Music Copyright & Contracts: Goldmine or Minefield

Barbara T. Hoffman

Instructor

THE LANDSCAPE OF THE MUSIC BUSINESS

AND THE MUSIC ENTREPRENEUR

UNDERSTANDING COPYRIGHT LAW AND EXCLUSIVE RIGHTS

COPYRIGHT BASICS:

• Fixation• Subject matter• Registration

–PA–SR

• Exclusive Rights

COPYRIGHT LAW AND EXCLUSIVE RIGHTS IN THE COPYRIGHT

Section 106 reads as follows:Subject to sections 107 through 118, the owner of copyright under this title has the exclusive

rights to do and to authorize any of the following:

1) to reproduce the copyrighted work in copies or phonorecords;

2) to prepare derivative works based upon the copyrighted work;

3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;

4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; and

5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion pictures and other audiovisual works, to display the copyrighted work publicly; and

6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

Since (4) and (6) (Subparagraph (6) was added to Section 106 in 1995) both deal with performance, we can say there are five basic rights of copyright under the 1976 Act:

1. The right to reproduce2. The right to adapt3. The right to publish4. The right to perform5. The right to display

COPYRIGHT TERM AND FAIR USE

The language used by Congress is set forth in Section 107 and states as follows:

Notwithstanding the provisions of section 106 and 106A, the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified in that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright. In determining whether the use made of any pat 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 fact that a work is unpublished shall not itself bar a finding of fair use if such finding is made upon consideration of all the above factors.

Acuff-Rose Music Inc. v. Luther R. Campbell (a.k.a. Luke Skywalker), et al., “2 Live Crew.” The group 2 Live Crew had recorded a parody (so they claimed) version of Roy Orbison’s “Pretty Woman.”

2 Live Crew’s commercial parody may be a fair use within the meaning of Section 107, Justice Souter, in his opinion, wrote:

“Because we hold that a parody’s commercial use is only one element to be weighed in a fair use enquiry, and that insufficient consideration was given to the nature of parody in weighing the degree of copying, we reverse and remand.”

WHAT IS THE LAW REGARDING SAMPLING? IS SAMPLING FAIR USE?

Sampling is the use of portions of prior recordings which are incorporated into a new composition.

Can you use four notes of any song under the “fair use” doctrine? There is no “four note” rule in the copyright law. One note from a sound recording is a copyright violation. Saturday Night Live was sued for using the jingle, “I Love New York” which is only four notes.

SAMPLING (cont’d)

Grand Upright Music Limited v. Warner Brothers Records, Inc. Marcel Hall, professionally known as Biz Markie, Biz Markie Productions, Inc., Cool V Productions, Inc., Cold Chillin’ Records, Inc., Biz Markie Music, Inc., Cold Chillin’ Music Publishing, Inc., Tyrone Williams, and Bennie Medina. In a Memorandum & Order granting an order for preliminary injunction, dated December 16, 1991, the judge was quite adamant that the use of three words of the Gilbert O’Sullivan recording and composition “Alone Again (Naturally)” was a copyright infringement.

“Thou shalt not steal” [footnoting Exodus, Chapter 20: Verse 15] has been an admonition followed since the dawn of civilization. Unfortunately, in the modern world of business this admonition is not always followed. Indeed, the defendants in this action for copyright infringement would have this court believe that stealing is rampant in the music business and, for that reason, their conduct here should be excused. The conduct of the defendants herein, however, violates not only the Seventh Commandment, but also the copyright laws of this country.”

SECTION 109 – LIMITATIONS ON EXCLUSIVE USE: EFFECT OF TRANSFER OF PARTICULAR

COPY OR PHONORECORD

Section 109 of the Act deals with the right of an individual to sell or otherwise dispose of the physical copy of a copyrighted work. This is sometimes known as the ‘first sale doctrine.” The rights do not extend to the copyright, just the physical copy.

SECTION 110 – LIMITATIONS ON EXCLUSIVE USE: EXEMPTION OF CERTAIN

PERFORMANCES AND DISPLAYS

Section 110 deals with exemption from copyright infringement for certain types of performance and displays (note that “performance” and “display” mean just that – this section does not apply to copying and distribution of materials), most of which are for not-for-profit and/or educational uses.

SECTION 112 – LIMITATIONS ON EXCLUSIVE USE: EPHEMERAL

Section 112 sets forth in great detail the rules governing a type of copy, referred to as an “ephemeral recording,” made for purposes of later transmission by a broadcasting organization legally entitled to transmit the work. Radio stations frequently make their own copies of recordings for broadcast; indeed, entire shows may be prerecorded (by copying) for later broadcast. Without this section of the act, the copying would be an infringement.

SECTION 114 – SCOPE OF EXCLUSIVE RIGHTS IN SOUND

Section 114 of the Copyright Act of 1976 has carved out some exceptions to the rights that the copyright owners of sound recordings would otherwise have had pursuant to Section 106. [Recall that Section 106 specifies that the copyright holder has the exclusive right to (1) reproduce, (2) adapt, (3) publish, (4) perform, and (5) display the copyrighted work.]

In Agee v. Paramount Communications, the court held that Paramount’s televised program Hard Copy’s use of sound recordings as background music violated the plaintiff’s exclusive right to reproduce sound recordings under Section 114. The court stated that the right of reproduction includes sync rights “even in situations where copies are not distributed to the public.”

