What They'll Never Tell You About the Music Business

by Peter M Thall

  WHEN AUTOMATIC RENEWAL APPLIES

  In 1992, Congress passed a law that provided that any works first copyrighted between January 1, 1964, and December 31, 1977, need not be renewed formally; the renewal (for, by then, a renewal term of forty-seven years) would be automatic. (This benefit would not have applied to “Pretzel” because its renewal date preceded the new law.) Since 1998, when the twenty-year extension was passed, the renewal term of sixty-seven years (that is, twenty-eight years plus thirty-nine years) would be automatic. By 2006, this issue became moot because any copyright first published with notice or registered under the 1909 law before January 1, 1978, advanced into its sixty-seven-year renewal term (twenty-eight plus nineteen plus twenty) renewal term prior to January 1, 2006. For example, the initial term of a copyright registered on January 31, 1977 would have expired on December 31, 2005. Its renewal term would have commenced on that date. Any copyright coming into existence after December 31, 1977 would be governed by the new law whose term now extends to the life of the author plus seventy years.

  THE SONNY BONO TERM EXTENSION ACT

  What happens if you forgot or chose not to terminate the nineteen-year extension to an original fifty-six-year copyright term? Do you lose the chance to terminate the new twenty-year extension as well? Not necessarily.

  For example, suppose that a copyright was in its renewal term on October 28, 1998, the date the twenty-year extension law took effect, but that the person or persons with a termination right had not exercised it by that date with respect to the nineteen-year extension, and it was too late to exercise it. In that case, the termination right could still be exercised with respect to the additional twenty years. (for example, a work copyrighted on or before October 28, 1939). The termination process exercised with respect to that extension is the same with respect to the seventy-fifth year as it is with respect to the fifty-sixth year. The time windows within which the right could be exercised, as described above, would still apply.

  KEEPING RECORDS

  All copyright owners whose works were created prior to January 1, 1978, should, for each work, make a schedule that notes all relevant dates and extension periods, as follows:

  Remember, all copyrights originally secured between January 1, 1923, and December 31, 1977, are now in their renewal period, at the end of which the copyrights will enter the public domain. Except in the special case described in the Sonny Bono Term Extension Act above, it is not useful to identify which portion of the renewal period the copyright is in (that is, the first twenty-eight-year renewal period, the nineteen-year extension, or the twenty-year extension). It simply doesn’t matter. Copyrights registered after December 31, 1922, and properly renewed, are still in their renewal period. Copyrights coming into effect (that is, works created) after December 31, 1977, have no renewal period. Their copyright terms are simply the life of the author plus seventy years.

  THE TECHNICAL REQUIREMENTS FOR TERMINATION

  To terminate copyrights under Section 304(c) of the Copyright Act of 1978, notice must be given to (served on) the copyright owner to whom the rights were transferred, and these notices must be recorded in the Copyright Office pursuant to regulations published by that office.

  Section 304 (c)(4) lists the specific notice requirements for a termination to be effective. One important issue not addressed by the copyright statute is how to find out where the notices of termination must be sent. Many music publishers no longer exist in their original form. Is a notice to Harms, Inc., sufficient to terminate the copyright now owned by Warner/Chappell? And vice versa? To what address should the notices be sent? What is the effect of notices that are returned by the post office? Is the terminating party required to secure a Copyright Office search report in order to find out the “official” owner of record of each individual copyright?

  A full Copyright Office search can cost several thousand dollars. The Copyright Office bases its charges on hourly rates, so any cost estimate you or your representatives are given will be just that—an estimate. Many old-timers were members of the Songwriter’s Guild, which continues to maintain a fairly accurate up-to-date list of copyrights created by their members, and the Guild’s list is often enough to identify the current owner. Regrettably, without patching together information via databases such as those of ASCAP or BMI, perhaps the Harry Fox Agency, and maybe even foreign societies’ records (less likely), there is simply no place other than the Copyright Office to which one can turn to search efficiently for the needed information.

  Agreements Not to Terminate May Be Invalid Of course, you can make an agreement not to exercise the termination right, but if the party you make that agreement with is not the current renewal rights holder, the grant will be invalid. Therefore, any money you received for the invalid grant would have to be returned…if you still have it. You can also serve the applicable termination notices and then make a contingent transfer effective after the termination actually occurs.

  —

  Suffice it to say that most scholars feel that the termination right is simply not waivable—for any amount of money. In fact, Section 304 (c) provides that termination of a grant is still effective even if an agreement to the contrary is entered into, including an agreement to make a will or to make any further grant.

