Wednesday, April 22, 2015

Sony Music Defeats "Iron Man" Composer's Lawsuit (At Least For Now)

A New York Federal Courts' recent decision concerning a "work for hire" determination could prove controversial. The Court's ruling involved "Iron Man", a rapper from the Wu-Tang Clan and a music composer working in television back in the 1960s.

Federal Court Judge Naomi Buchwald granted summary judgment to defendant Sony Music over plaintiff' Jack Urbont's claims the artist "Ghostface Killah" sampled the "Iron Man Theme" on two tracks of the rapper's second album, "Supreme Clientele.". In ruling in Sony's favor, the Judge examined how Marvel's Stan Lee had set up Urbont to create music for a certain the 1960s television show. She determined that Urbont contributed his materials as a "work made for hire," meaning that Marvel really owns the work and Urbont had no standing to claim an illegal sample. Sony is the beneficiary of this determination, but the opinion steps on controversial territory and might set off a flurry of amicus briefs should Urbont take the matter to a higher authority.

According to The Hollywood Reporter and Billboard, in the 1960s and 1970s, the House of Marvel operated in a loose collaborative working group environment known as the "Marvel Method." In part because of a lack of documentation around the time, there's been many subsequent fights over intellectual property rights. For instance, Marvel fought for years with "Ghost Rider"creator Gary Friedrich and they battled Jack Kirby when the comic book legend attempted to terminate a copyright grant. In those disputes, the issue of whether the artists had created their works as "made for hire" was closely examined, and in the Kirby case, judges applied what is known as the "instance and expense" test, or what happens when the "employer induces the creation of the work and has the right to direct and supervise the manner in which the work is carried out."

Last September, Marvel settled with Kirby just days before the U.S. Supreme Court was scheduled to discuss whether to grant a review. The high court sent out signals that it was indeed interested in picking up this case, and when that happened, there was a flurry of amicus briefs from intellectual property scholars and Hollywood labor guilds arguing a "critically important case" where Judges overseeing the Kirby dispute had applied the wrong standard when looking at commissioned works.
Judge Buchwald's decision over the "Iron Man Theme" raises the prospect of reviving this debate -- although there are wrinkles here that could arguably make it even more important. In coming to her conclusion, the judge addresses Urbont's situation back in the '60s. Urbont, whose later musical work includes That 70's Show, Oprah, 20/20 and The View, wasn't familiar back then with Marvel superheroes before getting in touch with Lee by a mutual friend. The composer wished to create songs for Marvel Super Heroes, and after reviewing comic books, he absorbed the nature of the characters and composed a theme and presented it to Lee's approval. After the songs were accepted, he received $3,000, which he used to record the music including the "Iron Man Theme."
There was no written agreement at the time, and Urbont didn't initially get royalties, but he was issued a certificate of registration. In the 1990s, he sued Marvel for unauthorized use of the theme and came to a settlement agreement, which referred to Urbont as the "owner" and Marvel as the "licensee."

Sony wasn't a party to Marvel's relationship with Urbont, and yet the judge allows the music company to challenge ownership anyway. As Urbont's lawyer put it in a motion brief, "It is outrageous for Sony to claim that the Works are works for hire, when the supposed employer does not itself claim that the Works are works for hire."

Nevertheless, the judge gives Sony standing to argue that "Iron Man Theme" is a work for hire, and once she does, Buchwald applies the same "instance and expense" test that became the focus of an attempted Supreme Court review in the Kirby case. She liberally quotes the 2nd Circuit's language in Kirby in guiding her analysis.

Eventually, she concludes that "the Iron Man Composition was created at Marvel’s instance because it was developed to Marvel’s specifications and for Marvel’s approval. As in the Kirby case, Urbont’s compositions 'were hardly self-directed projects in which he hoped Marvel, as one of several potential publishers, might have an interest...'" She writes that Marvel retained a right to direct Urbont's work and that the composition "was created at Marvel’s expense because Urbont was paid the fixed sum of $3,000 for his work."

