Under the 1976 Copyright Act, the length of
copyright protection was extended for the life of the author plus 70 years.
However, it also established a right for authors or their heirs to terminate copyright
transfers after a certain period of time. In other words, even if an artist or
songwriter signed a contract that purports to transfer all rights in a work in
perpetuity, even if the artist or songwriter is “unrecouped”, the Copyright Act
provides that the author can terminate that grant and demand that the rights
revert in a shorter period of time. Recording artists and songwriters have been
terminating their contractual transfers and demanding back control of their
copyrights. As anyone reading the headlines is aware, numerous superstar
artists and songwriters (e.g., Bob Dylan, Bruce Springsteen, Sting, etc.) have
sold their entire catalogs to third parties for enormous sums. However, it does
not appear that the 1976 Copyright Act sets forth any limit on how many times
an author is entitled to terminate the transfer of copyrights – which would
seem to indicate that 35 years from now these superstars (or, more likely,
their heirs) will be entitled to again terminate the contractual transfer and
regain the copyrights under Section 203 of the Copyright Act.
Generally speaking under the Copyright Act,
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 law. For grants by an author on or after 1978, termination must be exercised prior to
the 5 year period beginning at the end of 35 years from the execution of the grant.
Although there are certain formalities which must be complied with to
effectuate termination of the transfer, this essentially means that recording
artists and songwriters were entitled to exercise their rights of termination on
post-1978 works as of the start of 2013. Current headlines announce
that many superstars have done precisely that, and then turned around and sold
their music catalogs for millions of dollars. Although under Section 203 heirs who execute such a grant post-1978 cannot reclaim those rights again (e.g., Prince's estate), grants executed by an author on or after January 1, 1978 (including recent catalog sales by Dylan, Springsteen, Sting, etc.) do appear that they can be recaptured again after 35 years.
As a matter of music business history, 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 physical 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 new recordings,
store their product nor require the funds for promotion and marketing. High
profile artists with established fan bases and large catalogs of music like
Blondie, the Cars, Bruce Springsteen and others have no need for much in the
way of advertising and marketing, and there is no longer a need for
manufacturing, distributing or warehousing of their product. Simple ownership
and possession of the digitized masters is sufficient to conduct business.
It is noteworthy that, unlike song
publishing contracts which generally provide for the assignment and transfer of
a song copyright to the publisher, most record contracts have provided 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 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 has been ripe for dispute by any recording artist who tries to exercise termination
rights against a record company that resists the claim where the facts suggest
that no genuine “work for hire” relationship ever existed.
Many superstar artists and songwriters have
exercised their termination rights under the 1976 Copyright Act, regained their
catalogs, and then made multi-million dollar deals to sell the catalogs. Current
copyright law provides that the a copyright extends for the life of the author
plus 70 years, so 35 years from now Section 203 of that same 1976 Copyright Act
may allow the heirs of those superstars to terminate these current transfers,
regain the catalogs, and start the whole process again resulting in more
remuneration generated from the copyrights.
Wallace Collins is a New York lawyer practicing primarily in the area of entertainment law. He was a recording
artist for Epic Records before attending Fordham Law School. www.wallacecollins.com