  Another issue that has reared its head only in the past few years due to the proliferation of samples involves the question of what happens when a sample makes its way into a new copyright. What happens to the underlying, original song used in the new work? The transfer relating to the original work can surely be terminated, but what about the new work? Can the termination pull the rug out from under the new work and render it useless? Is the new work a derivative work such as a movie with a soundtrack where Congress specifically denied termination rights to songs not to mess with the other contributors?

  As should be abundantly clear from the preceding text, the subject of termination rights is enormously complicated, and many issues will be resolved only through litigation or legislation in the future. It is beyond the scope of this chapter to deal with these issues, so I will refer the reader to his or her own attorney for guidance in effectuating the authors’ or heirs’ intentions in this regard.

  The Gap This one is a doozy. The problem some people describe as “the straddling work” transfer arises when a contract entered into during the pre-1978 period refers to songs or recordings not yet created, and indeed not created until after 1977. Are the copyrights in these works terminable under the provisions of Section 203 or 304 (c). One permits termination after thirty-five years and the other after fifty-six years. The preconditions of termination differ under each section and the parties permitted to terminate differ as well. The Copyright Office and Congress have not yet resolved this dilemma which has inserted such uncertainty in commerce that deals have fallen through because potential buyers have no clue who the termination class is comprised of. The Copyright Office is endeavoring to determine if the date of the grant of rights in a non work-for-hire occurs on the date of the contract signing or upon the creation of the work. Say that in 1978, a songwriter signed an exclusive term contract for existing songs and songs not yet written. When does the thirty-five years run for each song? From the date of the contract even though some songs did not even exist at that time? When did the “transfer” occur? Here’s another one: what if their contract was signed in 1977 before the new law, with the thirty-five-year termination right, took effect? Some of the songs would be ruled by the 1909 law and others by the 1976 law (which took effect in 1978). Or would all songs be ruled by the 1909 law because the contract was signed before the new law took effect?

  Stay tuned as this is merely one of dozens of issues still to be resolved and probably litigated in the future, especially after 2013—or, hopefully, legislation will resolve the ambiguities in the law. As should be abundantly clear from the preceding text, the subject of termination is enormously complicated.

  No, when I speak of the Gap, I don’t me
an the clothing store. In copyright circles, there is only one gap: the mysterious status of copyrights that fall within the proverbial cracks. Let’s say you signed an exclusive songwriting or an exclusive recording contract in 1975—before the Copyright Act of 1976 took effect in January 1978. The first set of songs you delivered or the first album you delivered (let’s say in 1977) was clearly covered by the 1909 Copyright Act. Under that law, there existed no termination rights affecting these songs, or recordings. (The 1976 act granted a limited right of termination to these transfers [Section 304], but only after fifty-six years had passed, in order to give the author a chance to recapture his works before the nineteen-year extension took effect [now thirty-nine years]).

  If you signed an exclusive songwriting or an exclusive recording contract in 1979, and delivered your first set of songs or first album in 1980, clearly the termination provision (Section 203) of the new copyright law would apply to the transfers made in 1979.

  But what if you signed the first long-term agreement in 1975 affecting five years’ of your songs or sound recordings, and you didn’t deliver your second set of songs, or album, until 1979. Are those copyrights terminable under Section 304? Section 203? No one knows. Therein lies the gap.

  Some attorneys, faced with this dilemma, take the safe road and advise clients that unless there was a separate grant of rights occurring after 1977, only the fifty-six-year termination right applies (Section 304) under the current law. Period. Of course, a copyright cannot preexist the creation of a work. And the language of termination under the fifty-six-year provision speaks in terms of “renewal copyrights” which do not exist under the law containing the thirty-five-year provision. So the preponderance of the academic thinking is that a work created after January 1, 1977 can be terminated after thirty-five years, not fifty-six years, and that the termination class is defined under the thirty-five-year provision. Nevertheless, this is something that will not be clear until Congress fixes the problem it created.

  The Copyright Office cannot resolve the dilemma on its own; it will require legislation which, if passed, will raise its own set of problems if it is not carefully drafted. For example, will it matter if the songs delivered prior to 1978 were published or not published (an important consideration under the 1909 act)? if the songs delivered afterward did not arrive in the publisher’s (or record company’s) hands until years later? if there was any correspondence between the author (writer or recording artist) and the publisher/record label after 1977 that might constitute an actual “transfer?” This set of facts would make the issue moot as the transfer will clearly have taken place under the new law, even though the exclusive songwriting or recording agreement was entered into before 1978. What if the songwriter delivered a “splits sheet” after 1977 for the songs being delivered? Could this constitute a transfer after 1977? What if the song or the recording was created before 1978, although delivered afterward? What if the song or the recording was created after 1978, which is more likely the case?

