still needs to be developed and programmed into each album or movie transmission.

As we move into the future, barriers will continue to come down between telephone companies, cable TV, and video programming companies. The development of digital fiber optic networks will provide consumers with more choices and easier access to hundreds of channels as well as electronic home delivery of audio and video programs. Most troublesome is the fact that digital technology will make it possible for the consumer to make a virtually identical copy of any audio transmission royalty-free. Record companies and artists will increasingly find their products being transmitted and sold by way of cable networks or via computer modems and, yet, be precluded from collecting any revenue because such transmissions will arguably be deemed to be "broadcasts". As previously mentioned, even though these new broadcast and cable companies transmit record company product to consumers for their own commercial gain, they have no clear obligation either to secure record company permission or to compensate the label or the artist for the commercial use they make of the copyrighted works.

One apparent way to circumvent this problem would be for each major record label and movie company to develop its own cable TV channel which would allow viewers to order movies, albums and other related merchandise directly. Then, for example, the record label or movie company could charge the consumer a retail price equivalent for the transmission of a particular album.

Although such a solution has its obvious benefits, there is a downside. Operation of such a venture could prove to be costly and burdensome, specifically for a record label. In addition, there would still be nothing preventing a cable operator unaffiliated with a particular artist's label from establishing its own competing home-shopping music cable network, and then undercutting the prices offered by the artist's source label. In fact, it would be fairly easy for such an unaffiliated competitor to offer the transmission of a particular artist's album at a lower price because it does not have to bear the record company's financial investment in recording costs. Since the competitor would argue that it is merely broadcasting the product, not selling copies, the artist and its label could be without legal recourse. The competitor would only be liable for performance royalties which, at this point in time, are not payable on the sound recording.

Electronic distribution also has certain disturbing ramifications of the "Big Brother" variety. Popular culture has always thrived on decentralization - on garage bands, basement tapes, and independent film releases. If the larger entertainment conglomerates control the central databanks, what would the consequences be for independent releases and street music? Government intervention analogous to FCC regulation may be necessary to insure fair access to the databanks. New technology raises other questions: - What effect will credit card ordering directly through computer or cable hook-ups have on rights of privacy?; Would the databank also compile a wealth of personal information on each consumer?; If so, who will have access to this information?; Will centralized distribution make suppression of disturbing or "obscene" work much easier?; Will works be automatically transmitted in edited form? If so, who will decide what is suppressed and how a work is edited?

With respect to interactive technology, myriad intellectual property and related legal issues will be raised. If the consumer is enabled to manipulate the characters, the story line, and the action in a movie, movie companies need to consider how all of the alternative versions would be copyrighted. Since, in effect, the viewer would now be the creator of some essential portion of the work, the viewer might have an argument that certain derivative rights vest in him by virtue of his contribution to the work.

Interactive technology pundits predict that, with the advent of "virtual reality" apparatus, viewers will be able to truly experience a film by inserting themselves into the action and manipulating it such that the viewer could partake in a gunfight with Clint Eastwood, a prize fight with Sylvester Stallone, or experience the sensation of sex with Marilyn Monroe. As a preliminary matter, the manufacturers of the applicable interactive software would need to get appropriate clearance from the movie companies before altering the copyrighted works. However, with the proliferation of multi-national, vertically-integrated entertainment conglomerates, the company doing the altering might already be the owner of the copyright in the film (as was the case with "colorization" where Ted Turner had purchased certain films and later had them colorized). Nevertheless, supplemental legal issues would still be raised: If the viewer were to knockout Stallone, would this in some way subject the viewer to legal action by Stallone for disparagement of the actor? In the case of the Marilyn Monroe scenario, could intercourse with her image be said to violate certain privacy rights in some way, and who would assert those rights?

The ramifications of the new computer and communications technologies are simultaneously exciting and frightening. The next wave of technological developments is almost upon us and it is best that the entertainment industry and the legal profession confront the pertinent issues, review the relevant revenue streams, and resolve the outstanding legal issues now in order to capitalize on the coming changes as expeditiously as possible.

Wallace Collins is an entertainment lawyer. Tel: (212) 661-3656; www.wallacecollins.com. He was a recording artist for Epic Records before attending Fordham Law School. 

