Just as the music business has been staggering back to its
feet after the digital assault started by Napster over a decade ago, another
hard blow to the industry business model is starting to have ripple
effects. Recording artists and songwriters from 1978 and after are now entitled
to start terminating their contractual transfers and demanding back their
copyrights. The 1976 Copyright Act, in a provision that has generally been
overlooked until now, provides for the termination of copyright transfers. Even
if an artist or songwriter signed a contract that purports to transfer all rights in a work in perpetuity, the
Copyright Act provides that the author can terminate that grant and demand that
the rights revert to the author in a shorter period of time. This is a great
opportunity for artists and songwriters to get a second bite at the apple, so
to speak, and get a better share of the income earned from their creative works.
Paul McCartney has filed suit in New
York against Sony/ATV and is looking to get a
declaratory judgment that states he will soon regain his copyright ownership
share to his catalog of songs created as a member of The Beatles. In
what could become one of the most important legal battles in the music industry
this decade, he is looking to leverage the termination provisions of the
Copyright Act. McCartney’s lawsuit states that he has been serving and
recording termination notices for nearly a decade and now expects to recover
copyright interests as soon as October 5, 2018. The complaint states that “For years following service of
the first Termination Notices, Defendants gave no indication to Paul McCartney
that they contested the efficacy of Paul McCartney’s Termination Notices,” states
the complaint. What a declaratory judgment seeks is a ruling from the Court confirming that McCartney is entitled to return of his copyrights as per US Copyright law.
Although the Copyright Act is aimed at US-based artists and authors, and this
case raises some issues of how applicable it is to a UK-based artist, the more
important issue here is that McCartney is taking the battle of the effectiveness
of termination notices directly to a major company in a away that less well-positioned
artists have not done until now.
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 the termination period is 56 years after
copyright was originally secured under Section 304. For grants on or after
1978, termination may be exercised anytime during a 5 year period beginning at
the end of 35 years from the execution of the grant or, if the 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 can
start exercising their right of termination as soon as 2013 – which may
effectively decimate many record company and music publishing
catalogs.
Back when the 1976 Copyright Act was drafted few could
envision a world where the artists and songwriters might not need the music publishers or record companies to
finance, manufacture, promote, store and distribute their records. Back then
the expectation was that, although any particular artist could exercise the
termination right, what would effectively happen is that the label and artist
would simply be forced to renegotiate a deal to continue working together. Now
in the digital age, however, this is no longer true. A songwriter like McCartney can demand back his copyrights and then arrange for administration and collection of the income himself, a much more beneficial arrangement for the songwriter. Likewise, although not addressed in McCartney's lawsuit, an artist can demand back its masters and then simply offer them on the artist's own website or license the
rights to an online aggregator with little or no expense. This is particularly
true in the case of well-established artists with a large catalog of recordings since the artist would not even need the
record company to finance recording costs nor promote the records. The more digital the music
business becomes the more obsolete the large labels and publishers may become for
established artists. High profile artists with already established fan bases
and large catalogs probably have no need for much in the way of advertising and
marketing of their recordings, and certainly no need for manufacturing,
distributing or warehousing of the product. Simple ownership and possession of
the digitized masters would be sufficient.
By way of simple explanation, the termination rights of an artist or songwriter 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 artist or songwriter must serve a written notice of termination
on the original record company or publisher (or its successor) 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
McCartney's lawsuit involves only the song copyrights, but all eyes will be on McCartney’s lawsuit to determine the
effectiveness of notices under US
copyright law.
Wallace Collins is a New York lawyer specializing in
entertainment, copyright, trademark and internet law who is handling copyright terminations for many legacy artists and songwriters. He was a recording artist
for Epic Records before attending Fordham Law School. T:(212) 661-3656; www.wallacecollins.com
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