What They'll Never Tell You About the Music Business

by Peter M Thall

  Fair Use

  Be very skeptical concerning what you hear about “fair use”—use of copyrighted material that is not considered infringement. The rules covering fair use are contained in Section 107 of the Copyright Act of 1976, which states:

  The fair use of a copyright work…, for purposes such as criticism, comment, news reporting, teaching scholarship, or research, is not an infringement of copyright. In determining whether the use made of a work in any particular case is a fair use the factors to be considered shall include:

  (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;

  (2) the nature of the copyrighted work;

  (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and

  (4) the effect of the use upon the potential market for or value of the copyrighted work.

  The fair use provisions in the Copyright Act merely create a framework for identifying when and under what conditions copying will be allowed. It does not excuse infringements that fall outside of the guidelines. On the contrary, federal courts are beginning to resent the four-step “test” because they feel it has unreasonably, if unintentionally, boxed them in when reviewing a set of circumstances that does not fall neatly within the four conditions. They are tending now to use the four conditions as guidelines (which indeed they were intended to be in the first place), but not as the “final word” on when an alleged infringement is or is not fair use.

  In considering your rights under the statutory provision regarding fair use, you should note several things: First, as you can imagine, the phrase “shall include” invites a great deal of interpretation in each particular case. Second, even the most highly respected copyright law experts cannot tell you in any particular case what a court might conclude in applying the provisions of Section 107 to that case. Third, as a rule of thumb, if you are thinking of using a copyrighted work for what you think is a good cause and according to what you think should be permitted under this section, if there is any commercial gain whatsoever to you or to the people to whom you are thinking of offering your services, the odds are that the use will be prohibited and all of the hefty infringement remedies of the Copyright Act will come bearing down. And, as I noted previously, there is nothing that says it is okay to “borrow” a limited number of notes or bars from a musical composition.

  Similarly, recent cases have suggested that unless your creation “transforms” the one you are “borrowing” from, it will not constitute fair use. What is transformation? Legal pundits call it a Humpty Dumpty word. It means what a judge says it means. Basically, it means changing the original, borrowed, work into a new mode of being. This kind of change is not likely in a song context unless the new work is a parody—that is, a lampoon or a spoof.

  Do note, however, that whatever fair use is, its scope is narrowest with respect to unpublished works. While you can get away with infringing a work generally available to the public, as long as you fit within the guidelines mentioned above, or some version of them, fooling around with a work that is not intended (yet) for public dissemination is just asking for trouble.

  For those of you who are interested in taking existing works and parodying them, yet another word of caution is advised. Parody, briefly, simply mimics an original, and to the extent that its intention and execution are clear, parody can survive a claim of infringement. Satire, however, is a different story. Satire is parody that lampoons society itself. Satire can stand on its own two feet and is considered to be as original as a nonsatirical creation. Courts have tended to categorize satire as “direct” or “indirect.” Directly, satirical parody is not fair use; indirectly, satirical parody is. These distinctions may aid a court in reaching the conclusion it believes is just given the particular circumstances of each case—but it surely confuses the rest of us. While judges have recently resisted having a knee-jerk reaction to a property owner’s will, this is an area fraught with uncertainty, and an attorney’s guidance might be called for. (Note that even an attorney might not want to speculate on what a court would say about a particular work of parody or satire.)

  Finally, if you are thinking of copying someone else’s work and are prepared to argue a defense of fair use, do not think that setting up a corporation will protect you. Under the Copyright Act, the officers of a corporation that commits the infringement cannot hide behind the corporate protection of limited liability. The officers of the corporation are as culpable as the corporation itself.

  SAMPLING

  Sampling is the practice of capturing sounds from a previously recorded and released recording and incorporating them into a new recording. Sampling is subject to the same infringement criteria as any kind of borrowing. When technological advances put sampling within the reach of even novice record producers, many thought that this kind of copying was of no particular significance—that using a loop from an old song was even a compliment to the original songwriter or songwriter–recording artist. Then one day, a federal district court judge in New York was asked to look into a situation of “sampling” from the point of view of the person whose song was “borrowed.” Was it fair use? In the first sampling case, which was decided in 1991, Judge Kevin Duffy, a highly regarded federal judge whose understanding and perceptions of the copyright law are legendary, needed only five words to answer that question for all time: “Looks like stealing to me.” And that was that. Sampling is not fair use. It is theft.

