Tuesday, April 28, 2009

Sound Recordings: Termination of Assignments and Works Made For Hire

Attorney Wallace Collins wrote a great opinion piece in a recent issue of Billboard about the looming effect of Section 203 of the Copyright Act. This “obscure” section of the law recognizes an author’s right to terminate an assignment of copyright 35 years after the initial grant. The reason that it has been obscure up until now is that it won’t have an effect until 2013. The 1976 Copyright Act did not become law until January 1, 1978. Of course songwriters have been exploring termination issues with respect to old copyrights under the revised Section 204 (which applies to grants of copyright completed prior to January 1, 1978) for some time now.

The termination of assignments with respect to music publishing agreements will no doubt be handled in a fairly straight-forward manner, again, because publishers are used to creating fairly sophisticated arrangements with respect to the termination of pre-1978 copyrights. What promises to be more complex is the application of Section 203 to sound recordings. Anyone who has ever read a major label recording agreement (or a recording agreement modeled on a major label agreement) will recall that there is language in the agreement that states that every recording created under the agreement shall be deemed a “work made for hire.” Most people seem to know that a work made for hire is a work in which the “employer” is deemed to be the author of the work for copyright purposes and the original author has no right to ever terminate the assignment of the work. However, it is less well known that under the copyright act, the “work made for hire” doctrine applies to a limited number of works, and sound recordings are not part of this group. (Although for a brief period of time about a decade ago the recording industry managed to amend the Copyright Act to include sound recordings under this definition.) In other words, presumably, just because a record contract says that masters created under the deal are deemed works made for hire, this does not make it so.

The somewhat uncomfortable part is that none of this has been tested in Court yet, and won’t be tested for several years.

Section 203 provides that the author shall send a Notice of Termination “at any time during a period of five years beginning at the end of thirty-five years from the date of execution of the grant; or, if the grant covers the right of publication of the work, the period begins at the end of thirty-five years from the date of publication of the work under the grant or at the end of forty years from the date of execution of the grant, whichever term ends earlier.”

All of this seems extremely civilized, and as stated above, there is some precedent for this under the industry custom with respect to copyright in musical compositions. However, it is unclear how the record companies will react given their stated position that master recordings are works made for hire.

It is also unclear how the concept of derivative works and joint authorship will apply. For example, producers might begin to assert an authorship right in the sound recording at issue. Also, as many commentators have noted, U.S. law will not apply to exploitation of the recording outside of the United States.

Nobody really knows how this will all play out, but it will be an interesting time to practice law in the music business.

Thursday, April 23, 2009

Madoff and Music City

I recently heard about a songwriter who lost his publishing deal because his publisher had run into financial difficulties; he had invested money with Bernie Madoff. I don’t know why I was surprised to learn that the Madoff affair had repercussions in Music City.

This reminded me that a decade or more ago, there was a well-known business manager/financial advisor in Nashville whose practice seemed to straddle the music industry and other “legitimate” professions. This gentleman had a guru like reputation for being both an astute investor and for helping people learn to budget their finances responsibly. Many of my friends and clients worked with him. I met with him once and he offered to work with me. I declined for a number of reasons. Mainly, I think I was self conscious about my own financial status and I didn’t want a third party who worked with many of my clients to know how irresponsible I was (at least that was my perception). However, I also had a lingering uneasiness: I just didn’t know how people with average incomes could budget and invest in such a way that over a relatively short period of time they could become wealthy. This uneasiness always veered between a lawyer’s healthy skepticism and the feeling that I just wasn’t sophisticated enough to understand the financial model. (I had a similar feeling when I took and dropped Economics in college). I have had the same feeling trying to figure out everything from various business plans during the dot com boom, to mortgage backed securities to Bowie Bonds.

It turned out that the Nashville money manager was playing fast and loose with his client’s money and his whole organization eventually fell like a house of cards, just like Madoff but with a little less drama.

I don’t know the moral here. I do spend a lot of time thinking about human emotions, finances and greed. I read once that David Byrne was trying to write a song about economics…maybe he should write it as a country song.

Wednesday, April 22, 2009

Universal and You Tube Join Forces

The Wall Street Journal (which for some reason has become the best source for music business news) reported a few weeks ago that Universal music group and Google have reached an agreement that will allow Universal video content to be broadcast on You Tube and on a new stand alone site called Vevo, in return for a split of Google’s ad revenues.

This is genius and points the way that the music industry should be heading, a recognition of not only the ubiquitousness of technology but also of a shared interest. It also means that, in contrast to my own smug incorrect appraisal, the music video is not dead….far from it. The audience has simply moved away from cable television (why did MTV and VH1 stop playing videos? I can’t remember) and on to the internet with everyone else. All I had to do to confirm this was to observe my daughter watching Rihanna videos on You Tube with the same obsession that I had when I discovered that you could find old Small Faces and Stones videos on there.

Google is certainly the most interesting paradigm shifter- from its audacious Google library project to the ongoing litigation with Viacom, there is no end to its impact on our contemporary culture and our evolving understanding of the nature of intellectual property rights. This new model also shows how it might help save record companies in the same way that Apple did, by overcoming perceived obstacles, then defining and properly exploiting a shared interest.