This decision could prompt an appellate review -- a motion for reconsideration might be the first step --on the same grounds as the Kirby case, but there's something of further interest here too. As Urbont's briefs to the judge stress, Sony is not the employer and there's no cited cases where "a third party infringer seek[s] a finding that a particular work is a work made for hire when there is no dispute between the supposed contractor and author." Another difference between Urbont and Kirby?
"In Kirby, plaintiff could offer no testimony regarding the understanding of the parties because the plaintiff was deceased," Urbont's lawyers wrote. "In this case, Urbont is able to testify and has testified to a contemporaneous understanding with the producers of the television series that he owned the Works."

In other words, Urbont at least wants the treatment that Friedrich got when the 2nd Circuit vacated a summary judgment ruling and ruled there were triable issues. Judge Buchwald doesn't seem to think it matters what Marvel and Urbont called the working relationship, or how the settlement agreement referred to Urbont as the "owner." She says that a settlement doesn't really mean that Marvel conceded that Urbont was the owner, and further "case law within the copyright infringement context affirms that a licensing or settlement agreement should not supplant a court’s independent determination of copyright ownership." So, as a result of Judge Buchwald's ruling, Marvel seems to be the owner of the "Iron Man Theme" - and didn't even ask for it.

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

Wednesday, April 15, 2015

Universal Music Settles Digital Download Royalty Lawsuit

Universal Music has agreed to pay up to $11.5 million and bump up royalties going forward to resolve a lawsuit that alleged it had cheated recording artists by improperly classifying digital downloads off of services like Apple's iTunes as "sales" rather than "licenses." The settlement, filed on Tuesday and needing the Judge's approval, would compensate an estimated 7,500 artists including named plaintiffs Chuck D. of Public Enemy, Rick James (by way of trust), Dave Mason of Traffic, Whitesnake, The Temptations, The Motels and others.

The lawsuit came on the heels of a 2010 appellate ruling in F.B.T. Productions v. Aftermath - dealing with Eminem recordings - which suggested that "licenses" rather than "sales" were the more appropriate accounting treatment in an era where record labels no longer spend huge amounts on packaging physical CDs. The difference is substantial. Under "licenses" or "leases," artists have an even split with labels. Under "sales," artists only get about 15 percent of net receipts. Universal defended itself by questioning whether the FBT holding applied to many of the contracts of class plaintiffs. Other big labels including Warner Music and Sony were hit with class action lawsuits, both previously settled. However, Universal Music and subsidiary Capitol Records (as part of EMI) were hold-outs until fairly recently. Last month, after litigating a case that reviewed some 11,000 recording contracts, the parties signaled that a settlement was coming. 

According to a motion to approve the settlement filed on Tuesday, the Warner settlement (also $11.5 million) became a "starting point," but the parties struggled to reach their own conclusion, particularly on the issue of future relief. As part of the deal, Universal makes no admission of wrong-doing, but it will be paying nevertheless. In a statement, UMG commented, “Although we are confident we appropriately paid royalties on digital downloads and adhered to the terms of contracts, we are pleased to amicably resolve this matter and avoid continued legal costs.” Of the $11.5 million settlement, just over $3 million is going to attorney's fees and costs while about $200,000 is going to the named plaintiffs. The rest will be going to artists with contracts from UMG or Capitol Records between 1965 and 2004 with certain caveats.

Perhaps the most interesting aspect of the settlement deal is the royalty bump that artists will now be getting over future downloads. It's a 10 percent bump on the royalty rate, so if an artist previously got 15 percent of net receipts, that artist would now get an additional 1.5 percent, or 16.5 percent total. What's more, according to the motion to approve the settlement, "Class Members will also lock in certain additional benefits in the calculation of their royalties on Download/Mastertone income preventing reductions for, e.g., 'packaging' and free goods from being implemented in the future."

Digital downloads are on the decline as streaming income is surging, and at least one lawsuit is currently in play that challenges whether Sony is improperly characterizing those streaming receipts in an accounting-favorable way. However, this settlement seems to be a fair resolution of this controversy over how to compensate artists for their valuable work in a new medium which was not contemplated by their contracts, many drafted in the 1970s or 1980s - and it compensates these artists now, rather than after additional years of litigation and uncertainty.

There are bound to be many more such lawsuits on various issues as the landscape evolves going forward in the future.


