Main

Music and Recording Industry Archives

April 14, 2009

Video Game Music Composers--Reserve Your Performance Rights

Written by Christine A. Pepe

Rock Band®, Guitar Hero®, Dance Dance Revolution® (DDR), Stubbs the Zombie®--these are just a few examples of video games in which music has increasingly become a focal point, or at the least, an important element. As a side note, for those indie-rock fans, the Stubbs the Zombie soundtrack is quite good, featuring classic covers performed by bands such as Rogue Wave, Death Cab for Cutie, The Raveonettes, The Flaming Lips, and last but not least, The Dandy Warhols. I highly recommend it.

Now, there was a time when video game music was simplistic, rudimentary if you will. Think Pac-Man®, Ms. Pac-Man®, Donkey Kong®, Donkey Kong Junior® and Galaga®. It is probably difficult to imagine a use of these trademark video game songs in a context other than the games themselves. So it isn't surprising that, beginning decades ago, a practice developed whereby the music composers for these games typically relinquished all of their rights (including their performance rights) to the game developer and producer in exchange for an upfront payment. Once the physical copy of the game was sold, no more fees went to the music composers.

That was then. Now, because video games are being delivered by entities other than developers and on transmission-based platforms such as the Internet, there is no reason that composers of music for video games should sign away their rights. Take for instance, X-Box--it is now fully integrated with the Internet and allows users to stream games (instead of just purchase the physical product in the store). Internet-based services that now offer streaming of video games are causing the music contained in such games to be publicly performed. The providers of these video game services typically have or should have a license from ASCAP (and possibly other public performance right organizations). ASCAP is actively licensing such online video game services. If a game songwriter or composer member of ASCAP has reserved his or her right to collect the writer's share of the performance royalty, that writer or composer is now in a position to receive recurring royalties. In fact, game developers who register as publisher members of ASCAP would also be eligible to collect public performance royalties when their games are delivered via online services licensed by ASCAP.

ASCAP encourages its members who work in the video game industry to adopt the model that has developed in the film and television industries. In the film and T.V. worlds, the reality is that a producer needs to hold all rights in order to distribute the ultimate work. Therefore, film/T.V. songwriters and composers are required to give up their ownership rights in the musical work typically through a "Work for Hire" agreement, which is the industry standard. Nonetheless, in this industry, the composers and songwriters routinely negotiate a contractual provision allowing them to receive performance royalties, which can be a significant revenue source.

Similarly, songwriters and composers in the video game industry may reserve the right to receive performance royalties and should not simply consider the upfront payment, but also the potential use of the music (i.e., in television, film and commercial contexts) and the potential for recurring performance royalties in the future. Sample contractual language that would reserve the performance right would be as follows: "Composer shall be entitled to collect the 'writers share' of public performance royalties (as that term is commonly used in the music industry) directly from a public performance society that makes a separate distribution of said royalties to composers and publishers."

For more information about how ASCAP is leading the call for performance royalties in new media video games, please contact Shawn LeMone in ASCAP's Los Angeles Membership office at slemone@ascap.com, and check out the Game Audio Network Guild (GANG) at http://www.audiogang.org.

Written by Christine A. Pepe, Director Legal Affairs at The American Society of Composers, Authors and Publishers. ASCAP is a performing rights organization that protects the rights of its members by, among other functions, licensing and distributing royalties for the public performances of their copyrighted musical works. If you have any questions, feel free to contact Christine at cpepe@ascap.com.

November 3, 2009

CMJ MUSIC AND FILM FESTIVAL

Monica Pa is an associate with Davis Wright Tremaine LLP who attended the CMJ seminar. Here is a summary of her general report of the panel's discussion, but questions concerning the information provided at the seminar or the accuracy of advice given should be referred to the panel members.

The welcoming remarks were delivered by Ken Swezey, Esq., who is the Chair, of the Entertainment, Arts & Sports Law Section, New York State Bar Association, and a partner at Cowan, DeBaets, Abrahams & Sheppard LLP, New York City.

The program was introduced by Joanne Abbot Green and Rebecca A. Frank, Esq.
“Recession Deal Making”

The moderator was Susan Butler, Esq., Executive Editor of Music Confidential, Butler Business & Media LLC.

The panelists were: Helen Murphy President, International Media Services, Inc.; Jonas Kant, Esq. Senior Vice President, Business and Legal Affairs, Sony/ATV Music Publishing; Michael Poster, Esq., partner at Sonnenschein Nath & Rosenthal

General Discussion Regarding the Publishing Industry During A Recession

Helen spoke about trends in the film and television industry in LA. She observed that publishers are still deriving income from synch licenses in advertising and TV, but generally, the industry is under tremendous pressure. Studios are cutting back on both internal spending and outside talent. For example, terms that were once standard are not being given out anymore. T&E for talent is being cut, which was historically sacrosanct. And these cuts have had a ripple effect throughout the industry.

The panelist observed that publishing is actually doing OK, while the rest of the music industry is suffering. Joel observed that “this is a changed environment, even from last year.” He noted that there has been some increase in performance-side royalties (because of streaming services like Rhapsody and Pandora), and this may increase if, for example, iTunes starts a streaming service. But this increase isn’t sufficient to offset the tremendous loss in CD sales.

Sale of Catalogues

The panel spent a good deal of time discussing this issue. The Rogers and Hammerstein catalogue was sold this year, but this catalogue and its sale was unusual for a variety of reasons. In this economy, many catalogues are not up for sale. There are few buyers, and many sellers are not compelled to sell, so there aren’t many “fire sales” happening. The owner of the catalogue is going to wait for the economy to rebound before going into the market.
Joel Schoenfeld pointed out that, while many catalogues are not formally up for sale, some sellers may be informally testing the waters (e.g., “I’m not for sale, but I’m willing to talk”). So whether a catalogue is up for sale depends on knowing who to ask and what to say.
It’s also unclear how catalogues are being priced. A deal can include bells and whistles that exaggerate the catalogue’s sale price, such as “kickers” or “earn outs”. With respect to “earn outs”, in a perfect world, if certain targets are hit, only then would the total price of the deal be achieved. Michael Poster pointed out that “earn out” provisions are incredibly risky. The buyer has to jump through hoops and meet the seller’s (perhaps inflated) expectations, may also incur high deal costs, and such provisions may likely end up in litigation. With an “earn out”, the seller has some control over the buyer’s future conduct and has a right to audit.

Michael pointed out that a notable exception to the lack of “fire sales” is the case of private equity funds that purchased publishing catalogues during boom times and now have to unload this asset. Accordingly, private equity firms are selling their catalogues for cheap. Jonas pointed out that Sony is happy to see these catalogues go up for sale by these private equity firms, and has been able to buy these catalogues at a discount.

Alterative Income Stream and Advertising

With declining music income, people are looking creatively at ways to attach other non-traditional income streams. Helen pointed out that the agent’s business model has changed. Agents and labels have been aggressively attaching a percent of the talent’s various income streams (e.g., the emergence of 360 deals). In light of all these hands in the artist’s pockets, artists are now trying to do something different, which is facilitated by the fact that digital distribution is possible, and the rights business is becoming more transparent.

On the other hand, while there has been an obvious decline in CD sales, music can be monetized is creative and unpredictable ways. No one expected cell phone ring tones to take off, and now music video games generate a substantial and unexpected source of revenue. There is also the Beatles Cirque de Soleil show, and there will soon be one for Elvis. The biggest growing source of music revenue is digital content. Publishers and traditional music industry have been slow to incorporate these developments. Digital content is now 40% of the market. Maybe the industry will finally be forced to shift when digital content is 70% of the market.

The panel discussed whether, at this point, substantial income can be derived from advertising. This was one question that seemed to really boggle the panel. One panel member noted that it can be done. For example, Google derives almost 90% of its income from advertising. There may be more targeted advertising. For example, Google is best at linking ads with digital content (using an algorithm), but perhaps there will be other ways of linking content with advertisers, or more integration of advertisement with content.

Jonas Kant, speaking from his perspective as the music publisher, noted that publishing is generally an ad based income, and there are fewer ads now. When an advertiser, filmmaker, or television program selects a song to synch, they want to go with “a sure thing”, meaning a song that resonates with the audience. Therefore, well-known songs are more often being selected because this may resonate more with the audience, and accordingly, advertisers are unwilling to go with lesser-known artists.

* * *
“Starting From Zeroes: Start-Ups & Digital Distribution”

The Moderator was Lisa Weiss, Esq., Partner, Sonnenschein Nath & Rosenthal LLP.
Panelists: Aileen Atkins, General Counsel, Napster, Inc.; Mark Eisenberg, Esq. Executive Vice President, Global Digital Business Group, Sony Music Entertainment, Inc.; Drew Lipsher, Esq. Partner, Greycroft LLC.

Discussion

Lisa gave a background on copyright law and the DMCA. She summarized recent safe harbor decisions, including the summary judgment decision in favor of Vios. In one decision, the court held that failure to use filtering technology (which is widely available) does not undermine the applicability of the DMCA Safe Harbor provision.

Drew, as venture capitalist, discussed what VCs consider when deciding whether to invest in a digital content service. He was asked how important was it that a business have a license before launching. The issue is whether a service should build a business first and then get a license, or get the licenses first and then build business. “Ask forgiveness, not permission?” As an investor, his preference is for the companies to get permission first because the risk of litigation– from a financial return strategy – is unpredictable. But he may be more liberal depending on the service’s proposed business model (i.e., whose behind the service, whether the service has good terms and conditions, whether the company is more established, etc.) A separate business question is whether there is any value in a user generated model, whether advertisers are going to pay the service, and whether the service has any hope of generating a profit.

When asked how a new business can balance the cost of a license versus the cost of an eventual settlement/litigation, Drew characterized this situation as: “death by firing squad or death by hanging.” The service knows that it is going to have to pay; it’s just a matter of ascertaining what will be their greater cost. He observed that this is a return on investment issue, which is largely driven by time. Moreover, services face the problem that the process of obtaining licenses is fraught with defragmented rights in a work, and the lack of transparency.
Aileen observed that, for many start-up services, they will not be able to get a license unless they can convince the content owners they have a viable business model, and then the question becomes the terms and conditions of the license. So for many start-ups, the content companies are actually the ones determining the business model for them.

Marc, who represents Sony, gave the label’s perspective. The general assumption is that everyone wants to make money. What labels look at is the service’s business model and its path to profitability. “We know that music is popular and consumption of music is high – but this isn’t a business model.” While labels do not need the services to prove profitability on day one, there needs to be some way to pay for the license, which is why it’s necessary to look at the overall credibility of the service. “Just because you have an idea doesn’t mean that you can be licensed.”

All business must pay their suppliers. A business rarely asks the landlord to give them space for free. For a restaurant, there can be a great chef, great cuisine, excellent space, but people are at the restaurant for the food. If food is what customers are going to eat, then the restaurant should pay for the food. In this case, the sine qua non of the start-up service is the musical content, so why is there a debate about whether the labels should be getting paid for this.

Aileen pointed out that services want to pay for the music they use, it’s just impossible to wrangle all the different interests (publishers, labels, etc.) prior to launching the service. There is no consistency in the process or terms. This difficulty is exacerbated by the fact that labels are trying to hold onto a business that is in decline, and are unable to shift their business approach to accommodate digital content.

Drew pointed out that the problem with the “restaurant” analogy is that a restaurant only has to negotiate with a single landlord, and there is a standard in pricing, a known market. The difference is that, in the licensing process for music, the terms are constantly shifting. A landlord doesn’t ask to see a business model when renting out space. A music service wants to be legitimate, but the terms and rates are constantly shifting. As such, there are tremendous inefficiencies in music licensing.

Marc responded that there is a difference between frustrations with market inefficiencies and throwing up your hands and acting in blatant disregard of copyright law. When asked whether the terms of a license depend on whether the service comes to Sony before launching, versus launching first and then seeking a license, Marc said that rates depend on how the service operates. An infringer isn’t necessarily going to do better in terms of rates. If someone comes to Sony having launched first, there may be a premium that Sony exacts. On the other hand, if the business is successful, it may have more negotiating leverage.

Aileen was asked whether, if she were now mentoring a young service, what her advice would be. She said that Napster launched in 2001 with only a handful of licenses. At that time, no one knew what they were doing. The environment now is completely different than in 2001. The financial cost for litigation is substantial, which includes both time as well as attorneys fees. On the other hand, the costs associated with obtaining a license from content companies are also high.

Moreover, services may develop and change as it grows. For example, Facebook did not have an obvious path to profitability but it had millions of users and a huge platform. When Facebook launched, it didn’t necessarily realize that there was going to be a huge business for games (which could now generate billions of dollars in revenue). It’s unclear how Twitter is going to make money, but lots of people are using it, so we’ll just have to see.

In terms of music publishing, Drew observed that rights disaggregation is the biggest problem. A licensee can go to a publisher, get rights and rerecord the work. Rights have to come back together because digital content is increasingly sophisticated. For example, all services now include video, so this implicates a host of issues, including synch and publishing rights. With traditional distribution of music, the labels use to take care of publishing. How many different ways are there to divide a pie? There cannot be meaningful negotiations with this many competing interests. If the labels do not want a compulsory licensing system, and do not want arbitrators saying what the rates are, then they need to come up with a way to make licensing more regular, standard and systematic.

* * *
“Footprints In Cyberspace: Following Consumers Online”

Moderator, Marc S. Reisler, Esq., Partner at Holland & Knight.

Panelist: Flora Garcia Privacy Director, Time, Inc.; Laura Stack, Esq. Division of Privacy and Identity Protection, Federal Trade Commission; Shane M. McGee, Esq. CISSP, Partner, Sonnenschein Nath & Rosenthal LLP.

The panel addressed privacy issues by using a hypothetical multimedia entertainment company to discuss various digital projects that this company wanted to launch.

The first hypothetical involves the company’s music division which wanted to launch a website to promote the latest release from their 12 year old pre-teen pop sensation named Rhoda. Rhoda’s website featured a section on “Rhoda Memories” where visitors could share online (including videos or picture format) their memories or personal encounters with Rhoda. The website could also include a section called “Rhoda dress-up” where visitors could post pictures of themselves dressed as Rhoda.

Flora said that, from an in-house perspective, the first question is whether users are going to have to register online, and if so, would they be asking only for their email address and user name, or would they be asked for additional information. Another issue is that, since this website concerns and likely targets younger consumers, the Children’s Online Privacy Act (“COPA”) is implicated. This law prohibits companies from marketing to children 13 or under without parental consent.

If the website is going to market to children under 13, then it needs to obtain verifiable parental consent. Even if the website only collects an email address, the company still needs to send an email to the parent to confirm that their child has permission to register with the site. The email to the parents should also notify them of what type of information was collected, whether information will be shared with third parties, whether there is a way to opt-out of the sharing of information or receipt of emails, and how the company is going to protect and use collected information.

COPA provides a sliding scale of necessary parental verification depending on the type of information collected and how the information is being used. If the website wants to collect additional information from the child, like what school they go to or their favorite mall, and perhaps share this information with third parties, then the company needs to provide additional information when obtaining parental consent. The website may need the parent to sign a form, provide credit card information to confirm their identity and consent, etc.

Laura represented the view of the FTC. She noted that deceptive practices are pretty straightforward: do not create a material deception that will mislead a reasonable consumer. If the website is aimed at children, then the standard is the reasonable child.

COPA generally requires a privacy policy, notice of certain rights (what are you collecting, why are you collecting it, etc.), what do you do to safeguard information, and it provides requirements for verifiable parental consent.

This hypothetical website also involves children disclosing more than just an email address because it permits users to share Rhoda photographs and stories. As such, even though the initial registration does not ask for any information other than an email address, because of this feature, COPA may treat this website as collecting personal information from children, which triggers heightened requirements of verifiable parental consent. Moreover, even if the website does not specifically target children, if the service has reason to know that children are accessing their site, then it needs to comply with COPA. The website should use some filtering technology, and/or hire moderators for the website (which can be outsourced). There is software available to websites to strip personal information from users (with mixed success).
The FTC applies the standard of “what would a kid normally do, what should you be doing to keep kids safe.” In seeking parental consent, there needs to be transparency. Parents need to understand what they are saying yes to. This is especially the case where the website includes posts of children’s photographs given that there is such a problem with child pornography. A practical advice for websites for children is to stay away from all photographs unless the service uses a good moderator.

Aside from COPA, the FTC looks at whether the website has provided full and accurate disclosures. For example, was there a full disclosure that the child’s information would be shared to marketers? Do the parents realize that their child is going to be on marketing list? Where the company’s subsidiaries, divisions or affiliates are marketing to the user, its unclear whether this counts as a “third-party marketer.”

Motion Picture Division

The second hypothetical involves the motion picture division wanting to launch a new website to promote its new PG13 film. The website includes the ability to purchase movie related gear and merchandise, and visitors will be able to register to receive texts from their favorite characters from the film.

Because this film is PG 13, we can assume that its a general purpose site targeting audiences over 13 years old. The website does not necessarily need to comply with COPA, but when users register for the website, the company should utilize an age-screening process that is age neutral (e.g., the website can’t just ask whether the user is “over 13.” The website also needs cookies to prevent “back buttoning” (if the user realizes that he or she will be prohibited from accessing the website because he or she initially truthfully said that they were twelve, this prevents the child from hitting the “back” button and changing their initial selection).
Data security is about avoiding unintentional disclosures of information. Financial information and SS# are the big concerns. So websites that collect financial information need to utilize reasonable security measures. Even if it is not engaged in any financial transaction, if the website requests credit card information (even if only to confirm parental information), it still needs to comply with “PCI standards”, which are industry standards that credit card companies have developed for security on the Internet.

Video Game Division

The third hypothetical involves a video-game division that wants to launch a website where it can have attorneys who represent clients in parking court to sign up. [This hypo didn’t make a lot of sense to me.] The video game division intends to sign up this website as a member of a behavioral advertising network that uses a click-track company (meaning, the browsing behavior of website will be tracked and it will share the data with targeted advertising).

The concern is that this website should not sell information that will permit marketers to identify any user; instead, they should just receive information about anonymous IP addresses that the marketer could pop ads to. Generally, where a third-party advertising network wants to collect information about a user’s web behavior, the privacy policy should disclose the fact that the website is selling information to third parties, and must make clear that there is an opt-out option (although to be safe, the website should use an opt-in option instead).

The FTC has published guidelines on behavior advertising based on browsing behavior, and guidelines have also been promulgated by trade groups. The FTC is in a “wait and see” mode; they are going to give self-regulation a final chance.

* * *

The Luncheon Keynote Address was given by John Scher, co-CEO of Metropolitan Talent Ons
John started his address with the general bleak observations that the concert business is in chaos and record labels are failing. His view is that the labels were counting the merchandiser’s money, counting the promoter’s money, and counting the artist’s money, with their hands out to take a piece of these income stream, but they weren’t trying to make their own money. He talked about how labels historically paid as little as possible (there was a time when labels paid only 2 4% of royalties to artists, or paid with Cadillacs). Artists had to fight to get a decent royalty, and once they get a royalty, they had to force the labels to pay them the full amount due.

The concert promotion business is also struggling, especially since the business of concert promotion has shifted over the past few decades (especially, consolidation of the concert business). Currently, Live Nation is the largest and only public corporation in the concert business, but it has never made a profit. When Clear Channel spun off its concert division into Live Nation, John claims there was about 3 billion debt written off by Clear Channel. “Live Nation was a disaster for Clear Channel; there was no synergy.” The lack of profit by Live Nation seems inconsistent with its monopoly status. It controls the shows, ticketing, the “essence of the business”. The reason why it is not profitable is because Live Nation is a monolithic company, which is only going to get bigger if its attempt to merge with the largest ticketing company (Ticketmaster) is successful.

John spoke about the history of the concert business. He said that in the 60’s the only acts that toured were successful artists pushed by the labels. As the music concert business matured, promoters realized that they needed to get involved in youth culture to know what hot acts were emerging. So concert promoters began working with young artists to develop them.
Historically, the promoters’ deal with the artist was that there would be a guarantee. Once gross ticket sale came in, the promoter would pay its bills, pay the guarantee, the next 15% went to the promoter, and anything left was split between the artist (60%) and the promoter (40%).

As the industry evolved, artists were not making a fair share on the recording side so they needed to make more from concerts. The deals began to change. First, artists received a reasonable guarantee, but started demanding that the split of net profits be increased from 60% to 85%. Then, guarantees started increasing.

John observed that “All graduates from Wharton should go to hell.” Since the artist’s business managers took in 5%, they needed to justify their existence by pressuring promoters because they couldn’t pressure labels (which were large companies with sophisticated lawyers). The guarantees increased substantially, which meant that promoters took on greater risk and “the deals got tighter.”

The concert promotion business was stable those day because of Premiere Talent and its owner, Frank Barcelona. Premiere was the largest talent agency in the music industry. Frank understood that promoters needed to make a fair living so he instituted the idea of paying the artist 85% of the net profits (not gross) but no guarantees (so the promoter would never lose). This idea didn’t last because the business managers insisted on a guarantee.

As a result, John contends that deals in the concert business are extremely one-sided: enormous guarantees (regularly $500K-1 million) plus 90- 95% net. The venue receives income from ancillary sales (concessions and service or ticketing charges). Profit margins are incredibly thin, and there can be no real competition with Live Nation. Its now extremely difficult for any party to make money in the concert business. Superstar acts do well because they receive huge guarantees, but concert promoters are unable to afford any artist development. “The Deal has strangled the industry.”

John then discussed how 360 deals with artists put additional pressure on the concert business. Labels wanted a percentage of the artist’s merchandise and/or touring, but they do not provide any additional service in exchange for this new income stream. John warns that, if this continues, there will not be a live music industry that anyone wants to participate in. Attorneys need to make deals that are fair and reasonable for all parties. Do not try to take advantage; instead, the best deal is one where neither side in 100% satisfied. Record companies need to stop holding their hand out, and the industry needs to be better at protecting intellectual property. The industry needs to realize that, without artists creating content and performing, then there will not be a music industry.

* * *

“Ethical Negotiation Practices”

Panelists: Howard Siegel, Esq., Partner, Pryor Cashman LLP, and Professor John P. Sahl Faculty Director, Miller-Becker Institute for Professional Responsibility, The University of Akron School of Law.

Howard and John opened the discussion by observing that there is a general preconception that entertainment lawyers are unethical. Namely, that the artist’s criminal problems can be attributed to the their lawyers. But this is because the media is focused on celebrities, and entertainment attorneys are in their orbit. There are few news stories about non-celebrities (or their lawyers).

Practical Tips

• Do not “shoot from the hip” when giving advice to individuals about potential legal problems because the standard for finding a lawyer/client relationship is a low one. By giving quick advice, you run the risk of exposing yourself to potential malpractice liability.
• Always Have a Retention Letter. Contingency fee arrangements must be in writing. In New York, an attorney must have a written retention letter even if he or she has a non-contingency relationship if the fees will be in excess of $3000. The letter should also make clear the scope of representation. In taking on new business, keep in mind what is your level of competency and expertise.
• Communicate. The key source of trouble is lawyers who fail to maintain adequate contact with their client.
• If you receive a letter of inquiry from a disciplinary committee, participate fully and promptly. The key is to short circuit a full disciplinary inquiry. Even if you believe the disciplinary complaint is baseless, cooperate with the investigation because you can be reprimanded just for failing to respond.
• Analyze your errors and omissions policy, and be sure you know what is covered. Statistically, law graduates will have 3 to 5 malpractice actions initiated against them, which does not include disciplinary proceedings. Have an office policy about client files, client confidences, how the phone is answered, how you advertise for services, etc.
• Fee Disputes. because a client may elect mandatory fee arbitration (in New York), your retainer agreement should not be inconsistent with this. If there is a fee dispute, don’t take the disputed amount out of the client’s trust account.
• Ethics of Negotiation. You can refer to the law and other considerations in negotiating with third parties. When negotiating contracts, your client needs to agree to the terms of the agreement. If you are given oral authority for a range in negotiations, its best to put this authority in writing.
• Have a Scrubbing System. All drafts of agreements are discoverable in any subsequent litigation and can be used against you. So consider whether you should use oral communications instead of email.
• Be careful about threatening criminal action in communications with opposing counsel. This is not prohibited, but you should have some basis for threatening it rather than using it as negotiating leverage. By contrast, an attorney may not threaten to bring a disciplinary action. Although you can remind opposing counsel that they are crossing the line, you cannot blackmail or threaten a disciplinary action because you are obligated to report all disciplinary violations.

Representing Multiple Parties

In representing multiple parties (e.g., musical group), or in motion picture deal where you represent both the producer and director, bear in mind that groups always get along great in the beginning; “every divorce started out in a mad love affair.”

When representing multiple individuals, there may be differing goals and expectations. Rule 1.7 provides that a group’s lawyer may represent an individual member of the group provided the representation is not inconsistent with the group’s interest. This rule also provides a list of possible conflicts of interest, but try to “listen to your gut.”

You may continue to represent the group and/or stay involved in representing client where there is a potential conflict of interest if you obtain informed consent (and the conflict does not arise in litigation). Informed consent includes a full disclosure of the benefits and risks of continued representation, and a discussion of alternatives.

A multiple representation may require the lawyer to provide the client with a new or revised disclosure statement, retainer agreement and at least a written waiver. Courts are more likely to uphold waivers signed by clients when it provides specific and complete information about all possible conflicts.

Truthfulness with Persons Other than Clients

Aside from the obvious duty of be truthful to your client, you also have an obligation not to make false representations of material fact to third parties on your client’s behalf. And you also may have an affirmative duty to disclose material facts when necessary to avoid assisting clients in a fraudulent action. A “material” fact is broadly defined as any fact that will change a person’s course of conduct. Finally, a misrepresentation can occur if you incorporate or affirm another person’s false statements.

This begs the question of the difference between commercial puffery versus false representation. Statement that may be the “strict truth” may be technically true, but if you suggest a falsity, this may also subject you to a disciplinary violation. In attempting to create a bidding situation, take the high road. Permissible commercial pufferies are statements of opinion. You cannot misrepresent a fact.

* * *

“From Treatments To Royalties: The Basic Lifespan Of An Indie Film”
Moderator: Susan Bodine, Esq., Cowan, DeBaets, Abrahams & Sheppard LLP.
Panelists: Madhu Goel, Esq. Director, Legal & Business Affairs, A&E Television Networks LLC, Dan O’Meara Green Film Company; Marc Simon, Esq. Partner, Cowan, DeBaets, Abrahams & Sheppard LLP.

1) PURCHASING RIGHTS: Madhu Goel

Madhu first set forth the basic development deals that studios have with a producer. This can range from (a) an exclusive deal (where the producer is tied to the studio, which may be costly but then this gives the studio a lot of freedom) (b) a first-look deal (the studio has right of first refusal on a project); or (c) a housekeeping deal (where the studio provides some support, like an office space and a secretary), which is usually offered to a younger producer.

If there is no overall deal with a studio, an independent producer can pitch an idea, treatment, or screenplay to a studio through a pitch meeting. In order for the producer to protect his or her idea, he or she should try to get the studio to sign an NDA/confidentiality agreement prior to disclosure of the idea, which ensures the confidentiality of the pitched idea. But, if the director/producer is just starting out and doesn’t have any leverage, it may not only be difficult to have studio sign the NDA, the studio may have the director/producer sign a submission release, which is an acknowledgment that the pitch may not be unique, that the studio receives millions of pitches all the time, and even if the studio decides not to do business with that person, there is a chance that it will develop a property that is similar to the one that was pitched, and the producer promises not to sue the studio. Bear in mind that ideas are not protectible under copyright law, only the expression of ideas are protected. So if the expression of the producer or director’s idea is expressed in a “treatment”, then the treatment is protected by copyright law, and any derivate work created based on the treatment may also be barred. The director or producer, however, may have other state law claims, like breach of implied contract, but this may require a showing of novelty, depending on whether you are in New York or in California.

Option Purchase Agreement: Deal Points

Generally, the buyer of option rights wants the longest period of time to exercise the option. The standard option period is 12-18 months, but this can be much shorter. The price for the first option may be a percentage of the purchase price of the property, based on a higher back-end price or a percentage of a the film’s budget. Note that you may want flexibility in determining the option price. If the film development is only at the beginning stages, the parties don’t know the type of studio or the financiers who will support the project, so someone selling the rights does not know whether they are going to be involved in a $20 million or $80 million budget movie.


2) FILM FINANCING: Dan O’Meara

Two key concepts to keep in mind: (1) the waterfall; and (2) control by investor. All the other deal terms tend to be pretty boilerplate, but these are two issues can be deal-breakers.
“The Waterfall” is shorthand for a provision in a financing agreement that describes how the film’s profit will be allocated. The money is paid out in tiers. Most investors are concerned with where they are located “in the waterfall”, meaning their priority in being repaid their investment. Typically, two interests will be paid first: (1) the film’s sales fees (must hire an attorney and sales agent) and (2) the costs associated with a full theatrical delivery. After all the investors recoup their investment and premium, then the remaining money is divided between the producers, partners, investors, and other interests.

The second issue is the extent of control that an investor can have over what the producer does. The investor may have some general rights. For example, whatever was represented to them about the film’s budget and financing cannot change materially without the investor’s approval. (There may be a “most favored nation’s” clause providing that the producer cannot make any other finance deals on terms that are better than the terms that the producer has with that investor.) An investor may want to have some meaningful approval or consultation concerning the sale or distribution of a film, or some right to have control over key creative decisions. All of these deal terms will depend on how much leverage the respective parties have.

