This article about copyright termination rights originally appeared on Intellect – the MinterEllison technology, communications and IP blog in 2011. You can read all of their articles here and I recommend you subscribe.
It’s the hot sticky summer of 1978 in New Jersey. Standing on the boardwalk is a young, hungry 20-something guitar hero, singing his songs about love and fast cars and the raging fire of youth. A major record label comes along and offers him a cash advance to record an album – what does he do? Of course he signs the record contract. Even if it’s a bad deal. He’s hungry for fame and has no leverage or negotiating skills.
Copyright termination rights in America
Luckily for such naïve recording artists, s203 of the US Copyright Act of 1976 affords a way to regain copyright in both sound recordings and authorship of songs registered on or after 1 January 1978 through what are known as ‘copyright termination rights’.
Copyright termination rights are an equitable remedy enabling an author to terminate previous grants of copyright and renegotiate prior contracts to more accurately reflect the true value of the work, notwithstanding any prior agreement to the contrary.
According to the 1976 House Report accompanying the Act, copyright termination rights were required because:
‘… of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited‘.
In a sense, copyright termination rights give the recording artist a second chance to share in the economic success of their work and can be seen as a type of ‘insurance’ on the value of their copyright.
Under US law, copyright termination rights may be claimed 35 years from the date of recording (ie. no earlier than 1 January 2013) and the author must file a statutory termination notice on the grantee at least two years before the date they wish to reclaim their recording. There is a sunset period of five years from the date a work qualifies for termination before the right to claim copyright termination lapses.
A right to terminate copyright in Australia?
Closer to home, copyright in sound recordings is granted under s89 of the Copyright Act 1968 (Cth). The exclusive rights conferred on the copyright owner are listed in s85 and include the right to reproduce, publish and adapt the author’s work.
These exclusive rights are for the duration of the copyright, which for a sound recording is 70 years after it was first published (s93). Copyright also subsists in the underlying works, being the lyrics and musical work (s32), and the duration of copyright in these works (assuming the work was made public in the author’s lifetime) is the life of the creator plus 70 years (s33(3)).
On 1 January 2005, legislation was introduced in Australia establishing performers as the makers of sound recordings of their performances. Accordingly, performers will be the first owners of the copyright in their recordings.
Of course, this default position may be overridden by a contrary agreement between the parties. Moreover, if the recorded performance is made in the course of employment, the performer’s employer (which could be the record company) will be the first holder of the performer’s share of the recording copyright.
Finally, unlike in the US, there is no provision under Australian copyright law permitting an author to terminate previous grants of copyright to reclaim copyright in their work.
Work made for hire?
Meanwhile, back in the USA, the Recording Industry Association of America (RIAA) on behalf of the big four record labels (Sony BMG, EMI, Universal and Warner), is vehemently asserting that copyright termination rights do not apply to sound recordings because the copyright termination rights referred to in the Act do not apply to ‘works made for hire’.
Whether any particular sound recording is a ‘work made for hire’ is determined by the actual relationship between the parties.
Consequently, the key argument in any future litigation about copyright termination rights in America will be whether the artist, at the time they made the record, was classified as an employee of the record company or was an independent contractor.
The RIAA argues that the recordings belong to the record companies because the records were made by the artists in their capacity as employees of the record companies, within the scope of their employment, and are therefore ‘works made for hire’ to which copyright termination rights will not apply.
Bob Marley case
To bolster their case, the RIAA cites the recent unsuccessful copyright termination rights case brought by relatives of Bob Marley in the New York District Court. Marley’s family attempted to reclaim copyright in several of his records made between 1973 and 1977.
The Court held that the sound recordings were ‘works made for hire’ and therefore the record company was the ‘author’ for the purposes of the copyright and entitled to the copyright. Marley’s family are appealing the decision.
Artists’ representatives in the US counter that the Marley case only applies to narrower pre-1978 copyright termination rights, and that recording artists who had hit albums from 1978 had a relationship with the record label of independent contractors rather than employees. They assert that the artists are therefore entitled to exercise their copyright termination rights as they satisfy the ‘agency test’ for independent contractors laid down by the US Supreme Court, on the basis that:
- they did not receive the benefits of a typical employees such as a regular salary, health cover and social security payments and taxes were not withdrawn from their pay;
- the records in question we funded based on advances given to the musicians by the record companies against future royalties; and
- the records were not made under the supervision or control of the record company executives or on the record company’s premises.
Currently, it seems that few musicians are prepared to comment on the situation. There are rumours of heated negotiations between stakeholders taking place behind closed doors. Some commentators are predicting that, in the absence of an amicable settlement, the matter may go all the way to the Supreme Court. And with the music industry desperately trying to prevent the death of the big record label due to revenue losses arising from unauthorised file sharing, a showdown on Capitol Hill seems a distinct possibility.
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