  Copyrights vest under the current law upon creation. If it can be established that the songs or recordings were created before 1978, the songwriter or recording artist would take the position that the copyrights to them were not actually registered as such until after 1977; whereas songs or recordings written after 1977 would instantaneously be covered by copyright upon creation, thereby identifying them for all time as being affected only by the new law—yet the transfer of rights would have occurred before 1978.

  One final scenario to explode an already almost impossible problem to solve: What if there are multiple authors and they cannot agree on which provision covers termination (because the termination class is comprised of distinctly different people)? Who is going to resolve this self-made dilemma?

  A further complication would occur if there are multiple authors whose contractual relationships with publishers or record companies differ. One may have signed an agreement in 1977, although he or she may have delivered the songs in 1979; another may not have signed an agreement in 1977 at all, but owned her own publishing or recording rights; creation and “fixing” the songs or recordings after 1977, and assigning them to her own publishing company pursuant to an agreement entered into prior to 1977 would create yet new problems. If the author sells the company one day, can she terminate her own transfer to what had been her own company? And joint authorship raises its own set of rights which can trump the issues just discussed.

  Some dilemma.

  Without prognosticating too much, I think that the weight of the arguments dealing with the gap issue is in favor of having the termination provision affecting post-1977 works to apply. Even though the transfer document may have been entered into pre-1978, in most cases, the copyrights were created post-1977 and therefore were subject to section 203, which allows termination after thirty-five years following the transfer. Section 304, which required fifty-six years to pass before termination, has sufficient language (for example, renewal language that only applies to works created under the 1909 law) that reinforces the argument that the old law could not possibly apply to these post-1977 works. I think, therefore, that the issue will be resolved—possibly through legislation—in favor of the argument that Section 203 applies to these works. The date of termination would be thirty-five years after the actual date of creation. It would probably be that date that would effectively constitute the moment the transfer of rights occurred. I use the word “probably” because dates of creation are not always discernible, but absent clearer language in the statute, there really is no other date which could constitute the moment of transfer. The fact that identifying the date of creation is difficult is not dissimilar to the difficulty of identifying the date of an oral transfer of a nonexclusive license, which clearly is subject to termination. So the framers of the legislation did not seem to be troubled by the difficulty in assessing a precise date as opposed to something simple, like the date a contract is signed, where the date is usually embedded right on the first page.

  It is only logical to interpret the statute to mean that the transfer of rights to the publisher or record company could not possibly occur until the works were actually created, not before. How could one be an author, in whom the statute establishes the right to terminate a grant, until he actually has authored something? Jane Ginsburg, esteemed Columbia Law professor, and the daughter of Supreme Court Justice Ruth Bader Ginsburg, supports this position by pointing out the seemingly uncontrovertible logic that no copyright could preexist the creation of a work. Furthermore, she points out that the thirty-five-year time clock begins to run after the transfer has been “executed,” and she argues quite convincingly that execution can only occur once the work is created. Executed, in her interpretation, does not mean “signed.” Therefore, the statute in her mind is absolutely clear. There is no gap!

  This issue has vast financial consequences, so I would expect that it will not be long before it is finally resolved one way or the other. The consequences of each of the two choices are so different that you can expect lots of lobbying and arguing before this occurs.

  21 • COMPLIANCE WITH COPYRIGHT LAWS

  Hints for the Corporate Counsel

  Corporations cannot commit treason, nor be outlawed, nor be excommunicated, for they have no souls.

  But they can be sued for copyright infringement.

  —ME, AFTER EDWARD COKE

  Most corporations, their management, and their corporate counsels have never needed to comprehend or to process music rights. Certainly some companies, both large and small, have crossed paths with performing rights societies when they have utilized music on their telephone “hold” buttons, or when they have used music in a fairly sophisticated manner at store openings, at retirement or holiday parties, or in break rooms via television broadcasts, etc. But few of these companies had any idea what they would be getting into when they took their trademarks and products into cyberspace.

  Some of what I am about to discuss is mentioned in other c
hapters. However, for those who may selectively choose chapters to read and, in particular, for those who counsel corporations (whether as in-house counsel or as outside counsel) and may not be as interested in some of the other portions of this book, a brief review of the legal underpinnings of music copyright is in order, highlighting what facts must be reckoned with and what myths need to be debunked.