3) FILM PRODUCTION: Marc Simon
Creation, development, and production are the mechanics of film. The goal is to have the production team moving forward. A producer will want to create an entity (typically an LLC) to own the film, which facilitates accounting, clarity of ownership, and limits liability.
Some production considerations include:

• Location. Many states offer substantial tax credits, and some are transferable credits that can be sold. In New York, film tax credits can be turned into actual cash down the road, a money back credit, which can be substantial. Another issue is that film financing may be a tax deduction, which can be a selling point when trying to raise funds from wealthy individuals. An equity investor may be able to “write off” 100% of his or her capital contribution in the current year of production.

• Chain of Title Issues. Who owns the underlying property rights in the film. All the ownership agreements between producers and investors should explicitly address who owns the film, and there should be no conflicts among the various agreements so the LLC can sell the film without any issues.

• Clearly Defining the Term “Budget”. Many financing terms are based on the budget, such as bonuses.

• “Back End”/Contingent Compensation or Profit Participation (also known as the “producer’s share”). In an actor’s agreement, there may be a provision that the actor may recover 5% of the “producer’s share” as part of the actor’s contingent compensation.

• Writer’s Agreement. One issue may be the writer’s credits, including whether the writer receives shared or sole writing credit. The writer’s compensation and/or bonus may be based on his or her respective credit. There are certain industry standards for agreements with writers.

4) DISTRIBUTION: Susan Bodine

The process for obtaining film distribution is currently going through substantial changes. Its becoming increasingly rare for an independent film to be purchased wholesale by one distribution company who will pay a large advance and distribute the film worldwide on all different platforms. The film industry is reconsidering how films get seen and monetized. Right now, its hard to say “this is how it works” because this is a time of great experimentation. Traditionally, the goal for independent filmmakers was to have the film financed with private equity, then the film debuts at Sundance. The producers hire a great indie sales agent and the day after the film’s debut, it is sold to a distributor and then wins a bunch of Oscars.
Newer and smaller distribution companies have emerged, and they do not necessarily purchase worldwide rights. There are also newer models of distribution (Internet, VOD, TV) or distributors who start investing during the film’s production. Indiewire is a good website which discusses what’s going on in the industry, and covers DIY film distribution and marketing.

* * *

“Destination Unknown: What’s Next For The Industry In 2010”

Moderator: Vejay G. Lalla, Esq., Moderator Associate, Davis & Gilbert LLP
Panelist: Stanley Pierre-Louis, Esq. Vice President, Associate General Counsel, Intellectual Property & Content Protection, Viacom, Inc.; Drew Stein President & COO, IMO; Lance Podell, Esq., CEO, Next New Networks; Peter Drakoulias President, GAF Holdings

The panel addressed a range of issues. Here are just a few of the topics that they touched on.

(1) DRM Free Websites. Consumers apparently prefer MP3s without DRM (“digital rights management”) protection. Is DRM dead or are there different models to choose from? Content creators, however, want DRM and are still testing other ways to protect digital content. Consumers may want to be able to burn CDs, so are there other ways to have the content locked up, and under what terms. There can also be rental models or different uses. ITunes, which represents 80% of the market, does not use DRM.

Stanley talked about Viacom’s approach to DRM protection for audio-visual works. Consumers can view its shows in different ways (either pay by downloading on iTunes or free on Hulu). Mobile is still a growing area, especially since bandwidth constraints are improving. The key is to have the flexibility to test various ways of getting content to consumers by using different models.

Piracy is obviously a big concern (e.g., the Viacom-YouTube litigation). There are ways to create a filter to track unauthorized uploading on peer to peer networks. The content owner can use “watermarking” on blue ray disc. Another way to stem the tide of piracy is to give notice to persons engaged in illegal peer-to-peer downloading without suing them (a three-strike rule for infringement).

(2) How to Make Money from Content. Newer trends include TV on the Internet. There are two types of content. Content that was originally shown on TV and then repurposed for the Internet, and content created FOR the Internet. Content for the Internet is less expensive to create, there is less production and a quicker turnaround time. TV for the Internet is an exploding market. One way to keep cost down is to steer clear of copyrighted music by creating their own music for these programs.

(3) Another Emerging Trend is Branded Entertainment. Content created for the Internet is better able to utilize branded entertainment because of its ability to turn around content so quickly.

Branded entertainment includes more than just product placement. For example, the Gates Foundation has sponsored TV shows where the “product” that was being “placed” was a concept (e.g., encouraging kids to finish high school). The foundation paid the TV program to convey that message, which weaved the “staying in school” theme into that TV program.

(4) Is Music Superstardom Still Possible? What is role of marketing for superstardom? In marketing new content, what is role of the record label? Historically, the label’s main job was to put their muscle behind an emerging and promising musical act. They would distribute the artist’s music, promote the artist, give tour support, give an advance, and then these costs would be recouped through the sales of the musician’s recordings. Now, with mp3 files, the label’s control over the channels of distribution are less relevant, and MySpace and Facebook has usurped a part of the label’s promotion functions.

The question was posed on whether record labels missed the boat on digital content. Labels were slow to come to the party, and now they are trying to innovate. For example, Warner just inked a deal with YouTube where Warner may be involved with the sale of music video on YouTube.

The key to innovation is finding out ways to get consumers to engage with the content on the website, and for that, there needs to be compelling content. For example, games on websites are now huge. Both labels and other content generators need to use new technology to reach people and get them to come to their website. Larger, monolithic companies are not able to innovate the same way that smaller companies can. So now large companies are working with young entrepreneurs companies.

Lightening round predications for 2 years from now: what will be super hot/cold

Stan: As TV become more adapted to the computer, there will be a switch to Internet TV, and more people will be listening and watching content on their mobile devices. Screens hooked up to televisions will be better quality, and there will be more VOD and Netflix instant-movie streaming models.

Liam: prices will start rising for content. On the web, there was initially a culture of “I shouldn’t have to pay for content”. It will become more accepted over time that content/information is no longer free on the Internet (e.g., newspapers charging for membership).

Peter: larger industries are going to be more nimble, and will start looking at smaller channels, which will create new opportunities.

Drakoulias: Consumers are demanding everything on their time and on their channels. In two years, while traditional advertising will still be around (e.g., sponsorship), the general trend will be towards more accountability of advertising dollars. Also, more directed advertising to consumers, so it’ll be a tension between algorithms (e.g., Google and Pandora) and instinct.

February 16, 2010

Billboard Program - DEALS & DEALMAKERS... DRIVING THE BUSINESS

Coming up on March 4, Billboard is having its 9th Annual Music & Money Symposium at the St. Regis in NYC and it is offering EASL Section members a special promotional rate to attend the conference.

Please use the promo code: LAW for the special rate of $749 (a $450 savings).

Now in it's 9th year, this one-day event brings together the best minds from the music, legal, financial and Wall Street communities for an in-depth examination of the financial realities with which the music industry is contending.

This annual event attracts almost 250 top-level executives from record labels, publishing firms, marketing and promotion companies, as well as artist managers, attorneys, accountants, strategic advisors, distributors, financial services, analysts and consulting firms.

DON'T MISS:
Keynote Interviews With C-Level Executives
Informative Panel Sessions Featuring:
Media Investors, Music Publishers, Equity Groups, Venture Capitalists,
Digital Music Executives & Brand Marketers
Networking Receptions...and More!

www.BillboardMusicandMoney.com
http://www.billboardevents.com/billboardevents/mms/speakers/index.jsp

March 2, 2010

Recap of Digital Music Forum (East)

By Pamela C. Jones, Esq.

Last week I attended the Digital Music Forum (East) in downtown New York City.

Panelists and speakers included Rio Caraeff, President & CEO, VEVO; Russ Crupnick, VP & Senior Industry Analyst NPD Group; Michael Doernberg, CEO & Founder ReverbNation; Ted Mico, EVP Digital at Interscope Geffen A&M, Rich Bengloff of President, A2IM and more than 60 other ‘players’.

If you’ve been in a martini-induced stupor – ah, the good old days – you may not have heard that the old music business model is dead. Ted Cohen of TAG Strategic (former VP of Digital Development and Distribution at EMI) assured us “it’s not coming back”!

Setting the tone in his opening remarks, Cohen cautioned that the biggest risk facing today’s ‘digital music group’ is to not take a risk. He complained that legal and business affairs are bottlenecking deals, but walls are breaking down and some risk-takers are becoming overnight sensations, including “Lady Gaga”, the most-mentioned artist of the conference.

“Massive Exiting of Music Buyers In The U.S.”

Russ Crupnick of the NPD Group reported that there is a massive exiting of paid music buyers in the United States. He provided the following compelling evidence:

In 2009, 24 million fewer people purchased music in the United States over the prior year. There were 1 million fewer digital download purchases and 25% fewer P2P illegal downloads. Last year, Americans spent $34.6 million in digital download purchases of music, a decline of almost $2 million year over year. However, those that did purchase music spent more. In 2009, the average downloader spent $50 buying music downloads, compared to $33 in 2008.
Crupnick described 2 primary music-buying groups: (a) The “UberFan”, which represents 9% of music revenues and (b) the “Traditionalist”, accounting for approximately 40% of revenues. Traditionalists consist of an older demographic and include GENXers and ‘late boomers’. As a group, they represent 1/3 of all revenues from music sales. Crupnick warned that if this group is ignored by music strategists, “we’ll all lose our jobs”.

“The Democratization of Media”

Ted Mico, Executive Vice President of Digital for Interscope, Geffen and A&M, told the audience, “Big media is getting smaller” and “All media is getting democratized”. Today, 70% of all music revenues are digitally generated. In Mico’s opinion, the job of recorded music companies is to ‘discover’, ‘invest’ and ‘connect’ talent with consumers. He reported that music companies are redirecting their efforts to establish direct relationships with consumers. Today, the key commodity is the single track of music.

‘We live in a new world driven by singles” said Mico. “Lady Gaga sold 35 million single tracks globally” and “the Black Eyed Peas have sold 25 million single tracks globally”. Mico explained that if care is taken to create, develop and market the single track, then the album will take care of itself.

Mico’s mantra is “Attraction, Retention, Monetization”. To be successful, Mico’s strategy involves (1) building the best technology to connect artists to consumers and (2) aggregating the data collected from music consumers. Mico’s colleagues argue that this data is the keystone in developing the ‘new relationship’ between the artist and the consumer. IGA collects a staggering amount of data to use in the creation of ‘predictive analytics’. In fact, in one day alone, IGA engineers collect 23 million bits of social-listening data, which is then aggregated into metrics that digital music executives told us is crucial to the health of the ‘new relationship’ between artist and consumer.

March 30, 2010

Sony Music Entertainment is Seeking a Director to Join our Business & Legal Affairs Department

Sony Music Entertainment is a global recorded music company with a roster of current artists that includes a broad array of both local artists and international superstars, as well as a vast catalog that comprises some of the most important recordings in history. Sony Music Entertainment is a wholly owned subsidiary of Sony Corporation of America.

We are currently seeking candidates for a Director level position within our Business & Legal Affairs Department. The Director's responsibilities will include but will not be limited to the following:

Structure proposals and negotiate and draft a variety of music and entertainment-related agreements, including recording, licensing, producer/mixer, soundtrack, termination/release, settlement and merchandising. Obtain all necessary executive approvals and draft related approval memos and contract summaries.

Research and advise A&R, marketing, creative services, sales, promotion, royalties, finance and other departments regarding contractual obligations and restrictions.

Work with A&R administration regarding contractual budgets, monitoring recording costs and approving payments.

Review artwork, label copy, videos, advertising and other marketing and promotional materials to minimize company's legal exposure.

Identify and analyze potential risks related to the label's distribution of content and other business activities.

Investigate, analyze and respond to a variety of claims, including copyright, audit, breach of contract, publicity and trademark, and work with the corporate legal department to develop litigation strategies.

Qualifications/Requirements:
Member of New York Bar in good standing.
JD from a top law school.
At least 3 years at a prominent law firm, in house legal department or equivalent experience.
Superior negotiating, drafting and communication skills.
In-depth understanding of the areas of the law applicable to the music business, such as copyright, contract and trademark.
Strong business knowledge preferred.

All interested parties should apply directly via our website at www.sonymusic.com.

April 27, 2010

USING MUSIC IN DIGITAL MEDIA: BUSINESS AND LEGAL ISSUES

Lunch Program on Wednesday – June 16, 2010
(12 – 12:30 p.m. lunch, 12:30 -2 p.m. program)
(re-scheduled from February 26 snow day, non-CLE)
at the New York City Bar Association Building, 42 West 44th Street, New York, NY
(between Fifth and Sixth Avenues in mid-town Manhattan)

Co-sponsored by:
The New York State Bar Association's Entertainment, Arts and Sports Law Section
- Television and Radio Committee
Co-Chairs: Pamela Jones and Barry Skidelsky
- Motion Picture Committee
Co-Chairs: Steve Rodner and Mary Ann Zimmer

and

The New York City Bar Association
- Copyright Law Committee
Chair: Joel Hecker

Speakers: David Oxenford and Robert Driscoll of Davis Wright Tremaine LLP

In today’s digital world, more and more companies want to use music for their business purposes – whether as the primary focus of an entertainment web-site, the background to a commercial or video, or otherwise.

This non-CLE program will focus on business and legal issues regarding the use of music in digital media, and discuss related rights and clearances that need to be obtained, other steps one should take to minimize potential legal liability, and current controversies that remain to be resolved by the Courts and Congress.

Registration:
Program Fee, including lunch, is $35 for members for either the NYSBA or the NYCBA.

$40 for all others.

Space is limited, so please register ASAP on-line at:

http://www.nycbar.org/EventsCalendar/show_event.php?eventid=1377

May 31, 2010

Subject: EMI - Director/Sr Director Digital Legal & Business Affairs

TITLE: Director/Senior Director, Digital Legal & Business Affairs
REPORTS TO: Vice President, Digital Legal and Business Affairs
DEPARTMENT: Legal & Business Affairs
LOCATION: New York, NY
CONTACT: Send resumes to Jessica Davis: Jessica.Davis@emicap.com

ABOUT US: The digital legal and business affairs group forms part of the worldwide legal and business affairs department of EMI Music, the recorded music division of EMI. The digital legal and business affairs team is primarily responsible for supporting the digital business development groups throughout the organization by negotiating and drafting EMI’s US, multi-territory and global digital distribution deals to distribute EMI’s music, video and other content via a wide variety of companies including global digital service providers, major mobile/wireless carriers, Internet service providers and smaller entrepreneurial start up companies. The team works closely with the business to coordinate implementation and maintenance of the deals after they are completed. The group also advises the company in relation to the development of digital strategy and policy.

BASIC DESCRIPTION: This position requires a minimum of 4-5 years of transactional legal experience, preferably with an emphasis in intellectual property, entertainment and/or technology. In-house experience strongly preferred. Position works closely with business development executives to negotiate and draft digital distribution agreements, often dealing with complex issues and business models of first impression, including as related to digital downloads, subscription, ringtunes, user generated content and mobile applications. Negotiation of the deals requires coordination with, and input from, multiple departments and stakeholders at EMI. Deals are frequently multi-territory in scope. Accurate, timely and efficient information regarding deal status for management will be expected. Efficient negotiation and drafting in a qualitative manner is essential. Environment is fast-paced and requires the ability to prioritize and work closely with the business to determine and understand the priorities. Must stay up-to-date on latest legal developments (local, regional global) in the areas of publishing, copyright law, data protection/privacy and other industry developments affecting digital business. Expected to become a key internal person for advice and troubleshooting in all aspect of digital legal and business affairs, from deal initiation to ongoing account management and policy. Work as part of the team to develop strategy around infringement targets and litigation.

REQUIREMENTS / DESIRED SKILLS:
• J.D. (Member of New York State Bar preferred but not critical, especially if a member of the California bar)
• Qualified candidate with four - five years' of transactional legal experience, including some law firm experience (some in-house experience strongly preferred)
• Familiarity with commercial contracts and strong drafting and negotiation experience required, intellectual property emphasis preferred
• Familiarity with new technology issues and subject matter preferred
• Music industry experience preferred
• Negotiation experience, ability to lead and manage negotiations essential
• Motivated self-starter, excellent communication skills, team player, dedicated professional

July 17, 2010

Judge Reduces Constitutionally Excessive Damages in Infringement Case

By Elizabeth Gonsiorowski

On July 9, 2010, in Sony BMG Music Entertainment v. Tenenbaum, Judge Nancy Gertner of the United States District Court for the District of Massachusetts held that a jury award of $675,000 was unconstitutionally excessive. Though the award was within the statutory range, Judge Gertner reduced it by 90% and found that it was "far greater than necessary to serve the government's legitimate interests in compensating copyright owners and deterring infringement," and that it bore, "no meaningful relationship to those objectives." Ultimately, this decision (available at: http://pacer.mad.uscourts.gov/dc/cgibin/recentops.pl?filename=gertner/pdf/tenenbaummotnewtrialjuly9th2010.pdf) may mark a shift in the way courts perceive damages for copyright infringement in the digital age, and it highlights the issues that arise when large-scale copyright holders seek damages from individuals.

In 2003, the Recording Industry Association of America (RIAA) embarked on a campaign to curb online piracy, and ended up filing proceedings against about 35,000 people. Not surprisingly, its strategy generated bad press when record companies filed proceedings against a dead person, a 13-year-old girl, and several single mothers. By 2008, the RIAA decided that the proceedings were not an effective deterrent and decided to work directly with ISPs. ("Music Industry To Abandon Mass Suits", available at: http://online.wsj.com/article/SB122966038836021137.html) Though they stopped initiating proceedings, the record companies continued to pursue suits that had already been filed.

One such suit was Joel Tenenbaum's. Unlike the defendants in the cases that proved to be public relations disasters for the recording industry, Tenenbaum doesn't garner much sympathy. His file sharing history stretches back to when kids ripped Britney Spears' (first) single off of Napster in 1999 --and continued even after the plaintiffs sent him a cease and desist letter in 2007. No matter how willful his infringement may have been, the recording companies suffered "minimal harm," and Tenenbaum did not obtain any financial gains as a result of downloading the 30 songs in question. Ultimately, the court found the jury award to be "arbitrary and grossly excessive"--with good reason.

Judge Gertner considered the fact that Congress hasn't addressed the relevant damages provisions since the Digital Theft and Copyright Damages Improvement Act of 1999, which bumped statutory damages up to their current levels ($750 to $150,000 per work for willful infringement).( 17 U.S.C. 504(c)) In deciding not to defer to Congress's statutory damages with respect to Tenenbaum's infringement, she reasoned that, "the timing of the Act suggests that legislators did not have in mind the problem of consumers sharing music through peer- to-peer networks when the Act was drafted." Though Napster was in its infancy, the legislative history did not suggest that Congress had file-sharing in mind while drafting the Act.

The court also compared the $22,500 per song jury award to the damages that recording companies have generally accepted; most cases have resulted in default judgments or settlements where the recording companies requested that the court impose the $750 minimum. Notably, in the widely publicized Thomas-Rasset case (Capitol Records v. Thomas, 579 F. Supp 2d 1210 (D. Minn. 2008)), the plaintiffs rejected a remitted award of $2,250 per song. Here, the court offered the same remitted award, and the plaintiffs (four of which were plaintiffs in Thomas- Rasset) made it clear they would not accept. "To put it mildly," Judge Gertner wrote, they "were going for broke."

If the recording industry set out to prove a point, it may have done more harm than good. If the recording companies were primarily interested in monetary compensation, the remitted award should have been more than enough -- Judge Gertner went so far as to say that the reduced award of $67,500 "is still severe, even harsh." Instead of deterring copyright infringement, as the recording industry presumably intended, this decision demonstrates the issues related to practical application of copyright laws in the 21st century, and with respect to digital piracy, it calls the foundation of statutory damages into question.

Are File-Sharing Willful Infringers Now a Judicially Protected Class?

By Andrew Berger

On July 9, Judge Nancy Gertner in Sony BMG v. Tenenbaum did what no court has ever done before. The court held unconstitutional an award of statutory damages within the statutory range set by Congress. This ruling, if affirmed on appeal, will change the shape of copyright litigation for years to come.

In finding the verdict of $675,000 for defendant's willful infringement of 30 songs "unconstitutionally excessive," Tenenbaum applied the three "guideposts" established in BMW of North America, Inc. v. Gore, 517 U.S. (1996). The Gore framework assesses an award of punitive damages based on the (1) degree of reprehensibility of the defendant's misconduct; (2) disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and civil penalties authorized or imposed in comparable cases.

Judge Gertner's opinion is clear and well written. But I respectfully suggest the court got it wrong. I agree with the plaintiffs (their post-trial brief is located at: http://www.ipinbrief.com/wp-content/uploads/2010/07/Sonys-post-trial-brief-in-Tenenbaum.pdf) and the government (its post-trial brief is located at: http://www.ipinbrief.com/wp-content/uploads/2010/07/us-post-trial-memo-tannenbaum.pdf) that the standard for assessing the constitutionality of a statutory damages award is better tested by applying St. Louis, I.M. & S. Ry. Co. Williams, 251 U.S. 63 (1919).

Because this is a long post, let me explain what's below. I first discuss why Gore's guideposts are inapplicable, then indicate why Williams applies, and end with the adverse consequences Tenenbaum creates.

Why the Gore Guidelines Make No Sense Here

The Supreme Court has never indicated that the Gore analysis applies to a statutory damages case. Further, the Gore guidelines are an ill fit for the following reasons:

A. Gore dealt with punitive damages which are designed to punish in amounts that are usually unrestrained. But statutory damages are different. They are not only intended to punish, but also to compensate, impose appropriate damages on wrongdoers, deter future infringements and promote the creation of intellectual property.

B. Gore's guideposts derive from the need to give a defendant notice of the severity of the penalty that may be imposed. But the statutory damages scheme already gives notice. Congress has established and periodically adjusted the range of statutory damages and a verdict within that range is entitled to substantial deference.

C. The second Gore guidepost weighs the relationship between the punitive award and the actual harm. But this guidepost has no application to statutory damages which may be awarded without any showing of harm.

D. The third Gore guidepost judges the propriety of the award by focusing on its relationship with the applicable civil penalty. But this guidepost makes no sense here because the award is by definition the applicable civil penalty.

The Court Creates a Safe Harbor for File Sharers

Tenenbaum attempted to avoid the identity between the award and the penalty by deciding that Congress did not intend to apply the statutory damages scheme to "noncommercial infringers sharing and downloading music through peer-to peer networks." The court reached this extraordinary conclusion by a "careful review" of the "legislative history" of the Digital Theft Deterrence Act of 1999. But the history the court credited consisted of off-hand comments made by Senators Hatch and Leahy at hearings held after Congress passed that statue.

In fact, the legislative history demonstrates the opposite--that the aptly-named Digital Theft Deterrence Act sought to address the growing online theft of intellectual property by all infringers. Congress expressed the need for this legislation in words that echo Tenenbaum's conduct:

By the turn of the century ... the development of new technology will create additional
incentives for copyright thieves to steal protected works. Many computer users ...
simply believe that they will not be caught or prosecuted for their internet conduct. Also
many infringers do not consider the current copyright infringement penalties a real
threat and continue infringing even after a copyright owner puts them on notice.

The text of the 1999 amendment does not distinguish between classes of infringers nor immunize file sharers from statutory damages. Instead the statute applies the same damage scheme to all. Because the statutory language was plain, there was no need for the court to examine congressional intent, much less rely on post hoc comments from two Senators.

In light of the above, it is not surprising that Tenenbaum is the first to apply the Gore guideposts in a due process review of a statutory damages award. Other courts have opted for the more deferential standard in Williams (holding that a statutory damages award of $75, for a violation that resulted in actual damages of 66 cents, was within the statutorily-authorized range of $50 to $300 and thus was constitutional).

The Williams Standard is Applicable

Applying the Williams standard makes more sense here because that case also reviewed the constitutionality of an award that fell within a statutorily authorized damage range. Williams examined such an award as "so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable" giving "due regard for the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to [the law]." The Court expressly rejected the defendant's attempt to test the constitutionality of the "large" penalty by comparing it with the actual damage, stating that statutory remedies for "public wrongs" are not required to "be confined or proportioned to [plaintiff's] loss or damages."

The jury's verdict in Tenenbaum appears to fit within the Williams framework. The award was 15% of the maximum of $4.5 million the jury could have been assessed and therefore seems not "obviously unreasonable" or "oppressive" considering that Tenenbaum's conduct defines willfulness.

Tenenbaum's Adverse Impact on Copyright Enforcement

What is especially troubling about Tenenbaum is the negative impact it will have on copyright enforcement if affirmed.

The requirement in Tenenbaum that a plaintiff obtains statutory damages only by first demonstrating actual damage from the infringement means that many copyright cases will never be brought.

That's because a copyright owner may be unable to prove actual damages for a few reasons. First, the value of a copyright is, by its nature, difficult to establish. How much is an unpublished novel worth? Second, in cases involving public performances, the only direct loss is the lost license fee; as the Copyright Office recognized years ago, an award in such amount is an invitation to infringe with no risk of loss to the infringer. Third, actual damages are often less than the cost of detecting, investigation and, for sure, litigating. So why bother. Finally, an infringer may have made little or no lost profits or may have destroyed or never kept records making any profit calculation impossible.

Hopefully the First Circuit will be less willing to make illegal behavior affordable.


A version of this blog comment may be found at http://www.ipinbrief.com/are/

July 21, 2010

New Music Seminar Report

By Monica Pa, with Eva Dickerman's assistance

The first New Music Seminar occurred in New York in 1984. The director of the conference, Tom Silverman, of Tommy Boy Entertainment opened the current conference at Webster Hall with an interesting point: The music industry still faces many of the same concerns today that it did in 1984, namely the challenges of new technology and the evolving habits of the consuming public.

This conference was intended to be an informative and affordable program devoted to the future of music. It sought to give labels, website operators, artists and their representatives information about the music business, a forum to discuss changes in music and technology, and an opportunity to network with others in the industry. The conference organizers scheduled panel discussions, short talks and performances. There were also informal areas for exhibitors and networking. My sense was that the conference was geared towards artists rather than seasoned industry professionals. This was not necessarily a bad approach. For example, the NMS Guidebook contained an extremely helpful “do’s and don’ts” section, and included tips from industry experts about artist management, digital distribution, touring, marketing and merchandising, web strategy and music licensing.

There were three closed-door industry summits: The NMS Brand Summit, The NMS Tech Summit and The NMS Business Summit. These were unfortunately closed to press and reporting. I understand that the purpose of each summit was to provide a forum for dialogue about the music industry, and the panelists discussed legal issues, such as the new music deal and economic models. The legal panel (of which EASL was a sponsor) included Tom Silverman, Adam Ritholz, Jim Cooperman and venture capitalist David Pakman.

I was able to report on the marketing and branding panel in the morning, which focused on “how to cultivate fans and how to harvest them.” This discussion on marketing strategy and band branding offered information that is relevant to any entertainment lawyer.

The panel included Ariel Hyatt from Ariel Publicity and Cyber PR; Jay Frank from CMT; Gwen Lipsky from Sound Thinking; Eric Garland from Big Champagne; and Mike Doernberg from Reverb Nation.

The panelists began by pointing out that there exists a fundamental tension inherent in marketing music. On the one hand, music should be spontaneous and creative; on the other hand, marketing should be systematic and scientific. Musicians need to understand that their music is a product, and that they are not just creating music, but also creating a brand. Artists are often skilled at communicating their art but deficient at communicating from a business perspective.

The panelists emphasized the financial importance of a fan base. Historically, although fan relationships were important, these relationships were disconnected from the core music business, which was the creation and distribution of music by labels. Today, as the music industry has become more decentralized, fan relationships are increasingly important. To illustrate this point, the panelists discussed the “Theory of a Thousand True Fans.” The theory is that if an artist can have 1000 fans, and each fan contributes $100 a year, the artist could earn $100,000 a year, which should be a sustainable living. Not all fans, however, are created alike. The deeper the fan relationship, the more value that relationship contributes to the band as a brand. The more you understand about your fans and the more direct contact that exists between artist and fan, the more value that fan relationship has. Every artist, at least in his or her early stage, needs to develop and nurture a fan base to support the music and brand.

The classic marketing rule is that fans will result in a 20/80 profit split: 20% of the fans will account for 80% of the artist’s revenue. In terms of music, the split is even more pronounced (perhaps more like 10/90). So if there are 1,000 fans, the artist needs to focus on gaining the attention of the 1 in 10 fans that will be dedicated enough to purchase music, tickets, shirts, merchandise, etc.

Typically, musicians market online by having MySpace and Facebook pages, and perhaps by sending out sporadic communications through a general newsletter. They then tour and ask fans for money (e.g., purchasing tickets to a show) but this occurs before they have built any value as a commercial product. Artists need to be precise and goal-oriented in their communications with fans. Expert marketers focus on controlling the message that gets out. Smart marketers don’t just rely upon general social media platforms, but rather use analytics to understand the relevant fan base, in order to better create a compelling product and brand.

The panel discussed three stages for a band:

(1) Create: Bands are usually well-equipped at how to approach this initial stage. The band should make a compelling product, but also develop itself as a brand. In this early stage, the band members should create social media profiles, digitally distribute music, and give away free music in exchange for fans signing up to an email mailing list.

(2) Grow: Once the artist has established his or her product and brand, then it’s about maintaining and growing the fan base. Artists need to be able to understand the existing fan base (e.g., perfect their music and performance quality, play lots of gigs and get feedback, nurture fan relationships).

(3) Develop the Band’s Fan Base (see above): Artists should revise their marketing strategy on a daily basis and continually shift their engagement (in other words, keep assessing what the fans want and accommodate these demands). Musicians should pay attention to their audience and constantly refine the marketing strategy. Social media takes a while to get traction, so do not quickly abandon these platforms – it takes patience to develop successful strategies.

