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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What Is A Music Publishing Deal? - and Do I Really Need One?

    Sometimes I hear songwriters talk about wanting a "publishing deal" without even really understanding what that means. Depending on the circumstances of each writer and the terms of the particular contract, sometimes no publishing deal is better than the wrong publishing deal.

    The term "publishing", most simply, means the business of song copyrights.  Under US copyright law, a songwriter owns 100% of his song copyright and all the related publishing rights until the songwriter signs those rights away. Under the law, a copyright (literally, the right to make and sell copies) automatically vests in the author or creator of a work the moment the expression of an idea is "fixed in a tangible medium." (i.e., the moment it is written down or recorded on tape.)  With respect to recorded music, there are really two copyrights: the copyright in the musical composition owned by the songwriter and the copyright in the sound of the recording owned by the recording artist (but usually transferred to the record company when a record deal is signed).

     A writer owns the copyright in his or her work the moment he or she writes it down or records it, and by law can only transfer those rights by signing a written agreement to transfer them. Therefore, a songwriter must be wary of any agreement he or she is asked to sign. Although it is not necessary, it is advisable to place a notice of copyright on all copies of the work. This consists of the symbol "c" or the word "copyright", the author's name, and the year in which the work was created, for example: "(c) John Doe 2020."

     The filing of a copyright registration form in Washington D.C. provides additional protection in so far as it establishes a record of the existence of such copyright and gives the creator the presumption of validity in the event of a lawsuit. Registration also allows for lawsuits to be commenced in Federal court and, under Federal law, allows an award of attorneys fees to the prevailing party.  To order forms and for additional information on copyright registration go to www.loc.gov\copyrights. These days, a songwriter can register for a copyright on line.

     As defined by the copyright law, the word "publish" most simply means "distribution of copies of a work to the public by sale or other transfer of ownership, or by rental lease, or lending". As a practical matter, the music publishing business consists primarily of all administrative duties, exploitation of copyrights, and collection of monies generated from the exploitation of those copyrights. If a writer makes a publishing deal and a publisher takes on these responsibilities then that publisher "administers" the compositions. Administrative duties range from filing all the necessary registrations (i.e., copyright forms) to answering inquiries regarding the musical compositions.

     One important function of a music publisher is exploitation of a composition or "plugging" a song. Exploitation simply means seeking out different uses for musical compositions. Sometimes a music publisher will have professional quality demos prepared and send them to artists and producers to try to secure recordings of the songs. They may also use these tapes to secure usage in the television, film and advertising industries (known as a "synchronization" use).

     Equally important as exploitation is the collection of monies earned by these musical usages. Particularly in in the digital age, when transactions amount to billions and payments to fractions of pennies, the administration of song copyrights and the collection of revenues can be a complicated and massive undertaking. There are two primary sources of income for a music publisher: earnings that come from record sales (i.e., mechanical royalties from both physical and digital copies) and revenues that come from broadcast performances (i.e., performance royalties).  Mechanical royalties are collected directly from the record companies and paid to the publisher. Performance royalties are collected by performing rights organizations (e.g., ASCAP, BMI, and SESAC in the United States and different entities in each other country) and then distributed proportionately to the publisher and to the songwriter. In addition to plugging and administrative functions, it is also important to know that there is a creative side to music publishing. Since producing hit songs is in the best interest of both the writer and the publisher, good music publishers have whole departments devoted to helping writers grow and develop. The creative staff finds and signs new writers, works with them to improve their songs, pairs them up creatively with co-writers and hopes the outcome will be hit records.

     A publishing deal concerns rights and revenues. If a writer decides to do a publishing deal then the main issue for negotiation is going to be the language pertaining to the calculation and division of the rights in the copyright and division of the monies earned. In the old days, most deals were 100% copyright to the publisher and 50/50 share of the revenues because there was a concept that the "writer's share" was 50% and the "publisher's share" was 50%. This, of course, was an invention of the publishers. Legally, these terms have no such inherent meaning but their calculation is defined in each individual agreement. Most modern publishing deals, however, are referred to as "co-publishing" deals where the copyrights are co-owned 50/50 and the monies are usually calculated at around 75/25 meaning the writer gets 100% of the 50% writer's share and 50% of the publisher's 50% share for a total of 75%. It is best for the writer to insist that all calculations be made "at source" so that there are not too many charges and fees deducted off-the-top before the 75% calculation is made. Keep in mind, however, that the advance paid to the writer by the publisher is later recouped by the publisher out of the writer's share of income from the song. So, the net business effect is that the publisher pays the writer with the writer's own money to buy a share of the copyright (and the right to future income) from the writer.

     Although a writer can be his own publisher and retain 100% of the money, the larger publishers in the music business usually pay substantial advance payments to writers in order to induce them to sign a portion of their publishing rights to the publisher - and this can be a good thing for the writer. Although a deal for a single song may be done with little or no advance payment (provided there is a reversion of the song to the writer if no recording is released within a year or two), there should be a substantial advance paid ($5,000-$100,000+) to a writer for any publishing deal with a longer term (e.g., 3-5 years or more). Moreover, sometimes the length of an agreement is more than just a function of time, it might also be determined based on the number of songs delivered by the writer or, even more difficult to calculate, based on the number of songs that get recorded and released on a major label (something neither the writer nor the publisher may have any control over). 

     Publishing deals have to do with more than just the money though. Since every music publisher is different, it is important for the songwriter to assess both the business and the creative sides of a music publisher before signing any deal. Ultimately, the songwriter is trading a share of something the writer already owns 100% of (the song copyright) so it is important to be mindful of what it is exchanged for by way of services and money.

Wallace Collins is an entertainment and intellectual property lawyer. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com