McCARTNEY's SONY/ATV LAWSUIT MORE OF THE RIPPLE EFFECT FROM COPYRIGHT TERMINATIONS UNDER U.S. COPYRIGHT LAW.

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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