What constitutes a real fan (e.g., a “valuable” fan)? An audience member is someone who has listened to your music; a fan is someone who has a sustained relationship with you. You should have a two way relationship with your fans, and that relationship should be growing and exponential.

One panelist noted an interesting tidbit: an email “friend” is 8 times more valuable than a “friend” on a social networking website (e.g., a Facebook friend). Mailing lists are therefore more valuable then merely having passive Facebook friends. The ideal trajectory for fan development is to convert a social network friend to an email friend to a devoted fan.

There are two models for monetizing a fan base: breadth and depth. “Breadth” refers to the general awareness of the artist. For example, Lady Gaga is incredibly well-known, so there is a lot of fan awareness of her product. Depth refers to the engagement of fans. An artist with a million views on YouTube has wide awareness, but to transform this awareness into “engagement,” viewers need to purchase the music after viewing the video. An artist can survive with a low awareness base if there is substantial fan engagement. If each fan will buy the t-shirt, go to the concert, tell his or her friends, and create long‑term sustained interest, then the artist will have a continuous stream of revenue. An artist with high awareness but low engagement will not survive as a business. It's crucial to use marketing data to figure out ways to move fans along the continuum of involvement, from awareness to engagement.

When an artist engages a listener, the artist wants to do it quickly and then effectively capitalize on it. When a person hears a song and decides to buy it; that is a rare and valuable opportunity. To create the most opportunities for engagement, the song needs to be widely available and distributed everywhere. One panel member discussed how he had become interested in a song that had already been released for three weeks. He couldn’t purchase the song though because the record label had not made it available for digital sales. This squandered a valuable opportunity. Moreover, since that song was not available, the website suggested that he listen to a similar artist name Boy Wonderbread. The panelist liked Wonderbread’s music and ended up purchasing a few songs. As a result, the label lost the $1 that the listener was going to spend on the original artist, and he ended up spending $10 on Boy Wonderbread.

Ariel Hyatt made an interesting point that few people purchase their own music on iTunes and Amazon. But, she said, this is like making dinner for 10,000 people without tasting the food before it leaves the kitchen. It is also key to make sure that listeners can easily purchase the artist’s music. Hyatt provided an interesting “Clicks to Content” slide, which showed how many “clicks” it takes to purchase a song on a website. For example, if a listener goes on iTunes to purchase a song she just heard, it takes up to 14 clicks to actually purchase it if she does not have an account. Google Onebox stream takes 3 clicks to get to the music. It takes one click to hear the song on a promoted stream on a music blog, on a YouTube video, on a video or audio stream from Facebook, on an artist’s MySpace page, etc. Anything above 2 clicks and the consumer will likely lose interest. Bear in mind that, for the average consumer, when faced with too many choices, the consumer will end up choosing nothing. The decrease of music sales may be related to there being TOO much available music.

Jay Frank said that, regardless of all this marketing information, the music should be great, identifiable and have an immediate impact, which means artists need to impress listeners fast. The top 25 selling downloads in 2010 had an average intro length of 6.6 seconds, and 2/3 of the top selling downloads have an intro of 7 seconds (“don’t bore us, get to the chorus!”). People are giving music about 6 seconds before deciding whether the song is worth purchasing.


September 19, 2010

Entertainment Business Law Seminar

CMJ Music Marathon
New York University
Helen and Martin Kimmel Center for University Life
New York City

Friday, October 22, 2010

To view/download the flyer, visit: http://www.nysba.org/AM/Template.cfm?Section=Entertainment_Arts_and_Sports_Law_Home1&CONTENTID=42235&TEMPLATE=/CM/ContentDisplay.cfm

To view/download the registration form, visit:http://www.nysba.org/AM/Template.cfm?Section=Entertainment_Arts_and_Sports_Law_Home1&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=42236

To register online now, visit: http://www.nysba.org/AM/Template.cfm?Section=Entertainment_Arts_and_Sports_Law_Home1&Template=/Security/Login.cfm

Attorney Rate - $199.00. Fee includes admission to the Music Business Law Seminar only (Friday, October 22, 2010), New York MCLE credits, written course materials, breakfast, and refreshments. This fee DOES NOT include a CMJ Music Marathon 2010 registration.

Note: To receive discount rate of $199, attorney registrations must be received by 5:00 p.m. on Wednesday, October 13th. If you register after this time or on day of event, an additional amount of fifty dollars ($50.00) will be added to registration fee.

Lawyers attending the seminar will receive 6 New York State MCLE (Mandatory Continuing Legal Education) credits, consisting of 4 in Practice Management, 1 in Skills and 1 in Ethics, all of which may also be accepted in other jurisdictions.

NEW FOR LAW STUDENTS!
Law Student Rate - $100.00. Fee includes one year student membership with NYSBA and EASL, refreshments during the seminar, however, no MCLE materials or MCLE credit. Students will need to fax a copy of their current student ID along with the registration form. Registration under this option will be available in advance through the NYSBA site until Wednesday, October 13th. This fee DOES NOT include a CMJ Music Marathon 2010 registration.

CMJ Registration link: http://cmj2010.com/registration
CLE Program Information: http://cmj2010.com/daytime-events/cle-legal-program
CLE Schedule: http://cmj2010.com/daytime-events/cle-legal-program/schedule

The last day to pre-register online is October 13, 2010. Register online now

Accommodations for Persons with Disabilities:
NYSBA will make reasonable modifications/accommodations to allow participation in its services, programs, or activities by persons with disabilities. NYSBA will provide auxiliary aids and services upon request. NYSBA will remove architectural barriers and communication barriers that are structural in nature where readily achievable. To request auxiliary aids or services or if you have any questions regarding accessibility, please contact Kathy Heider at 518-487-5500 or kheider@nysba.org.

September 29, 2010

Second Circuit Confirms Digital File Download is Not a Public Performance

By Joel L. Hecker
HeckerEsq.com

The United States Court of Appeals for the Second Circuit has just issued its decision, dated September 28, 2010, affirming the district court ruling that a download of a digital file containing a musical work does not constitute a public performance of that work under the U.S. Copyright Act. However, the appellate court vacated the district court's assessment of fees for a blanket ASCAP license and remanded it for further proceedings. The decision can be found at US v. American Society of Composers, Authors and Publishers, decided September 28, 2010, docket number 09-0539-CV.

Digital File Downloads

The first issue before the court on appeal was whether a download of a digital file containing a musical work constitutes a public performance of that work. It was not disputed that playing the music after it had been downloaded is a public performance, since the downloading of the files actually created copies of the musical work. Therefore, the copyright owners must be compensated for these downloads. However, the case involved the public performance right, which is a separate and distinct copyright right.

The court first turned to Section 101 of the Copyright Act, which defines "performance" to mean to "recite", "render", "play", "dance", or "act it". The court stated that a download is plainly neither a "dance nor an act", and went on to determine whether the download falls within the meaning of the terms "recite", "render", or "play".

The court had no difficulty determining that the ordinary sense of these words entail what is called contemporaneous perceptibility. That is, a "recital" is a performance before an audience and a performance, as defined in the audio-visual context of Section 101, requires such contemporaneous perceptibility.

The court also dismissed ASCAP's interpretation of the definition of "publicly", holding that "publicly" simply defines the circumstances under which a performance will be considered public and does not define the meaning of "performance".

In further support of its decision, the court juxtaposed the parties' agreement that stream transmissions constitute public performances because streaming entails a playing of the song that is perceived simultaneously with the transmission. In contrast, said the court, downloads do not immediately produce sound. That only occurs after a file has been downloaded and played back. Accordingly, the court concluded that transmittal without a performance does not constitute a "public performance" under the Copyright Act.

Fee Determination for Using the ASCAP Repertory

The district court had determined royalty rates for blanket licensing fees for the uses involved in the case. The Second Circuit found that the district court did not adequately support the reasonableness of its methods or royalty rate applied. Accordingly it remanded the case to the district court to redetermine reasonable fees for the licenses in light of the guidelines set forth in the opinion. A discussion of those guidelines is too involved for this blog and the reader is referred to the opinion itself.

Joel L. Hecker, Of Counsel to Russo & Burke, 600 Third Avenue, New York, NY 10016, practices in every aspect of photography and visual arts law, including copyright, licensing, publishing, contracts, privacy rights, and other intellectual property issues. He can be reached at (212) 557-9600, website www.heckeresq.com, or via email: HeckerEsq@aol.com.

October 13, 2010

The 5th Annual Entertainment Business Law MCLE Seminar

"How To Take It With You"

One-Day Event Offers 6 MCLE Credits for Attorneys

Presented by the CMJ Music Marathon in Association with the New York State Bar Association Entertainment Arts & Sports Law Section

The 5th Annual Entertainment Business Law Seminar at CMJ Music Marathon & Film Festival 2010 in New York City has announced its complete panel schedule and participants including keynote speaker, President of Lava Records Jason Flom.

The Mandatory Continuing Legal Education (MCLE) accredited one-day event titled “How to Take it With You” will be held on Friday, October 22, 2010 at New York University’s Helen and Martin Kimmel Center, in the Richard L. Rosenthal Pavilion. Leaders at the center of the entertainment industry will discuss how legal practitioners can best protect their clients’ creative property in the digital age. The seminar is presented by CMJ Music Marathon & Film Festival in association with the New York State Bar Association Entertainment Arts & Sports Law Section (EASL).


Program panels for the law seminar include:

Today Manhattan, Tomorrow The World - How U.S. entertainment content providers can succeed in foreign markets.

Compensation is the Sincerest Form of Flattery - Exploring the latest developments in likeness & publicity rights.

The End is Near: What You Need to Know About Copyright Terminations - Discussing key issues in copyright terminations including who is eligible and what is dissolvable as well as termination impacts and gray areas.

How to Avoid the FRPR Blues: Ethical Issues in Music, Film & Entertainment Law - Exploring ethics issues that arise when lawyers assume non-traditional legal roles or take on multiple roles while representing entertainment clients.

Rights, Restrictions & Compatibility: The Challenges of Mobile TV - Addressing issues facing lawyers negotiating distribution deals for mobile content including what is “mobile” versus “Internet.”

The Changing Landscape of Film Distribution: A Digital Vision - Examining new partnerships between film festivals and digital platforms to increase the accessibility and visibility of independent films.

The Kid Stays in the Picture: Agreements with Minors - Investigating the rules and risks of contracting with minors including tips on the best approach to dealing with them.
How to Legally Make an App for That - Looking at dealmaking issues in this new media stream including licensing and content use.

Lawyers attending the seminar will receive six (6) New York State MCLE credits, consisting of four (4) in Practice Management, one (1) in Skills and one (1) in Ethics, plus breakfast, lunch and refreshments.

For registration and complete line-up of panelists please visit http://cmj2010.com/daytime-events/cle-legal-program/ or www.nysba.org/EASLCMJ2010.

NOTE: An additional amount of fifty dollars ($50) will be added to the registration fee if you register after 5:00 p.m. on Wednesday, October 13 so REGISTER TODAY!!

November 10, 2010

CMJ Entertainment Business Law Seminar – Afternoon Session

By Eva Dickerman

Rights, Restrictions & Compatibility: The Challenges of Mobile TV
Seth Metsch, Digital Counsel, Business & Legal Affairs, A&E Television Networks (Moderator); Jeffrey D. Neuburger, Partner, Proskauer Rose LLP; Shirin Malkani, Vice President, Legal & Business Affairs, National Basketball Association; Sharon E. Kopp, Assistant General Counsel, Business & Legal Affairs Verizon FiOS TV & V CAST Video; Salil Gandhi, Co-Founder, Crybaby Media

Due to the increasing capabilities of mobile devices, the cell phone has become the primary gadget for Americans. Television content providers are eager to take advantage of the unique opportunity to get their programming quite literally into the pockets of consumers. As they negotiate the deals that make mobile distribution of television programming possible, the panel members are shaping the law in this area. The panel discussed the obstacles and issues they face in making top shows and events available to our fingertips.

How Should Clients Be Advised As They Draw Up New Deals?

One of the primary issues is that it is difficult to define a mobile device. Is it just a device that fits into your pocket? How should the iPad be categorized? If mobile but not Internet rights are granted, can the content be hosted on an iPad? One of the greatest difficulties with mobile video distribution is its very newness – in previously written deals there may not have been mention of mobile distribution.

Neuberger noted that there are no clear definitions of the different kinds of mobile devices. As technology evolves, we have to ask whether those distinctions are even meaningful. Neuberger suggests that licensing should be articulated in terms of functionality. Agreements written in the past defined scope of rights in terms of the device, but now the scope of rights should be defined in terms of functionality. Gandhi, referring to his experience at Joost, noted that the focus should be on branding and functionality rather than screen size.

Going forward, when negotiating deals, distributors will want to secure all rights in all media.

There is also the possibility of longer term contracts to define the license based on external factors that will exist even in spite of technological change (i.e. target demographics.)

The Evolution of the Mobile Platform

Kopp noted that Vcast serves as an aggregator. She described the unique position of Verizon – it seeks to provide content to customers in any format that customers might want – so the company is simultaneously negotiating television, mobile and Internet rights. The goal is to give customers a uniform experience across screens.

Vcast is offered using carrier bandwidth. The service has some streaming and downloadable programs. From the perspective of delivery method, Vcast uses mobile bandwidth, and, vis-à-vis the discussion above, is clearly a mobile service. An app that uses WiFi, however, will be harder to describe as a purely mobile app.

The Sports Context

Malkani discussed some of the idiosyncrasies of delivering sports content on mobile devices. All leagues do not deal with rights in the same way – there are some national rights and some team rights, the latter of which serve internal markets. It is hard to know if the consumer can ever have a single, unified package in light of these different markets.

Malkani also noted that although mobile is a desirable new format, traditional television is still incredibly important for sports because fans want to see the action on the big screen. Furthermore, since sporting events are live, fans want to watch a game when it’s happening. Malkani explained a little bit about NBA’s developing mobile strategy. The app Gametime allows users to get scores, stats, and video highlights. There is also a ‘league pass’ that is offered through the Gametime app. Although previously the NBA had separate apps for the League and the team, now users will get league updates or team versions within Gametime – in other words the strategy shifted to allow for a single streamlined app, rather than a set of disaggregated apps. Verizon also has an NFL app that has been quite successful – Kopp credited the ‘front and center’ branding of the app – when a Verizon user looks through the icons on a phone’s display screen, the NFL symbol is clearly visible.

How Important Is the Screen Size?

Several of the panelists noted that older deals articulated the distinctions between devices in terms of screen size. Neuberger suggested that screen size might not continue to be as relevant.

Indeed, the importance of the labels given to different devices is a shifting one. For example, in the past the terms “TV” or “television” were equivalent to broadcast television, but as time went on, the definitions came to include cable networks.

TV Remains a Driving Force…

However, the screen size issue does still matter to a certain extent. As the big cable networks pay content providers large license fees, the networks want to make sure that these agreements are still valuable to them by ensuring the uniqueness of the content that they are receiving.

Some of the Difficulties of Mobile Deals

As previously mentioned, there is an overarching issue of how to define mobile devices and how to determine the rights required to distribute programming via those devices. Some contracts limit the definition of mobile to ‘cellular technology’ – but what about the increasing reliance upon WiFi networks? What about the phone versus tablet distinction? In general, contracts are also more likely to grant broadband rights rather than mobile rights.

Another important question concerns how to deal with territory restrictions on content. The whole point of a mobile device is that its owner takes it with him or her wherever he or she may go. How can companies ensure that restricted content stays within authorized territories? Do there need to be authentication license-keys?

Malkani explained that when the NBA launched a mobile app, the vendor incorporated a geofiltering device to make sure that the streaming complied with the geographical blackouts mandated by the different cable companies. When Malkani herself used the mobile app, if she were to be in LA in the morning, then the corresponding blackouts in the California market would mean that certain content would be unavailable on her phone. If she were to return to NY later that day, then the corresponding blackouts in the NY market would also be reflected in the content available on her phone.

Several panelists noted that content providers will also want to insure that the video is captive within the device, and cannot easily be acquired within the mobile context but watched on different screens. In other words, providers do not necessarily want to grant users mobile access to content if these users will simply be hooking up their phones to their televisions, and watching the content through the latter rather than their mobile devices.

Talent and Mobile Content

Gandhi noted that talent is now going directly to consumers through apps. He noted that the advantage of straight-to-consumer delivery is the allowance of preserving the rights needed to build a brand. There is also the desire, in the attempts to build a brand, to try to maintain as many revenue streams as possible; one is doing oneself a disservice in the age of television everywhere. Distributors want to make content available to customers in any way, but talent may want to divvy up the rights.

Furthermore, there are important distinctions based on the device, since the expectation will be that consumers will pay for mobile uses but not on the Internet.

There is also the sense that it may be better for talent to use short-form content in the mobile context – consumers want to see new and specially produced content. The NBA too looks strategically for potential other content beyond the games. Vcast however is moving towards long-form programming.

Where Is the Business Model of Mobile Video Going?

Neuberger suggested that as there is increasing pressure on companies to collect revenue from all of their interactive applications, there may be an approaching end to free, meaningful content, and hence, more rigorous pay models will emerge.

The panelists agreed that social networking would make its way into the mobile app context. Since consumer engagement is the ultimate goal, having ‘check-ins’ as a way to make television more social may increase consumers engagement with the content that they are purchasing.

The Changing Landscape of Film Distribution: A Digital Vision
Marc Jacobson, Entertainment Attorney, Marc Jacobson, P.C. (Moderator); Betsy Rodgers, Vice President, Legal and Business Affairs, IFC Entertainment; Jessica Nickelsberg, Director of Legal and Business Affairs, Tribeca Enterprises; John Logigian, Attorney and Independent Film Consultant, Isil Bagdadi, Co-founder and President of Distribution, CAVU Pictures.

The panelists began the discussion by explaining their work within the film distribution industry, with a focus on new and emerging modes of distribution.

Betsy Rodgers explained IFC Entertainment’s "festival stunt” partnership with film festivals. IFC acquires films at festivals (such as Sundance and SXSW), or immediately prior to the festival’s start date. Then IFC releases the film on VoD concurrent with the festival. Since IFC already had an established relationship with the cable companies, this creative turn seemed to be a natural step. These partnerships require IFC to establish a legal relationship with the festivals, and IFC must gain licensing rights to the trademarks, branding and intellectual property of the festival. Rodgers said these partnerships are valuable to IFC as a distributor, because the buzz from the festival can help to get viewers excited about the films. This arrangement allows the distributor to capitalize on the value created at the festival. Furthermore, many of these films would not be able to reach audiences otherwise. It is also a cost-effective process, because prints are incredibly expensive to create.

However there are also some complications with festival stunts.

Time Constraints: In the case of the Sundance Film Festival, IFC might already have acquired some films before the festival has begun. In that case, the delivery materials might have been received from the filmmaker prior. The difficult situation is when IFC wants to license films that have not been acquired before the festival. By the time the IFC team discovers what films are in the festival, the delivery materials might already be due in order to ensure a concurrent release on the VoD platform. In this case, there needs to be an incredibly quick turnaround – in papering the agreement, making sure the films are fully cleared (which can be a challenge since often filmmakers will only have festival rights to music in their films), and in ensuring that the film is fully finished and can be encoded in time to make it onto the VoD platform.

Psychological Hurdles: Filmmakers often dream of having their films get wide releases in theatres. Since most big theatre chains will not take a film that has been previously released on VoD, accepting such a distribution ‘stunt’ for the filmmaker may mean giving up certain expectations. Furthermore, if the primary release of a film occurred on the VoD platform, the film might be disqualified from the big awards races.

Financial Hurdles: Producers need to read their agreements. Low budget films will often contain a provision that allows the use of SAG actors at a low rate. If the film is not given a theatrical release, however, there might be significant penalties.

Jessica Nickelsberg next explained the evolution of the Tribeca brand. From the flagship Tribeca Film Festival, Tribeca Enterprises has recently launched a new initiative, Tribeca Films, a distribution arm which underlying mission is to get independent films out to a wider audience. Tribeca Films distributes on a variety of platforms; in theaters, online, on DVD, and on demand.

Tribeca also has its own version of the festival stunt. During the 2010 festival, Tribeca Enterprises launched “Tribeca Film Festival Virtual,” a digital festival experience. For one week during the festival, viewers could (at the price of $45) go and watch eight feature films online (otherwise only available at the festival), at an encrypted site.

John Logigian focused on broader distribution trends within the industry. Traditionally it has been the ancillary markets (i.e., home distribution) that have been the big money earners. The profit margin is much greater in the home entertainment sphere than it is in the theaters. However, home entertainment is becoming less profitable for the studios. Now that delivery is digital, (whether digital streaming or downloading), there is no longer the ‘packaged goods’ element (i.e. selling of DVD’s at a retailer). Profit margin was much greater in the packaged goods market.

An upside of the digital revolution has been digital projection. Digital projection allows a reduction in the enormous cost of manufacturing and shipping of prints. Certainly there is a cost to convert to digital projection, but it is possible that companies will help theaters underwrite the costs of digital projection. Another notable development has been the spectacular growth of 3D.

Isil Bagdadi focused upon the growth of the DIY (do it yourself) movement in film. Her major concern was that filmmakers are losing ownership rights to their works by entering into certain agreements with distributors. Her concern with the festival relationships described above is that if festivals get into the distribution game, will there be favoritism in programming at the festivals themselves?

Bagdadi championed a ‘services deal’ agreement, in which a distributor gets a fee for providing the services of distribution, but does not get ownership rights. Bagdadi also suggested the possibility of self-distribution.

In response to Bagdadi, Logigian brought up some counterarguments to the benefits of the DIY approach. Although it looks great on paper to retain ownership rights, it is the distributors who have leverage in the ancillary marketplace – and most revenue comes from the ancillary marketplace rather than from the theatrical release.

The panel as a whole engaged in a discussion of the different types of financing arrangements for independent films. Investors will have different expectations and different risks depending on where their money is going. If investors are putting in money for marketing, then they will be the first individuals to be repaid. Investments in production, however, hold a different kind of risk profile.

The panel also discussed the option of bifurcating the investment (i.e., various parties investing money for production and marketing), which might allow the filmmaker to get a better deal. Logigian noted that the foreign pre-sales market (selling a film to distributors overseas before the film is made) has largely dried up except for the biggest-name films. The panel also briefly touched upon the value of getting a high net worth individual to put equity into a film if studio financing is not a possibility. Jacobson also mentioned the option of state tax credits as a means of filling gaps in the financing of a film, and providing early capital for a marketing or festival campaign.

How to (Legally) Make an App for That - Dealmaking in the Mobile Media and Gaming Arena
Kenneth N. Swezey, Esq., Managing Partner, Cowan DeBaets Abrahams & Sheppard, LLP (Moderator); Hayley Geftman, Esq., Vice President, Business and Legal Affairs, MTV Networks; Sam Howard-Spink, Clinical Assistant Professor of Music Business, NYU; Amy Lauren, Esq., Vice President, Digital Legal & Business Affairs, EMI; Stephen Sternschein, Esq., Founder, Heard Games; Artist Manager, Heard Games

Sam Howard-Spink began by discussing some sweeping trends. He noted that in the first half of 2010, between 2.6 and 2.9 billion dollars were spent on content (excluding consoles, controllers and other devices). Spink also noted the importance of the growing phenomenon of “in-app” purchasing; once a consumer is inside the app, the consumer makes a further purchase. Spink suggested that when a consumer has taken the effort to spend a few dollars to buy the app, the consumer is more likely to go spend more money on content within the app itself. Spink also noted the different ways that music can be used within app games: original compositions, the use of existing music licensed into the game, rhythm action games (i.e. Guitar Hero), and generative games (the user creates music in real time by using a set of protocols – although such games might pose greater licensing issues).

What Is the Best Business Model For An App?

Geftman noted that apps have had an increasing presence at MTV for the last few years. MTV has been involved in the apps world in different contexts: distribution of content to third party apps, creation of paid apps, free apps surrounding certain temporal awards, and ad-supported apps.

Sternschein noted that at Heard Games, apps are being built and designed to engage and monetize a particular brand. In other words, each app has a unique and specific approach on a band-by-band basis. Sternschein hopes for the growth of artist-based apps as a means to re-contextualize and repackage music in the digital environment. Apps may play a role in integrated marketing campaigns promoting artists.

Lauren noted that at BMI, apps are still a hybrid form. Certainly many apps are getting traction, and sometimes these apps are tied into the overall strategy of an album release.

Then the audience had some fun as Spink showed a few apps, including the Gorillaz app (BMI), Shinobi Ninja Attacks (Heard Games), and Bloom – a generative game. These apps are just a few examples of a new approach in the music industry. These games create a narrative framework, which is in turn tied to music and lyrics, and reward users for interacting with the content that is being promoted.

Licensing Issues:

a) Costs There are different costs associated with the development of apps depending on the level of involvement – if creating a highly customized app, the process might be quite expensive. There has to be a developer deal in place, in addition to due diligence review on all of the content going into the app. Geftman noted that there must be clear language about merchandising and marketing within app agreements, since apps generally will be tied to MTV’s content.

b) Artist Concerns v. Developer Concerns When working with a developer on an app, the primary concern of the artist will always be: what is the scope of the intellectual property rights being given away? Will use of the song be limited to one app? Developers, on the other hand, are trying to get as many rights as possible.

c) Licensing to Different Devices As previously discussed by the Mobile TV panelists, there is segmentation in the current licensing schemes – different rights are granted for mobile, television and Internet (and apps may be used in any of these contexts). Therefore rights owners must be very specific about the rights they are granting to developers.

It is possible that a ‘new creature’ might come about – that of the music game, in which music and coding is treated as a single creative gesture. Such an evolution of the app might be an alternative to the segmentation of rights.

App Developer Agreements

Geftman stressed that the developer agreement should stipulate that apps are being created as works for hire. The developer will own his or her own source code, but anything being built for the content provider, will remain the provider’s property. In general, the panelists concurred that there should be a flat fee, such that at the point of delivery the process is completed. BMI’s Amy Lauren noted that the app developer agreement has many similarities to a standard software development agreement.

There is also an understanding that terms of use and privacy terms need to be placed on the launch page, otherwise this information may be hard to fit into the app.

The Apple Deal

Although typically when dealing with Apple, content providers will serve as the retailers, in the context of apps, EMI or MTV may serve as the retailer. This arrangement shifts the risk from Apple, and is in some sense new terrain for record labels based on previous relationships with Apple. As a retailer, the content provider will face consumer issues, tax implications, and territorial issues. Although Apple has an end-user license agreement for retailers, this agreement may not address all of the issues relevant to the app. It can be difficult to renegotiate the terms of a developer agreement with Apple. Yet in the case of an independent entity (such as Heard Games), since there is less of a potential financial gain at stake, Apple may be more flexible with the types of marketing it allows.


November 30, 2010

Harper v. Maverick

By Barry Werbin

The news of the moment is that yesterday, Nov. 29., the U.S. Supreme Court denied cert. in the Harper v. Maverick case, which had raised the question of whether the Copyright Act's innocent infringer defense could apply to when a person downloads digital music files so as to further reduce the minimum statutory damages award below the $750 threshold per work infringed to as little as $200 under 504(c)(2). The Fifth Circuit had held that Section 402(d) foreclosed application of the innocent infringer defense because it provides that if a copyright notice "appears on a published phonorecord or phonorecords to which a defendant had access...then no weight shall be given to...a defendant's interposition of a defense based on innocent infringement in mitigation of actual or statutory damages."

Justice Alito, however, filed a dissent, which can be accessed here for anyone interested: www.supremecourt.gov/orders/courtorders/112910zor.pdf. He noted that Section 402(d) is limited to "phonorecords," which the Act defines as including only "material objects." He argues that this Section was adopted in 1988, long before the digital revolution, and a person who downloads a digital music file does not and cannot see any copyright notice. In such a case, he argues (as did the District Court that was reversed by the Fifth Circuit) that the defendant (here, 16 years old) should have the opportunity to establish that she was not aware of or did not have reason to believe she was engaging in illegal infringing activity. The Fifth Circuit interpreted 404(d) as only requiring that the original phonorecord display a copyright notice, and that an infringer could have ascertained the work was copyrighted. Justice Alito wrote that "The Fifth Circuit did not specify what sort of inquiry a person who downloads digital music files is required to make in order to preserve the §402(d) defense, but it may be that the court had in mind such things as research on the Internet or a visit to a local store in search of a compact disc containing the songs in question."

January 10, 2011

UMG v. Augusto

By Barry Werbin

In another case testing the bounds of the first sale doctrine, on Jan. 4, 2011, the Ninth Circuit upheld a district court's decision that a record label's printing of a restrictive stamp on promotional CDs that the CDs could not be re-distributed did not create a license agreement, such that promotional CDs can be resold under the first sale doctrine without further permission from the record label. The decision in the case, UMG vs. Augusto, can be accessed here: http://www.ca9.uscourts.gov/datastore/opinions/2011/01/04/08-55998pdf.

The case was filed in 2007, when Universal Music Group (UMG) sued a California resident, Troy Augusto, who sold promotional CDs on eBay. Promotional CDs are given away by record labels to "music industry insiders" to provide publicity and exposure for upcoming commercial releases of new CDs. In 2008, a district court ruled against UMG on the ground that the promo CDs were gifts under federal law and that the terms under which the CDs were furnished were consistent with ownership, not a license. Augusto, who was not a music industry "insider," acquired promo CDs from music shops and online auctions, then resold them on eBay, advertising them as "rare collectibles not available in stores."

The Ninth Circuit held in pertinent part: "Because the record here is devoid of any indication that the recipients agreed to a license, there is no evidence to support a conclusion that licenses were established under the terms of the promotional statement. Accordingly, we conclude that UMG's transfer of possession to the recipients, without meaningful control or even knowledge of the status of the CDs after shipment, accomplished a transfer of title." The court noted that "nothing on the packaging of the Promo CDs or in the licensing label requires that the recipient return the Promo CDs to UMG" and "UMG receives no recurring benefit from the recipients' continued possession."