Judicial Approval of Contracts With Minors

As a recent Wall Street Journal cover story pointed out, technology start-ups and other computer software companies like Apple and Google often compete to employ young teenage whiz kids to write code or create new apps. With media giants like Disney and Viacom creating shows featuring younger and younger performers, and YouTube, Spotify and other online companies hosting content by eager young creators, content from minors is in ever-increasing demand by corporations. All of this raises the predicament of employing or dealing with contracts with minors (or contracts which involve a contracting party under the age of 18). I have handled many court proceedings concerning contracts with minors so the following might be of interest to my colleagues in legal departments of tech firms.

A minor may disaffirm a contract at any time during minority or upon reaching majority. Without a valid written agreement the employment is "at will" under the law of most states which means the minor can depart at any time. Copyright law, which is applicable to computer code, requires a signed writing to transfer copyrights and applies to authors of all ages, so without a valid written agreement the content created by the minor may not be validly transferred from its author to the employer. The dilemma created by a minor's ability to disaffirm a contract is that it may seriously jeopardize the employer's financial investment in the services of the minor.

The mere exercise of having the parent or guardian of the minor co-sign, approve or "guarantee" the contract does not resolve the problem. The minor may still repudiate the contract on the ground of infancy, asserting that the parent or guardian lacked authority to make the contract. In some jurisdictions, courts deem it against public policy to even enforce such guarantee language against the parent or guardian since it would subvert the purpose of the laws concerning the judicial approval of contracts with minors. So-called "working papers" under state law might work for purposes of a fast food chain or similar hourly wage employment but probably are insufficient for a tech company's purposes.

Although many tech companies may rely on the fact that they believe the minor is an employee creating intellectual property for the company, this may not be sufficient to transfer rights to the company in the computer code written by the teenage whiz kid as, for example, "work made for hire" under U.S. copyright law. It is beyond the scope of this article to address all of the factors courts consider when determining the issue of work for hire and the ramifications of the various outcomes of the cases concerning employers and computer programmers. Suffice to say that relying on the work for hire doctrine is an uncertain path for a tech company (all the more so when dealing with a minor).

State Laws

Several states, including New York and California, have laws specifically concerning judicial approval of contracts with minors. New York's Arts and Cultural Affairs Law §35.03 provides for judicial approval of certain contracts for services of "minors" under the age of 18. The procedure involved can be somewhat arduous to navigate, and may prove to be a difficult gauntlet to run for a lawyer inexperienced in this area. However, tech and media companies employing minors or contracting with minors should investigate the efficacy of pursuing court approval to protect their investment.

Once the court judicially approves the contract, the minor is held to a standard of adult responsibility for its contractual obligations assuring the employer company that it will get what it bargained for and that the contract is legally valid.

As a practical matter, a proceeding for judicial approval of a minor's contract in New York is commenced by the filing of a verified petition. It can be filed by a parent, the guardian, a relative of the minor or any interested person or entity such as the employer. The petition must contain a statement of the length of the employment term, compensation, and all other relevant, material terms of the agreement. A complete copy of the proposed contract must be annexed to the petition together with affidavits from the parents and/or guardians which consent to the petition and support the facts.

In addition to identifying the details of the nature of the minor's employment and the compensation to be paid, the petition must also contain a statement of who, other than the minor, is entitled to the minor's earnings and facts regarding the property and financial circumstances of the parent or parents so entitled. The petition may nominate a person to be appointed as limited guardian solely for purposes of establishing a trust account for the proceeding and should set forth the reasons why the person nominated would be proper and suitable.

Although a lawyer is usually appointed, a parent or other petitioner is not precluded from being appointed as limited guardian by reason of his or her interest in any part of the minor's earnings or in the contract provided such interest is disclosed. The court will designate how much is to be set aside and saved for the minor under guardianship until the minor becomes 18 years old. The court also has the option to appoint a special guardian to represent the interests of the minor at any time after the petition is filed.