  But what if the use is de minimus (of no particular significance)? What if the public would not recognize the appropriation? Is a three-second use de minimus? Don’t bet on it. (A favorite excuse used by law school students who empty out their roommates’ beer supply is de minimum non curat lex: the law does not concern itself with trifles. But use this justification for sampling another person’s creation and you do so at great risk.)

  Is recognition of the appropriation essential to constitute actionable infringement? What if the material sampled cannot be scored? What if it is simply a combination of sounds that an artist had produced? The Atlantic Records recording agreement, in the grant-of-rights paragraph, says, “Company has the exclusive and unlimited right to own, control and exploit Artist’s services as a recording artist and to all the results and proceeds of such services.” Is reggae spoken rather than sung? Is the voice rhythmic? To what extent can you sample the rhythm without fear of a lawsuit?

  Can a doorbell ring from a film be sampled with impunity? What about a police siren from a television program?

  Sampling is not limited to audio. An example of both at once is the sampling of a portion of a motion picture: Not only are the motion picture company’s rights being compromised, but those of the actors as well. Sampling a moment, or a phrase, from Casablanca would pit the sampler against not only Warner Bros. Pictures, but against the estates of Humphrey Bogart and Ingrid Bergman as well. Let alone Sydney Greenstreet, Claude Rains, or Peter Lorre. If you think the George Clintons, the Average White Bands, and other musicians whose music is frequently sampled are insistent on pursuing their rights under the copyright law, wait until you meet the heirs of Paul Henreid and Conrad Veidt!

  Fair Use Turned on Its Head

  Once again the Ninth Circuit, known for its “imaginative” rulings (and disdained by many for them) has come up with a theory that defies past views of a copyright owner’s right to stop others from infringing their works. In 2015, in a case involving a twenty-nine second video clip of a toddler dancing to the 1984 Prince hit “Let’s Go Crazy” (that came to be known as “Dancing Baby”), the copyright owner was reprimanded for not considering the possibility that the use of its song fulfilled the statutory and judicial requirements of fair use. Instead of looking at fair use as simply an affirmative defense of what would be technically considered an infringement, the court supported arguments by Google, Twitter, and Tumblr that the copyright owner should itself have the burden o
f establishing that at a minimum, it “considered” that the claimed infringing action might have been a fair use before issuing takedown notices to the ISPs presenting the clip. This view of a copyright owner’s responsibility to the public is appearing in other areas in recent years, not the least of which is in the area of music licensing discussed in chapter 21, this page.

  Not to Worry; They’ll Never Find Out

  A client of mine once performed a song live (with an appropriate ASCAP license) at a rehearsal for a television special when something went awry and news photographers and television cameramen who were present for PR reasons, recorded the problematic moment. The live show was about an hour in length; the problematic moment was over in thirty seconds. The producers reshot the scene. The copyright owner of the song that was performed, an Italian music publisher, had declined a request for a television synchronization license. So the performance of the song was replaced with another for the upcoming television special and all was well in copyright land. But the copyright owner found out about the live performance and, wrongly, presumed that the song was being used on the television program. She threatened to bring a willfull copyright infringement lawsuit, hired Wall Street litigators, and was riding a very high horse of self-righteousness when I contacted her, explained that the song was performed only live, with an ASCAP license, and was not to be included in the television program. She backed off with an apology. I then asked, “By the way, how did you know the song was performed? The set was closed and you were in Europe.” She answered with a response that I shall forever remember and repeat to any of my clients who use anothers’ property without permission and who assert that “they will never find out.” She said that she was in Austria, on holiday, with her two children. They had just come back from skiing. She was making fondue in the kitchen while she sat her sons in front of the television to watch CNN so that their English would improve. Suddenly she overheard her song on the TV. She ran into the living room and saw the film of the moment that I described earlier when something went awry at the live show—the clip lasted no more than four seconds. And whose music was playing behind the video at that one moment in the one-hour show that was never actually televised? Hers! The press which had attended the live show had filmed the scene and filed a clip with their news services. What were the odds on that happening? You never know—except that we do know: They’ll Always Find Out.

  Infringement Insurance

  I do not know of a successful artist who has not faced a claim of copyright infringement. From George Harrison to Paul Simon, it is just one more risk of being in the music business—and a costly one at that. But writers can obtain insurance against infringement. That’s right. There is a certain logic to this in view of the fact that unintentional and unconscious acts are as actionable as intentional and conscious ones. (So-called “willful” acts—usually infringements after warnings are communicated to the eventual defendant—will, however, usually incur higher damages. But willful acts are not usually the result of plagiarism but of the other kind of infringements noted at the beginning of this chapter—recording or performing another’s song without permission.) This insurance, which is known as errors and omissions (E&O) insurance covers “honest” mistakes. It is fairly expensive, but definitely worth considering.

