Copyright Terminations: What Rights Holders Must Know [Erin M. Jacobson]
With copyright terminations in the offing as a result of statutory terminations, there are plenty of authors and heirs out there hoping they can recapture their copyrights, but current rightsholders need to be just as informed as others if they hope to stay competitive in a challenging landscape.
The window is open for authors and heirs to recapture ownership of their copyrights. Terminations create a lot of new movement for copyrights in the marketplace and music rights' owners need to be just as knowledgeable as authors and heirs in order to stay competitive.
Statutory terminations come with many complexities, but the basics are as follows:
In the United States, termination of a grant can be effected during a five year period: (1) Beginning 56 years after the original copyright date of the work for grants made before January 1, 1978; or (2) Beginning 35 years after the date of the grant for grants executed on or after January 1, 1978.*
Both of these categories of termination require that proper notice be sent anywhere between ten and two years before the effective date of termination and notices must also follow strict requirements. Works for hire and grants by will are not terminable and terminations under U.S. copyright law only apply to U.S. rights.
Outside of the U.S., there are some other countries that have their own rules regarding terminations, most notably, the British Commonwealth countries. British Reversionary Rights are generally uniform throughout the Commonwealth, but vary slightly per country and must be assessed on a case-by-case basis. Other countries do not have any termination rights included in their copyright laws.
“Information on the recapture of music rights usually refers to composition rights only, as whether master recordings rights can be recaptured is the subject of an ongoing debate in the U.S. that will only be solved by litigation or a change in copyright law.”
Information on the recapture of music rights usually refers to composition rights only, as whether master recordings rights can be recaptured is the subject of an ongoing debate in the U.S. that will only be solved by litigation or a change in copyright law. The issue here is that, as stated above, works for hire are not terminable, and most recording agreements state that the masters are works for hire for the record company. However, U.S. law requires that for a work to truly be a work for hire, it must be either created by an employee within the scope of employment, or specially ordered or commissioned by the company, with an agreement in writing stating the work is a work for hire, and the type of work must fall within nine categories established in the law.
The problem here is that artists are not employees of record labels and master recordings are not one of the nine categories required for works to qualify as works for hire. Until this point, labels have been successful in retaining the masters by arguing the masters qualify as collective works or compilations, and by giving artists a few additional royalty points. However, at the time of this writing, there is a class action lawsuit pending in California to decide this very issue.
The Real Reason Why Authors and Heirs Want to Recapture Their Rights
Although the legal requirements for termination are imperative to navigating the copyright recapture landscape, most discussions on this topic fail to address why authors and heirs are so keen to exercise their termination rights in the first place. The answer to this question is that authors and heirs are terminating because they are not happy with their current publisher or label. This unhappiness normally is caused by the companies’ lack of attention paid to the catalogues, which results in significantly decreased earnings for those catalogues.
“Authors and heirs are terminating because they are not happy with their current publisher or label. This unhappiness normally is caused by the companies’ lack of attention paid to the catalogues, which results in significantly decreased earnings.”
Large companies, typically the “majors”, tend to focus their efforts on acquisitions and growth, which is not bad, but they fail to increase staff and training at the same rate as their growth. This leaves many compositions lost at these large companies because they are not being actively exploited and, in many cases, the staff isn’t even aware of the compositions. Further, when creators or heirs do try to get a company’s attention, their efforts are often ignored because the company does not want to spend time and resources on low-earning compositions. To further exacerbate the situation, many of these companies are not even accounting properly to the creators or heirs, and again, won’t take the time to investigate or remedy the situation because their efforts are focused solely on the highest earning compositions and further growth.
On the master side, not only are the royalty rates from the labels paltry, but in many cases, the albums are out of print and not being sold, and therefore the creator or heirs really just want a chance to do something with the music again instead of accepting the music’s fate of being locked in a vault, with the original tapes rotting away, never to see the light of day again.
“In my experience, independent publishers tend to receive fewer termination notices because they do a better job with attending to and exploiting their catalogues, and usually make fewer mistakes in collection and accounting.”
In my experience, independent publishers tend to receive fewer termination notices because they do a better job with attending to and exploiting their catalogues, and usually make fewer mistakes in collection and accounting. I work with many independent publishers (both those I represent and those who work for my author/heir clients) who do a fabulous job making sure these works continue to stay relevant and earn income.
Some companies think they can prevent authors from terminating their rights by inserting provisions in their contracts whereby the authors waive their rights of termination. However, this practice is completely ineffective because the right to terminate cannot be waived via contract. Some companies also try to prevent terminations by making new, and equally unfair, deals with aging authors and heirs. I’ve even seen major companies effectively force creators or heirs into a new deal by using the threat of litigation against them when these companies know full well that their opponents do not have the resources to fight to reclaim their rights.
The other tactic companies take is to ignore received notices of termination or wait until right before the effective date to raise objections in an effort to deprive the authors/heirs with ample time to respond. It’s a common joke throughout the subset of attorneys dealing with terminations that the fastest way to be ignored by a company is to send them a termination notice (or tell them they owe you money).
When rightsholders receive a termination notice, they should address it and engage good counsel who knows how to deal with the dynamics of these situations. Typically, once companies can no longer ignore the notices, they then dispatch the same few lawyers to repeatedly make the same narrow deals. When I represent music publishers, I work with them on specific strategies to address the catalogue at issue and craft a deal that benefits both parties in each situation, whereby the company can retain the work and continue to reap the financial benefits, but whereby the author or heirs also feel their needs are satisfied.
“Music has a life and legacy of its own and how these copyrights are handled can either set them up to flourish or be forgotten.”
Music will always be the foundation of the music business, but the music business is not the same as it was 56 or 35 (or even 10) years ago. Music has a life and legacy of its own and how these copyrights are handled can either set them up to flourish or be forgotten. The changing times require changing ways and my practice focuses on this innovation to benefit both the rights’ owners and creators so that both can continue to benefit from these magnificent musical creations.
* Technically, section 203 of the U.S. Copyright Law says the window opens at the end of 35 years after the date of execution of the grant, or if the grant covers the right of publication, then at the end of 35 years after the date of publication or at the end of 40 years after the date the grant was executed, whichever is earlier.
Note: This article does not constitute legal advice.
Erin M. Jacobson, known as “The Music Industry Lawyer”, represents and protects independent, established, and legacy songwriters and artists (including their heirs and estates), distinguished legacy catalogues, independent music publishers, Grammy and Emmy Award winners, and other music professionals at her law practice based in Beverly Hills, CA. For more information, visit www.themusicindustrylawyer.com.