As directed by the court, before the time at which the petition is noticed to be heard certain persons (other than the petitioner and anyone who has joined in the petition) must be served with an order to show cause why the petition should not be granted: (1) the minor; (2) the parents of the minor; (3) the minor's guardian(s); (4) each party to the contract; (5) any person having the care and custody of the minor; (6) the person with whom the minor resides; and, (7) the minor's spouse.

An order granting judicial approval of a contract for the services of a minor will rarely be granted on the papers alone. Usually a brief hearing is held at which the minor, the parent(s) and the various other interested parties may be questioned by the judge regarding the contract. Courts may require provisions in the court's order concerning how many hours the minor can work and may require that the employer provide tutors if regular schooling will be disrupted by the employment. Most terms and conditions of each arrangement will be affirmed as long as they are found by the court to be reasonable and not contrary to the best interests of the minor. Once the court does grant approval, an order will be issued which will, in effect, declare the minor an adult for purposes of fulfilling his or her contractual obligations.

California law concerning the judicial approval of minors' contract for artistic or creative services (Ca. Family Code §6750, et seq.), although similar, differs in certain respects. For instance, under California law there is no limitation on the length of the term of a minor's contract whereas in New York the limit is seven years. A hearing is usually required in California as in New York but under California law a maximum of only 50 percent of net earnings will be set aside until the minor becomes 18 years old whereas New York has no limit on what portion the court can direct to be set aside.

Once the court does grant approval, an order will be issued which will, in effect, declare the minor an adult for purposes of fulfilling his or her contractual obligations. Then all the results of the minor's services, including any copyrights in code or apps created by a minor during employment by the start-up or tech company, will be properly transferred as bargained for by the employer.

  

Wallace E.J. Collins III is an entertainment and intellectual property lawyer based in New York. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com 

*reprinted with permission of The New York Law Journal 2014

http://www.newyorklawjournal.com/expert-analysis/id=1202667640206/Judicial-Approval-of-Contracts-With-Minors%3Fmcode=1380566174563&curindex=0

THE IMPORTANCE OF CREATING AN INTERNAL BAND CONTRACT

     Over the years there have been many lawsuits between and among the members of various musical bands. These lawsuits have concerned everything from disputes over the distribution of money to the right of departing members to use (or not to use) the band name in connection with ongoing endeavors. In most cases, it would have been better to be safe than sorry, and get the understandings of the band members in writing when everyone was in agreement just so all the parties remember what they agreed to at the start. Disputes over copyrights and trademarks as well as money could be avoided with a properly drafted "pre-nup" for the band.

     The internal group member contract between the members of a band is fundamentally important, but many musical groups ignore this crucial early step. When two or more people associate for the purpose doing business they create a partnership in the eyes of the law. General partnership law applies to the association unless a written agreement states otherwise. General partnership law provides, among other things, that all partners equally own partnership property and share in profits and losses, that any partner can contractually bind the partnership and that each partner is fully liable for the debts of the partnership. In the case of most musical groups, a written agreement setting forth the arrangement between and among the group members as partners is preferable to general partnership law.

     A band agreement can address issues such as who owns the group name (and whether and in what capacity a leaving member can use the group name), who owns what property (including not only sound equipment but intangible property such as recording agreements and intellectual property such as the songs and the recordings created by the group), and how profits and losses are divided. Since it almost goes without saying that members of a band inevitably leave and groups inevitably disband, it is important to structure an inter-band agreement in the early stages of a career. It will function in a sense like a prenuptial agreement when matters start to disintegrate, and it can make the break-up process less painful.

     Some bands may deal with this agreement among themselves and some bands may have a lawyer prepare a basic inter-band agreement. If it is a fairly equal partnership where all members are writing and performing and sharing equally, it is a fairly simple process. However, where some members are songwriters and others are not and/or where one member claims ownership in the name or another makes significantly larger financial contributions than the others, it can become a complicated process. If the band cannot work it out among themselves, they can either sign a conflict waiver permitting the one attorney to act solely as scribe (and not as advisor) on behalf of the group, or each member of the group may need to get his or her own lawyer to protect each respective member's interests. Like it or not, as artistic and creative as forming a band can be, this is a business and it is wise to recognize that and deal with it. These inter-band issues are better dealt with at the beginning when everyone is optimistic and excited rather than later when tempers flare and bitterness pervades as egos clash.