Further supporting the concept of a "gift" is The Postal Reorganization Act, which prohibits "the mailing of unordered merchandise" without "the prior expressed request or consent of the recipient." The court found that under this statute, such unsolicited materials "may be treated as a gift by the recipient, who shall have the right to retain, use, discard, or dispose of it in any manner he sees fit without obligation whatsoever to the sender." UMG, however, argued that The Postal Reorganization Act applied only to "consumers", and record industry insiders were not "consumers." Nevertheless, in what appears to be a novel interpretation, the court deemed such insiders as the equivalent of "consumers", because "music industry insiders consume the Promo CD just as any other purchaser would, by listening to it. The reason these insiders are selected to receive the Promo CD is because they are not just consumers, they are consumers with influence."

Significantly, just a few months earlier, the Ninth Circuit went in the opposite direction when it decided the long awaited Vernor v . Autodesk case, in which it held that various "license" terms accompanying software - in that case the popular AutoCAD program - which restricted its transfer or lease, did not convey "ownership" of the particular copy of the software purchased by an end user. As only the "owner" of a particular "copy" of a copyrighted work may resell it under the first sale doctrine, one who only possesses but does not own a particular copy of software cannot resell or further distribute it without violating the rights of the copyright owner.
Without mentioning the Vernor case, the UMG Court contrasted cases involving computer software: "Unlike the use of software, which necessitates a license because software must be copied onto a computer to function, music CDs are not normally subject to licensing. Therefore, the benefits of a license for software do not exist under these facts."

February 23, 2011

A Friday Night: Reflections on the Critiques of "Would the Bard have Survived the Web?"

By Mary Rasenberger

The excellent op-ed entitled "Would the Bard have Survived the Web?," written by Scott Turow, Paul Aiken, and James Shapiro (the Authors Guild's President, Executive Director and a member, respectively) and published in the New York Times on February 15th (available at: http://www.nytimes.com/2011/02/15/opinion/15turow.htm?_r=2), generated numerous responses and a great deal of controversy in the blogosphere. The op-ed took a look at the golden age of English theater in the late 16th and early 17th centuries when there was "a wave of brilliant dramatists", and described how the erection of walls around theaters (literal pay-walls) allowed theaters to charge theater-goers, which enabled playwrights and actors to get paid by the public for the first time, rather than only by patrons. When authorities knocked the walls down in the mid-17th century to silence the seditious political ideas they feared were being expressed within, the ability to make a living from playwriting came to an end for a time and so did the "explosion of playwriting talent." The article warned that if we allow the copyright system we currently have in place to crumble under prevailing attitudes and internet piracy, the explosion of creative talent we have today may likewise dwindle. A number of letters to the editor and blogs have criticized the op-ed and used it against copyright law generally. The primary arguments can be summarized as follows: (1) there was no copyright at the time of Shakespeare, so clearly money can be made without copyright, and (2) Shakespeare copied from others, showing that copyright law restricts rather than induces creativity.

The first point does not even merit a response, since the op-ed authors themselves describe how copyright developed a half century later, providing a new, more stable way for authors to make a living. The second point belies a complete over-simplification and misunderstanding of U.S. copyright law. Incorporating elements of a prior work into one's own is not necessarily infringement and has always been part of the creative process. Copyright law, as construed by the courts, has long-since accommodated this process through, among other doctrines, the substantial similarity test, lack of protection for ideas, facts, common expression, and scènes a faire, the fair use doctrine, and for older U.S. works, formalities that put a large number of works into the public domain, as well as the almost 80 pages of exceptions and limitations in the Copyright Act. As a copyright practitioner, rarely a day goes by when I don't tell a client, usually a copyright holder, that it is free to use elements of another's work in some manner or another. While the courts don't always get copyright right, they often do, and through the last two centuries they have demonstrated enormous flexibility in their applications of the copyright law as technologies have shifted, including expanding fair use considerably in a manner that reflects evolving practices and technological advancements.

While the analogy to Shakespearean theater in the op-ed was imperfect, as most analogies are, the point of the article was clear and an excellent one - that "a rich culture", such as we now have requires a large number of creative individuals - "authors and artists", who devote their careers to their art. Indeed, our Founders were wise enough to understand that a true democracy requires a proliferation of free expression, that individuals not be beholden to any patron including the government, and that this can only be achieved by allowing professional creators to earn money from their works on the open market. Copyright is a brilliant way to achieve that end. The Shakespearean era theater grew out of the literal pay-wall described in the op-ed; our vast, prolific culture today has largely grown out of copyright law, a legal pay-wall.

The Guild's op-ed acknowledges that there is a place for free creative work online; and certainly there are those who will create for free, as many of the responses also point out. Indeed, many professionals who make a living from their works often will produce, perform and/or distribute works for free for any number of reasons (marketing, friendship, philanthropy, or the desire to see a particular work "out there"). Copyright gives creators the flexibility to do that - to decide when they want to assert their rights. Yet that is not what the op-ed is talking about; rather, it reminds us that copyright law enables artists and authors to make a living and is why we have the tremendous creative output we have today -- just as the theater's literal pay-wall was key to the creative burst in the theater in Shakespeare's time.

Let me give you a concrete example. Friday, after finally having acknowledged that my son was too sick to join my husband skiing, I cancelled our plans and we found ourselves with a delightfully free weekend ahead of us. I worked late and, among other things, read posts critiquing the op-ed forwarded to me by my co-teacher at Fordham Law (of a seminar "Copyright Reconsidered - Authorship in Historical Perspective"). Pondering the posts, I signed off and decided to indulge myself for the rest of the evening: I went to the gym and watched a movie on TV. As I later realized, it had been a truly indulgent evening -- over the next four hours my two kids (ages 13 and 14) and I had consumed millions and millions of dollars' worth of copyrighted works.

First, my daughter and I listened to the radio on the way to the gym, switching stations to find songs one or both of us liked; we heard some hard rock that was too hard for me, the Rolling Stones, Pink Floyd, and Rihanna (my choice --over her eye rolling). At the gym, she listened to her iPod, with a collection of about 2000 songs -- post-1990 alt-rock, punk rock and hard rock (all legally downloaded). I watched and listened to music videos licensed by the health club chain. I surfed between 6 or 7 stations, including dance, top hits, rock, alternative, rap, and whatever was playing songs that would keep me moving, some of which were creative and fun - lots of great choreography, dancing and/or special effects. On the way home, we listened to Evanescence (I'd been watching one of their videos when my daughter came to find me and we started to talk about it), and an Angels and Airwaves song that my daughter had heard in the locker room and wanted me to hear, on her iPod. She also played me a Blink 182 song and another sister band of Angels and Airwaves to compare the music.

At home, my son suggested I watch the "The Other Guys" on video-on-demand (a superb, hilarious movie). He listened to his iTunes songs (a collection of pre-1980 rock, also legally downloaded) on the computer while playing Wii Ski (which has wonderful artwork - it makes you feel like you are there on the powder covered mountain). He also watched the George Lopez sitcom simultaneously while checking out interactive ski trail maps. My daughter took pictures on her digital camera of our new kitten, then edited them and added special effects using iPhoto and Picnik software, chatted with friends on Facebook, texted others, all while listening to her iTunes collection on her computer. Then, we all got into bed and read - different books. (I read Just Kids by Patti Smith - a testament to the artistic soul and the difficulties creators experience for their art. Thanks to copyright, Smith's and Mapplethorpe's days of privation when "just kids" paid off and they both were eventually able to make a living off of their art.)

As spoiled as we are with an abundance of creative content, our activities on Friday evening were not completely atypical for Americans. I am sure that even those who object to copyright laws and believe that somehow art gets produced without it, also have iPods full of songs, watch TV and movies, read books, and rely on a large assortment of software programs, and would feel deprived without this "content."

The reason why I describe all this is because it's important to bear in mind that it took hundreds of professional creators who work full-time honing their art so that we can enjoy it to produce what the three of us consumed in just one evening. At a minimum, the following full-time creative professionals were involved in creating our evening at home, most of whom you can assume need to earn a living:

• Recorded music: performers (lead and side musicians) and song writers for about 50 songs, amount to at least several hundred people.

• Music videos: recording artists, professional dancers (hundreds among all the videos), choreographers, sound engineers, directors, cinematographers amount to several hundreds of people for all of the videos combined.

• Movie and TV: screen writers (probably several for just the movie), actors (who clearly added some of their own creativity/improvisation), directors, editors, cinematographers, special effects artists, sound artists. Don't forget the scores and accompanying background music, which are in addition to the music listed above.

• Wii Ski: visual artists, computer programmers -a couple dozen at least, I'd guess.

• Computer programs (iPhoto, Picnik, digital camera, cell phone, interactive maps, Facebook ... among others) - involving dozens, if not hundreds of people

• Books: Each one probably took the author the equivalent of at least one year (and probably much longer) of full-time work, plus there may have been ghost writers, and editors likely played a creative role.

All of those people make a living doing their work and had to get paid (in most cases, not a heck of a lot but enough to make a living) - before the big bad media companies who are, according to some, ruining the world with copyright, made a cent of profit. Although I paid for every item of content where payment was required, my amortized costs for our evening were maybe $20.

How fortunate we are. We have access to so much wonderful and creative art that brings us together in the ways we share and experience it. Yet we take all this content and the shared experiences it provides us for granted. Try to imagine our lives without music everywhere we go, TV, movies, books, newspapers and software. (What if we didn't have music, movies, TV, and books to share and talk about with our teenage kids? The arts afford so many opportunities for sharing thoughts, feelings and learning - and the kids don't even realize it!) The reason that we are able to have access to an abundance of really great content is that we live in a country with so many creative people who have devoted their lives to their art -- and they can do so because we have copyright laws that work.

What if we couldn't support professional creators anymore because no one could afford to pay them - which, as the Authors Guild op-ed warns, could happen if it becomes impossible to make money on content because everyone is stealing it online? The op-ed authors' point is that we, as a culture, have been lulled into taking that kind of creative output for granted, but there is no guarantee it will continue. While it's certainly true that there will always be people who will create regardless, do we really want to rely on the creativity of kids, academics, moonlighters and retirees, or, blogs for our culture? Without copyright, we certainly wouldn't have anyone to underwrite the significant costs of creating film, videos, computer games or software - so just say good bye altogether to those arts. There are few creators who could afford the time to write a book, write or record original music, or choreograph if they had to find other ways to make a living.

Copyright propelled a huge explosion of creative output in America. The production of our creative works is so vastly more complex than any patronage system could muster, even if we were willing to give up expressive and artistic freedom - which we are not. Furthermore, creativity is one of the things we are really good at in this country. We excel at teaching our kids to think creatively in and out of school, and as a society at large. As a result, copyrighted works are one of our largest exports. Let's celebrate that creativity. Let's not let rhetoric and the imperfections of current copyright law diminish it. Rather, let's learn from the past and help steer copyright law so that it continues to morph to accommodate the evolving technologies and practices of our arts today.

September 5, 2011

The Comprehensive Guide to Reclaiming Old Masters

By Steve Gordon, with assistance from Nari Roye

'Legacy' recordings, or reissues from the vast catalogs of Sony, EMI, Warner and Universal and their associated labels such as Epic, Columbia, Capitol, and Atlantic, are still a huge business for major labels. According to Billboard, as of the first half of 2011, sales of catalog music accounted for 47% of all album sales and 60% of track sales. Spotify's top 50 albums contain many compilations with older titles including The Essential Michael Jackson, Fleetwood Mac's Rumours, 100 Hits of the '80s, and The Essential Journey. Yet most of the income from these sales accrues to the benefit of the record companies, rather than the artists or their estates, because the labels only have to pay royalties after fully recouping production and marketing costs, and recoupment occurs at the artists' royalty rates.

This means that the labels are making money even if the artist has not earned enough to repay the labels' expenses. Sales of legacy records is a huge factor in keeping the majors afloat as they continue to suffer from competition from free music made possible by illicit websites. The demographic for legacy recordings tends to consist of older fans who are not as adept at using the internet to collect free music downloads or are more apprehensive of the legal consequences than their children.

Meanwhile, income from recorded music has plunged to approximately $6 billion from more than $14 billion over the past decade, in large part because of unauthorized downloading. As this downloading is oftentimes skewed towards newer releases, the record labels have become disproportionately dependent on sales of older recordings.

Artists' Right to Terminate

Under the Copyright Act, classic albums by Bob Dylan, Billy Joel, Van Halen, Talking Heads, AC/DC, and many others will begin to be subject to 'termination'. Termination also applies to a vast number of less famous recordings, starting with those produced in 1978. This could have a significantly negative economic impact on the labels.

The 1976 Copyright Act includes a "termination right," which cannot be contractually given up, which allows the original content creator to "reclaim" the copyright on his or her works. Congress recognized the disparity in bargaining power between creators and assignees, usually corporations, and provided a practical compromise that would recognize the interests of both sides. In addition, the termination right acknowledges the impossibility of determining the value of a work until it has been exploited. Ideally, artists would have the opportunity to sign better deals after the value of their works are recognized.

What This Means to the Songwriter and Artist

In regard to the music business, this means that songwriters and artists are entitled to recapture the rights in their songs and records, even though they previously granted exclusive rights to music publishers and record labels.

Authors of songs and sound recordings produced after January 1, 1978 can terminate a transfer in two ways: (1) the sooner of 35 years after 'publication' (that is, commercial release) or (2) 40 years after the date of the contract (songs written prior to 1978 may also be subject to termination, but the rules pertaining to that are beyond scope of this blog).

The reason this issue is important now is because the 35 year period will be coming to an end in 2013, and many artists/songwriters have already given notice of termination (the law requires, as discussed in the last section of this article, authors or their successors to provide at least two years notice prior to the year of termination, but not more than 10 years.) If recording artists or their successors can recapture rights in their records, it is now easy to distribute those records at almost no cost through the internet.

Now, the Hard Part Begins

This blog focuses on the hurdles that recording artists, their successors or estates will have to jump over in order to take advantage of termination rights. It also addresses how the record companies will try to prevent the artists from doing so.

There are two major obstacles confronting artists in terminating the transfer of rights in their records to the record companies:

(1) Termination rights only apply to records that were not created as 'works for hire,' and
(2) the artist may not have been the only author of the recording.

Some Legal Nitty-Gritty: The Work for Hire Issue

Standard recording contracts almost always state that any records made pursuant to the agreement are 'work for hire.' This would make the record company the 'author' of each record and the artist would have no right to terminate his or her grant of rights to the label. However under the law, these clauses may not be valid or enforceable.

There are to date no cases on this point. Traditionally, the labels hedged their bets by inserting an additional clause that if, for any reason the recordings were not deemed to be a work for hire by a court of competent jurisdiction, then the artist agreed to assign all of his or her rights, including the copyrights in the recordings. However, under the latter provision, the artist would have the right to terminate because an assignment is considered a 'transfer' under the Copyright Act, and the termination provision applies to transfers.

Section 101 of the Copyright Act defines a work for hire as follows:

(1) a work prepared by an employee within the scope of his or her employment; or

(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

In 1999, the recording industry, represented by the Recording Industry Association of America (RIAA), tried to insert sound recordings into subsection (2) by including the words "as a sound recording" after the words "audio visual work". The RIAA actually did temporarily succeed in inserting this change in a 'technical amendment' to a bill called the Satellite Home Viewer Improvement Act of 1999, thus conferring full authorship of those recordings on record companies rather than recording artists if the recording agreement stated that an artist's services were provided on a work for hire basis.

The amendment had no connection to the subject matter of the bill, which concerned statutory licenses applicable to retransmission of television signals. It was also not included in prior drafts of the bill, but rather crept in at the last moment. According to press reports, this amendment (which clearly served the interests of record companies) was drafted and shepherded through Congress by a particular legislative aide, who, shortly after its adoption, accepted a position as a lobbyist for the RIAA. With neither analysis nor debate, the amendment was accepted by both houses of Congress and signed into law by President Clinton.

When outraged musicians and scholars discovered that the substantive law of copyright had undergone this dramatic change, the reaction was swift, loud, and overwhelmingly disapproving. Reeling from the bad press, Congress held a brief hearing, during which Sheryl Crow and Don Henley testified, and retroactively repealed the amendment.

Notwithstanding Congress' repeal of sound recordings in subsection (2), it is likely that the record companies in a court battle would still contend that sound recordings are covered by subsection (2) because each recording an artist makes can be considered to be a contribution to a collective work as a compilation, that is, an album.

In fact, many recording agreements include language describing an artist's performance "as a contribution to a collective work", one of the listed categories. Record labels would argue that each individual sound recording of a musical composition is a contribution to the collective work or compilation, that is, the finished album and, thus, a work made for hire. Artists may contend that each individual sound recording stands by itself and is only incidentally compiled into a collective work as one of its uses. They would also argue that an album is no more of a compilation than a novel with multiple chapters.

Of course they could also argue that if Congress intended to include sound recordings in subsection (2), it would have not have retroactively deleted sound recordings after inserting them in 1999. However, the RIAA was able to insert in the Copyright law that the fact of the repeal of sound recordings from subsection (2) would not establish that sound recordings were not works for hire.

Since the second part of the definition of work for hire may not include sound recordings, in order for record companies to deny artists their right to termination, they may also argue that artists were 'employees' rather than independent contracts. The determination of whether an individual is an employee for the purposes of the work made for hire doctrine is determined under the common law of agency, in which a court looks to a multitude of factors to determine whether an employer-employee relationship exists. In the Supreme Court case affirming that the common law of agency should be used to distinguish employers from independent contractors in the work for hire context, Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), the Court listed some of these factors:

In determining whether a hired party is an employee under the general common law of agency, we consider the hiring party's right to control the manner and means by which the product is accomplished. Among the other factors relevant to this inquiry are the skill required; the source of the instrumentalities and tools; the location of the work; the duration of the relationship between the parties; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party's discretion over when and how long to work; the method of payment; the hired party's role in hiring and paying assistants; whether the hiring party is in business; the provision of employee benefits; and the tax treatment of the hired party.

Under these criteria, most sound recordings would not seem to be works for hire because most record companies generally do not control artists when the latter is in the studio making a record. In addition, artists almost never receive employee benefits, don't record on company premises, and record companies generally do not withhold payroll taxes from any advances or royalties. The labels, however, may argue that the artists were in fact employees because the record companies usually have the right to approve the songs artists record, they control the studio time for the recording, have approval rights over what was recorded, and in what studios the artists could record. On the other hand, some experts contend that the labels may be reluctant to make the employee argument, because if artists were found to be employees, the labels may be responsible for paying back taxes. Indeed, most recording agreements specifically state that the artists are not employees.

Second Problem: The Artist May Not Be the Only Author

Even if the artist is not an employee and is entitled to terminate his or her grant of rights in the recordings to the label, there is another important issue that must be considered. Producers may be considered as authors too. This is because they don't necessarily act at the direction of the label or the artist (although they usually enter into work for hire agreements, in which case they would not be considered to be authors). Absent a work for hire agreement, producers are often an integral part of the creative process, and may be deemed to be "joint authors." Therefore an artist who notifies his or her record company that he or she is terminating the transfer of rights in any recording to the company may have to sort out a new deal with the producer prior to exploiting the re-captured recordings or risk a lawsuit by the producer. In addition, if an artist had to battle a record company in court, the artist may first have to seek the cooperation of the producer, as one of the issues in such a court battle would be whether the artist was the sole author.

It is also possible that audio engineers and session musicians may have a claim of authorship, but these would be harder cases to argue, as they generally work at the direction of others, taxes are usually withheld and they may well be considered to be employees. The RIAA warns on its website that if recordings are not considered to be works for hire "all collaborators on a sound recording ... would be in competition with each other and commercial exploitation ... would be impossible without the agreement of all of the collaborators, to the detriment of both artists and consumers." As we discussed, though, sound engineers and session musicians would probably not qualify as authors.

What Happens Next?

Many experts think that there will be multiple settlements between recording companies and artists, whereby the artists get additional advances for legacy recordings by waiving their rights to terminate, and the record companies try to avoid court battles that could backfire if they lose. According to the New York Times ('Record Industry Braces for Artists' Battles Over Song Rights' by Larry Rohter, August 15th, 2011), "Given the potentially huge amounts of money at stake and the delicacy of the issues, both record companies, and recording artists and their managers have been reticent in talking about termination rights."

The article quoted a record company executive as stating that there are significant differences of opinion among the big four, which has prevented them from taking a unified position. "Some of the major labels," he said, "favor a court battle, no matter how long or costly it might be, while others worry that taking an unyielding position could backfire if the case is lost, since musicians and songwriters would be so deeply alienated that they would refuse to negotiate new deals and insist on total control of all their recordings."

In the absence of a definitive court ruling, some recording artists and their lawyers are talking about issuing termination notices, eventually distributing the recording themselves, while daring the record companies to stop them. "Right now this is kind of like a game of chicken, but with a shot clock," the Times quoted Casey Rae-Hunter, deputy director of the Future of Music Coalition, which advocates for musicians and consumers. "Everyone is adopting a wait-and-see posture. But that can only be maintained for so long, because the clock is ticking."

According to noted copyright scholar David Nimmer, a legislative solution would be best solution, but until then the courts will decide on a case by case basis.

The Steps Artists Need to Take Right Now

Whatever the ultimate result, here are the actual steps that artists, their successors or estates need to take to initiate termination of transfer of rights in records:

Who Can Terminate

If the artist is deceased, his or her "statutory successor" can terminate. The statutory successor is the surviving spouse, or surviving children or grandchildren. If none of them are alive, the author's executor, administrator, personal representative, or trustee can terminate. If the artist is a band or group, termination requires a majority vote of the joint authors or their successors.

When Notice Must Be Served

The artist or statutory successor may give notice of termination no less than two years and no more than 10 years before the date that the transfer will terminate.

Content of Notice

The notice must be in writing signed by the owner(s) of the termination interests or by their duly authorized agents, and must state the effective date of the termination. The notice must also comply, in form, content, and manner of service, with requirements that the Register of Copyrights.

To Whom Should They Send Notice

The notice must be served upon the grantee (i.e., the label with whom the artist contracted) or the grantee's successor in title. A copy of the notice must also be recorded in the Copyright Office before the effective date of termination, as a condition to its taking effect.

Congressional Debates

The New York Times recently reported that John Conyers (D. Mich) is proposing legislation that would clarify that artists can terminate their grant of rights in their recordings to record labels. The Times article commented, "With years of costly litigation looming, groups that represent the interests of recording artists and songwriters said they found Mr. Conyers's remarks encouraging. But given the issue's legislative history any amendment process in Congress is likely to be long and complicated."

I agree with this and would only add that although many experts have already suggested federal legislation would be a good solution to the ambiguous state of the law as discussed above, any such legislation would have to be very delicately drafted to address the interests of possible co-authors including producers.

Steve Gordon is an entertainment attorney and author of The Future of the Music Business (Hal Leonard 3rd ed. 2011) who would like to express his appreciation to Nari Roye, Esq, who assisted in writing this article. A version of this blog was originally published by digitalmusicnews.com on Monday, August 29, 2011.

September 18, 2011

EU Extension of Copyright Term to 70 Years

By Nili Wexler

On September 12th the Ministers of the European Union voted to extend copyright protection for performances of recorded music to 70 years from the date of the original recording. EU member states will have two years in which to incorporate these changes in their national legislation.

Voting with the 17- member majority were the United Kingdom, France and Spain. In a press release, the EU elaborated on its reasoning: "[p]erformers generally start their careers young and the current term of protection of 50 years often does not protect their performances for their entire lifetime. Therefore, some performers face an income gap at the end of their lifetimes." (http://www.nytimes.com/2011/09/13/business/global/eu-extends-royalty-protection-to-music-performers-and-producers.html?_r=1.)

This decision comes after a two-year long struggle by major record labels and by artists such as Paul McCartney and Cliff Richards, who sought to protect their rights in their works which would have otherwise expired in their lifetimes. These artists, along with other star artists of the 1960s, were due to lose copyright protection in their music. In the United Kingdom, the ruling is being termed "Cliff Richards' Law", as Mr. Richards led the campaign when his 1958 hit "Move It" lost its copyright protection. Joining Mr. Richards and Mr. McCartney were nearly 40,000 other musicians.

The copyright extension presents a windfall for a music industry that has faced decreasing revenues since digital music downloading, and who anticipate increased revenue from this extension. Last year, global sales of recorded music fell by nine percent to $15.9 billion. Notably, advocates of the amended law were unsuccessful in gaining an extension to the 95 year term used in the United States.

Musicians and music company executives have greeted the extension with elation. Opera singer Placido Domingo welcomed the extension as "great news for performing artists." (http://www.ifpi.org/content/section_news/20110912.html.) Francis Moore, the chief executive of IFPI, cited the improvement of "conditions for new investment in talent as a benefit that will accrue to both record companies and new artists who now enjoy a prolonged copyright period." (http://www.ifpi.org/content/section_news/20110912.html.) Supporters of the extension have expressed that it reflects a new fairness in the recognition of performers as crucial to a song's success by narrowing the gap between the protection extended to performers and the composers and authors of the songs.

IMPALA, the Independent Music Companies Association, argues that the extension will be particularly favorable for smaller record labels and artists. Helen Smith, executive chair of IMPALA claims, "Those most affected by the extension will be [the] hundreds of thousands of individual artists and performers, as well as thousands of micro, small and medium-sized companies...at a time when certain interests seek to weaken copyright for their own purposes, this sends a vital message that the right of creators to earn a living is taken seriously by the EU." (http://online.wsj.com/article/BT-CO-20110912-709354.html.)

Further, the new law includes the so-called "use it or lose it clause" to afford additional protection for the artists. This clause provides a springing copyright to artists if music companies that otherwise own the copyright fail to market the recording within "a reasonable period of time."

Not everyone is thrilled about the new law. In opposing the extension, EU member state Belgium argued that the move would largely benefit music producers over struggling musicians and artists. Belgium was joined by some industry observers in questioning how widely the benefits of the extension would be distributed. For example, Steve Gordon, a music attorney in the U.S., similarly cautions that the move may benefit recording companies, "superstar" artists who own their own recordings, and those who managed to negotiate a larger than normal royalty agreement, but that "it will probably offer little help to lesser-known artists." (http://www.digitalmusicnews.com/stories/091111eu.)

The argument that the move is simply a boon for recording companies who will not extend these benefits to artists was echoed by Shane Richmond, a writer for The Telegraph. He argues that recording companies clearly are not concerned with the best interests of their artists, and cites the U.S. termination rights issue as an example. A 1976 amendment in the U.S. (made law in 1978) allowed artists to reclaim their rights in recordings after 35 years. Some artists may begin claiming these rights in 2013, and Richmond asserts that what is expected is "that the record labels will argue that these artists were 'work for hire' and therefore not entitled to their rights back. Labels like to talk about the rights of artists until the artists' interests' conflict with their own. How will the IFPI spin this argument? We'll see soon enough." (http://www.telegraph.co.uk/technology/news/8759524/Will-copyright-extensions-ever-end.html.)

Some critics went so far as to attempt to block the extension. Chris Engstrom, along with 40 other members of the European Parliament asked the EU for a review of the recent decision, but their request was denied. Engstrom criticized the extension as an effort to "keep the various lobbyists for big business happy, in this case the big record companies that own the rights to 80 percent of all music that has been recorded in history. If the copyright term extension goes through this week, they will be very happy with their politicians who delivered." (http://www.pcworld.com/article/239533/pirate_politician_calls_for_block_on_eu_copyright_extension.html)


October 4, 2011

Copyright Termination Rights: The Looming Battle for Music Industry

By Lesley Chuang

2013 is going to be a big year for the music industry.

An amendment to the Copyright Act in 1976 gave musicians and songwriters the ability to unilaterally terminate any previous grant of transfer or license of copyright after 35 years. Since the amendment went into effect in 1978, the first set of copyright grants governed by the Act will become eligible for termination on January 1, 2013.

In the front and center of the copyright termination battle is Victor Willis, the original lead singer of the Village People. The New York Times recently covered Willis' attempt to regain control over his share of "Y.M.C.A." and 32 other songs. (http://www.nytimes.com/2011/08/17/arts/music/village-people-singer-claims-rights-to-ymca.html?pagewanted=all) "Y.M.C.A." reportedly generates upwards of $1 million per year. As the hits from the late 1970s continue to earn profits for the music industry, many predict a battle over termination rights in the years to come.

Termination Right Under §203

In 1976, Congress amended the Copyright Act to give creators of copyrighted material termination rights. For musicians and songwriters who, at the early stage of their careers, handed over their rights without much bargaining power, the amendment was intended to give them another bite of the apple.

Specifically, 17 U.S.C. §203 covers any "exclusive or non-exclusive grant of a transfer or license," such as assignments, exclusive and non-exclusive licenses. The section applies to any grant made by an author on or after January 1, 1978. Effectively, the provision limits a conveyance of rights to 35 years.

Invoking Termination Rights

Termination is an option and not automatic. Once the termination date is calculated, musicians and songwriters must give their publishers a statutory termination notice at least two years (up to 10 years) in advance. Without notice, previous grants will not be terminated. Importantly, termination rights are inalienable, even if there are contract provisions to the contrary.

Scope of Termination Rights

Termination rights are not limitless. For instance, a music publisher may continue to utilize derivative works prepared pursuant to the previous grant. In addition, termination rights are effective only in the United States. For a worldwide assignment, the publisher will retain all rights outside of the country. Furthermore, if there are multiple authors, a majority of the authors must agree to terminate the grant.

