SOUND RECORDING AND SONG PUBLISHING TERMINATION RIGHTS UNDER U.S. COPYRIGHT LAW

      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

D.I.Y. v. GETTING SIGNED TO A MAJOR RECORD LABEL IN THIS SOCIAL MEDIA ERA

The question these days for musical performing artists seems to be whether it is better to do it yourself ("DIY") or sign with a major record company. The answer depends.

It used to be, back in the 1970s, '80s, '90s and even into the start of the new millennium, that the major record companies had talent scouts scouring the country and searching the clubs for talent. There were layers of A&R staff at major labels (A&R stands for “artist and repertoire”) who were often producers that would take artists into studios and make recordings. That way a record label could find out what an artist might sound like on record before proceeding further. The A&R staff would also review songs from publishers and songwriters to choose “hits” for the artists already signed to the label to record. Sometimes artist managers and lawyers would pitch talent to the A&R personnel, a process which was commonly referred to as “shopping” an artist to a label. For the most part, those days are done.

These days the A&R staff could more accurately be referred to as R&D (research and development). They no longer need to scour the clubs or take demos shopped to them by managers and lawyers. Artists can make state of the art recordings in their homes and distribute it digitally with the push of a button. The labels can search the internet and websites like YouTube and Facebook to see what artists are garnering interest from the public. These days it is more about creating a “buzz” with an online presence and doing live shows to build a fan following. The record companies are interested in analyzing data before they take an interest in investing time and money in a project.

The major labels are now less about finding and developing raw talent and more about marketing and promoting the artists that have developed themselves and built the widest public appeal. Rather than bring new artists into the studio to work with them, the labels tend to find artists that are already performing live and drawing crowds, and already have at least some recordings commercially released and available on line. Since an artist can create good quality recordings in a home studio, and easily upload music for commercial release through any number of online distributors, any artist can make music and get it out to the public without the need for a major record label’s assistance. The labels actually want the DIY artist to develop its sound and test market itself. When there is interest from the public, numerous hits on an artist’s website or YouTube video, substantial sales of the artist’s music, and long lines at the live shows, then the major labels start sniffing around. The contractual downside of signing with a major record company is that in most cases their contracts assign ownership of your copyrights to them in exchange for funding (an advance and a promise of royalties); the DIY artist can retain ownership of its copyrights and then use and exploit them to generate income.

On the up side, as an artist these days you can make and distribute your own recordings on-line through the digital streaming services and promote the music through social media and with live performances - and keep 100% of the copyrights and 100% of the profits. In the "good old days" an artist needed a record company to fund the recordings in state-of-the-art recording studios and then print, warehouse and ship the physical records to stores. Before Spotify, AppleMusic and other digital streaming services, radio was the only gateway to the public, and you needed a record company to market and promote the music to radio.  You no longer need to go that route. You can do it yourself if you prefer.

If the DIY route is not for you, then you still need to do some legwork to get the attention of a major record company. What you as an artist need to do, first and foremost, is work on your art. That can be a combination of writing great songs, making great recordings, making interesting videos and creating a great live show – any or all of those things. You need to build your websites and develop your social media in order to link your fans to your work so that the public can hear your music and see your performances. An artist needs to create a “buzz”, create excitement and interest for what the artist is doing creatively. Some artists do it with a killer song and others do it with an interesting video. You need to create something unique and interesting that the public just cannot resist. It is not easy. It takes hard work and perseverance – and requires a little luck to get attention. However, if the alternative is to give up and go work in a grocery store or some other day job, then you might as well hone your craft and give it all you have to try to create something that demands that people pay attention. Then, if you want, you will get signed to a major record company that will, hopefully, help fund your expanding efforts and spread your artistry to a broader audience around the world.

Wallace Collins is an experienced entertainment lawyer. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. T: (212) 661-3656; wallacecollins@gmail.com