The 1976 Copyright Act provides for the
termination of copyright transfers. Even if an artist or songwriter signed a
contract with a record company or music publisher which 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. Recording artists and songwriters are now entitled to terminate
their contractual transfers and demand back control of their copyrights;
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 the termination period is 56 years after copyright was
originally secured under Section 304 (c)-(d). 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 were entitled to start exercising
their right of termination on post-1978 works as of the start of 2013.
Not unexpectedly, the record companies as
well as the music publishers are not pleased with the copyright termination
provision and the inevitable ramifications thereof. With respect to songs and
music publishers, some seminal cases have already been decided. In Scorpio
Music S.A. v. Willis (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. Willis stands to become the undivided
owner of a one-half to one-third interest in 33 song copyrights. Although the Scorpio decision addressed a fairly narrow point concerning multi-author
transfers, the decision sets the stage for the bigger battles
looming on the recorded music side of the business. The same termination
procedures apply to all copyrighted works, including the separate and equally
lucrative sound recording copyrights transferred to record labels as part of typical
recording artist contracts over the years.
Back when the 1976 Copyright Act was
drafted, few practitioners would have envisioned a world where the artists
might not need the record companies to finance, manufacture, warehouse 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 (either with the artist or with the heirs of
the deceased songwriter or artist). Now, in the current digital transmission age,
this is no longer necessarily true. Any artist can demand back the copyright in
the masters and then simply offer them directly to fans on the artist’s website
or the artist can license the rights to an online aggregator or digital
streaming service with little or no expense. This is particularly true in the
case of the recordings of certain well-established artists because those artists
would not need the record company’s ongoing support to finance the recording
costs to create recordings, store product nor require the funds for promotion
and marketing. The more digital the music business becomes the more obsolete
the large record labels may become for established artists. High profile
artists with established fan bases and large catalogs of music like Blondie,
the Cars, Bruce Springsteen and others would have no need for much in the way
of advertising and marketing, and no need for manufacturing, distributing or
warehousing of their product. Simple ownership and possession of the digitized masters
would be sufficient to conduct business.
Unlike song publishing contracts which
generally provide for the assignment and transfer of a song copyright to the
publisher, most record contracts provide that the sound recording is created as
a “work for hire” for the record label. Under the 1976 Copyright Act the
termination provision is not applicable to certain types of copyrights,
including a genuine “work for hire” grant. However, this does not preclude
recording artists from exercising their right of termination. Sound recordings
are not listed under section §101(2) which identifies various works that
constitute a work for hire. Moreover, several years ago I litigated a case, Ballas v. Tedesco (41 F.Supp.2d 531
(D.C.N.J. 1999)), where a New Jersey Federal District Court addressed this
issue and Judge Greenaway held that the sound recording in that case did not
qualify as a work for hire. There is a great deal of case law addressing the applicable
legal employer/employee issues involved including those established in the
seminal Supreme Court case Community For
Creative Non-Violence, 490 U.S. at 738, 109 S.Ct. 2166 ("CCNV") which held that a
statue did not satisfy the terms of §101(2) because it "does not fit within
any of the nine categories of ‘specially ordered or commissioned' works
enumerated in that subsection, and no written agreement between the parties
establishes [the statue] as a work for hire.” Most case law that addresses the
subject of “work for hire” holds that whether a work created by an employee is
a work for hire or not depends on various factors as well as the circumstances
of the relationship - and not just the language of the contract. This area of
law appears to be ripe for litigation by recording artists who want to exercise
their termination rights where the facts suggest that no genuine work-for-hire
relationship ever existed.
From what I have researched, it appears that in most cases
the artist has a fair likelihood of prevailing over the record company on this
point when the CCNV "work for hire" factors are applied (i.e., artist not an employee (e.g., no unemployment benefits paid/withheld, etc.), artist not under the direct supervision and control of the record company during the creative process, etc.) - so I expect that the record companies will make a decision to negotiate with the bigger superstar artists and then turn the other cheek with the recordings generating less income and just let them revert back to the artists (since a bad precedent in a lawsuit could open the floodgates for other artists to demand back their masters).
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 (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 for recorded music still makes this a valuable right to reclaim.
However, what is good for the artists and creators might further erode the
influence of the major record labels and prove detrimental to them as music industry
powerhouses in the future.
Wallace Collins is an entertainment lawyer specializing in entertainment, copyright, trademark and internet law. He was a songwriter and recording artist for Epic Records before attending Fordham Law School. T: (212)661-3656 www.wallacecollins.com