There is a lot of talk about copyright termination rights of late, as the earliest opportunity for post-1978 copyright grants is coming up in 2013. Bruce Springsteen’s Darkness on the Edge of Town,” Billy Joel’s “52nd Street,” and Kenny Rogers’s “Gambler” were all released in 1978. Next year, artists like these will be eligible to reclaim ownership of their 1978-released recordings – and the revenue they will generate.
The Copyright Act of 1976 (which went into effect January 1, 1978) gives certain rights to authors (or heirs as the case may be) to terminate the grants of transfers of licenses. The termination right is inalienable and most contract provisions purporting to waive these rights in advance are unenforceable. The Act provides a window of time within which a notice of termination must be served upon the grantee of the copyright rights in order to the start the process. It is important that the termination notice meet all statutory requirements, as Courts have denied termination rights in cases where the notices were defective.
The 1976 Act was enacted to provide a “second bite at the apple” for creative endeavors that became commercially lucrative, but the author or artist did not benefit from the work because the value was not fully known at the time the rights were granted. The goal was to protect artists who received a small compensation for what later became a hit with lucrative residual royalties. This can be especially important in the current landscape where technology has added commercial markets that did not exist at the time of the original contract. For example, the internet has opened up the music market in in ways unforeseen when the copyrights to songs were first granted exclusive license to record labels. The Act allows artists a second chance on benefiting from their intellectual property. And in the late 1970s or ‘80s, who would have contemplated downloadable music libraries, e-books, or Netflix?
These advances in technology play an important role in this issue. For example, unauthorized downloading of music on the internet has caused sales to plummet, especially for new releases. This has left record labels more dependent on sales of older recordings. With termination approaching, these companies will receive yet another financial blow. With so much on the line record companies are desperate to rule out application of the termination rights, contending that the artists, songwriters, etc. produce works-for-hire and are essentially employees. Consequently, they argue that all work produced is property of the record company as their employer. This is a weak defense, as the working conditions of most of these artists fail to meet any of the other conditions to qualify them as employees, such as place of work, paying payroll taxes, and Social Security payments. That the companies are grasping at straws points to how important it is to them to retain the copyrights.
While type of employment seems obvious, there are some major uncertainties that the legislation fails to address. For example, the definition of an “author” is somewhat unclear, particularly whether or not it includes record producers, session musicians, and studio engineers, who are all important components to bringing a song to life to be released to the public. Their inclusion would entitle them to a share of the rights after termination. And what about American recordings by foreign bands? British bands like Led Zeppelin and Pink Floyd signed their contracts in Britain but produced songs in the US. How does the law apply in cases like this? It will be interesting to see how these less-talked-about issues play out.
I anticipate that even though termination rights start next year, we are going to see these issues caught up in litigation, which will postpone the anticipated gains that these authors and their heirs are expecting.