     A typical band contract will address certain fundamental group issues. One important issue is who owns the group name if one member leaves or if a group dissolves which group of members are entitled to use the name. Under partnership law the partners would be the joint owners of the name and any member would probably be permitted to use the name (or maybe no members would be allowed to use the name once the partnership is deemed dissolved). Trademark rights are determined based on the "use" of a mark (not on who thought of the name) so each of the members of the group would be an equal co-owner of the group name under trademark law. The end result under either partnership law or trademark law might be impractical.

     In most cases, the band agreement will state that if a particular founding member was the creator of the group name then only a group comprised of that member and at least one other member can use the name. This will apply whether one other member leaves or if the group disbands and only the founding member and one other reform the group. There are as many different ways this provision can be drafted as there are different group names. When a group member leaves, the remaining members are going to want to keep the group name and are not going to want the leaving member to dilute its value or confuse the public by using it in any way. The band agreement provision may say that a leaving member cannot use the name at all or that the leaving member can only mention that he was "formerly" a member of the group (provided that such credit is printed smaller than the member's name or his new group's name, etc.).

         

     Rights in the group name may also concern revenues generated in addition to rights, specifically as they concern the sale of merchandise (e.g., hats, t-shirts, calendars and other products and paraphernalia). The band agreement should have a "Buy-Out/Pay Out" provision which would deal with this financial aspect of the group name.

     The band agreement will need to contain provisions regarding the sharing of profits and losses. One provision may pertain to revenues earned during the term while each member is in the group and another may pertain after the departure of a member or the demise of the group. In most cases, a group just starting out will have a provision that all profits from the group are shared equally between all members with an exclusion for songwriting monies (which each of the respective songwriter members would keep for themselves). Where an established group adds a new member, the provision may provide that the new member gets a smaller percentage than the founding members.

     However, in most cases, during the term there is not a problem determining appropriate revenue shares. The more complicated problem of revenue division arises after a member departs. The agreement may provide that the leaving member is entitled to his full partnership share of profits earned during his tenure but a reduced percentage (or no percentage) of profits derived from activities after his departure - or the agreement may provide for a reduced percentage for a short period of time after departure (e.g., 90 days) and then nothing thereafter. This is an easier issue to remedy as it relates to live performances and sales of merchandise during those performances than it is as it relates to record royalties. The group needs to determine what happens, for example, when a group member performs on 3 albums but leaves before the fourth album is recorded. Although it might be acceptable to refuse to pay the leaving member any royalties on the fourth and future albums recorded by the group under the record contract the leaving member signed as part of the group, it might not be fair to refuse to pay that leaving member his share of royalties from the 3 albums that he did record with the band. Of course, this might vary in the agreement depending on whether the leaving member quit or was fired.  

     Another important financial issue is the question of the leaving member's share of partnership property such as band recording equipment or a group sound system. Again, the agreement might specify a monetary payout to the leaving member if he is terminated but forfeiture if the leaving member quits. If merchandise with the leaving members name and likeness still in inventory is sold after the member leaves, a decision will have to be made about whether and how much the departed member might receive for the use of his name and likeness.

     The issue of control is also very important to deal with in inter-band contract. In most cases, each member will have an equal vote and a majority will rule. However, there are as many variations as there are bands. For example, some acts might require unanimous agreement or an important member may have two (2) votes and/or the band’s manager may have a tie-breaking vote. The agreement may also provide that certain matters such as requiring financial contributions from group members or incurring debts on behalf of the band require a unanimous vote. Again, there are endless variations including situations where a particular member makes all of the decisions or where new members do not have a vote on band business. One interesting inter-band arrangement was that of The Beatles.  In answer to that age-old question, "no", Ringo did not get less. In fact, my understanding of their arrangement was that it was what might be called a reverse democracy: each member had one vote but if any member voted against doing something then the band would not do it. In other words, their arrangement required unanimous consent to proceed with an activity.