Works Made for Hire Exception

Termination rights do not apply to works made for hire. An example of a work made for hire is a work prepared by an employee within the scope of his or her employment. A commissioned work may also be considered as a work for hire. For works made for hire, the employer is considered the author and owns the copyright, unless the parties agree otherwise. This exception is the main area where most of the battle will take place, as companies are gearing up to challenge terminations as for hire.

Victor Willis' Case

In January 2011, Willis provided a termination notice to Can't Stop Productions for a number of his musical works, including "Y.M.C.A." and "In the Navy" and "Go West." In July, Can't Stop Productions and its French affiliate, Scorpio Music, filed a complaint for declaratory relief in the Southern District of California. (Case No. 11CV1557 BTM RBB.)

Can't Stop Productions and Scorpio Music first argue that Willis was employed as a writer for hire. They claim that The Village People were a concept group created by the companies, and Willis was an employee. Specifically, Willis was hired to "translate the lyrics of and/or create new lyrics for certain musical compositions ..." and he was provided with the material and a studio to record. Secondly, the companies claim that Willis does not have the right to terminate because he is only one of several authors of joint works. As mentioned earlier, a majority of the authors is required by law to terminate a grant.

Willis currently earns $30,000 to $40,000 annually from The Village People recordings. According to the New York Times, that could triple or quadruple if he succeeds in recapturing his rights to those recordings. The outcome of this case could have serious implications for the music industry.

Looking Ahead

Termination rights give musicians and song writers a second chance to earn royalties, 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." (http://tmtblog.minterellison.com/2011/09/born-in-usa-recording-artists-in.html) In addition to Willis, some of the biggest stars from the same era - for example, Bruce Springsteen, Billy Joel, Tom Petty, and the Eagles - are reportedly beginning to invoke termination rights on their recordings and compositions.

On the one hand, some recording companies will suffer monetary loss because of terminated grants. Termination rights may exacerbate the loss in revenue from unauthorized file sharing and the decline in record sales. On the other hand, many recordings and compositions will be on the market for the first time since their creations, which could represent an opportunity for music publishers to negotiate a deal that will broaden or diversify their catalogs. As more musicians and songwriters invoke their termination rights, the year 2013 will signal the beginning of a long legal battle. Only time will tell the impact of termination rights on the evolution of the music industry.

October 5, 2011

U.S. Supreme Court Denies Certiorari in ASCAP v. United States


By Brendan Mee

On Monday October 3rd, the Supreme Court denied certiorari in American Society of Composers, Authors and Publishers (ASCAP) v. United States, ending ASCAP's bid to have digital downloads over the Internet characterized as "performances" under the Copyright Act. (American Society of Composers, Authors and Publishers (ASCAP) v. United States, 627 F.3d 64 (2d Cir. 2010), cert. denied, 565 U.S. __, (U.S. Oct. 3, 2011)(No. 10-1337).)

Under an antitrust consent decree from 1941, the Southern District of New York has rate-setting authority to determine what ASCAP can charge users for a blanket license to publicly perform compositions from the ASCAP catalog. Thus, the United States was the defendant in the appeal, while the underlying dispute was between Yahoo! and Real Networks (the Internet providers), and ASCAP, over the terms of the blanket license.

The question presented in the cert Petition was whether a music download constitutes a "performance" for which ASCAP was owed a royalty under Section 106(4) of the Copyright Act. The Second Circuit made a sharp distinction between music downloads and music streaming, and agreed with the district court that the plain meaning of the Copyright Act could only be read to imply that a "performance" requires a "contemporaneously perceptible performance." Therefore, the Second Circuit did not consider a music download to be a "performance."

Ted Olsen presented the case for ASCAP, which had its own "plain meaning" argument, relying to some extent on "neighboring provisions" of the Act, rather than on the Act's definition of "perform," the latter on which the Second Circuit relied heavily to reach its decision. The Petitioner also argued that the Second Circuit's distinction between downloading and streaming would be unworkable in practice as technology developed. Most interestingly, ASCAP argued (along with several amici) that the decision was inconsistent with the United States' obligations under the WIPO Copyright Treaty. ASCAP argued that as a result of the consent decree, the Second Circuit had exclusive jurisdiction over the "vast majority of disputes" regarding public performance rights, and therefore. Further, the Petitioner argued that other appellate courts were unlikely to hear such cases, and the importance of the case at hand warranted resolution on the merits, even in the absence of a circuit split on the issue.

In the Respondent's Brief in Opposition, the United States echoed the Second Circuit's statutory construction. It reiterated that there was no circuit split warranting review by the Supreme Court, and argued that the Second Circuit's application of U.S. law was fully consistent with the United States' obligations under the WIPO Copyright Treaty, which in its view merely required that the acts covered under the Treaty are covered by some exclusive right under U.S. law.

One cannot speculate what prompted the Supreme Court to decline the case. Certainly it was a tough case for the Petitioner in light of the language in the Copyright Act defining "performance;" but the loss for ASCAP was also another hard break for songwriters and composers already badly hurt by technology shifts.

Below are links to the briefs:

Petition for certiorari : http://sblog.s3.amazonaws.com/wp-content/uploads/2011/06/10-1337.pdf

Brief in opposition: http://sblog.s3.amazonaws.com/wp-content/uploads/2011/08/09-26-Composers-BIO.pdf

Amicus brief of Broadcast Music, Inc.: http://sblog.s3.amazonaws.com/wp-content/uploads/2011/08/09-26-Composers-Broadcast-Music.pdf

Amicus brief of Independent Music Publishers et al.: http://sblog.s3.amazonaws.com/wp-content/uploads/2011/08/09-26-Composers-Independent-Music-Publishers.pdf

Amicus brief of Ralph Oman: http://sblog.s3.amazonaws.com/wp-content/uploads/2011/08/09-26-Composers-Ralph-Oman.pdf

Petitioner's reply: http://sblog.s3.amazonaws.com/wp-content/uploads/2011/08/09-26-Composers-Petitioners-reply.pdf

November 17, 2011

Universal Music Group Purchases EMI's Recorded Music Assets for $1.9 Billion

By Tyler Mazey

In a widely reported sale, Vivendi's Universal Music Group (UMG) purchased EMI's recorded music assets at auction for a price of $1.9 billion. However, UMG did not pickup EMI's valuable publishing assets, which were bought for $2.2 billion by a group of investors led by Sony. This split and sale raises a host of issues that look to change the face of the music business in its entirety, including the future of the recording industry, government approval, and current and future licensing deals.

Sale

UMG's purchase of EMI's recorded music operations leaves only three major record labels. It also creates an interesting difference among the three. Prior to the purchase, UMG had close to $6 billion in revenue, Sony had $5.7 billion, and Warner had $3 billion. EMI had $1.8 billion in revenue according to annual reports from March of 2010. (http://www.nytimes.com/2011/11/12/business/media/emi-is-sold-for-4-1-billion-consolidating-the-music-industry.html) With the addition of EMI's, UMG will control close to 40% of the market share in recorded music.

Even though CitiGroup was not able to recoup its entire EMI purchase price from a decade ago, some say that UMG overpaid for EMI's recorded music operations. Warner was a major participant in the EMI auction, but balked at the apparently exorbitant price tag. Warner's purchase of EMI would have been a significant deal, putting it closer to the same market share as the other two majors. Considering that EMI would have been a nice jewel in Warner's crown, one can assume that the value of the assets was not nearly as high as the price UMG paid at auction. Even though consumers are no longer purchasing recorded music at the same levels as they were at the turn of the millennium, record labels are still being purchased at near millennial prices.

Assuming EMI's recording assets were overvalued as a separate entity, those assets still provide an exciting opportunity for UMG to leverage its combined market share in the face of an uncertain digital future. Greater market share creates the opportunity to generate greater revenues from on-demand digital music services. While some independents may be pulling catalogues from services such as Spotify, Rhapsody, and Rdio due to miniscule royalty payments, UMG has the largest catalogue. This leads to the possibility for an extraordinary amount of royalties once a true leader is crowned in the on-demand digital music streaming sector.

Government

While increased market share can help UMG to lead online, that same leverage creates an intense amount of government scrutiny. In Roger Faxon's memos to his staff, he even mentions that "Universal will need to clear the necessary hurdles before they can take ownership. And that too will take time and effort." (http://www.billboard.biz/bbbiz/industry/record-labels/read-emi-ceo-roger-faxon-s-memo-to-staff-1005510952.story) UMG is already planning to divest $500 million in recorded music assets in order to clear regulatory hurdles in the U.S. and Europe. However, Europe's Independent Music Companies Association (IMPALA), expects the deal to be blocked outright, even with this divestment. IMPALA's argument is that the last time the European Commission looked at the company, it ordered UMG to sell off assets to cut itself down to an "acceptable" size. Since that time, UMG has grown substantially and has additional ties with concert giant LiveNation. This would make it less likely for the European Commission to approve UMG purchase of EMI's recording assets. (http://www.billboard.biz/bbbiz/industry/record-labels/impala-says-it-expects-emi-universal-deal-1005511552.story)

UMG's position is therefore quite tricky. It is purchasing EMI to create a bigger, bolder company, but will have to divest assets in order to make that happen. UMG can cut less valuable assets out of its catalogue, but still has to deal with the regulatory and restructuring process. Taking the time and money to jump through regulatory hoops takes valuable investment income away from the core corporate function of finding and developing new artists.

Present and Future

All of this legal hassle will affect the profitability of EMI until it is completely integrated under Vivendi/UMG umbrella. Faxon has said that EMI's continued obligation through the transition period is to continue to drive each of the businesses to the best of EMI's ability. Given the regulatory hurdles to overcome, business is likely to continue as usual until through the fiscal year. EMI will continue to make deals, invest in artists, release records and enter into licenses. There will be no layoffs throughout the transition, and interaction between EMI and UMG is strictly limited until the sale is approved. Therefore it is expected that present deals will not be affected. (http://www.billboard.biz/bbbiz/industry/record-labels/read-emi-ceo-roger-faxon-s-faq-to-staff-1005513552.story)

While it is business as usual for EMI during the transition, its future will likely be significantly altered by the sale. One can assume that UMG will want to consolidate and synergize EMI with existing operations in order to reduce overhead. This will mean layoffs and possible disruptions in the artist release cycles. However, this is not UMG's first rodeo.

Once past the regulatory hurdles and consolidation, UMG will have close to 40% of recorded music market share and be able to flex its muscles. UMG will be able to dictate licensing rates to the rest of the industry; if you want a UMG song, you will have to deal with a UMG price. Having almost 40% of the market cornered may make it difficult for music supervisors to find easy replacements for the plethora of music licensed, creating difficulties for many industries, such as television, movie and commercial ad placements. Music supervisors are under tight budgets and even tighter schedules. Increased rates could throw a big wrench into the way they do business. While there is other music available, UMG's giant market share will make it more difficult to find less expensive alternatives.

There is also the tricky issue of the on demand Internet streaming services. Most of these services survive off of the licensing deals made with the major labels, and if rates go up, profits may never be seen. However, UMG can flex its muscles in order to choose a winner in this space. Considering that most of these services pay based on market share, UMG stands to gain a significant advantage in terms of revenue streams and negotiating power.

Conclusion

As the Internet Age continues to eat away at recorded music revenues, UMG will need to lead the rest of the industry into the future. One thing is certain; UMG will be in a position to make or break the recording music industry. Although record labels were the technological leaders of the past, it now seems as though the major labels are technology followers. Having close to 40% of recorded music market share gives UMG the ability to choose winners and losers. UMG needs to flex its market share muscles for its artists, shareholders, and the future of the industry. Otherwise, UMG will be creating a bleak tomorrow for its own business and the businesses of its peers.

November 19, 2011

Why the Music Industry Isn't Ready for Redigi

By Kyler McGillicuddy

Redigi has been receiving a lot of attention by both the music industry in general and the Recording Industry Association of America (RIAA). The reason for this focus is the type of business Redigi is attempting to create. Redigi is a web based used digital music store. Though it has come up with a unique business plan for digital music, I don't believe that the courts should allow it to continue operating due to the potential market results. To really get a handle on the problem at hand, please bear with me as I explain a bit more.

Redigi works by requiring a user to download its program, which then searches the user's music library for acceptable music to sell. Acceptable music is any that has been legally downloaded, and therefore does not include tracks copied from a CD. Once it has indicated a music track to sell, the program uploads the copy onto Ridigi's website and deletes the corresponding file on the user's computer. Once uploaded, the track is assigned a number and is sold. Redigi does not sell more than 1 track per track uploaded. It works just like a retail store. For example, if 3 people upload the same track, then there are 3 of that particular track for sale. Once 3 people purchase the tracks, that particular track is no longer available until someone else uploads another.

In traditional physical music sales this would not be cause for much concern, passing legal muster by relying on the first sale doctrine of copyright law. The first sale doctrine allows owners of copyrighted material bought legally from the copyright holder to resell without infringement. If one wants to sell a used CD, one simply has to hand over the CD in exchange for money. Although this seems like this would be a fairly simple translation to a used digital music store, but there are some quirks of electronics that make it more complicated than first appears.

The problem with this transaction in the digital realm is that Redigi has to make a copy of the track at least twice; once when it removes it from the computer, and again when the track is sold to someone else. This is the legal basis for the cease and desist complaint brought by the RIAA against Redigi. The way I see it, the argument hinges on whether or not Redigi can copy music to take advantage of the first sale doctrine.

For the time being, I'm going to assume that all of the programming involved in Redigi's business plan works perfectly. This means that no pirated files are allowed, no copying tracks from CD's, and the original is deleted once uploaded. With those assumptions in mind, how would a decision allowing Redigi to continue effect the market and copyright?

First, consider the market. Redigi pays $.32 per track and sells each as low as $.59, considerably lower than iTunes. As a used digital track is just as good as a new one, basic economics would tell us that an identical good offered at a lower price will shift demand towards the cheaper one, so the market for new music will decline. There is a potential for an upswing to the market if people are more willing to purchase new music knowing that they can resell it, but of music users, I highly doubt the approximate $.30 difference in cost is restricting any current purchases.

Second, allowing Redigi to continue would hurt artists. Artists rely on sales of new music to survive. Artists do not get paid for used music sales. Used music sales would also affect artist contracts, as many contain escalation royalty provisions. Escalation provisions increase the percentage of royalty the artists receive as their sales figures increase. A used digital market would reduce the number of new tracks, and correspondingly reduce artist earning potential.

Finally, what about copyright? The courts would have to stretch copyright law to allow copying of digital music for resale. That places the digital copyright arena on an interesting slope. Just how much copying is allowed? What about movies? Will knowing there is a profit to be made from selling used music increase infringing copying? Are there other circumstances where copying to reach the first sale right is not infringing? The decision would have to alter copyright and the market to favor an outcome for Redigi. So let us consider what would happen should Redigi lose the battle.

First, the market would not change. The digital track sales will continue to increase and physical album sales will remain on a steep decline, and new music sales would continue to affect artist contracts. Second, copyright would also be unchanged. No change to the law is needed in order to find Redigi as an infringer, since the necessary copying it employs to upload and sell the track is illegal under the Copyright Act.

Redigi has come up with a novel business plan in the realm of digital music, and should be commended for the achievement. However, the drastic changes necessary to the marketplace and copyright law to accommodate its business plan are too destructive to allow.

January 20, 2012

Golan v Holder Supreme Court Decision

Held: Section 514 does not exceed Congress' authority under the Copyright Clause. (a) The text of the Copyright Clause does not exclude application of copyright protection to works in the public domain.

The Supreme Court opinion in Golan v Holder can be found at:

http://www.supremecourt.gov/opinions/11pdf/10-545.pdf

April 7, 2012

Poindexter v. EMI

By Barry Werbin

This quietly noteworthy music copyright infringement decision was issued March 27th by Judge Swain (SDNY), and reminded me of the 6th Circuit's 2005 decision in Bridgeport Music Inc. v. Dimension Films (410 F.3d 792 (6th Cir. 2005)), where that Circuit, in a case of first impression, held there was no "de minimus" copying defense as a matter of law in music sampling infringement cases (Bridgeport addressed a two-second sample of a rap song used in a film). Now, in Poindexter, a case that primarily addresses lack of standing and scope of work for hire/assignment agreements, Judge Swain also held that the subject sample consisting of a single "F-sharp" note played on a piano for less than two seconds was de minimus and not subject to copyright protection because a single note is not copyrightable, citing Swirsky v. Carey (376 F.3d 841 (9th Cir. 2004)).

The decision can be accessed here: http://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2011cv00559/374395/40/.



April 30, 2012

Mechanical Rate Settlement

By Aleeshea Sanders

The Copyright Royalty Board is set to approve an historic agreement proposed by major music industry trade association groups representing major record labels, music publishers and songwriters, and digital music service providers and mobile phone companies, for statutory mechanical royalty rates and terms under Section 115 of the Copyright Act (17 U.S.C. 115) for all physical and digital music services. The settlement announced by the Recording Industry Association of America (RIAA), the National Music Publishers Association (NMPA), and the Digital Media Association (DiMA) maintains, with limited adjustments, the existing mechanical rate structure and terms from the 2008 rate proceedings for physical phonorecords, permanent digital downloads, ringtones, limited downloads and interactive streams (i.e., 9.1 cents for downloads, CDs and other physical formats, 24 cents for ringtones, and the same formulas, with minor changes, used to determine the mechanical rate for different kinds of subscription and free interactive-streaming services). (Motion to Adopt Settlement Docket No. 2011-3 CRB Phonorecords II)

The proposed regulatory language in Part 385-Rates and Terms for Use of Musical Works Under Compulsory License for Making and Distributing of Physical and Digital Phonorecords (Motion to Adopt Settlement Exhibit A - Docket No. 2011-3 CRB Phonorecords II) creates new rates and terms for five new digital service categories for compulsory licensing:

1. Mixed service bundles (a locker service, limited interactive service, downloads or ringtones combined with a nonmusic product, e.g., a mobile phone, consumer electronics device or internet service) for 11.35% of revenue or 21% of total content cost, whichever is greater.

2. Paid locker services (subscription-based locker, e.g., iTunes, providing on-demand streaming and downloads) for 12% of revenue or 20.65% of total content cost or 17 cents per subscriber, whichever is greater.

3. Purchased content lockers services (a free digital locker that provides free "cloud storage" to a purchaser of a permanent digital download, ringtone or CD) for 12% of revenue or 22% of total content cost, whichever is greater.

4. "Limited offerings" (e.g., limited interactive subscription-based service offering limited genres of music or specialized playlists) for 10.5% of revenue or 21% of total content cost or 18 cents per subscriber, whichever is greater.

5. Music bundles (e.g., CD with download, ringtones and permanent digital downloads) for 11.35% of revenue or 21% of total content cost.
The Proposed Agreement provides for the launch of new digital music services and business models offering music to consumers, and it sets mechanical royalty rates on digital music going forward through 2017.

May 3, 2012

Elimination of Grammy Categories

By Gergana Miteva

This year the National Academy of Recording Arts & Sciences (The Recording Academy) granted far fewer Grammy Awards than those awarded in previous years. The 54th annual Grammy Awards were reduced and consolidated from 109 to 78 awards within their respective core genres of R&B, American roots music, classical, Latin, jazz, country, pop and rock. (See a full list of consolidated awards here: http://www.grammy.org/recording-academy/announcement/category-list) The overall effect of the restructuring was to eliminate the separate male and female soloist awards, lump together collaborative works with group works, and solo performances with instrumental solo performances, as well as combine sub-genres into broader genre awards.

In its letter to its members announcing the restructuring, the Recording Academy cited as one of the reasons to reduce awards was to make each category more competitive, since it had experienced "consistently low entries over the past several years in many categories." Among the 31 eliminated awards was the Best Latin Jazz Album category, which sparked a class action lawsuit against the Recording Academy soon after it announced the consolidation. In his complaint, well-known Latin jazz percussionist Robert (Bobby) Sanabria and three other notable Latin jazz recording artists, charged, among other claims, the Recording Academy with breach of contract and breach of fiduciary duty owed to members of the Recording Academy, and asked the court to reinstate the Best Latin Jazz Album category. The musicians describe this category as having granted "the long-overdue recognition to the highly-regarded artistic work of musicians who blended the improvisationary leaning of jazz with the native music and cultures of the Caribbean and Central and South America." (See complaint, available at: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=OmzvfJBEeIvKr7VdrnkQMQ==&system=prod) This category was originally introduced in 1994 and its first recipient was Arturo Sandoval, a renowned jazz trumpeter and composer. (http://www.grammy.com/nominees/search?page=2&artist=&title=&year=All&genre=16)

Among the plaintiffs' main grievances against the Recording Academy is the manner in which it chose to carry out the restructuring. They accuse it of not engaging its members in the process, of not keeping them informed, as well as of not using consistent criteria in evaluating the award categories, and as a result making the process discriminatory. Further, the plaintiffs allude to the detrimental effect the elimination of the category would have on their careers and on their chances of ever getting a Grammy, thus depriving them of a "meaningful opportunity to gain broad exposure of their music to the general public..." and devaluing past nomination recognitions they have received in the eliminated category. (See complaint: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=OmzvfJBEeIvKr7VdrnkQMQ==&system=prod)

Last week New York State Supreme Court Justice Jeffrey Oing granted the Recording Academy's motion to dismiss the class action lawsuit without issuing an opinion. The Recording Academy welcomed the judge's dismissal of the case and announced that they anticipate to make some "individual tweaks and adjustments" to the 2013 Grammy Awards during their meeting in late May, but they will not alter the overall award restructuring. (http://www.goldderby.com/forum/topics/view/2217#). Bobby Sanabria has already expressed his intention to appeal, however this may be a battle better fought in the court of public opinion, rather than in the court of law. While the law may not be coming down on Mr. Sanabaria's side, numerous prominent musicians and activists, such as Carlos Santana and Rev. Jessie Jackson have supported the lawsuit and have strongly criticized the consolidation as diminishing the ethnic and cultural diversity of the Grammy Awards. (http://allhiphop.com/2012/02/03/mordr-cornel-west-jesse-jackson-join-fight-against-grammys-over-eliminated-categories/)

It is very possible that artists previously eligible for the eliminated categories would be negatively affected and might be marginalized as a result, but this is not necessarily the case. Musicians who were once eligible in both an eliminated subcategory and a broader category only competed in the narrower category, which may also have marginalized them because they were not considered for the generic categories. These musicians will now have the opportunity to be nominated in the broader, and arguably more competitive and prestigious categories, which may serve as an even stronger boost for their careers. This said, eliminating awards for music sub-genres which traditionally do not enjoy commercial success but carry powerful artistic and cultural value, could very well have deprived certain artists of their last venue of global public exposure.

May 11, 2012

Scorpio v Willis Decision - Termination of Post-1977 Grants

Case 3:11-cv-01557-BTM-RBB Document 30

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA

SCORPIO MUSIC S.A., et al.,
Plaintiffs,

v.

VICTOR WILLIS,
Defendant.

Case No. 11cv1557 BTM (RBB)

ORDER GRANTING MOTION TO DISMISS

Defendant Victor Willis ("Willis" or "Defendant") has filed a motion to dismiss Plaintiffs' Complaint. On March 20, 2012, the Court held oral argument on the motion. For the reasons discussed below, Defendant's motion is GRANTED.

I. FACTUAL BACKGROUND

Defendant Victor Willis is the original lead singer of the Village People. This lawsuit concerns Willis's attempt to terminate his post-1977 grants to Can't Stop Music of his copyright interests in 33 musical compositions ("Compositions"), including the hit songs, "YMCA," "In the Navy," and "Go West."

Plaintiff Scorpio Music S.A. ("Scorpio") is a French corporation engaged in the business of publishing and otherwise commercially exploiting musical compositions. (Compl. ¶ 1.) Plaintiff Can't Stop Productions, Inc., ("CSP") is the exclusive sub-publisher and administrator in the United States of musical compositions published and owned by Scorpio Music. (Compl. ¶ 2.) Can't Stop Music ("CSM") is a division of Plaintiff Can't Stop Productions, Inc.

Plaintiffs allege that between 1977 and 1979, they hired Willis to translate the lyrics of and/or create new lyrics for certain musical compositions which were owned and published in France by Scorpio. Copyright registrations for the 33 Compositions at issue credit Willis as being one of several writers. (Compl. ¶ 12.) By way of Adaptation Agreements, Willis transferred his copyright interests in the subject Compositions to CSM, and CSM thereupon assigned to Scorpio its rights in the lyrics. (Compl. ¶ 11.) The Adaptation Agreements provided that Willis would receive a set percentage (12%-20%,depending on the composition) of CSM's gross receipts from exploitation of the Compositions.

In January 2011, Willis served on Plaintiffs a "Notice of Termination of Post-1977 Grants of Copyright on Certain Works of Victor Willis" with respect to his interests in the 33 Compositions. (Ex. A to Complaint.)

On July 14, 2011, Plaintiffs commenced this lawsuit. Plaintiffs challenge the validity of the termination and seek a declaratory judgment that Willis has no right, title, or interest in the copyrights to the Compositions, requiring Willis to withdraw the notice of termination, and enjoining Willis from making any claims to the copyrights in the Compositions. In the event that Willis is found to have a right to terminate, Plaintiffs seek a declaration that (1) Willis's reversion of rights be limited to "the same percentage ownership as he receives as compensation relating to the Compositions and as set forth in the Adaptation Agreements"; and (2) Willis be enjoined from terminating any licenses issued or derivative works authorized, by Plaintiffs, which existed prior to the termination of the copyright assignment.

II. DISCUSSION

A. Valdiity of the Notice of Termination

Plaintiffs' main argument is that Willis's notice of termination is not valid because Willis is the only author who served a notice of termination. According to Plaintiffs, under 17 U.S.C. § 203(a)(1), a majority of all of the authors who transferred their copyright interests in a joint work, whether their transfers were part of the same transaction or separate transactions, must join in a termination for it to be valid. Willis and Amicus Songwriters' Guild of America ("SGA"), on the other hand, contend that since Willis was the only person who executed the grants of his copyright interests in the Compositions, he alone has the ability to terminate those grants. The Court agrees with Willis and SGA.

Because the transfers of copyright at issue in this case occurred after January 1, 1978, the Copyright Act of 1976 ("Act") governs. The Act provides authors and their statutory successors with the ability to terminate a transfer of copyright or license by serving advance notice under specified time limits and conditions.

17 U.S.C. § 203 provides:

(a) Conditions for Termination.--In the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination under the following conditions:
(1) In the case of a grant executed by one author, termination of the grant may be effected by that author or, if the author is dead, by the person or persons who, under clause (2) of this subsection, own and are entitled to exercise a total of more than one-half of that author's termination interest. In the case of a grant executed by two or more authors of a joint work, termination of the grant may be effected by a majority of the authors who executed it; if any of such authors is dead, the termination interest of any such author may be exercised as a unit by the person or persons who, under clause (2) of this subsection, own and are entitled to exercise a total of more than one-half of that author's interest.

Termination of the grant may be effected at any time during a period of five years beginning at the end of thirty-five years from the date of execution of the grant. 17 U.S.C. § 203(a)(3).

To terminate a grant, a termination notice must be served on the grantee or grantee's successor not less than two nor more than ten years before the date of termination specified in the notice. 17 U.S.C. § 203(a)(4)(A).

The issue before the Court is whether, in a case where joint authors of a work transfer their respective copyright interests through separate agreements, a single author may alone terminate his separate grant of his copyright interest in the joint work or whether a majority of all the authors is necessary to terminate that grant. Upon consideration of the language and purpose of 17 U.S.C. § 203 in conjunction with the law governing the rights of joint authors, the Court concludes that a joint author who separately transfers his copyright interest may unilaterally terminate that grant.

When interpreting a statute, we start with the "plain meaning" of the statue's text. In re Roman Catholic Archbishop of Portland in Oregon, 661 F.3d 417, 433 (9th Cir. 2011). As explained by the Supreme Court, "courts must presume that a legislature says in a statute what it means and means in a statute what it says there." Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253-54 (1992). However, "we do more than view word or sub-sections in isolation. We derive meaning from context, and this requires reading the relevant statutory provisions as a whole." Hanford Downwinders Coal., Inc. v. Dowdle, 71 F.3d 1469, 1475 (9th Cir. 1995).

Section 203(a)(1) provides, "In the case of a grant executed by one author, termination of the grant may be effected by that author." Section 203(a)(1) goes on to provide, "In the case of a grant executed by two or more authors of a joint work, termination of the grant may be effected by a majority of the authors who executed it." When referring to a grant executed by two or more authors of a joint work, section 203(a)(1) refers to a "grant" in the singular, not "grants." Thus, under the plain meaning of the statute, if two or more joint authors join in a grant of their copyright interests, a majority of the authors is necessary to terminate the grant. If, however, a single joint author enters into a grant of his copyright interest, that author alone can terminate his grant.

The Court's reading of section 203(a)(1) harmonizes with the law governing the rights of joint authors, both as it existed at the time of the passage of the Act and as it exists today. As recognized in the House Report accompanying the passage of the Copyright Act of 1976, "Under the bill, as under the present law, coowners of a copyright would be treated generally as tenants in common, with each coowner having an independent right to use of [sic] license the use of a work, subject to a duty of accounting to the other coowners for any profit." H.R.Rep. No. 94-1476, at 121 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5736. (The Act added section 201(a), which states, "The authors of a joint work are coowners of copyright in the work.")

Then, as now, each co-owner of a joint work becomes a holder of an undivided interest in the whole. Pye v. Mitchell, 574 F.2d 476, 480 (9th Cir. 1978) (citing to 1 Nimmer on Copyright § 69 (1976)). Thus, "[i]n the absence of an agreement to the contrary, one joint owner may always transfer his interest in the joint work to a third party, subject only to the general requirements of a valid transfer of copyright." Nimmer on Copyright § 6.11 (2011) ("Nimmer").