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

Tuesday, April 14, 2015

HOW DO I GET MY RIGHTS BACK: TERMINATION RIGHTS UNDER U.S. COPYRIGHT LAW

     The 1976 Copyright Act provides for the termination of copyright transfers. It entitles content creators to reclaim their copyrights - regardless of any contract stating otherwise –after certain time periods. So, even if an author, artist, musician, photographer or songwriter signed a contract which purports to transfer all rights in a work for perpetuity, the Copyright Act provides that the author of the work (or the author's heirs) can terminate that grant and demand that the rights revert in a shorter period of time. Authors and creators are now entitled to terminate their contractual transfers and demand back control of their copyrights; authors can terminate their book publishing contracts, songwriters can demand return of their musical compositions from music publishers and recording artists and record producers can demand return of their sound recordings from the record companies.
            
Generally speaking, for copyright grants made on or after January 1, 1978 (the effective date of the 1976 Copyright Act) the termination period is 35 years under Section 203 of the Copyright Act. For pre-1978 works Section 304(c) of the Copyright Act, says that a copyright owner (or his or her heirs) can terminate all grants, licenses or transfers of beginning on the 56th year after that assignment was made. Termination may be exercised anytime during a 5 year period beginning at the end of either the 35 year or 56 year period from the execution of the grant (as applicable) or, if the pre-1978 grant concerns the right of publication of the work, then the period begins on the sooner of 35 years after publication or 40 years after execution of the grant. Although there are certain formalities which must be complied with to effectuate transfer, this essentially means that recording artists and songwriters were entitled to start exercising their right of termination on post-1978 works as of the start of 2013. 

 The big exception to the termination right is if a work was done as a "work-for-hire.” Section 101 of the Copyright Act of 1976 delineates what types of works by their nature are incontestably works for hire. It is essentially a two part test: (1) was the work created by an employee within the scope of his or her employment, and; (2) if not, is it (a) one of the nine enumerated work-for-hire classes of works and (b) is there a written agreement signed by the author acknowledging the work for hire relationship. Included on the list of nine enumerated categories of works that are works for hire are collective works, compilations and motion pictures. Not included on this list are books, photographs, songs and sound recordings.

     There are ongoing legal battles over how termination rights affect the book, comic book and motion picture fields. Not unexpectedly, the entertainment business companies are not pleased with the copyright termination provision and the inevitable ramifications thereof.

     With respect to songs and music publishers, some litigation has already been decided. In Scorpio Music S.A. v. Willis (Case No. 11 CV 1557 (C.D. CA 2012), California Federal District Judge Moskowitz determined that original Village People member, Victor Willis, could terminate his transfers and recapture a direct copyright interest in many of his group's songs, including "YMCA." In this case, after Willis notified Scorpio that he was terminating the prior transfers, Scorpio sued arguing that Willis could not terminate because a majority of each song's authors had not also agreed to terminate their transfers. The court sided with Willis, ruling that an author can unilaterally terminate the transfer of his share in a copyrighted work without his co-writers.  Although the Scorpio decision addressed a fairly narrow point concerning multi-author transfers, the decision opens the way for most songwriters to get their composition copyrights returned and sets the stage for the bigger battles looming on the recorded music side of the business. The copyright termination procedures apply to the separate and equally lucrative sound recording copyrights transferred to record labels as part of typical recording artist contracts over the years. Since the term “sound recordings” is not explicitly contained in the enumerated work for hire category list, practitioners representing record companies will need to try to find other ways to justify any claim that sound recordings are indeed works for hire in order to preclude termination by artists.

     The termination rights of the author of a copyrighted work are generally subject to a 5 year window. Termination must be made effective within the termination window or the right to terminate the grant is forfeited. To be effective, the author must serve a written notice of termination on the original record company or publisher (and/or any successors) no more than 10 and no less than 2 years prior to the effective date stated in the notice. The notice of termination must state the effective date of termination. Perfection of the termination requires that a copy of the written notice also be filed with the U.S. Copyright Office prior to the effective date of termination.

     Although the termination rights of an artist under the 1976 Copyright Act would only be effective for the U.S. territory, the size of the U.S. consumer market still makes this a valuable right to reclaim. 

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