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Termination Rights: How Artists May be Able to Undo Old Deals and Reclaim Copyrights Mike Matesky November 8, 2012 Copyright © 2012 Christensen O’Connor Johnson Kindness PLLC

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Two Sentence Summary Artists who transferred their copyrights in the late 70s and early 80s are giving notice that they are taking their copyrights back. Such notices may or may not be valid.

Presentation Overview Before the Break: The Legal Background – Copyright Basics – Copyright Ownership & Works Made for Hire – Termination Rights After the Break: Are Sound Recordings Subject to Termination Rights? – The Case Law So Far – Considerations for Artists Getting Paid – Considerations for People Paying Artists

Copyright Basics Exclusive Right to Reproduce Exclusive Right to Prepare Derivative Works Exclusive Right to Distribute Copies Exclusive Right to Publicly Perform* Exclusive Right to Display* Exclusive Right to Perform Publicly by Digital Audio Transmission* * Does not apply to all types of works

Music Copyright Basics Every musical recording involves two copyrights: – Copyright in underlying musical composition – Copyright in particular recording

Copyright Ownership Copyright exists when work is fixed in a tangible medium of expression Ownership of copyright initially vests in the “author” The author is typically the person who creates the work Exceptions: – Joint Works – Works Made For Hire

Joint Works A Joint Work is “a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.” Joint Authors are Joint Owners of Copyright – Tenants in common – Each own an undivided, proportional interest in the copyright

Joint Works Second & Ninth Circuit: Contributors must intend to create a joint work Seventh Circuit: Contributing more than “de minimus” amount to unitary work creates joint work.

Joint Works “With audio recording of a live musical performance, and the making of sound recordings, the performers and the sound engineer/producer, are, absent any special circumstances classic joint authors.” – William Patry

Works Made For Hire Party paying for the work is deemed the “author” and therefore the copyright owner This means the creator never owns the copyright in the work Can apply in two situations: (1) employee, or (2) independent contractor

Work Made For Hire: Employee Creator is an employee; and Creates the work within the scope of employment

Work Made For Hire: Independent Contractor The work is specially commissioned for use as one of nine specifically identified types of works; and The parties sign a written work-made-for-hire agreement

Work Made For Hire Work Made For Hire Categories: – A contribution to a collective work; – Part of a motion picture or other audiovisual work; – A translation; – A supplementary work; – A compilation; – An instructional text; – A test; – Answer material for a test; – An atlas;

What About Sound Recordings? Sound recordings were added to the statutory work-made-for-hire categories, then removed after an artist-led uproar. Congress said neither the explicit addition nor subsequent removal of sound recordings to the work-made-for-hire categories should be used to interpret whether any sound recording can be considered a work-made- fore-hire

Written, Signed Agreement Seventh Circuit: Written agreement must be signed prior to creation of the work Second Circuit: Later written agreement that confirms original work-made-for-hire understanding may be sufficient

Assignment v. Work Made for Hire Even if a work cannot be considered a work made for hire, the party commissioning the work could still require assignment of the copyright That assignment could be subject to termination rights

What are Termination Rights? In the case of any work other than a work made for hire, the grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination.* Termination can occur notwithstanding any agreement to the contrary. *A separate provision deals with terminations of transfers that occurred prior to 1978

When Can Termination Rights be Executed? Termination can occur during a 5-year window beginning 35 years after the transfer (with certain exceptions).

Who Can Exercise Termination Rights? If one author granted the transfer, that author (or that author’s heirs under certain conditions) can terminate the transfer. If two or more authors of a joint work granted the transfer, majority of authors who executed the transfer (or their heirs, subject to certain conditions) can terminate the transfer. Query: if multiple authors each granted separate transfers, do you need a majority of authors to terminate, or can each author terminate their individual transfer?

How Can Termination Rights be Exercised? Notice of termination can be sent between 2 and 10 years prior to termination date. Notice must contain certain information, including the date of termination (which must fall within the 5 year window beginning 35 years after the transfer). A copy of the notice must be recorded in the Copyright Office before the effective date of termination.

So, Then What Happens? All copyright rights under this title that were previously granted revert to the author or authors, including those owners who did not join in signing the notice of termination, but… – A derivative work prepared in the meantime can continue to be utilized; and – Only U.S. copyright rights are affected (other provisions of the grant/contract still in place);

What about Re-Negotiating? After you serve a notice of termination (2 to 10 years prior to termination date), you can enter into a valid, binding grant or agreement to grant further rights. Some authority suggest a revocation and re- grant could also be valid.

So….What? What does all this mean for recording artists and others involved in the creation and distribution of sound recordings?

…We’ll discuss that after the break!

Can Sound Recordings Be Works Made For Hire? There is a very limited amount of legal precedent discussing whether or when sound recordings can be considered works made for hire

Work Made for Hire: Case Law Poindexter v. EMI, No. 11 Civ. 559 (LTS)(JLC) (S.D.N.Y. Mar. 27, 2012). Pro se plaintiff was co-producer of the sound recording, and co-author of composition, of Thin Line Between Love and Hate. Plaintiff sued EMI for using a sample. Plaintiff signed agreement “confirming” the recording would be property of Atlantic, and Atlantic would be author and owner as work-made-for-hire. Court accepted the recording as work made for hire without analyzing the statutory work made for hire categories.