Congress was aware that a single joint author may grant his interest in the joint work separately from his co-authors or may join in a grant with one or more of his co-authors. Knowing this, Congress legislated that "[i]n the case of a grant executed by two or more authors of a joint work," a majority of the authors who executed the grant is necessary for termination. 18 U.S.C. § 203(a)(1) (Emphasis added.) In other words, when two or more authors of a joint work execute a joint grant, a majority of the authors who executed the grant is necessary to terminate the grant. Section 203(a)(1) certainly does not require that a joint author enter into a joint grant with one or more of his co-authors. Nor does the statute provide that where two or more joint authors enter into separate grants, a majority of those authors is needed to terminate any one of those grants.

Plaintiffs argue that the term "grant" as used in section 203(a)(1) refers collectively to all transfers by joint authors, even if the transfers were separate transactions. This argument is not persuasive. Nowhere does the statute indicate that the term "grant" has a special meaning and encompasses all transfers of interest by joint authors, regardless of whether the joint authors individually transferred their interests through different instruments at different times. (In this case, it also appears that at least some of the joint authors granted their copyright interests to Scorpio, not CSM, as Willis did. Thus, Plaintiffs would include under the umbrella of a "grant," separate transactions where copyright interests were transferred to related but different entities.)

Furthermore, it makes sense to interpret the term "grant" to refer to a single transaction whereby the rights of one or more joint authors was transferred, because the time for terminating a grant is calculated from the date of execution of the grant. Under Plaintiffs' interpretation, in the case of separate transfers by joint authors, there would be uncertainty regarding the date of execution, which could become a moving target. For example, if joint authors A, B, C, and D each separately transferred their interests, with an interval of several years between each transfer, would the "date of execution" keep changing as each author transfers his/her interest? If so, it could be many years after A's transfer that the "grant" is considered "executed."

Finally, it would be contrary to the purpose of the Act to require a majority of all joint authors who had, at various times, transferred their copyright interests in a joint work to terminate the legally permissible separate grant by one joint author of his undivided copyright interest in the work. The purpose of the Act was to "safeguard[ ] authors against unremunerative transfers" and address "the unequal bargaining position of authors, resulting in part from the impossibility of determining a work's value until it has been exploited." H.R. Rep. No. 94-1476, at 124 (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5740. Under Plaintiffs' interpretation, it would be more difficult to terminate an individual grant than it would be to make it in the first place.

Plaintiffs attempt to support their position by pointing to the law governing pre-1978 grants. Grants executed prior to January 1, 1978 are terminable by each executing joint author (to the extent of the particular author's interest), even if a majority of the executing joint authors do not join in the termination. 17 U.S.C. § 304(c)(1). As discussed in Nimmer, § 11.03, it appears that Congress treated pre-1978 grants differently because if a grantor of renewal rights failed to survive until such rights vested, the renewal rights would pass to the grantor's successors and the original grantee would take nothing. Accordingly, "[b]ecause joint-author grants of renewal rights thus terminate individually by operation of law upon an author's death, it was thought 'inappropriate' to require anything more than individual termination via the termination provisions." Id. The stricter requirement for termination of post-1977 grants begs the question of whether a "grant" may encompass separate transfers of interest by joint authors and does not shed any light on the matter before the Court.

Plaintiffs attempt to support their position by relying on language in Sweet Music, Inc v. Melrose Music Corp., 189 F. Supp. 655 (S.D. Cal. 1960), where the court explained that it did not make a difference to the outcome of the case that plaintiff joined in the same assignment agreement as the deceased co-author as opposed to having executed a separate assignment. However, Sweet Music concerned the enforceability of an assignment of renewal interests by one author where a co-author, who also assigned his renewal interests, died prior to renewal. Sweet Music did not concern the termination of grants under the Copyright Act of 1976 and does not shed light on the issue before the Court.

The Court concludes that because Willis granted his copyright interests in the Compositions separately from the other co-authors, Willis may, under 17 U.S.C. § 203, unilaterally terminate his grants. Thus, Plaintiffs' declaratory relief claim fails to the extent it is based on the inability of Willis to terminate his grants of copyright. To be clear, Willis's termination affects only the copyright interests that he previously transferred (his undivided interest in the joint work). The copyright interests transferred by the other co-authors will not
be affected by Willis's termination.

B. Writer for Hire

In their Complaint, Plaintiffs allege that Willis has no rights in the copyrights at issue because he was a "writer for hire" who rendered his services as an employee of CSM. At oral argument, counsel for Plaintiffs represented that they were withdrawing this claim.

C. Percentage of Copyright Interest

In the event Willis is found to have a right to terminate his grants of copyright interest in the Compositions, Plaintiffs seek a declaration that Willis "be limited to the same percentage ownership as he receives as compensation relating to the Compositions and as set forth in the Agreements." (Compl. at 9.) However, Plaintiffs' claim is not supported by the law.

Upon termination, Willis would get back what he transferred - his undivided interest in the whole. See 17 U.S.C. § 203(b) (explaining that upon the effective date of termination, "all rights under this title that were covered by the terminated grants revert to the author . . . .") Absent a different agreement among the joint authors (of which there is no evidence in this case), the joint authors shared equally in the ownership of the joint work, even if their respective contributions to the joint work were not equal. Nimmer, § 6.08. Thus, if Willis was one of three joint authors of a musical composition, Willis would have a 1/3 undivided copyright interest in the composition. If Willis granted his copyright interest in the composition to CSM and then later terminated that grant, Willis would get back his 1/3 undivided copyright interest, regardless of what percentage royalty he was paid during CSM's ownership of the copyright interest.

Plaintiffs do not claim that the royalty percentages, which ranged from 12 to 20%, were based on the percentage of Willis's copyright interests, and it does not appear that this was the case. For example, Willis is one of three authors listed on the copyright registration for "YMCA." (Def. Ex. C.) Assuming the three authors were actually joint authors, Willis has a 1/3 undivided interest in the copyright. However, the Adaptation Agreement pertaining to YMCA provides for a 20% royalty. (Def. Ex. B.)

Plaintiffs do not cite any legal authority supporting the proposition that upon termination of his grants, Willis does not get back the percentage of copyright interest he granted, but, rather, is limited to a percentage of ownership equal to the royalty percentage. The Court concludes that Plaintiffs' position lacks merit and dismisses Plaintiffs' declaratory relief claim on this issue.

It appears that there is a dispute between Plaintiffs and Willis, with respect to some or all of the Compositions, regarding the percentage of copyright interest Willis originally held, granted, and wants back. At oral argument, counsel for Willis indicated that Willis contends that Henri Belolo, one of the individuals listed as an author on the copyright registrations for some or all of the Compositions, was not actually a joint author. If Willis is correct, his undivided interest in the Compositions is larger than it appears. For example, Willis would have a 1/2 undivided interest in YMCA instead of a 1/3 undivided interest.

The Complaint makes a passing reference to the dispute regarding authorship. The Complaint states that upon information and belief, Willis claims the right to recapture at least half of the copyrights in each of the Compositions. (Compl. ¶ 34.) The Complaint also states that Willis "ignores the existence of other people listed as writers of the Compositions to claim that he, alone, wrote all of their lyrics." (Compl. ¶ 35.) However, the Complaint does not seek a declaration regarding the determination of the issue of authorship and the percentage of copyright interest Willis granted and is entitled to receive back.

It is necessary for Plaintiffs to know what percentage of the copyright interest Willis is entitled to receive back, because, among other things, it will affect Plaintiffs' duty to account to Willis and the other joint author(s). Therefore, the Court will allow Plaintiffs to amend their Complaint to seek declaratory relief on this issue.

D. Statute of Limitations

In the Complaint, Plaintiffs allege that Willis's claim to the copyright in the Compositions is somehow time-barred.

To the extent Plaintiffs argue that Willis is time-barred from arguing that a "co-author" listed on a copyright registration is not actually a joint author, this argument is premature. As already discussed, Plaintiffs have not yet sought a declaration regarding the percentage of Willis's copyright interest in each of the Compositions. To the extent Plaintiffs argue that Willis is time-barred from claiming that the percentage of his copyright interests exceeds the royalty percentages set forth in the Adaptation Agreements, the Court rejects Plaintiffs' argument. For the reasons discussed above, Plaintiffs' claim that the percentage of copyright interest recoverable by Willis is capped by the royalty percentage has no legal basis, and Plaintiffs have not explained why Willis should be time-barred from asserting his rights under the law.

E. Termination of Existing Licenses and Derivative Works

Plaintiffs also seek a declaration that Willis is precluded from terminating any licenses issued or derivative works authorized by Plaintiffs prior to the termination of the copyright assignment. Willis does not dispute that existing derivative works may continue to be exploited under existing licenses under the terms of the grants and the existing licenses. See 17 U.S.C. § 203(b)(1). Therefore, it does not appear that there is a controversy in this regard. If Plaintiffs can point to facts showing that there is a controversy regarding utilization of derivative works prepared prior to the termination of the grants, Plaintiffs may amend their Complaint to include these facts.

III. CONCLUSION

For the reasons discussed above, Willis's motion to dismiss is GRANTED. Plaintiffs' Complaint is DISMISSED for failure to state a claim. The Court grants Plaintiffs leave to file an amended complaint within 30 days of the entry of this Order. If Plaintiffs do not file an amended complaint, this case shall be closed.

IT IS SO ORDERED.

DATED: May 7, 2012

BARRY TED MOSKOWITZ, Chief Judge United States District Court
10 11cv1557 BTM(RBB)

May 16, 2012

From the Village to the Arena: Copyright Termination Issues Left Unsung In Aftermath of the Village People Ruling

By Lisa A. Alter
lisa.alter@alterandkendrick.com
(212) 707-8377

The Los Angeles District Court ruling that Village People Songwriter Victor Willis is entitled to terminate his grants of rights in 33 musical compositions is being hailed as a landmark decision that "will send shock waves through the record industry." The case is the first to be decided under the provision of the U.S. Copyright Act that affords authors (including composers and lyricists) and their heirs the right to terminate grants under copyright made by the author on or after January 1, 1978. That provision, 17 U.S.C. Section 203, was specifically designed by Congress to allow creators the chance to recapture their creations 35 years after contracting them away (or 40 years after the works were first published, whichever date arrives sooner). While Section 203 of the Copyright Act (like Sections 304(c) and (d) which govern terminations of grants made prior to 1978) was intended to protect the interests of authors who all too frequently entered into inequitable contracts due to their unequal bargaining position, the lobbying efforts of book and music publishers anxious to hold on to these copyrights made the resulting legislation far more complex. Indeed, the termination provisions and the Copyright Office regulations that complement them are sufficiently confusing so that it is difficult for a creator to reclaim his or her rights without consulting with a lawyer specifically working in the copyright area.

That said, the question addressed by the court in Scorpio Music S.A. v. Victor Willis was actually quite simple: was it necessary for Willis' co-authors to join him in serving notice of termination on the publisher, Scorpio Music. This is an issue that never should have gone to court. The Copyright Act states plainly and succinctly that where 2 or more authors execute a grant of copyright a majority of those authors are required to terminate the grant. However, "In the case of a grant executed by one author, termination of the grant may be effected by that author." No other songwriters were party to the contracts entered into by Willis and Scorpio Music; presumably, his co-writers entered into separate agreements with the music publisher. Based on this fact and the "'plain meaning' of the statute's text" the Willis court held that "a joint author who separately transfers his copyright interest may unilaterally terminate that grant." While it is gratifying that the first time the Section 203 termination right (commonly referred to as the "35 Year Termination Right") has come under judicial scrutiny the court ruled in favor of the author, the very limited fact pattern reviewed in this case makes the decision fairly inconsequential. The law is quite clear as to how many authors must serve notice of termination based on the number of authors who are signatory to a specific grant, but there are other areas of ambiguity in the statute which, if litigated, will have a far greater impact on the music industry than Willis.

Foremost among the open issues is a question that goes straight to the heart of the record industry: may recording artists terminate agreements entered into with record labels and recapture the rights to their sound recordings? Since the enactment of the Copyright Act, many songwriters, composers and heirs have successfully invoked the statutory termination provisions. However, due to the fact that sound recordings were not within the scope of federalcopyright laws prior to February 15, 1972, until recently there has been little consideration of the application of the termination provisions to grants of rights in sound recordings. Clearly allowing recording artists to assert termination rights would further the intent of Congress to "safeguard authors against unremunerative transfers." If the balance of power in the negotiation between a songwriter and publisher is inequitable, how much more so is that of the negotiation between the artist and record company?

Yet record labels, concerned about imminently losing control of valuable sound recordings from the late '70s and early '80s, have mounted a 2-prong argument against allowing recording artists to exercise their statutory termination rights. First, claim the labels, sound recordings are by definition works made for hire and thus outside the scope of the statutory termination provisions. However, while in certain circumstances a sound recording may be found to be a work made for hire (meaning, in essence, that the record company is the "author" of the work), this is a factual determination that must be made (or potentially litigated) on a case by case basis. The Copyright Act does not state that sound recordings are by definition works made for hire and, indeed, most sound recordings would fail to meet the work for hire criteria set forth in the Copyright Act.

The record companies' second line of attack is that, in the event that sound recordings are not works made for hire, multiple parties may have authorship standing and thus be entitled to assert a termination right. These parties, the labels assert, could include not only artists, but also producers, mixers, sound engineers, and editors, among others. While this is an interesting question (the Copyright Act does not define "author" in any instance other than to state that the "author" of a work made for hire is the employer) it is clearly not grounds for preventing an artist from asserting the 35 Year Termination Right with respect to a contract entered into between the record company and that artist. Since this issue may also be the subject of litigation (one can envision the action brought by a record company served with notice of termination by a mixer or editor) it would certainly be prudent for Congress to circumvent the matter by amending the Copyright Act to provide a definition of the author of a sound recording as the featured artist or artists, or, in the event there is no featured artist, the featured producer.

While the recent decision in the Village People songwriter case is frequently mentioned in the same sentence as the record industry, the case involved the rights of a songwriter versus a music publisher with respect to musical compositions written by the songwriter. Record rights were not involved at all. The Willis case was a frivolous lawsuit brought by a desperate music publisher not well versed in the U.S. copyright law. It is probable, however, that more substantive cases will be brought under Section 203 of the Copyright Act, and highly likely that those cases will focus on the right of an artist to terminate a grant of rights in a sound recording.

Hopefully, the decision of Judge Moskowitz to uphold Willis' right to terminate the grant of rights in his songs based not only on the plain meaning of the law but also on the recognition of the Congressional purpose in enacting the termination provisions, will offer guidance to future courts examining the termination rights of recording artists.

May 24, 2012

Village People's Original Lead Singer Victorious in Termination Lawsuit

By Christine A. Pepe, AVP ASCAP

In Scorpio Music S.A., et al. v. Victor Willis, Judge Moskowitz of the Southern District of California ruled that Victor Willis, song writer and original lead singer of the Village People, could unilaterally exercise his right of termination under the Copyright Act and reclaim his interests in 33 musical compositions, including iconic works such as "Y.M.C.A." and "In the Navy." The decision represents a victory for songwriters and performing artists who typically license or assign their copyrights to music publishers or record labels. To summarize, if an author of a joint work individually executes a grant of copyright to a third party, he or she may unilaterally terminate that grant without majority consent of the other joint authors.

In July 2011, defendant Willis served on the plaintiffs, music publishers to whom Willis had previously transferred his copyright interests in certain compositions, a notice of termination of grants of copyright for 33 musical works. The plaintiffs brought suit against Willis seeking declaratory judgment that: (1) Willis' notice was invalid and (2) should the court find the notice to be valid, Willis' reversion of rights is limited to the royalty percentage that he received under the agreements between the parties.

As Willis' transfer of copyright occurred after January 1, 1978, Section 203 of the Copyright Act applies, which reads in relevant part as follows:

(a) Conditions for Termination.--In the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise, than by will, is subject to termination under the following conditions:

(1) In the case of a grant executed by one author, termination of the grant may be effected by that author . . . . In the case of a grant executed by two or more authors of a joint work, termination of the grant may be effected by a majority of the authors who executed it . . .

See 17 U.S.C. § 203 (emphasis added).

With regard to the validity of Willis' termination, the plaintiffs argued that under Section 203 (a)(1), because the subject compositions were joint works, a majority of all authors who transferred their copyright interests in a particular work must join in a termination. In other words, Willis could not unilaterally terminate his grant of copyright. The plaintiffs argued that the statute's language, "In the case of a grant executed by two or more authors of a joint work, termination of the grant may be effected by a majority of the authors who executed it" applies. They urged that the term "grant" as used in this phrase refers collectively to all grants by authors of a joint work, even if they were separate transactions.

Starting with the plain meaning of the statute, the court noted that when referring to a grant executed by two or more authors of a joint work, section 203(a)(1) refers to a "grant" in the singular--not "grants." Based on this observation, the court concluded that if two or more joint authors execute a single grant, only then is a majority necessary to effectuate a termination. If a single author of a joint work executes an individual grant, as Willis did, then that co-author can unilaterally terminate the copyright grant without obtaining consent of the other authors. Such a reading, the court held, harmonizes with the law governing copyright co-ownership--that each co-owner of a joint work holds an undivided interest in the whole and in the absence of an agreement to the contrary, may always transfer or license his or her interest in the joint work to a third party, subject only to a duty of accounting to the other co-owners. As the termination time is calculated from the date of grant execution, the court also found plaintiffs' proposed construction unwieldy. If the term "grant" consists of multiple separately executed grants by joint authors, how would the "date of execution" be calculated? Such a reading, the court determined, would create uncertainty "regarding the date of execution, which could become a moving target."

In the event that Willis' termination notice was valid, the plaintiffs alternatively argued that his reversion of rights should be limited to the royalty percentage that he received under the agreements between the parties. Again relying on traditional principles of copyright co-ownership, the court rejected this argument. Absent an agreement to the contrary, joint authors share equally in the ownership of the joint work, even if their contributions to the work were not equal. In other words, if Willis was one of three joint authors, he would have 1/3 undivided copyright interest in the musical work and upon an effective termination, he would get back exactly that--1/3 undivided copyright interest. The royalty percentage that was negotiated has no bearing on the copyright interest.

Obviously, this decision represents a victory for songwriters and recording artists who wish to terminate their copyright grants. Going forward, it is likely that music publishers and record labels will, as a matter of practice, attempt to have all joint authors execute one single grant so that majority consent is required for there to be an effective termination.

July 2, 2012

Sony Purchases EMI Music Publishing

By Elissa D. Hecker

On June 29th, investors led by Sony acquired EMI Music Publishing. The cost was $2.2 billion, which gave Sony control over more than two million songs and a larger share of the market than its closest competitor, Universal.

Even though Sony will administer the new EMI catalog through its publishing division, Sony/ATV, the companies will remain separate entities. Martin Bandier, chairman of Sony/ATV (and formerly of EMI), will run both companies.

September 21, 2012

Kernel Records Oy v. Timothy Z. Mosley p/k/a Timbaland, et al.

By Barry Werbin

A very interesting and detailed case addressing what constitutes a published "US work" in the context of global online publishing and distribution, is Kernel Records Oy v. Timothy Z. Mosley p/k/a Timbaland, et al. (11th Cir. Sept. 14, 2012). The plaintiff, a Finnish record company, had purchased rights to a musical computer arrangement called Acidjazzed Evening, which was first published by the original author allegedly in Australia in August 2002 as a "disk magazine" called Vandalism News, and later by a Swedish website, which had uploaded it. The defendants (including UMG, EMI and other music publishers) created, distributed and marketed an allegedly infringing (sampled) song called Do It. Kernel failed to apply for U.S. copyright registration, but alleged that because the work was first published outside the U.S., no U.S. registration was required as a prerequisite to sue. Mosley argued, however, that by making Acidjazzed Evening available for download from an "Internet site," the work was simultaneously "published" in every country of the world having Internet service and, thus, the work was subject to the U.S. registration requirement. The Florida District Court agreed and dismissed the case on a summary judgment motion based on its view that the Copyright Act dictates that a work simultaneously published in every country of the world should be treated as a "United States work" under Section 411 of the Act, and therefore is subject to the Copyright Act's registration requirement.

The 11th Circuit affirmed on alternative grounds under Section 411 of the Act but rejected the District Court's analysis and basis for the summary judgment grant, stating: "The district court...confounded 'the Internet' and 'online' with 'World Wide Web' and 'website.' Because of the strict temporal and geographic requirements contained in the statutory definition of 'United States work,' conflating these terms had a profound impact on the district court's evidentiary analysis. By confounding 'Internet' with 'website,' the district court erroneously assumed that all 'Internet publication' must occur on the 'World Wide Web' or a 'website.' The district court then erroneously assumed all 'Internet publication' results in simultaneous, worldwide distribution. [A] proper separation of the terms yields a very different analysis." The Court ultimately held that Mosley failed to meet his factual burden in establishing the exact nature of the online posting of the song and its intended scope of distribution to support summary judgment in defendants' favor. The Court noted that "proof of distribution or an offer to distribute, alone, is insufficient to prove publication. Central to the determination of publication is the method, extent, and purpose of distribution" and in the context of whether a work was first published abroad, also relevant is the "timing and geographic extent of the first publication."

However the Court ruled alternately that, based on discovery in the case, summary judgment was still warranted because "[t]he record reveals a lack of sufficiently probative evidence to determine that Acidjazzed Evening is a foreign work" because there was no evidence that the Australian "disk magazine" site was ever made "publicly accessible." The Court concluded that there was only "simple speculation that Acidjazzed Evening "was published on the Internet [in Vandalism News] in August 2002. A reasonable fact-finder could not find that a simultaneous, worldwide publication occurred in August 2002. Because the record lacks sufficiently probative evidence of simultaneous worldwide publication, we need not determine what effect simultaneous worldwide publication would have under 17 U.S.C. §101's definition of a United States work." As Kernel Records bore the burden of proving compliance with statutory formalities, the Circuit affirmed summary judgment on this alternative ground.

Therefore the core issue remains of what constitutes a "U.S. work" for first publication purposes in the context of online/Web/Internet uploading first done outside the U.S.

March 20, 2013

UMG Recordings, Inc v. Veoh Networks, Inc. et al

By Barry Werbin

On March 14, the 9th Circuit came down with a lengthy superseding opinion in UMG Recordings, Inc v. Veoh Networks, Inc. et al [prior withdrawn opinion is at 667 F.3d 1022 (9th Cir. 2011)], holding that Veoh, the video sharing site and service, is entitled to a defense under the DMCA's "safe harbor" in 17 U.S.C. § 512(c), which limits a service provider's liability for "infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider."

In affirming a Cal. District Court's grant of summary judgment in favor of Veoh, the Court agreed with the Second Circuit's opinion in Viacom Int'l v. YouTube, Inc., 676 F.3d 19, 31 (2d Cir. 2012), in rejecting UMG's arguments that that the DMCA safe harbor did not apply because: "(1) the alleged infringing activities did not fall within the plain meaning of 'infringement of copyright by reason of the storage [of material]at the direction of a user;' (2) genuine issues of fact remained about whether Veoh had actual knowledge of infringement, or was 'aware of facts or circumstances from which infringing activity [wa]s apparent;' and(3) Veoh 'receive[d] a financial benefit directly attributable to . . . infringing activity' that it had the right and ability to control." [from Court's Summary]

In particular, the court rejected UMG's arguments that Section 512(c) of the DMCA only applied to web hosting services as opposed to a much broader class of "service providers," such as Veoh, and that the statute limited the safe harbor only to "storage" but not "facilitation of access." As the Court stated: "To carry out their function of making websites available to Internet users, web hosting services thus routinely copy content and transmit it to Internet users....We cannot see how these access-facilitating processes are meaningfully distinguishable from Veoh's for § 512(c)(1)purposes." (at p. 25)

With respect to "actual knowledge" and "red flag" awareness, the Court held that the district court was correct in finding that UMG "failed to rebut Veoh's showing 'that when it did acquire knowledge of allegedly infringing material - whether from DMCA notices, informal notices, or other means - it expeditiously removed such material.'" (at p. 28) "We therefore hold that merely hosting a category of copyrightable content, such as music videos, with the general knowledge that one's services could be used to share infringing material, is insufficient to meet the actual knowledge requirement under §512(c)(1)(A)(i)." (at p. 33)

With respect to "red flag" knowledge --whether a provider is "aware of facts or circumstances from which infringing activity is apparent" -- the Court held that "Veoh's general knowledge that it hosted copyrightable material and that its services could be used for infringement is insufficient to constitute a red flag." (at p. 34) Consistent with the Second Circuit's opinion in Viacom v. YouTube, the Court observed that while a service provider can't "bury its head in the sand to avoid obtaining such specific knowledge," after "viewing the evidence in the light most favorable to UMG as we must here, however, we agree with the district court there is no evidence that Veoh acted in such a manner. Rather, the evidence demonstrates that Veoh promptly removed infringing material when it became aware of specific instances of infringement. Although the parties agree, in retrospect, that at times there was infringing material available on Veoh's services, the DMCA recognizes that service providers who do not locate and remove infringing materials they do not specifically know of should not suffer the loss of safe harbor protection." (at p. 34)

The Court also affirmed the District Court's finding that "Veoh did not have the necessary right and ability to control infringing activity and thus remained eligible for safe harbor protection." (at p. 40) In part, the Court rejected UMG's view that "control" under Section 512(c) should be equated with common law vicarious liability (which was applied in Napster), an interpretation also rejected by the Second Circuit in Viacom. The Ninth Circuit held:

"We agree with the Second Circuit and hold that, in order to have the 'right and ability to control,' the service provider must 'exert[] substantial influence on the activities of users." Id. 'Substantial influence' may include, as the Second Circuit suggested, high levels of control over activities of users... Or it may include purposeful conduct, as in Grokster. In this case, Veoh's interactions with and conduct toward its users did not rise to such a level."

There's a lot more discussion and interesting reading about additional facts relating to "knowledge," such as emails sent to Michael Eisner, one of Veoh's investors, by Disney's CEO citing specific infringing content. But the Court viewed this as a "deficient" DMCA notice coming from a copyright owner, and that the cited content was thereafter promptly removed anyway.

A copy of the decision is available at: umg_veoh_Decision.pdf

April 25, 2013

UMG Recordings Inc. v Escape Media Group Inc.

By Barry Werbin

Attached is a copy of the First Department's unanimous reversal of Justice Kapnick's prior decision in UMG Recordings, Inc. v. Escape Media Group, Inc., which held that pre-1972 sound recordings were covered by the DMCA despite such works not being covered by the Copyright Act. UMG Recordings Inc v Escape Media Group Inc.pdf The First Department noted that Justice Kapnick's decision had relied "heavily on Capitol Records, Inc. v MP3tunes, LLC (821 F Supp 2d 627 [SD NY 2011]), in which the United States district court tackled precisely the same issue and found that the DMCA embraced sound recordings fixed before February 15, 1972."

The Court held that to adopt defendant's view "would directly violate section 301(c) of the Copyright Act." Instead, it adopted UMG's view that "Section 301(c) forbids the Act from 'annull[ing]' or 'limit[ing]' the common-law rights and remedies of owners of such works, and the DMCA, if it were to bar infringement actions against Internet companies that otherwise comply with the DMCA, would do just that." The Court observed that in the absence of the DMCA, "there would be no question that UMG could sue defendant in New York state courts to enforce its copyright in the pre-1972 recordings, as soon as it learned that one of the recordings had been posted on Grooveshark [defendant's Internet music streaming service]." Thus, any "material limitation" on a copyright owner's New York common law rights, "especially the elimination of the right to assert a common-law infringement claim, is violative of section 301(c) of the Copyright Act."

Further, in reading the Act as a whole, the Court emphasized that the DMCA's textual references to "copyright" or "copyright infringers" pertains "only to those works covered by the DMCA. The DMCA expressly identifies the rights conferred by the Copyright Act in stating who a 'copyright infringer' is for purposes of the DMCA. Had Congress intended to extend the DMCA's reach to holders of common-law rights it would have not have provided so narrow a definition."

Lastly, the Court reconciled two underling policies: "The statutory language at issue involves two equally clear and compelling Congressional priorities: to promote the existence of intellectual property on the Internet, and to insulate pre-1972 sound recordings from federal regulation. As stated above, it is not unreasonable, based on the statutory language and the context in which the DMCA was enacted, to reconcile the two by concluding that Congress intended for the DMCA only to apply to post-1972 works."

In conclusion, the Court suggested that "it would be far more appropriate for Congress, if necessary, to amend the DMCA to clarify its intent, than for this Court to do so by fiat."

September 25, 2013

Sony, Warner, UMG, ABKCO v. SiriusXM

By Mark L. Belkin

On September 11, 2013, a consortium of music industry giants brought action against satellite radio leader SiriusXM in California, over the defendant's use of their back catalogs that pre-date 1972. In February 1972, the Copyright Act was amended to allow for protection of all fixed sound recordings of copyright holders, but only on those works created after February 15, 1972. SiriusXM has been using those recordings created before 1972 on its numerous channels, and the recording industry claims that it must pay royalties for such uses.

The companies involved represent the majority of the music industry, including Sony Music Entertainment, Capitol Records, Warner Music, UMG, and ABKCO, and they are not alone in bringing action against SiriusXM. Of late, there are at least four other lawsuits filed. These include $100 million dollar lawsuits from Flo and Eddie of the Turtles and SoundExchange over similar royalties issues on pre-1972 recordings - implying that more are sure to come.