     Another issue of control that must be decided for the band agreement concerns the hiring and firing of band members: how votes are calculated (e.g., will each member get one vote or will a particular member's vote count double) and how many votes are needed (e.g., a majority or a unanimous vote) to fire a group member and/or hire a new member. In most cases, a new member voted into the group will then be required to sign on to the internal group contract. It must also be decided how to vote on any amendments to the band agreement since this may materially effect the relationship between the members after the group has started. In most cases, a majority vote will be deemed determinative but some members may prefer a unanimous vote on such things as amending the agreement (as well as hiring or firing). This will have to be decided between and among the members of the group.

     Finally, the group’s internal agreement should contain a comprehensive Buy-out/Pay-out provision that deals with departing members. In most cases, whether the leaving member quits or is fired the agreement will provide that the leaving member waives all rights in the intangible assets of the partnership (e.g., the group name, the group contracts, etc.). If the member quits, he might waive any right to and benefit derived from the hard assets such as band sound equipment. If the leaving member is fired, the agreement might provide that he or she is entitled to the pro rata percentage of the current value of the hard assets. With respect to this payout, the band agreement may provide that if the valuation exceeds a certain amount (e.g., $25,000.00) or would put the band partnership in financial distress, the payout would be in a certain number of equal monthly installments (e.g., over 12 months).

     Again, this Buy-out/Pay-out provision can be as simple or as complicated as the band members deem necessary. There are as many variations in this as there are differences in personalities between the members of a group. Each member and each group must find its own balance.

     Inter-band issues and disputes are many and varied. Recently, a member of the Eagles sued the remaining members saying he was forced out of the Eagles’ corporation by the other shareholders (and invoked provisions of the California corporate law pertaining to minority shareholders in close corporations). Years ago an ex-member of The Black Crowes sued his former band mates claiming that he was entitled to an equal share of all the money they made after they threw him out of the band. His contract claim was based on nothing more than a pie chart drawn on a napkin. Legend has it that, years before while eating at a diner after a band rehearsal, each member had signed his name on his slice of the "pie" drawn on the napkin allegedly agreeing that they would stay together and share all of the money equally come what may. Of course, when circumstances changed the fired member used that napkin to assert his rights.

     It is difficult to form a good band and to achieve a successful career in the music business. Any group of two or more musicians working together would be well-advised to create and sign a good Internal Band Contract so that the band does not later self-destruct over money and ego issues and forfeit its hard-earned career success. In a perfect world, each member could afford its own lawyer to quickly and inexpensively prepare and sign such an agreement. In the real world, that may not be the case. In any event, some kind of basic band agreement is a good starting point for any new band.

Wallace Collins is a New York lawyer specializing in entertainment, copyright, trademark and internet law. He was a songwriter and recording artist for Epic Records before attending Fordham Law School. Tel:(212) 661-3656 / wallacecollins@gmail.com / www.wallacecollins.com 

American Idol Lawsuit Against Sony Sheds Light On Some Controversial Accounting Practices At Major Labels

19 Entertainment, the record company founded by “American Idol” creator Simon Fuller, has sued Sony Music Entertainment for allegedly cheating artists such as Carrie Underwood and Kelly Clarkson out of monies due to them. The lawsuit sheds light on some controversial accounting practices at the major labels and explores the minefield that is the various incomes streams that now comprise the modern music business. Issues raised include how a major label accounts for revenue generated from platforms like Spotify and iTunes, how advertising expenditures are treated, and whether Sony is required to share proceeds from battles on the copyright litigation front.

Copyright Litigation: Sony says its contracts with 19 concerning certain American Idol alumni provides for 19 to share in excess recoveries only from legal proceedings that Sony institutes in the name of 19 or a particular artist. Sony argues that this provision does not apply to proceedings that are brought in Sony’s name, including those aimed at stopping the broad-based copyright infringement of Sony’s catalog such as the action brought against the file-sharing website Limewire which settled for $105 million. 19’s position is that the contract gives Sony the right to sue in the artists' names and compel cooperation from them which logically necessitates that artists be compensated from the proceeds of such copyright infringement lawsuits. 19 maintains that Sony has many ways to bring a  lawsuit and that the manner in which Sony starts a litigation is of no consequence to 19’s right to receive a portion of any money which is attributable to the infringement of a particular 19 artist’s record.