  Sometimes the administrating publisher will agree to share in the cost or add the writer to its own E&O policy (another reason to engage a publisher). Most of the standard E&O policies are issued by insurance companies in the ordinary course of business to protect against an occasional lapse in the due diligence process in producing television programs or motion pictures, and do not really fit the need here. I advise my clients as a matter of course to obtain plagiarism insurance, which has come in handy more often than you can imagine. Instead of simply signing off on a standard form of E&O policy, however, the artist-songwriter’s lawyer and business manager should read the document, consider the wording carefully, and, if necessary, rewrite it where appropriate to fit the need it is supposed to serve.

  Specifically, the “covered acts” are not defined specifically enough to meet the needs of the songwriter or artist-songwriter, so the traditional E&O language is obsolete when it comes to the kind of coverage songwriters need. Exposure to liability is couched in terms of “products” instead of songs, and some policies actually exclude intellectual property such as copyrights. In that case, all the money spent on premiums has been spent on insuring against the wrong kind of injuries. Coverage should extend not just to recorded songs, but to all creations that are musical compositions, or parts of musical compositions, which the creator can prove existed as of a certain date and time. This can be accomplished via computer-dated demo recordings or copyright registrations or even by mailing tapes to oneself by registered mail, return receipt requested, with the title(s) of the work(s) on the front of the envelope. Rather than mount a full-bodied assault on the contract language, which will be strenuously resisted by the insurance agent and company, it may be sufficient to modify a standard E&O policy binder by simply expanding the definition of covered products.

  THE IMPACT OF THE INTERNET ON RECORDING AND PUBLISHING AGREEMENTS

  Now that we have dealt with the awesome power afforded copyright owners under US copyright law, let’s consider contemporary copyright issues that have been thrust into the collective consciousness of the music fraternity since the advent of digitization and the Internet. There are battles going on between those who are for the strongest possible copyright protections, no matter what the medium, and various anticopyright troops. Who wins these battles will impact not only the creative and business elements of the music business, but, in economic and cultural terms, our very civilization.

  Technical solutions to distributing music via the Internet have been found. iTunes, Tidal, GooglePlay, Rhapsody, Microsoft, and Slacker for example, as well as numerous other portals offering authorized recorded music, are currently in operation, as are Spotify and Pandora, which serve different purposes but are steadily having a negative effect on download services. Now it is in the hands of the music rights owners to find a way to put them to effective e-commerce use. One of the reasons the “old” Napster and its progeny, Grokster and Morpheus, were so popular is that there is obviously a great demand for one-source and one-stop shopping. Apple, Microsoft, Google, and now Sony and others have now figured out how to supply that demand in a cost-effective and efficient way.

  There are numerous implications of the total absence of a standard with respect to how and to what extent the digital download is dealt with in recording and music publishing agreements: We have discussed royalty escalations and net sales in chapter 4. In addition, there is considerable indecision with respect to this most important consideration: the location of the download. Depending on where the act of use takes place, different rules and laws may apply and different parties will claim an interest in licensing (or refusing to license) the use and collecting the money generated by the use.

  Digital downloads occur somewhere. We are not always sure where, but the location of the content provider seems to be the location of choice. Of course, private agreement may not survive legislation in the many parts of the world that are beginning to discover that they are themselves “players” in the international entertainment complex. (For example, if the United States or other countries eventually tax downloads, why not place one’s server in Guyana, where the tax may be less or nonexistent?) The European Union is already recommending a sales tax on all online purchases. The United States is resisting it.

  Some lawyers have thrown up their hands in the course of negotiating recording and publishing agreements precisely due to the fact that there are no standards—let alone global standards—established for determining where a digital transfer to a user occurs. Ordinarily, when negotiators either compromise on a point, or decide it is not worth arguing, they understand the implications of what they are doing. In this case, however, no one can even imagine the consequence
s of failing to get it right, and no one even knows what getting it right means.

  Where indecision abounds, rather than try to solve the issue with the record company’s lawyers, the artist’s lawyer or manager, in understandable frustration, will often view all things that are not negotiable, or not immediately capable of solution, in terms of money. Increase the advance and we’ll drop the subject, they will say. But in the end, the artist will indeed pay for the lack of precision in the negotiation and for the lack of clarity in achieving an understanding as to where a digital download occurs. Writers and publishers will also suffer as a result of this lack of precision.