At the heart of the plaintiffs' argument is that SiriusXm profits immensely from the pre-1972 recordings of many artists by using their intellectual property to attract and maintain over 25 million subscribers to its service. The plaintiffs are asking the courts to force SiriusXM to obtain licenses and pay royalties on those artists that contribute to channels which play music from 1940's, 1950's, 1960's, and up to February of 1972. SiriusXM applies the federal copyright standard to itself and does not provide royalties for pre-1972 recordings, but what about state law? A vital factor for the action being filed in Los Angeles County, is the plaintiffs' argument that for at least the last 30 years, sound recordings have been protected statutorily by Section 980 of the California Civil Code. "The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior sound recording, but consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording." Civil Code § 980(a)(2). Even though the 1972 amendments to the Copyright Act did not protect recordings already fixed, Congress understood that the recording industry already relied on statutes and common law to protect its intellectual property, and amended the legislation to preserve "any rights or remedies under the common law or statutes of any State" with respect to sound recordings that were fixed before February 15, 1972. 17 U.S.C. § 301(c).

In Goldstein v. California, the Supreme Court ruled on this very subject in 1973, holding that federal law did not preempt state laws for pre-1972 recordings. Finding that "[u]ntil and unless Congress takes further action with respect to recordings fixed prior to February 15, 1972, the California statute may be enforced against acts of piracy such as those which occurred in the present case." Congress did not enact a federal law on the subject and therefore state law applies.

Does the recording industry want federalization of those protections on pre-1972 recordings? The Copyright Office in 2009 released a report recommending that pre-1972 recordings be brought under federal copyright protections. (http://www.copyright.gov/docs/sound/pre-72-exec-summary.pdf). Through the RIAA, the recording industry argued that federalization would pose a problem for record companies. RIAA's Senior Vice President of Business and Legal Affairs, Susan Chertkof, stated that the cost of registering each album with the Copyright Office and other legal complications, led to the recording industry generally opposing a move by Congress to federalize pre-1972 rights. (http://www.copyright.gov/docs/sound/meeting/transcript-06-02-2011.pdf). It would seem that the recording industry has a preference for establishing precedence through the courts and maintaining state level protections for pre-1972 works. However, as anything in major industries, this is subject to change.

The complaint claims that SiriusXM earned $3.4 billion in revenue and it already pays royalties on those recordings fixed after the 1972 Amendments to the Copyright Act. The labels are asking for actual and punitive damages, as well as a preliminary and permanent injunction enjoining the defendants from infringing on all the pre-1972 fixed recordings. The precedent established would affect other music services, including digital providers like Pandora, and businesses such as bars and sports venues which currently are not obligated to pay royalties on fixed recordings outside federal protections.

The complaint is available here:
http://www.hollywoodreporter.com/sites/default/files/custom/Documents/ESQ/bc520981.pdf

September 26, 2013

Scorpio Music S.A., et al v. Victor Willis

By Michael Cataliotti

The 35-year copyright termination clause within the 1976 Act is a topic that has been discussed industry-wide for some time now; yet with the precedent-setting dismissal of the plaintiffs' complaint for failure to state a cause of action that was recently handed down by Chief District Judge Barry Moskowitz of the Southern District of California, many questions have arisen as to the fate of those prominent compositions by Bob Dylan, Tom Petty, the Eagles, and their contemporaries. A quick search for the case will bring up an array of articles about the potential impact of Victor Willis's seeming ability to recapture copyright in and to 33 of those compositions he co-authored, "Y.M.C.A." being one of the most notable. What those articles do not reference so often, however, is that despite this, no appeal has yet to be filed, and should Scorpio Music and its co-plaintiffs seek review of the District Court's determination, it is entirely unclear what will come from the Ninth Circuit.

Should the decision be upheld, the impact on the recording industry may be tremendous, but the impact on other avenues could be even more grandiose, as Mr. Willis has openly stated that one of the things he has learned over the years is that "[y]ou can stop somebody from performing your music if you want to, and I might object to some usages." From this, the impact on all sorts of publishing (from songs to books), tours, cover bands, venues, and the like, could be disastrous. Only time will tell at this point.

http://www.nytimes.com/2013/09/11/arts/music/a-copyright-victory-35-years-later.html?_r=2&adxnnl=1&adxnnlx=1378856059-G/Ypm+OljGyed7hfaI7slw&

http://www.billboard.com/articles/news/5687347/village-peoples-victor-willis-wins-copyright-victory


October 31, 2013

IsoHunt Goes Out with a Bang

By Angele Chapman

BitTorrent websites like IsoHunt.com have become the "underground" way to illegally download music, movies, and more without paying. BitTorrent is a file distribution protocol that enables torrent files to be shared between users through a peer-to-peer file sharing software. These torrents usually contain media files that are hot commodities for those who wish to avoid paying for movies, music, programs, and other products. This new blast of technology is opening up the doors to copyright infringement and a great deal of lawsuits in the entertainment industry.

In March of this year, the U.S. Court of Appeals for the Ninth Circuit affirmed a summary judgment ruling in favor of seven film studios, finding that the defendant Gary Fung, who is the founder of IsoHunt, induced third parties to download infringing copies of the plaintiffs' copyrighted works. (Columbia Pictures Industries, Inc., et al. v. Gary Fung, et al., Case No. 10-55946 (9th Cir., Mar.21, 2013) (Berzon, J.)). Fung failed in his attempt to use the DMCA's safe harbor provision as a defense against parties such as Disney Enterprises, Inc, Paramount Pictures Corp., and Warner Bros Entertainment, Inc. Fung asserted, "A service provider shall not be liable for monetary relief, or, except as provided in subsection (j), for injunctive or other equitable relief, for infringement of copyright by reason of the provider's transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider, or by reason of the intermediate and transient storage of that material in the course of such transmitting, routing or providing connections..." (Columbia Pictures Indus. v. Gary Fung, 710 F.3d 1020, 1040 (9th Cir. Cal. 2013)).

After this case, other companies whose business has been affected by IsoHunt's copyright infringement have joined in seeking an injunction. As result, IsoHunt and the Motion Picture Association of America recently reached a settlement for $110 million, three weeks before their trial was set to begin. IsoHunt will finally shut down, after over 10 years of operation, to its 7.5 million unique visitors. This settlement also includes a global prohibition against founder Gary Fung from further profiting from the infringement of MPAA member studio content. (Popular BitTorrent Site IsoHunt Shutdown, Forced To Pay $110 Million, RT (Oct. 18, 2013, 3:46 PM), http://rt.com/usa/bittorrent-isohunt-shutdown-forced-340/)

What this Means for IsoHunt

IsoHunt has agreed to cease all of its international operations, leading to the shutdown of another top BitTorrent file sharing website. Gary Fung agreed to this settlement as it became apparent he was fighting a losing battle. Another motivating factor may have been that the MPAA warned Fung that it was seeking as much as $600 million in damages if the case proceeded to trial. Nonetheless, this settlement sends a strong message to other BitTorrent websites that continue to infiltrate the entertainment industry and profit from illegal business practices by enabling users to engage in copyright infringement. (Eriq Gardner, IsoHunt To Shut Down After Settlement With Hollywood Studios, THE HOLLYWOOD REPORTER (Oct. 17, 2013, 9:31 AM),
http://www.hollywoodreporter.com/thr-esq/isohunt-shut-down-settlement-hollywood-649203).

This settlement speaks volumes for the power that large media companies have to shutdown file sharing websites. Specifically, it places a duty on websites to regulate the files being shared in order to avoid copyright liability. It also causes great concern for those companies who have evolved primarily on their access to such illegal activity. However, there seems to be an apparent difference between decisions stemming from courts in Europe and the United States. For example, The Pirate Bay, another torrent website, was handed a judgment against it in Swedish courts, yet the website is still in operation. Both websites were sued by the MPAA, yet The Pirate Bay has been able to survive that lawsuit. Regardless of what country in which the website is based, the March decision and recent settlement between IsoHunt and MPAA illustrates that enforcing copyright infringement is essential to major corporations.

As of October 23rd, the IsoHunt website no longer existed. The founder wrote a farewell letter to his users and advised as to how they might go about obtaining sought-after torrent files. He noted, "about 95% of those torrent files can be found off Google regardless and mostly have been indexed from other BitTorrent sites in the first place." His quote depicts that while the content companies may feel as if they have won the battle here, the war is far from lost.


November 1, 2013

CMJ Business Law Seminar

By Candy Santana

Change, change, change, the common theme at the Entertainment Business Seminar, coupled with recent decisions by the courts and their implications on the industry. The panel devoted to copyright, which was led by Christine Lepera, was the culmination to a day filled with informative discussions. This panel was significant because as noted, Congress is in the early stages of renovating the Copyright Act for the first time since 1970. This section consisted of an amazing array of panelists who conversed about a wide variety of topics, such as recent developments in intellectual property law, the first sale doctrine, and fair use. The panel also touched upon several recent cases, including the Pandora v. ASCAP, Kirtsaeng v. John Wiley & Sons, and Cariou v. Prince.

Gary Greenstein began by tackling the issues with musical works: underlying compositions, notes and lyrics, direct licensing, and Performance Rights Organizations. He discussed with great detail ASCAP's consent decree, along with an analysis of Pandora v. ASCAP, which, as Mr. Greenstein stated, is "Shaking up the world of ASCAP." Why is this decision shaking things up? The court held that the ASCAP blanket license must include its entire repertoire, including the songs of the publishers who are trying to withdraw their digital rights. The court reasoned along with other issues that in the consent decree the language "unambiguously" states that ASCAP has to provide Pandora a license to perform all of the works in the repertory and ultimately granted the motion for summary judgment in favor of Pandora. Due to the fact that this decision just came down recently, we shall see what the implications will be with respect to licensing.

Next, Joe Salvo, the current president of the Copyright Society of the U.S.A., discussed cases that dealt with the first sale doctrine, starting with Kirtsaeng v. John Wiley & Sons. He began by addressing the question: To what extent does the first sale doctrine apply when a copy or copyrighted work is manufactured and sold abroad? In Kirtsaeng v. John Wiley & Sons, the issue was whether the "first sale" doctrine applied if the copy of work was printed abroad and then initially sold with the copyright owner's permission, and whether the buyer of the work is allowed to bring the copy into the United States and distribute the work as the buyer desired. As noted by Mr. Salvo, the owner of the particular copy lawfully made under this title is permitted without the authority of the copyright owner to sell or otherwise dispose of that particular copy. However, section 602 of the Copyright Act indicates that importation into the U.S. without the authority of the owner of a copy of work acquired outside the U.S. is a violation of the copyright. The court reasoned with the geographical limitations and suggested that Congress wanted to even out the playing field for those manufactured copies made in the U.S. and those made abroad. The Court addressed the other issues raised by both parties, but ultimately held that the "first sale" doctrine applies to copies of a copyrighted work lawfully made abroad.

Mr. Salvo continued with the inquiry of to what extent does the first sale doctrine apply to digital copies and digital music? He stated that, as a matter of public policy, once the copyright owner has reached the economic benefit of the copyrighted work, we are not going to let the copyright owner continue to control the distribution of the copyrighted work. He summed up his discussion with an analysis of Capitol Records, LLC, v. Re Digi Inc, where the court held that the owner of a digital music file, lawfully made and purchased, can not resell its file through ReDigi under the first sale doctrine.

Lastly, Moderator Christine Lepera discussed Cariou v. Prince in her presentation of the fair use doctrine. Ms. Lepera began by introducing background facts of the case and continued with the District Court's analysis. In Cariou v. Prince, the court rejected Prince's fair use defense and concluded that Prince did not intend to comment on Cariou or Cariou's photos, or on aspects of popular culture closely associated with Cariou or the photos when he appropriated them. However, the Second Circuit reversed the District Court's decision, holding that all works except five of Prince's artworks were considered fair use of Cariou's work as a matter of law. What is interesting about this case (as provided in Ms. Lepera's Power Point presentation), is that the Second Circuit held that "what is critical is how the work in question appears to the reasonable observer, not simply what an artist might say about a particular piece or body of work." It is fascinating to see how the court used a "reasonable observer" standard in order to determine if the work was transformative. The question then becomes: What is a reasonable observer? How would the reasonable observer measure transformative use? It will be interesting to see how this case would effect the entertainment industry with respect to copyright infringement.

The panel ended with questions led by the Moderator and the audience. Change seemed to be the common theme and the key developments discussed by the panel left us thinking about what will be the future of entertainment business and law.

November 2, 2013

2013 Entertainment Business Law Seminar Presented by CMJ & EASL

By David Jacob, Esq.
Marc Jacobson, P.C.

Collective Versus Direct Digital Licensing

The first panel of the day featured speakers with varying perspectives as to whether copyright owners are better off having the Performance Rights Organizations (PROs) collectively license their performance rights for new media or negotiate the deals directly themselves. Marc Jacobson of Marc Jacobson, PC led the discussion, which featured representatives from Spotify, Sound Exchange, music publishers and an economist.

James Duffet-Smith, Head of Licensing Business Affairs for Spotify, stated that from its point of view, direct licensing makes sense when dealing with recordings because of the way the transaction is handled. The labels deliver recordings, which Spotify is able to match in its system, and track and pay out directly based on the number of plays. However, in the context of music publishing, there is not any content actually changing hands. A publisher does not deliver any actual recordings, and it is more difficult for companies in Spotify's position to pay out the many songwriters or publishers that could be involved in a particular song in a particular territory. The problem is the lack of a central database upon which everyone can rely for intellectual property ownership information.

One thing that everyone seemed to agree on, which was also reiterated later in the day by keynote speaker David Israelite, CEO and President of the National Music Publishers Association, Inc., is that the PROs are doing as good a job as can be expected; although they are working in a broken system that needs to be updated in the digital age. The panel suggested that one way to do this is to adjust how the consent decree operates, or remove it altogether. The consent decree limits a PRO's ability to exploit the full value of its catalog, and is the main reason why publishers are attempting to withdraw their new media rights from the PROs. It was suggested that having the publishers involved in the rate court process could be one way to have all parties properly represented throughout the process.

Film Finance: It's To Your Credit: Getting the Full Use of Tax Credits for Film Production

This panel gave an overview of how New York State offers film tax credits. New York has made great strides over the last decade to get more talent and production into the State for various types of productions. As one of the speakers pointed out, there was once a time where most films would go to Toronto and Montreal to film "New York" scenes, simply because their tax credits were more attractive to the producers.

New York City's efforts to change this trend have been extremely successful, as 2012 was the busiest year yet, with 26 prime time episodic shows produced in NYC, along with 162 films and more than 160 TV shows. The entertainment industry now employs over 130,000 New Yorkers, and contributes $7.1 billion to the city's economy.

In addition to focusing on attracting film productions to New York, efforts have also been made to increase commercial productions and post-production services. Generally speaking, a producer can receive transferable tax credits of up to 30% for qualified film production or post-production costs, or 20% of qualified production costs for commercials.

Ethics: The Law of Anyplace: Ethical Considerations of Lawyering Without Borders (Virtual Practices, Outsourcing, Technology)

Professor Stephen Gillers, Elihu Root Professor of the New York University School of Law, led the ethics discussion for the day. His presentation focused primarily on the ability for an attorney to represent clients in other states and at what point does this amount to "practicing law" in a state in which one may not be licensed to practice. Technology has made it very easy for an attorney to provide legal services from almost anywhere in the world, and the lines are becoming blurred as to when one may commit malpractice.

The logic that one can represent a client in another state as long as the attorney stays at his or her computer in a state in which the attorney is licensed seems to be dated. If that same attorney goes to meet his or her client and offers legal services and advice directly in that state, then he or she may be committing malpractice by performing the unauthorized practice of law.

Professor Gillers also argued that the bar exam and general law school curriculum might be a poor approach to evaluate how fit an attorney is to practice law. Most attorneys are fairly specialized in the type of law in which they practice. Furthermore, while an attorney may be licensed to practice law in New York, it doesn't mean that he or she is fit to practice any type of law. As an ethics attorney in New York, Gillers is licensed to practice any type of law, but he would still be committing malpractice by representing a client in a specific field in which he is not familiar or competent. Alternatively, he questioned that as an attorney who specializes in copyright law, which is federal law and the same in every state, what is the point of requiring that the attorney be licensed in every state in which he or she actively practices?

Changing the Channel: Recent Cases and Developments Redefining the Television Landscape

Much of this panel focused on the ongoing controversy surrounding the Aereo lawsuits. The panel focused on Aereo's attempts to circumvent the copyright laws by claiming that its service does not constitute a public performance. Rather, Aereo claims that each transmission is a private performance, because each user has its own specific antenna that transmits a unique copy of specific content directly to an individual user. This argument comes from the Cablevision rulings, which the panel stressed, are being exploited in ways that can be very detrimental to the entire broadcasting industry and content owners.

As Rick Stone, partner at Jenner & Block, included in his presentation, Aereo threatens revenues from retransmission fees and has the potential to completely collapse the broadcast TV model as we know it. He went on to discuss two main mistakes made by the Cablevision ruling. First, the Cablevisioncourt ruled that a transmission is in itself a performance, and consequently, it becomes necessary to determine who is capable of receiving each particular transmission. Stone argued a public performance could consist of multiple transmissions to different places at different times, and that it was the court's focus on the individual transmission of a unique copy that was Cablevision's second mistake. Stone stated that Cablevision tried to distinguish each transmission and decide if any individual transmission would amount to a public performance. However, Stone clarified that the Transmit Clause in question makes no mention of "copies" or "master copies", but rather the statute simply focuses on whether a "work" is transmitted.

The panel was hopeful that the Supreme Court would hear this case in the near future and distinguish or overrule the Cablevision ruling to further protect the rights of distributors and content owners. If the courts uphold the Aereo business model, it essentially creates a roadmap for copyright infringement.

Sync or Swim: Licensing Music for Film/TV/Video Games in a Digital World

This panel focused on some of the basic factors to keep in mind when dealing with synchronization licensing. This segment of the music industry has become a reliable source of income as well as an important tool for breaking artists. TV shows, commercials, video games and movies all present different obstacles in placing and negotiating a song in such a project.

For TV shows, Jeff Brabec, Vice President Business Affairs at BMG Chrysalis/BMG Rights Mangagement, spoke about the different strategies that certain shows will take in order to negotiate the best deals. Some of the music-oriented shows, such as "American Idol" and "Dancing With the Stars", will employ a standard license that pays all songs the same rate based on the amount of time the song is used. These shows are essentially a "take it or leave it" license that allows no room for negotiation. The standard license for most TV shows includes media rights to the effect of "all media now known or hereafter devised" and a term of "in perpetuity." However, Brabec was quick to point out that as a publisher, he can only grant the rights to what he controls. As such, he will always cross out "in perpetuity" and simply write "for life of copyright."

The panel also focused on scoring and licensing music for video games. In this context, most people will think of games like Guitar Hero and NBA2k13 (music supervised by Jay-Z). However, in the grand scheme of video games, the music is normally one of the last things to be added. Very few games will provide for a large budget for music unless it is to be a major focus of the game. Even games like Grand Theft Auto that let users control a number of different radio stations throughout the game still have relatively small music budgets compared to the overall budget of the production. Most of the time, composers will be added at some point near the end of the game development and will use storyboards and screen shots to begin scoring a soundtrack that will be used in various scenes.

Chris Hajian, the lone composer on the panel, spoke about the different projects in which he has been involved and the types of work-for-hire contracts he has become accustomed to signing. However, he also shared some words of caution that there are still many artists and composers who are taken advantage of because they don't know the value of their own works and the long-term royalties that can be generated after the licenses. His advice for up-and-coming composers was to read the contracts and understand the rights that are being signed over. His one horror story was from a colleague of his from years ago that scored a nice little jingle and was convinced to sign it over as a work-for-hire for a new TV show. By doing so, this composer gave up any future royalties in the song and only received the fairly small upfront licensing fee. It just so happened that this song became the theme song for a fairly successful TV show that you might have heard of..."The Price Is Right".

Copyright 2013

The last panel of the day focused on recent developments surrounding intellectual property law. Notably, the panel touched on the Cablevision/Aereo controversy and the court's focus on the potential audience of a particular transmission, rather than the potential audiences, of the underlying work. While the Second Circuit has focused on this analysis, the Ninth Circuit has focused more on the transmission of the underlying work, which could lead to a Circuit split.

Another interesting topic of this panel was the discussion of the First Sale Doctrine and how it is applied in the digital context. The panel first touched on the conflict between the First Sale Doctrine and the limitations on the unauthorized importation of copyrighted material. The Supreme Court ruled earlier this year that the First Sale Doctrine trumps the importation limitation and does apply to foreign manufactured goods that are lawfully made (Kirtsaeng v John Wiley & Sons, Inc.).

The First Sale Doctrine discussion continued with a summary of the recent Capitol Records v ReDigi decision. ReDigi is an online marketplace for used digital music. Its software would analyze a user's music files and allow the upload and sale of such files. Upon each sale, the ReDigi software would erase the seller's copy of the music on the user's hard drive. The key factor that killed this service was the process of uploading a seller's music files to ReDigi's "cloud locker." This process created unauthorized reproductions of the works. Although ReDigi argued the First Sale Doctrine protected it, the courts disagreed because the service violated the copyright owner's exclusive reproduction right. Within this decision the court strongly rejected the expansion of the First Sale Doctrine to cover digital files.

January 8, 2014

Capitol Records, LLC et al. v. Vimeo LLC et al., case number 1:09-cv-10101, (SDNY)

Blurb adapted from a report by Andrea Calvaruso

On January 2nd, Judge Ronnie Abrams of the SDNY ruled to allow Vimeo LLC (Vimeo), a video-sharing service, to file an immediate appeal with the Second Circuit regarding whether the DMCA safe harbor for copyright infringement covers pre-1972 recordings covered by state copyright law. Vimeo's questions regarding what constitutes red flag knowledge were also certified.

The court rejected the right to appeal of the other questions regarding the DMCA safe harbor mid-case, including Vimeo's repeat infringer policy, whether it was willfully blind and "right and ability to control "the allegedly infringing activity, whether it acted with "willful blindness" and whether it had a repeat infringer policy in place.

The Judge Abrams also allowed the plaintiffs to amend the complaint to add more claims of infringement, finding the amendment timely.

January 11, 2014

Bad Lawyering On "The Good Wife": Setting The Record Straight On Music Publishing Law

By Eric S. Goldman
http://ericgoldmanesq.com/blog/

Even though I'm not usually a fan of shows featuring lawyers, I am a big fan of "The Good Wife". So when "The Good Wife" ran an episode entitled David And Goliath that delved deeply into my legal wheelhouse, I was excited. The show was all about copyright law and music publishing, and I've been an entertainment lawyer for 20ish years. Yet as the episode unfolded, I kept finding myself saying: "Wait a minute, that's not right. That's not how the law works."

Things started out well, because the fact pattern was pretty interesting. Two little known singer/ songwriters recorded a pop version of a rap song entitled THICKY TRICK. Basically, the pop version took the entire song lyric from the rap song, slowed down the tempo and added a bubble gum melody. The singer/ songwriters thought that the pop treatment highlighted how ridiculous the lyrics were. The pop treatment of the song was then performed on a "Glee"-style television show. After the show, the pop version of the song became a top seller on iTunes, generating millions of dollars in sales.

The issue was: could the singer/ songwriters sue the television show for copyright infringement over the misappropriation of a song they did not write?

Sadly, things rapidly went downhill. The episode touched on a number of copyright and music publishing issues, and pretty much got them all wrong.

1. Compulsory License. First, a little background. The U.S. Constitution laid the groundwork for modern copyright law in Article 1, Section 8, Clause 8, which reads "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries". In other words, a copyright is a man-made bargain - authors give the public access to their work, and the authors get a state-mandated monopoly on the exploitation of that work.

In the music publishing world, a license of the right to record a song is called a mechanical license. The basic copyright bargain found in the Constitution has led to a compulsory mechanical licensing scheme. Artists can record and distribute their music, provided that anyone else can record and distribute new versions of that music by obtaining a government-mandated mechanical license. In other words, the government tells artists that the liberal licensing of their works is "compulsory."

In "The Good Wife", the manager for the singer/ songwriters obtained a compulsory mechanical license because he wanted to do the simplest thing. The problem is, no one in the music industry uses compulsory licenses because they are unduly burdensome. Insert joke about government-run programs here.

Compulsory licenses have vigorous accounting and record keeping requirements - the costs of complying with the terms of a compulsory license usually exceed the income generated by the use of the licensed song. So pretty much everyone in the industry obtains mechanical licenses for previously recorded songs from record labels and music publishers, who are in the business of granting those licenses and grant them pretty freely.

Mistake Number One: It would have been far easier and cheaper to get a mechanical license for the rap song from the music publisher or record label than it would have been to obtain and comply with a compulsory mechanical license.

2. Derivative Copyright. The lawyers on "The Good Wife" spent a fair amount of time running around trying to obtain a derivative copyright in the covered rap song. However, there is no such thing as a derivative copyright.

There is such a thing as a derivative work. A derivative work is a new work based on a pre-existing work. When someone produces a Broadway musical version of a film, the Broadway musical is a derivative work. There is also copyright in a derivative work. That Broadway musical qualifies for all of the protections available under copyright law as an original work of authorship. Yet there is no such thing as a derivative copyright.

The basic issue on the show was that the singer/ songwriters incorporated a new melody into the rap song. All of the lawyers on the show accepted without question the proposition that incorporating a new melody into the rap song made the cover version a derivative work. In order to create a legal derivative work, the singer/ songwriters would have had to obtain an underlying rights agreement giving them permission to create a new pop song based on the original rap song.

However, was the cover version a derivative work based on the rap version? Maybe not.

The singer/ songwriters obtained a compulsory mechanical license in the rap song. A mechanical license to record a previously recorded song, compulsory or otherwise, includes the right to make a new arrangement of that song to the extent necessary to conform it to the style or manner of interpretation of the performance involved. An arrangement can be defined as chord progression, harmonies, accompaniment rhythm and musical fill phrases which define the style and feel of a song.

It's not clear whether, by incorporating a new melody line, the singer/ songwriters created a derivative work, which was beyond the scope of their compulsory mechanical license, or merely created a new arrangement which would be within the scope of their license.

Mistake Number Two: There is no such thing as a derivative copyright. There is such a thing as copyright in a derivative work, and there is such a thing as an underlying rights agreement which grants permission to create a derivate work.

Mistake Number Three: It is not a foregone conclusion that incorporating new music into a song creates a derivative work. It is a question of fact whether the changes are merely a permitted new arrangement.

3. Satire. The lawyers for the singer/ songwriters, including The Good Wife herself, argued that the cover version was a satire of the rap version. Such assertion confused satire with parody, and then misapplied the parody defense to a copyright infringement claim.

A satire misappropriates material protected by copyright in order to comment on society as a whole. A parody misappropriates material protected by copyright in order to comment on the copied material. In Campbell v. Acuff-Rose Music, Inc., 510 US 569 (1994), the Supreme Court reasoned that, because of this distinction, it was much easier for a parody to qualify as a fair use than it is for a satire.

In this instance, the singer/ songwriters were intentionally making fun of the song they copied, as well as rap music in general. So, rather than arguing satire, the singer/ songwriters' lawyers should have been arguing parody, as parody was the stronger (and more accurate) defense.

That being said, this cover song took the entire lyric from the underlying rap song. While a parody may take enough from the original work in order to conjure up that original work in the minds of the audience, a parody may not take the entire original work.

Mistake Number Four: The best available defense was that the cover song was a parody, not that it was a satire.

Mistake Number Five: The parody cover song probably used too much of the original rap song to qualify as a fair use, since it took the entire lyric.

4. Master Recording Copyright. The dispute between the singer/ songwriters and the television show ultimately hinged on one thing. The TV show's version of the song included very specific background noise - bowling balls hitting pins. And the singer/ songwriters' version of the song was recorded in a bowling alley. Which proved that the television show actually broadcast the singer/ songwriters recording.

Lawyer Alicia Florrick noted: "That's just theft." Yes, but theft of what?

The lawyers had been arguing that the TV show stole the singer/ songwriters' song, violating the copyright in that song. Yet the case was resolved when it was demonstrated that the TV show stole the master recording of the singer/ songwriters' song, violating the copyright in the master recording.

This is a tricky concept. An MP3 recording of a song incorporates two copyrights. The first is the copyright in the song. The second is the copyright in the master recording of the song. If you want to make a new recording of the song itself, you get a mechanical license, compulsory or otherwise. If you want to use the specific master recording of the song incorporated into the .mp3 file, you have to get a master use license.

This distinction between the copyright in a work of art and the copyright in the physical copy of that work of art plays out in odd ways. For example, I own several original oil paintings. While I have the right to display the physical copies of those paintings in my possession, I do not have the right to make and sell copies of those paintings. The right to make and sell copies remains with the artists.

Why is this important in our episode? It is because while there was a lot of talk about whether or not the singer/ songwriters were entitled to a copyright in their cover version of the original rap song, there was absolutely no discussion about who owned the copyright in the master recording of the cover song. All parties concerned simply assumed that the singer/ songwriters owned the copyright in the masters.

The thing is, the artist almost never owns the copyright in master recordings. The label usually owns the copyright in the master recordings, because the label supplies the recording equipment and personnel necessary to create them. Here, the master recording was created in a bowling alley owned by an unidentified party, using recording equipment and people provided by an unidentified party. It's entirely possible that the singer/ songwriters don't own the copyright in the master recording of their cover song. Which means that the happy ending in the episode may be very, very short-lived.

Mistake Number Six. The lawyers did not distinguish between the copyright in the song and the copyright in the master recording of the song.

Mistake Number Seven. The lawyers assumed that the singer/ songwriters owned the copyright in the master recording of the songs.

Fortunately for all parties concerned, I don't think most people watch "The Good Wife" for its realistic portrayal of the legal profession. On the show, first year lawyers spend a lot of time in court; associates have reasonable expectations of making partner in their fourth year; litigators routinely handle both civil and criminal matters; and the current economy is the perfect time for a Chicago law firm to go national.