Streaming Platforms: 19 claims that Sony underpays artists by paying the lower of two royalty rates on streaming income. Specifically, Sony treats music exploited on services like Spotify as "sales" or "distributions" rather than "broadcasts" or "transmissions." The effect of doing this according to 19 is to account for such deliveries as no different than downloads purchased. Sony says artist royalties are contractually tied to the language used in the major label's licensing deals with third party services. If that was not so, Sony argues, there would be no purpose in setting up a contract with two different royalty rates as Sony simply would be obligated to pay the higher rate. Sony argues that the language would be meaningless if it never had the possibility of treating streaming income as distributions. In opposition, 19 alleges that Sony is acting in bad faith by mischaracterizing what is happening in streaming which “robs 19 of the fruits of the Recording Agreements by purposefully avoiding using the correct operative words when Sony knew a 'broadcast' or 'transmission' was precisely what was occurring."

Royalty Escalators: The lawsuit also addresses what happens when consumers go to iTunes and buy individual tracks off an album. Though many of the songs were not released as "singles" per se, Sony treats them as singles to allegedly avoid having them count towards album sales that would trigger royalty escalators for the recording artists. Again, Sony points to the "unambiguous language" of the agreements: "If the parties intended multiple separate sales of Records that are not Albums to count as an Album, they would have said so" states Sony.  Sony says the interpretation that multiple individual tracks sold should be grouped as partial album sales "leads to absurd results," calculating the economic consequences being at most just "two dollars and change" even if millions of records were sold. 19 argues that its audit calculated an underpayment of $960,000 thanks to this practice, and further states: "It's easy to see that the labels can come out 20 percent to 40 percent (or even more) ahead if they sell 11 to 13 tracks individually to the same or multiple buyers, rather than the entire album in a single transaction to a single buyer."

Simon Fuller’s company 19 is alternatively looking to bring a claim against Sony for breaching its duty of good faith and fair dealing by allowing iTunes and other download providers to permit the "disaggregation of the Album format," allowing individual tracks to be sold for the alleged benefit of Sony and to the detriment of 19 and its artists. But according to Sony, "19’s assertion that the Agreements did not contemplate the changes to the music industry caused by the rise of individual track downloads is refuted by the fact...that all of the Agreements were executed after individual track downloads became a fixture in the music industry."

This lawsuit is still in its early stages but, whatever the outcome, it is sure to have important ramifications for the music business.

WALLACE COLLINS is a New York lawyer specializing in entertainment and intellectual property law.  He was a recording artist for Epic Records before attending Fordham Law School. T: (212) 661-3656.  www.wallacecollins.com

Contracts With Minors: Protecting Your Child's Talent Assets

If your son or daughter is an aspiring entertainer, computer code writer, app designer or video game whiz kid, this article might be of interest. With media giants like Disney and Viacom/Nickelodeon creating shows featuring younger and younger performers for the adolescent and ‘tween demographic, and YouTube, Spotify and other online companies hosting content by eager young creators, child stars and teenage creators are in ever-increasing demand. Moreover, technology companies often employ young teenage whiz kids to write code and develop video games and mobile apps. All of this raises the predicament of dealing with a contract which involves a contracting party under the age of eighteen.

The dilemma for these companies is that a minor may disaffirm a contract at any time during minority or upon reaching contractual majority (at the age of 18). The mere exercise of having the parent of the minor co-sign, approve or “guarantee” the contract does not resolve the problem. The minor may still repudiate the contract on the ground of infancy, asserting that the parent or guardian lacked authority to make the contract. Although many tech companies may rely on the fact that they believe the minor is an employee creating intellectual property for the company, this may not be sufficient to transfer rights to the company as a “work made for hire” under U.S. Copyright law, or otherwise.

For this reason, the people and companies that your children deal with may seek court approval of the employment arrangement. States such as California, New York and Tennessee have laws which establish procedures regarding the judicial approval of contracts with minors. Companies working with minors will probably seek to employ this process at some point because once the Court judicially approves the contract the minor will be held to a standard of adult responsibility for its contractual obligations – and this procedure assures the company that it will get what it bargained for.

