Prince and the Copyright Revolution (Part 2)

As was discussed in part one of this article, a paradigm shift is underway as entertainment companies could soon lose control of some of their most valuable hit songs, bestsellers and other core assets. Thousands of artists - including Tom Petty, Bryan Adams, and Charlie Daniels - have filed notices of termination under the provisions of Section 203 of the Copyright Act of 1976 and are seeking to reclaim the rights to their works. The question is: How will the media industry will respond in the face of this turn of events?

The right of termination = Leverage for artists

Section 203 is intended to serve as a safeguard for creative artists by allowing them to terminate transfers that may have been part of unfair contracts. However, this "right of termination" only applies to grants that were executed on or after Jan. 1, 1978, and the earliest this right can be exercised is 35 years after the date of execution. This means that Jan. 1, 2013, marked the first year grants could be terminated under Section 203.

But the full import of this right can only be fully appreciated if one first understands the provisions of the Sonny Bono Copyright Term Extension Act (CTEA) of 1998 - derisively referred to by some as the "Mickey Mouse Protection Act." The CTEA covers most copyrights, and it provides that copyright terms last for the life of the author plus an additional 70 years. But now, thanks to Section 203, authors get a second bite at the apple and can reclaim copyrights after waiting only 35 years.

Artists should be forewarned, however, that reclaiming the rights to their works does not automatically translate into more profits. A viable business plan that will capitalize on, and protect, their new ownership rights will be needed. After Victor Willis of the Village People terminated his grant and recaptured the rights to 33 of his compositions, he stated that he is not exactly sure what he is going to do with them.

The fact is, authors like Willis will likely still need the marketing power of big publishers even if they successfully reclaim their rights. Therefore, the best idea may be to simply renegotiate a new contract - using termination rights as a bargaining chip. Media companies should likewise be amenable to hammering out new deals as older music catalogs continue to generate vital revenue streams through synchronization and performance licenses, and bestsellers are increasingly being licensed for films.

But make no mistake, where agreements cannot be reached amicably, no company in the entertainment industry will give up property they believe to be rightfully theirs without a fight. Artists should therefore brace themselves for the onslaught of entertainment companies that will seek to show that a grant is ineligible for termination.

Arguments against eligibility

Argument #1: The work was "made for hire."

Works created by employees, as opposed to independent contractors, are not eligible for termination as the rights for such works vest in the employer, not the employee . Under the CTEA, the copyright terms for such "works made for hire" last for 95 years from the date of publication, or 120 years from the date of creation, whichever expires first. Establishing that the creator was an employee requires satisfying the common law agency factors set forth in Community for Creative Non-Violence v. Reid (1989). This may be difficult to do, however, if the artist did not have any of the benefits or obligations typically associated with employment.

The alternative is to show that, even though the author was an independent contractor, the grant cannot be terminated because the work was "specially commissioned." This will require evidence of a signed contract specifying that the work was made for hire. Additionally, the work in question must fit into one of the nine categories established in the Copyright Act for it to be considered ineligible for termination.

Argument #2: Timely notice was not given.

Section 203 requires that notice be given to each grantee and recorded in the Copyright Officeno less than 2 years and no more than 10 years prior to the expected date of termination. Since an untimely notice is fatal - thereby leaving the copyright in place for its full term - media companies may believe that the best course of action is to simply wait and hope that authors do not become aware of their right of termination until this window of opportunity has closed and it is too late.