Music Industry Braces For Copyright Termination - LAUREN MACK, 3L - IPLS Copyright Chair

On September 22, 2011, Cardozo Law School and the Intellectual Property Alumni Group co-sponsored an event entitled “Termination of Copyright Transfers and Licenses.” Joseph Peterson, partner at Kilkpatrick Townsend & Stockton LLP, spoke first by explaining the details of the termination right included in the 1976 Copyright Act. Section 304(c) of the Act allows a copyright owner to terminate licenses or transfers made prior to 1978 fifty-six years after the grant. Licenses and transfers made during and after 1978 are governed by Section 203 and may be terminated thirty-five years after the grant is made, meaning that assignments made in 1978 can be terminated in 2013 if the author gives notice at the earliest possible date. The upcoming 2013 terminations have been receiving quite a bit of press lately, partially thanks to a lawsuit filed by the writers of the “Y.M.C.A.,” but Keenan Popwell, director and counsel of business affairs for SESAC and second speaker of the night, pointed out that this is not a new phenomenon and that music publishers have been quietly handling author terminations of rights in musical compositions assigned before 1978 for years. To terminate an assignment or a license, the notice provisions of the applicable statute must be carefully followed and a majority of the creators or their heirs must agree to terminate. This means that if there are two authors, both must agree to terminate, but for works with three authors, only two need to agree. Termination rights are not waivable because the right protects authors with little bargaining power early in their careers. Assignments of copyrights are often made before the work has been exploited, so this “second bite at the apple” allows artists to recapture some profits either by reassigning the copyrights or exploiting the works themselves. An author who creates a work made for hire does not have a termination right because works for hire are not transferred or licensed, but rather manifest in the hirer. A copyrightable work can become a work for hire in one of two ways. It must either be “prepared by an employee within the scope of his or her employment” or the parties can agree in writing that a work “specially ordered or commissioned” will be considered a work for hire. This portion of the Copyright Act has not escaped the notice of the music industry. Recording agreements typically include language stating that any sound recordings made under the agreement are works for hire, and in the event that they are not deemed works for hire, the artist assigns the rights to the sound recordings to the label in perpetuity. So why might this provision fail to solve the copyright termination problem for record labels? Because sound recordings are not listed as a type of work specially ordered or commissioned in the statutory definition of a work for hire, making it unclear whether sound recordings can be considered works for hire absent an employment relationship. But sound recordings were not always missing from that list. Peterson noted that they were briefly included when a technical amendment to the Copyright Act was passed in 1999. Since technical amendments are only supposed to make nonmaterial changes, there was quite the uproar from the musical community after word got out that a House staffer had slipped “sound recordings” into the work for hire definition just before the amendment was passed, causing Congress to later delete the addition and instruct judges to ignore the change. With the ability to contractually render a sound recording a work made for hire, the event moderator suggested that perhaps record labels should go the other route and employ artists to ensure that all works created within the scope of that employment would belong to the label for the full life of the copyright. While an interesting idea, this solution is likely to cause more problems than it solves. With employment comes liability, since employees have the ability to sue for wrongful termination and discrimination, while independent contractors are less protected. Beyond the inevitable lawsuits, benefits and taxes, paying musical artists a salary remains a losing proposition. A popular saying in the music industry is that seven out of ten records fail, two break even, and one turns a profit. At this success rate, paying all ten of those acts enough to live on in order to retain the full rights to their future sound recordings would be an unsustainable business model.