The legal procedure is nothing to be afraid of for parents although in most cases you will want to retain a lawyer to guide you through the process – probably the same lawyer that you use to negotiate the contract itself. A proceeding for judicial approval of a minor's contract is usually commenced by the company or employer filing a petition with the Court. Along with the petition there will be affidavits or statements from the parents of the minor consenting to the arrangement.

An order granting judicial approval of a contract for the services of a minor will not usually be granted on the papers alone. A hearing will be commenced in which the minor, the parents and the various other interested parties may appear before the assigned Judge. In the course of the proceeding, the court will decide what portion of the net earnings of the minor, if any, are to be set aside in a trust. In fixing the amount to be set aside, the court will take into consideration the financial circumstances of the parents entitled to the minor's earnings, the needs of the parents' other children and the needs of the minor's spouse, if married. Such amounts as are set aside are to be saved for the minor under guardianship until the minor becomes 18 years old.

Once the court does grant approval, an order will be issued which will, in effect, declare the minor an adult for purposes of fulfilling his or her contractual obligations. This will assure that the company gets what it bargained for and that your child is adequately and fairly compensated for his work.

One final warning: some companies try to avoid the cost of the court proceeding and, instead, seek to have the parent or guardian of the child sign a guaranty. Parents are well-advised to be very careful about what they sign. As mentioned earlier, the parent cannot bind the child to the contract no matter what they sign. The child, as a minor, can legally walk away from the contractual arrangement. However, if the parent has signed some document that states that the parent is liable for amounts due to the company from the child or for damages if they child disavows the contract, that contract may be enforceable against the parent and the parent could be on the hook for much more than they anticipated. A parent can sign something that consents to the child working with the company but should be wary of signing any document that goes any further.

    

         

WALLACE E.J. COLLINS III, ESQ. is a leading industry authority on contracts with minors practicing primarily in the areas of entertainment, technology and intellectual property law. www.wallacecollins.com; Direct Tel: 212-661-3656

In "Raging Bull" Case US Supreme Court Opens The Door To Even Long-delayed Copyright Infringement Lawsuits

     In a copyright dispute over the movie "Raging Bull", the U.S. Supreme Court held that the case can continue despite the substantial passage of time. In a 6-3 decision the Court held that plaintiff Paula Petrella, daughter of the late screenwriter Frank Petrella, did not wait too long to file her lawsuit against MGM claiming an interest in the film.

     The plaintiff's father had collaborated with the legendary boxer Jake LaMotta on a book and several screenplays which were the basis for the Oscar-winning movie. When the plaintiff's father died in 1981 the copyrights were inherited by his daughter. His daughter sued MGM in 2009 seeking royalties from continuing commercial use of the film. First, a Federal judge had held that she had waited too long because she had been aware of the potential to file a lawsuit as early as 1991. Then,the 9th U.S. Circuit Court of Appeals agreed, relying on the studio's argument that the plaintiff's delay of nearly two decades in bringing the case was unreasonable. Now, however, the Supreme Court has reversed and is providing plaintiff with the opportunity to continue her copyright infringement lawsuit. 

    For a long time, film and television studios and major record companies have relied on the legal doctrine of unreasonable delay to prevent relatives, estates, and other claimants from bringing copyright claims years or even decades after the products had been released. The statute of limitations under US copyright law requires that lawsuits must be commenced within three years of an infringing act and every new release of a product and the ongoing exploitation of a copyright essentially resets the three year clock for copyright purposes. In other words, if a plaintiff sued, even after decades, they would only be entitled to damages going back three years (although they could possibly secure a share of income going forward into the future). However, many cases were dismissed under other legal arguments, such as laches, which would permit a Court to dismiss a case brought too many years after the original infringing act (which, in effect, would nullify the three year rolling statute of limitations).

    Without getting into all of the nitty gritty details of the decision, what matters is that those who, for whatever reason, might have been unable (or unaware of their right) to commence a claim for their share of copyright income now have a foot in the door. The rolling three-year copyright protection is fair to artists, authors and other creators of copyrights, and gives them incentive to create their works and the right to fight for a fair share of the income derived from the use and exploitation thereof.