“Works For Hire” A Key Issue As Music Stars Begin Terminating Copyright Transfers

Courts in the United States are beginning to interpret a Copyright Act of 1976 provision allowing authors of protected works to terminate their rights assignments beginning this year. Intellectual property attorneys appear to differ over the importance of the recent rulings, but they agree that the battle line in termination cases between the recording industry and artists will be drawn over whether or not a piece of music was created for hire.

In a nutshell, 17 United States Code Section 203 allows authors who transferred or licensed their copyrighted works on or after 1 January, 1978 to withdraw those grants at any time during the five years beginning at the end of 35 years from the date the grants were made. The author must give advance written notice not less than two nor more than 10 years before the effective date of the termination. However, the provision does not cover works made for hire, or those covered by will.

Who will come forward to reclaim rights once given away? The heirs of the co-author of the popular Christmas song, “Santa Claus is Coming to Town,” seven of Ray Charles’ 12 children, and the performer who played the Navy officer and cop in the Village People have been involved in litigation against the current copyright owners of their material, Hogan Lovells US LLP Partner Dori Ann Hanswirth said. Top record albums from 1978 are ripe for termination, and Bob Dylan and other major performers have filed termination notices, she said in a July/August 2012 Intellectual Property Magazine article.

At the time Hanswirth’s piece ran, only one lawsuit dealing with Section 203 had reached the decision stage. Scorpio Music S.A. v. Victor Willis arose from a termination notice filed by Willis, former lead singer for the Village People, for 33 musical compositions, including “YMCA” and “In the Navy,” she wrote. Scorpio sued to try to establish that Willis had no rights to the music, arguing that for termination to be valid, a majority of all authors who transferred their copyright in a joint work had to join in the request. Because Willis was the only copyright owner who served the notice, and the other Village People members didn’t join him, the notice was invalid, Scorpio said.

A federal court in California, however, decided that since Willis was the only person who executed the grants of his copyright rights, he alone could withdraw them. Moreover, the court said, Section 203 was enacted to remedy the unequal bargaining power of authors, so making it harder for them to terminate their copyright grants would run counter to the purpose of the measure.

Recent Decisions

Since last summer, there have been rulings in The Ray Charles Foundation v. Raenee Robinson, and Coots Baldwin et al. v. EMI Feist Catalog, Inc., Hanswirth told Intellectual Property Watch.

The former case involved a termination notice filed by seven of Charles’ children on the assignments of more than 50 pieces of music written or co-authored by Charles, Hanswirth wrote. The foundation responded to the notice by suing the children, alleging they breached an earlier agreement under which they received a $500,000 irrevocable trust and gave up any further rights to their father’s estate.

Charles’ children filed an “Anti-SLAPP” motion under California law, Hanswirth said. (SLAPP stands for strategic lawsuit against public participation, Anti-SLAPP motions aim to put a speedy end to malicious or frivolous lawsuits that chill speech). That put the onus on the foundation to show it had a good probability of success, a burden it couldn’t meet, she said. The court’s ruling, which may be appealed, strongly rejected all Foundation objections, she said.

Coots appears to be “on the cusp” of a substantive ruling on whether there is any difference between an author’s right to terminate a copyright transfer and an heir’s right, Hanswirth wrote. The case, originally filed in Florida, was refiled in New York when the Florida court ruled that it lacked jurisdiction, she said. It’s not clear what the final outcome will be, but the Anti-SLAPP strategy that proved so effective in Ray Charles Foundation will not be available to Coots because the motion is only available to defendants, she said.

If the Scorpio and Ray Charles Foundation decisions mean anything, they signal that courts “are going to take these termination rights seriously,” Hanswirth said. But Manatt, Phelps & Phillips (Los Angeles) Partner Eric Custer said the cases “are not particularly important” for interpreting termination rights. One wasn’t decided on its merits, and the other “involved a pretty settled area under the law and an uncommon fact pattern,” he told Intellectual Property Watch. Both involve music publishing (musical composition rights), and neither got into the “main question, that of work for hire, and so likely won’t mean much for an artist in the context of sound recording copyrights,” he said.

Bad News for the Recording Industry?

Section 203 is good news for authors, but not so great for the music industry. The provision is part of the original 1976 Act, so rightsholders should have been aware of, and budgeted for, it all these years, Hanswirth said.

But the problem is that there are several grey areas under relevant laws, in particular whether sound recording copyrights can be works for hire, Custer said. The Act defines a work for hire as one prepared by an employee in the scope of his or her job or one specially ordered or commissioned for use in, say, a movie. “This is an important distinction as works for hire cannot be terminated.” While most recording contracts state that recordings made thereunder are works for hire, under the law you can’t make something a work of hire just by designating it as such, he said.

For post-1977 copyrights, qualifying as a work for hire means falling within one of two tests under the law, application of which to recording artists and sound recording copyrights is uncertain, Custer said. Given that uncertainty, and that the first sound recording copyrights weren’t even theoretically capable of termination until this year (35 years after 1978), “these issues have not been fleshed out as yet.”

For now, Hanswirth said, the works-for-hire argument is potentially the chief defence available to rightsholders. But “there is no clear answer (and little precedent) as to how courts will rule if the issue is litigated.” Custer said. In fact, given the varying tests for work for hire, it’s possible both sides could be right, and that based on the facts of each individual recording, some courts may find some are works for hire and others are not, he said.

Why Terminate?

Asked how famous an artist has to be to make copyright termination worth her while, Custer said that since preparing and serving the notices is not that expensive, “there is really no downside to taking that initial step.” At a minimum, an artist might treat the process as an opportunity to renegotiate the original deal with her label, he said.

The real question will be whether it’s worthwhile for an author actually to litigate these issues, which could involve complicated and costly lawsuits, Custer said. If an album only generates a few thousand dollars per year, and a lawsuit might cost hundreds of thousands of dollars, “then it may not be economical to actually pursue these rights,” he said.