Paramount used the defense that the reproduction was incidental to a tape-delayed performance, which would be excluded from plaintiff’s exclusive rights under Section 114(a). The court rejected this defense, stating that “Paramount’s duplication and synchronization…, were designed to achieve more than time shifted performance”…

THE COMPULSORY MECHANICAL LICENSE PROVISIONS

Mechanical Royalties• The fee payable for the use of the underlying

composition (the PA Copyright) is called a mechanical royalty.

• The compulsory license is the granddaddy exception to the copyright owner’s complete control over the use of the copyrighted material. In effect, it puts a ceiling on what the publisher can charge record companies for the use of copyrighted music.

THE COMPULSORY MECHANICAL LICENSE PROVISIONS (cont’d)

The compulsory license provisions apply only to the right to make sound recordings of the copyrighted work and to sell and otherwise distribute them. The compulsory license cannot be used to justify either record or tape piracy. Nor can it be used to justify making and/or selling copies Subsection (a) of Section 115, “Availability and Scope of Compulsory License,” sets forth the scope of the compulsory license under the 1976 Act:

When phonorecords of a nondramatic musical work have been distributed to the public in the United States under the authority of the copyright owner, any other person, including those who take phonorecords or digital phonorecord deliveries, may, by complying with the provisions of this section, obtain a compulsory license to make and distribute phonorecords of the work.

THE COMPULSORY MECHANICAL LICENSE PROVISIONS (cont’d)

The DPRSR Act of 1995 also updated the provisions of Section 115 to include “digital phonorecord deliveries,” defining them as follows:

“As used in this section, the following term has the following meaning: A “digital phonorecord delivery” is each individual delivery of a phonorecord by digital transmission of a sound recording which results in a specifically identifiable reproduction” ….

THE COMPULSORY MECHANICAL LICENSE PROVISIONS (cont’d)

Clause (2) of Section 115(a) sets forth the extent to which a work can be arranged or altered without the consent of the copyright owner through the use of a compulsory license. The purpose of this clause is to allow the user of the copyrighted work the right to make arrangements of the work, but to limit those arrangements so that the work will not be “perverted, distorted, or travestied.”

THE COMPULSORY MECHANICAL LICENSE PROVISIONS (cont’d)

Section 115(c)(3)(A) deals with compulsory licenses for digital transmission:

(3)(A) A compulsory license under this section includes the right of the compulsory licensee to distribute or authorize the distribution of a phonorecord of a nondramatic musical work by means of a digital transmission which constitutes a digital phonorecord delivery, regardless of whether the digital transmission is also a public performance of the sound recording under section 106(6) of this title or of any nondramatic musical work embodied therein under section 906(4) of this title ….

WORK FOR HIRE

Unless a work is created by “an employee within the scope of his or her employment,” which, in the case of the agreements we are interested in, is hardly ever the case, there must be a written agreement in order for the work to be considered a work for hire. Sections 201(b) and 101 are quite clear about this:

… In this case of a work for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.

WORK FOR HIRE (cont’d)

IN Hi-Tech Video Prods. v. Capital Cities/ABC, the court held that a video was not a work made for hire and invalidated the copyright which had been registered as a work made for hire because the plaintiff had no written agreement with the creators that the video would be a work for hire. Plaintiff was unable to prove that the individuals were employees rather than independent contractors and lost the copyright in the video.

COPYRIGHT INFRINGEMENT

Use of a copyright owner’s rights without permission which is not de minimis is an infringement.

SONGWRITING AND MUSIC PUBLISHING

What is Music Publishing?

“Music publishing is the owning and exploiting of musical copyrights,” Wixen, R.D., Simple Guide to Music Publishing (Hall/Leonard 2005). A music publisher is to a songwriter what a book publisher is to an author. Contemporary music publishing is centered not around the sale of printed music but on the sale and use of sound recordings.

SONGWRITING AND MUSIC PUBLISHING (cont’d)

“The primary value of a publisher is that they are an ally in exploiting and marketing your musical copyrights. The five (5) functions of a music publisher are:

• exploitation• administration• collections• protection• acquisition

SONGWRITING AND MUSIC PUBLISHING (cont’d)

The rights of copyright which can be exploited:

• Mechanical royalties• Performance royalties

– ASCAP– BMI

• Synchronization• Other types of income

Types of Publishing Deals

• Ownership v Administration• Co-publishing and Co-writing• Work for Hire• Song Writing

THE BAND/COLLABORATION

What’s in a name?

The pitfalls of collaboration:

• who owns copyright• creative control• revision of copyright

RECORD DEALS AND RECORDING CONTRACT BASICS

• Royalty Rates, Advances and Recoupments

• The most important points:– Guaranteed Release– Marketing and Promotion Budget

A SUMMARY OF IMPORTANT CONTRACT POINTS

1. Time Limit2. Options3. Recordings and Releases4. Royalty Clauses5. Reduced Royalty Clauses6. Record Company Deductions from a Performer’s Royalties7. Escalating Royalty Clauses8. Costs of Packaging a CD, Tape, or Other Recording9. Free or Discount Recordings10. Returns and Reserve Accounts11. Advances12. The Recording Artist as a Songwriter13. Foreign Release14. New Technology Formats15. Videos16. Audits17. Tour Support18. Advertising, Marketing and Promotion Support19. New Equipment Funds20. Sampling21. Websites22. Net Profit Deals

STARTING YOUR OWN RECORD LABEL

• Why do it?

• Setting up your record label.

• Using the internet to promote and market.

INTERNET, VIDEO GAMES, CELL PHONES AND NEW MEDIA