Work Made for Hire: Case Law Greenwich Film v. DRG Records, No. 91 Civ (JSM), 1992 WL (S.D.N.Y. Sept. 25, 1992). Greenwich Film hired a composer to create a film score. Greenwich Film later sued DRG for distributing the soundtrack without permission. DRG argued that Greenwich Film didn’t own the copyright. The court said the soundtrack was commissioned for use in a motion picture, so it could have been a work made for hire, but there was no written agreement signed by the parties. However, the court said that the composer did assign his copyright to Greenwich Film.

Work Made for Hire: Case Law Axcess Broadcasting v. Lulirama, 128 F.3d 872 (5th Cir. 1997). Axcess hired Lulirama to write advertising jingles that Axcess would sell to television and radio clients. Billing statement signed by parties with handwritten notation that works for “for hire” It was not clear which jingles would be for radio, television, or both.

Work Made for Hire: Case Law Axcess Broadcasting v. Lulirama, 128 F.3d 872 (5th Cir. 1997). The court held that it couldn’t determine whether any particular jingle was a work made for hire, because it was not clear if jingles were specially commissioned for use in an audiovisual work (instead of just for radio). The court suggested that, at a minimum, a jingle had to be commissioned at least in part for use in an audiovisual work to meet that standard.

Work Made for Hire: Case Law Ballas v. Tedesco, 41 F. Supp. 2d 531 (D.N.J. 1999). Ballas, a ballroom dancer, hired Tedesco to create a recording. The parties had a falling out and Tedesco later used the recording as part of a larger audio work. Ballas sued, and argued that he owned the copyright in the recording as a work made for hire. The court held the recording was not a work made for hire because it did not fit any statutory work made for hire category, and there was no written work made for hire agreement signed by the parties.

Work Made for Hire: Case Law Staggers v. Real Authentic Sound, 77 F.Supp.2d 57, 63 (D.D.C. 1999). Record label hired a producer, who hired Staggers to write, arrange, and perform music for an album. Staggers later sued the record label for copyright infringement. The record label argued that it owned the copyright in the recording as a work made for hire. The court disagreed, stating that sound recordings don’t fit into any of the “specially commissioned” work made for hire categories.

Work Made for Hire: Case Law Warren v. Fox Family, 328 F.3d 1136 (9th Cir. 2003). Fox hired someone to compose music for the Remington Steele television show The composer later sued Fox for, among other things, copyright infringement The court held that there was a sufficient signed, written work-made-for-hire agreement (even though it was called something else), and the compositions were contributions to an audiovisual work

Termination Rights: Case Law Scorpio Music v. Willis, No. 11-CV BTM (RBB), 2012 WL (S.D. Cal. May 7, 2012) Scorpio and Can’t Stop Music (CSM) hired Victor Willis to write or translate lyrics for several compositions After 1978, Willis assigned his copyright interest in the compositions to CSM by written agreement, in exchange for 12% to 20% in royalties.

Termination Rights: Case Law In January 2011, Willis served a termination notice on CSM Scorpio and CSM filed suit challenging the validity of the termination notice, because Willis was the only author to sign the notice The copyright registrations for the works named several co-authors Willis and the Songwriters Guild of America argued that only Willis needed to sign the termination notice, because he executed a separate transfer of only his own individual interest

Termination Rights: Case Law “The issue before the Court is whether, in a case where joint authors of a work transfer their respective copyright interests through separate agreements, a single author may alone terminate his separate grant of his copyright interest in the joint work or whether a majority of all the authors is necessary to terminate that grant…[T]he Court concludes that a joint author who separately transfers his copyright interest may unilaterally terminate that grant.”

Termination Rights: Case Law Scorpio had originally advanced a work made for hire argument, but abandoned it. The court also noted that there could be further dispute regarding whether Willis gets a 1/3 interest or a ½ interest in the copyrights.

Termination Rights: Case Law Ray Charles Foundation v. Robinson, No. 12-cv-2725 ABC (FFMx) (C.D. Cal.) Warner-Chappel owned copyrights to the Charles works Charles gave his heirs a flat sum as their sole inheritance Charles gave his Foundation the right to receive royalties from Warner-Chappel’s exploitation of the works The Charles heirs served termination notices on Warner- Chappel The Foundation sued the Charles heirs saying the termination notices breached the heirs’ agreement to accept the flat sum as their sole inheritance

Termination Rights: Case Law The court is currently considering the Charles heirs’ motion to dismiss for lack of standing.

Termination Rights: Case Law DC Comics v. Pacific Pictures, CV ODW (RZx) (C.D. Cal. Oct. 17, 2012). – Heirs of Superman authors unable to terminate 1938 transfer, because 1992 agreement already superseded 1938 transfer. Marvel Worldwide v. Kirby, 10 Civ. 141 (CM) (KNF) (S.D.N.Y. Jul 28, 2011). – X-Men and other comic characters were works made for hire under 1909 Copyright Act, such that termination rights did not apply

Considerations For Artists Assignments are better than work made for hire agreements Without a signed writing, it’s not a work made for hire Be skeptical of statements that a work fits a work-made-for- hire category if not accurate If possible, sign a separate agreement transferring your personal interest in the work If someone wants to renegotiate a deal, get some legal advice before doing so If you contributed to a successful work (or you are the heir to someone who contributed to a successful work) around 1980 or earlier, get some legal advice regarding your rights!

Considerations for Commissioning Parties Always get a written, signed work-made-for-hire agreement (before creation of the work, if possible) Always include an assignment clause as well If work is intended to fit a work-made-for-hire agreement, include language to that effect in the agreement Have everyone who participated in the work sign an agreement…preferably the same agreement If renegotiating prior to termination notice period, clarify that new deal is a revocation of the old deal

Mike Matesky Christensen O’Connor Johnson Kindness PLLC