That being said, I can't help but feel a little disappointed. For a brief second, I felt validated by "The Good Wife", because what I do for a living was deemed interesting enough to supply the plot for an episode of a top-rated TV show. It's kind of like getting to sit at the cool kids' table at lunch, only to find out that it's because they want you to do their homework.

Maybe I just need to watch less television.

January 14, 2014

Insane Clown Posse

By Michael Cataliotti

Insane Clown Posse, better known as ICP and comprised of two members, Joseph Bruce and Joseph Utsler, have been on the fringe of the music industry for decades with its "horrorcore" rap style. Although predominantly underground, ICP's fanbase is loyal and comprised of individuals who are passionate about everything ICP and being "juggalos". "Juggalos" is a moniker used by ICP fans to describe themselves, similar to "Deadheads" for Grateful Dead fans or "Little Monsters" for Lady Gaga's followers.

In 2011, the FBI designated the "Juggalos" as a "loosely organized hybrid gang" in its 2011 National Gang Threat Assessment. In response, ICP sought evidence as to how this determination was made and filed a FOIA request. That request has gone unanswered in any substantitive manner.

ICP and four "Juggalos" have filed suit in order to combat the gang designation which they allege has "violate[d] fans' constitutional rights, including free speech, freedom of association and the right to due process", as well as having caused significant financial harm to Insane Clown Posse and its label.

While the suit is not likely to impact the industry on a grand scheme or cause a large-scale ripple effect, it is interesting to note that other mainstream artists have fans who are rather zealous, but certainly should not be deemed a "loosely organized hybrid gang", such as Lady Gaga's "Little Monsters", Justin Bieber's "Beliebers", and Opie & Anthony's "Pests".

http://www.cnn.com/2014/01/08/showbiz/juggalo-gang-lawsuit/index.html

April 22, 2014

Capital Records v. Harrison

By Barry Werbin

A very interesting opinion (Capital Records v. Harrison.pdf) was issued by NY Supreme Court Judge Shirley Kornreich on April 14th. The decision addresses the proper statute of limitations under the CPLR for copyright infringements of pre-1972 sound recordings. Judge Kornreich sets up a possible split among the very few judges who have ruled on the issue in NY, as to whether it should be three years as under the federal Copyright Act, analogizing infringement to a tort or injury to property type claim, or the six-year residual limitations period for causes of action for which there is no specific statute of limitations. A case to be followed unless it settles.


May 11, 2014

Fair Use Considerations in DMCA Misrepresentation Claims: First Circuit "Cases of Interest" No Longer Very Interesting

By Amanda Schreyer
http://fierstkane.com/amanda-schreyer

In my recent article, "Misrepresentation Under the DMCA: The State of the Law", NYSBA Entertainment, Arts, and Sports Law Journal (Spring 2014, Vol. 25, No. 1), I discussed two recent, interesting cases out of the First Circuit: Tuteur v. Crosley-Corcoran (Tuteur v. Crosley-Corcoran, 1:13-cv- 12028 (D. Mass. filed January 25, 2013))(the "Blogger-Giving-the-Finger Photo Case"), and Lessig v. Liberation Music Pty Ltd. (Lessig v. Liberation Music Pty Ltd., 1:13-cv-10159 (D. Mass filed May 20, 2013))(the "Lessig Lisztomania Case"). In those cases, an issue before the District Court of Massachusetts was whether the defendant knowingly made a material misrepresentation in its Digital Millennium Copyright Act (DMCA) takedown notice in claiming that the plaintiff's use of the defendant's copyrighted work was infringing. Between the writing of the article and its publication, both cases were dismissed. Tuteur had survived Crossley-Corcoran's motion to dismiss, but Lessig only got as far as an amended complaint before settling. (According to the Electronic Frontier Foundation, Lessig's counsel in the case, the settlement contained the following statement: "Liberation Music agrees that Professor Lessig's use of the Phoenix song 'Lisztomania' was both fair use under US law and fair dealing under Australian law." According to Tuteur (via her blog): "We've settled the lawsuit. The parties have entered into a settlement agreement which has resolved all claims and controversies to their mutual satisfaction.")

In both Tuteur and Lessig, the plaintiffs claimed that the defendants were liable under §512(f) of the DMCA because they knowinglyv and materially misrepresented that the plaintiffs' use of the defendants' copyrighted works was infringing when they sent takedown notices to the plaintiffs' service providers. Under §512, within a copyright owner's takedown notice, the copyright owner must state that "the complaining party has a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law." (§512(c)(3)(A)(v)). While the statute does not provide per se liability for a violation of §512(c)(3)(A)(v), Congress did impose liability on a copyright owner who "knowingly materially misrepresents" that the material it is requesting to be taken down is infringing. Section 512(f) provides:

Any person who knowingly materially misrepresents under this section . . .that material or activity is infringing, ... shall be liable for any damages, including costs and attorneys' fees, incurred by the alleged infringer, by any copyright owner or copyright owner's authorized licensee, or by a service provider, who is injured by such misrepresentation, as the result of the service provider relying upon such misrepresentation in removing or disabling access to the material or activity claimed to be infringing...

Therefore, a copyright owner should be held liable under §512(f) if he or she "knowingly misrepresents" that he or she has a "good faith belief" that the work is infringing.

Fortunately, the well-known case, Lenz v. Universal (the "Toddler-Dancing-to-the-Prince-Song YouTube Video Case") - a case in which the plaintiff claimed that her use of the defendant's copyrighted work was fair use under the Copyright Act and thus "authorized under the law" - persists in the Ninth Circuit after seven years. In Lenz v. Universal, 572 F. Supp. 2d 1150 (N.D. Cal. 2008)("Lenz II") the district court held that a copyright owner must evaluate whether the use of the copyrighted work is a fair use prior to sending a takedown notice in order to demonstrate the "good faith belief" that the work is infringing under §512(3)(c)(A)(v), and denied both parties' summary judgment motions. Both parties have appealed to the Ninth Circuit. (Lenz v. Universal, 13-16106 (9th Cir. filed May 31, 2013)).

Tuteur and Lessig were important for DMCA case law because the plaintiffs in both cases also claimed their use of the defendants' copyrighted works was fair use. The Tuteur court, in its order denying the defendant's motion to dismiss, rejected Lenz II, holding that in order for a copyright owner to make a "good faith belief" that the use of the work is not "authorized by the law," the owner must consider whether the use of the material is fair use. In addition, that court held that the standard to be applied to the copyright owner sending the takedown notice is the subjective test (See Rossi v. Motion Picture Ass'n of Am., Inc., 391 F.3d 1000 (9th Cir. 2004)) of whether a plaintiff can provide sufficient evidence that the defendant "had some actual knowledge that its [t]akedown [n]otice contained a material misrepresentation," but did not conclude whether Crossley-Corcoran had such actual knowledge.

The dismissal of these cases is disappointing because a decision on the merits would have added to the body of law interpreting the statutory meaning of misrepresentation under the DMCA. It is still unclear what the terms "good faith belief," "authorized by the law" and "knowingly misrepresent," mean in the context of §512. Therefore, the law remains unsettled across the country as to what level of analysis of the use a copyright owner must have taken, and what facts the copyright owner must have known, before sending a DMCA takedown notice, in order to be held liable for misrepresentation under the DMCA.

October 8, 2014

A CALIFORNIA FEDERAL DISTRICT COURT'S DECISION IN A CASE AGAINST SIRIUS XM HAS BROADER IMPLICATIONS THAN JUST WHETHER INTERNET RADIO AND SATELLITE SERVICES MUST PAY FOR PRE-1972 SOUND RECORDINGS

By Steve Gordon

The author would like to thank his associate, Anjana Puri, and law intern, Teronse Miller II, for their research assistance.

Federal copyright law applies to sound recordings but only to those produced on or after February 15, 1972. (Sound Recording Act of 1971, Pub. L. No. 140, 85 Stat. 39). Those older recordings are protected by individual states' statutes or common law. A recent spate of lawsuits has raised the issue of whether Pandora's Internet radio service and Sirius XM's satellite service have the right to play sound recordings produced prior to February 15, 1972, without permission from and without paying the owners of the copyrights in those recordings or the artists performing in those recordings. Pandora and Sirius argue that since federal law does not apply to such recordings, the Digital Performance Right in Sound Recordings Act of 1995 (DPRA), which created a right of public performance for sound recording when transmitted digitally, does not apply to pre-1972 recordings and that therefore they do not need permission from the owners of the copyrights in such sound recordings or the artists who performed on them.

Pre-1972 recordings include some of the most commercially successful records of all time, including those featuring the Beatles, the Rolling Stones, Elvis and Sinatra, as well some of the greatest Motown recordings by artists such as Diana Ross and the Supremes, the Temptations, and many others. According to a recent article in Billboard, pre-1972 recordings account for about 5% of plays at Pandora and 15% at Sirius XM ("SoundExchange Launches Campaign for Royalties on Pre-1972 Recordings" by Glenn Peoples, 5/29/14). Therefore, this is an important issue for both Pandora and Sirius. But a federal trial court decision in one of these cases, i.e., Flo & Eddie Inc. v. Sirius XM Radio Inc., et al. (Case No. CV 13-5693 PSG (CD Cal, Sept 22, 2014)), has even broader implications and potential impact than whether these digital streaming services have to pay for pre-1972 recordings. To understand those implications, it's necessary to provide some background.


A Brief History of Copyright and Public Performance Rights for Recorded Music

In 1897 the federal copyright law was amended to protect public performance rights in musical compositions. (http://www.copyright.gov/circs/circ1a.html). This meant that venues at which songs were publicly performed had to acquire licenses to perform musical compositions. There were no such things as sound recordings at the time. In 1914, a group of prominent writers (including Irving Berlin) and their music publishers came together to form the American Society of Composers, Authors and Publishers (ASCAP) to collect royalties from places that played their songs at nightclubs, taverns and bars. Monies generated by the public performance of songs received a major boost when commercial radio emerged in the 1920's. ASCAP started offering its blanket license to radio stations for the right to play any musical composition in its repertoire. However, by the 1930's the radio stations felt they were paying too much money and created a public rights organization (PRO) of their own, Broadcast Music, Inc. (BMI), to compete against ASCAP. Later, another PRO emerged in the U.S. to collect public performance royalties on behalf of contemporary classical composers, SESAC (which originally stood for Society of European Stage Authors and Composers).

In the 1930's through the 1950's, the record business emerged as a significant sector in the U.S. entertainment industry. Led by a myriad of mostly small independent labels such as Sun Records (Elvis Presley), Atlantic (Ray Charles), Stax (Otis Redding) and Mercury (Sarah Vaughan), these labels were led by entrepreneurs who constantly tried to get local radio stations to play their records. Often they would actually offer cash (and other forms of "consideration") to DJs or station managers to play their tracks. The practice was known as "payola." Following hearings exposing these practices in the late 1950's, Congress made it illegal for any radio station to receive consideration for broadcasting particular records unless it disclosed that fact along with the identity of the person furnishing such consideration. (47 U.S.C. § 317 (1960)). Despite the law against payola, as recently as 2005 the record companies have been caught trying to bribe radio stations to play their records. Former New York State Attorney General Eliot Spitzer prosecuted payola-related crimes in New York and settled out of court with Sony BMG Music Entertainment (now Sony Music) in July 2005, Warner Music Group in November 2005 and Universal Music Group in May 2006. The three majors agreed to pay $10 million, $5 million, and $12 million respectively in fines. Spitzer's office found that the companies had used a broad array of illegal "pay for play" tactics to secure airplay for its music, including bribing programmers with laptop computers, luxury hotel stays and even free tickets to Yankee games.

Nonetheless, starting in 1999, as income from recorded music has plummeted, the recording industry, led by the majors, has been lobbying hard to change the federal copyright law to make radio pay them for playing their records. The latest incarnation of this effort was the introduction in September 2013 of the Free Market Royalty Act (HR 3219). Like the earlier failed Performance Rights Act, this Act would require AM/FM broadcasters to pay performers and copyright owners. As hard as record industry has tried however, the broadcasting community, led by the National Association of Broadcasters (NAB), has pushed back by lobbying effectively against a general right of public performance in sound recordings. (However, as discussed below, the record companies were successful in persuading Congress in 1995 to create an exclusive public performance right for digital transmissions of sound recordings).

In 1971, as mentioned above, Congress passed the Sound Recording Act, making any recordings fixed on or after February 15, 1972 subject to the protection of the Copyright Act - but this statute specifically provided that the federal copyright law would not protect public performance rights for sound recordings, thereby allowing broadcasters to continue to pay nothing to the labels. The legislation was basically a compromise between the recording industry, which wanted to create uniform federal protection against physical piracy rather than continue to fight against it in each state, and the broadcast community, which did not feel that it should have to pay the labels for playing their records and thereby promote record sales. Then in 1976 Congress overhauled the old 1909 Copyright Act to conform to international standards, including changing the term of protection from a 28 year term with a renewal term of another 28 years, to 50 years after the death of a creator or 70 years for corporate works (these periods were later extended 20 years each). Once again, however, the broadcast community was able to persuade Congress to maintain the carve-out of public performance rights for sound recordings. The 1976 Act also included another provision that the recording industry did not favor. Congress included a right to terminate grants of copyright after 35 years. The reasoning for this right of termination was that since young creators would often sell or assign their copyrights for little money at the beginning of their careers, they or their families should have the right to recapture those copyrights. Yet if this provision applied to recordings made before the implementation of the Act on January 1, 1978, any record older than 35 years would be subject to possible termination by artists. Therefore, instead of asking Congress to apply the new Copyright Act to records made before 1972, the industry urged that records continue to be protected by state law. Consequently, the Act specifically provided that pre-1972 sound recordings would remain subject to state or common law copyright.

As discussed above, the recording industry has been thus far unsuccessful in trying to obtain public performance rights under federal law, but in 1995 it did manage to obtain exclusive digital public performance rights. The DPRA granted owners of a copyright in sound recordings an exclusive right "to perform the copyrighted work publicly by means of a digital audio transmission." The DPRA was enacted because the recording industry was able to persuade Congress that digital technology would threaten its business by allowing people to make perfect copies from digital transmission thus displacing record sales. They only significant opposition was a little company based in Horsham, Pennsylvania, called Music Choice. In the next several years, the Internet started to take off and new services such as AOL and Yahoo! were successful in getting a compulsory license through Congress as part of the Digital Millennium Copyright Act (DMCA) of 1998. This meant that non-interactive digital streaming services could use any recording without permission, provided that they qualified for licenses. The two major qualifications were that the services were non-interactive and that they paid the required royalty rate. Both Sirius XM and Pandora operate under that regime today. They pay SoundExhange, a not-for-profit that collects royalties from statutorily covered services and redistributes the monies to record companies and artists on a 50-50 basis. Yet both Sirius XM and Pandora take the position that they are not legally required to pay for pre-1972 recordings, because neither the DPRA nor DMCA apply to such recordings.

The Current Pre-1972 Cases

There are at the current time six cases questioning Sirius XM or Pandora's position that they do not have to ask for permission or pay for pre-1972 recordings. There are now four lawsuits brought by Flo and Eddie Inc., a corporation created in 1971 that is owned and exclusively controlled by Howard Kaylan and Mark Volman, two of the founding members of the music group "The Turtles." Flo and Eddie Inc. started three lawsuits against Sirius XM in California, Florida and New York, and filed another one earlier this week against Pandora in California. We discuss the recent decision in favor of Flo and Eddie Inc. in California, below. The recording industry lead by Capitol, a wholly owned label of Universal Music, is suing Sirius XM in California and Pandora in New York. All of these suits raise the issue of whether digital music services must ask permission to play pre-1972 recordings. (SoundExchange has also brought a separate suit against Sirius XM, but the issue in that case is not whether Sirius XM can deduct monies for pre-1972 sound recordings but how much it should be allowed to deduct).

The issue presented in these six cases is immensely important because it has implications that go far beyond just whether Pandora and Sirius XM should be paying for pre-1972 records. The reason is that the state law statutes and most of the case law applying to sound recordings predate the digital era. For instance, in both Capitol and Flo and Eddie Inc.'s case against Sirius XM in California, the plaintiffs argue that a 1982 amendment to California's Civil Code provides statutory protection for pre-1972 recordings. Therefore, if this statute is found to protect digital public performances of sound recordings, it would necessarily protect all public performances of sound recordings. Such a finding would implicate many other businesses at which sound recordings are publicly performed (including not only terrestrial radio, broadcast TV and cable), but also any other physical place such as every bar restaurant and nightclub in the United States, as well as any other physical venue that plays music publicly (amusement parks, bowling alleys and stadiums). Indeed, if a court were to rule in favor of the record business in these cases, that decision could radically change the landscape of music licensing in the United States.

Judge Gutierrez's decision

Yet that's exactly what Judge Gutierrez decided in Flo and Eddie Inc.'s lawsuit against Sirius XM in California. The judge declared: "The Court finds that copyright ownership of a sound recording under § 980(a)(2) includes the exclusive right to publicly perform that recording. See Cal. Civ. Code §980(a)(2). Accordingly, the Court GRANTS summary judgment on copyright infringement in violation of §980(a)(2) in favor of Flo & Eddie." Flo & Eddie Inc. v. Sirius XM Radio Inc., et al. (Case No. CV 13-5693 PSG (CD Cal, Sept 22, 2014)).

It's clear that, if upheld, this decision would mean that both Pandora and Sirius XM would have to seek permission and pay for pre-1972 recordings. However, would nightclubs, bars, restaurants as well as radio stations have to seek permission to play and pay performance royalties for pre-1972 records? On its face, yes. The judge based his ruling on the wording of the statute which reads in relevant part: "The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons except one who independently makes or duplicates another sound recording that does not directly or indirectly recapture the actual sounds fixed in such prior recording, but consists entirely of an independent fixation of other sounds, even though such sounds imitate or simulate the sounds contained in the prior sound recording." Cal. Civ. Code § 980(a)(2). Judge Gutierrez emphasized that there is nothing in the statutory language what would preclude performance rights in pre-1972 sound recordings. He wrote in relevant part: "...the Court infers that the legislature did not intend to further limit ownership rights, otherwise it would have indicated that intent explicitly."

Judge Gutierrez concluded: "that copyright ownership of a sound recording under § 980(a)(2) includes the exclusive right to publicly perform that recording." This interpretation of California law would make the exclusive right of public performance in sound recordings apply to any public performance of a pre-1972 recording, whether on a digital service or otherwise, including performances in terrestrial radio or television broadcasts, nightclubs, restaurants, bars and any other public places. In other words, they would all have to seek permission from the copyright owner of each pre-1972 recording - usually the record company. (Unlike the Turtles, most commercially successful artists do not retain rights in their records). The owners of such recordings could then charge any amount they wished, or deny permission altogether.

On October 6th, Sirius XM announced that it would appeal Judge Gutierrez's ruling. In the meantime, all the other lawsuits against it and Pandora are ongoing.

The RESPECT Act

In May 2014, proposed legislation favored by the major labels titled "Respecting Senior Performers as Essential Cultural Treasures" or the RESPECT Act, was introduced into the House of Representatives. The bill proposes an amendment to the federal copyright law that would specifically require non-interactive digital radio services to pay royalties for pre-1972 recordings "in the same manner as they pay royalties for sound recordings protected by federal copyright that are fixed after such date." This would mean that services that are currently paying SoundExchange to play post-1972 recordings, including Sirius XM and Pandora and other smaller Internet radio stations, such as Songza and iHeart Radio, would have to pay SoundExchange to play pre-1972 recordings. That money would then flow to the labels and the artists on 50-50 basis after SoundExchange took a modest administrative fee.

The RESPECT Act would also provide a remedy under which performance royalties for the transmission of such recordings may be recovered in a civil action in federal court if a digital music service failed to make such payments. However, it would prohibit an infringement action against a transmitting entity from being brought under a state law if the appropriate royalty was paid under this Act, thus prohibiting lawsuits such as the current ones against Sirius XM and Pandora.

Finally, the RESPECT Act would not confer federal copyright protection to pre-1972 recordings, which would continue to be protected under applicable state laws notwithstanding the payment of royalties under federal statutory licensing requirements. Thus, the termination right would not be available for pre-1972 recordings.

Possible Outcomes and Conclusion

If Judge Gutierrez's decision is upheld on appeal, it is possible to imagine a plethora of lawsuits against radio and TV stations subject to California law, as well as bars, restaurants and other venues for playing pre-1972 sound recordings without permission. For this reason, followers of "judicial realism" may reasonably speculate that the Ninth Circuit will find a way to disagree with the district court's statutory construction.

In a 2011 report, the Copyright Office opined that pre-1972 sound recordings should be federalized except that the termination provisions of the Copyright Act should not apply. This opinion is in basic agreement with the RESPECT Act - both would require Internet radio to pay for pre-1972 sound recordings while avoiding the termination provisions of the 1976 Act.

If the RESPECT Act is passed, the need for any lawsuits against Pandora and Sirius XM would be eliminated. Further, since the RESPECT Act states that digital services would pay royalties for pre-1972 recordings "in the same manner" as they pay royalties for later recordings, SoundExchange would receive those monies and this would mean that 50% would go directly to the artists. That would be a good thing.


November 20, 2014

Pre-1972 Sound Recordings Could Kill the Radio Stars

By Barry Werbin and Sharon O'Shaughnessy
Herrick, Feinstein LLP

On the heels of the Central District of California's related September 2014 decision, Judge Colleen McMahon of the Southern District of New York, has denied Sirius' motion for summary judgment on Flo & Eddie, Inc.'s class action complaint alleging that Sirius XM Radio (Sirius) committed common law copyright infringement and engaged in unfair competition by publicly performing pre-1972 sound recordings of The Turtles, and by reproducing those recordings in aid of its performances. Flo & Eddie, Inc. v. Sirius XM Radio, Inc. (S.D.N.Y. Nov. 14, 2014). Absent Sirius convincing the court by December 5, 2014, that there are remaining issues of material fact that would require a trial, Judge McMahon will enter summary judgment in favor of Flo & Eddie as to copyright infringement liability and proceed to an inquest on damages.

Ultimate victories for Flo & Eddie, Inc., which owns the copyrights to The Turtles' master recordings, could be disastrous to Sirius, a subscription-based satellite and Internet radio services provider, which operates 24/7, devotes entire channels to pre-1972 sound recordings, and, like other streaming music providers, has never paid separate royalties to perform sound recordings. Damages could reach millions of dollars, and this sea of change after decades of status quo non-enforcement will surely result in copycat lawsuits that will turn the broadcast and streaming music industry on its head.

Sirius and other providers pay music license royalties covering the underlying musical compositions, but music is the only type of creative work that has two independent copyrights: (i) a copyright in the composition (lyrics and music) that generally is held by the composers of works or their music publishers; and (ii) a copyright in the sound recording, which is the medium in or on which a particular performance of a musical composition is fixed for posterity and for playback. As Judge McMahon explained, "In essence, a copyright in a sound recording is a copyright in the performance -- not in the work being performed."

While federal law has protected copyrights in musical compositions since 1831, Congress only made sound recordings eligible for federal statutory copyright protection in 1971. This protection operates prospectively and, consequently, recordings that were "fixed" (i.e., recorded) prior to February 15, 1972, are not eligible for federal copyright protection. As Congress did not adopt a federal copyright scheme for pre-1972 sound recordings, holders of sound recording copyrights seeking to exercise their rights must look to state common law to determine the copyright protections and remedies to which they are entitled.

Enter Flo & Eddie, Inc., a California corporation that is wholly owned by Mark Volman and Howard Kaylan. Volman and Kaylan were two of the original members of the 1960s rock group The Turtles, whose memorable hits include "Happy Together" and "It Ain't Me Babe." Flo & Eddie, Inc. acquired all rights to The Turtles master recordings. Sirius acknowledges that it "performs" sound recordings, including pre-1972 Turtles recordings owned by Flo & Eddie,Inc., by broadcasting them over its satellite radio network and streaming them over the Internet. To facilitate this service, Sirius makes multiple copies -- temporary, permanent, whole, and/or partial -- of pre-1972 The Turtles sound recordings during its broadcast process, performs the copies it makes, and does so without obtaining sound recording reproduction and performance licenses from Flo & Eddie, Inc.

Flo & Eddie, Inc. filed three class actions against Sirius in California, New York, and Florida, asserting state common law copyright infringement claims (as well as claims for unfair competition, conversion, and misappropriation) under the laws of the three respective states. Florida has yet to issue its ruling.

In the California action, Flo & Eddie, Inc. argued that Sirius was liable for two unauthorized uses of its sound recordings: (i) publicly performing Flo & Eddie, Inc.'s recordings by broadcasting and streaming the content to end consumers and to secondary delivery and broadcast partners; and (ii) reproducing Flo & Eddie's recordings in the process of operating its satellite and Internet services. Sirius argued that the bundle of rights that attaches to copyright ownership of a pre-1972 sound recording does not include the exclusive right to publicly perform the recording. Flo & Eddie,Inc., however, contended that an exclusive public performance right existed under California law.

Relying on California's copyright statute, Civil Code §980(a)(2), the California court agreed with Flo & Eddie, Inc. and, on September 22, 2014, granted its motion for summary judgment on its public performance-based claim. After first noting that the California legislature intended ownership of a sound recording to include all rights that can attach to intellectual property, save the singular exception for a "cover" of a recording, the court concluded that copyright ownership of a sound recording under §980(a)(2) necessarily includes the exclusive right to publicly perform the recording. The court also found in favor of Flo & Eddie, Inc. on its unfair competition, conversion and misappropriation claims.

As New York, unlike California, does not have a specific statute that protects a public performance right in pre-1972 sound recordings, Judge McMahon considered the following four issues under New York common law: (i) whether the owners of pre-1972 sound recordings possess an exclusive right to the public performance of those works and whether Sirius infringed Flo & Eddie, Inc.'s copyright; (ii) whether Sirius' broadcast of The Turtles recordings is protected by the "fair use" doctrine; (iii) whether upholding Flo & Eddie, Inc.'s claims would violate the Dormant Commerce Clause; and (iv) whether Flo & Eddie, Inc.'s claims were barred by laches.

In the New York action, Flo & Eddie, Inc. first argued that New York's common law copyright protection prohibited both the reproduction and public performance of The Turtles' pre-1972 sound recordings. Echoing the argument that it made in California, Sirius contended that New York common law copyrights in pre-1972 sound recordings do not afford an exclusive right of public performance. After first acknowledging that this was a question of first impression, Judge McMahon ultimately concluded that "the New York Court of Appeals would recognize the exclusive right to public performance of a sound recording as one of the rights appurtenant to common law copyright in such a recording." Judge McMahon reached this conclusion based upon a detailed examination of the background principles and history of New York copyright common law, which revealed that the common law typically protects against unauthorized performances and has provided "expansive" protection for artistic works that do not enjoy federal statutory copyright protection for at least 50 years. Sirius' argument -- that New York case law contains no discussion of public performance rights in sound recordings -- was unavailing. As the court ultimately concluded, "New York has always protected public performance rights in works other than sound recordings that enjoy the protection of common law copyright. Sirius suggests no reason why New York -- a state traditionally protective of performers and performance rights -- would treat sound recordings differently."

The court next determined that Sirius reproduced Flo & Eddie, Inc.'s copyrighted recordings without authorization by (i) reproducing The Turtles' recordings for its three main databases, associated backups and smaller on-site databases; and (ii) producing several temporary but complete copies of The Turtles' recordings for its play-out servers, caches and buffers. In response to Sirius' argument that it was not liable for infringement because it did not "distribute" The Turtles' recordings, Judge McMahon pointed out that "[t]o the extent that distribution is an element of common law copyright infringement, publicly performing sound recordings is an act of distribution. Otherwise, Sirius cannot explain how New York courts could have recognized infringement claims alleging that defendants publicly performed copyrighted works without authorization."

Judge McMahon also rejected Sirius' contention that its creation of multiple complete copies of Flo & Eddie, Inc.'s sound recordings could be considered "fair use." After noting that New York courts have not articulated the scope of New York's fair use doctrine, the court undertook a fair use analysis based on the Copyright Act standard and concluded that "Sirius makes non-transformative use of Flo and Eddie's recordings and does so for commercial gain. It is, therefore, 'common sense' that Flo and Eddie would suffer market harm when Sirius takes its property and exploits it, unchanged and for a profit." The court also held that Sirius engaged in unfair competition, Flo & Eddie, Inc.'s assertion of its common law copyright is not barred by the Dormant Commerce Clause, and Sirius cannot invoke the defense of laches.

These explosive rulings may have dire consequences for the broadcast radio industry -- especially streaming music platforms. While the California and New York decisions will be appealed, they raise a host of issues that underscore the uncertain future of the sound recording copyright landscape. For instance, if the decisions are not stayed pending appeal, will pre-1972 music disappear from the airwaves? Will litigating the existence of a public performance right on a state-by-state basis upend the entire broadcasting industry? What happens if the myriad of state laws end up conflicting in the Internet age? Will Congress step in, as many have started urging, and bring pre-1972 sound recordings under the fold of the federal Copyright Act? In the words of The Beatles, legislators need to "Come Together" and sort this out.

[The full SDNY decision can be accessed here: http://www.scribd.com/doc/247180767/Flo-Eddie-v-Sirius-XM-NY-Order.]

November 21, 2014

Turtles 2, Sirius 0: Is Broadcast Radio Next?

By Steve Gordon

Last Friday, a New York federal court ruled that New York State law protects public performance rights in sound recordings. Although the defendant in the case was SiriusXM Satellite Radio, which is a digital service, the ruling would appear to apply to any radio station, nightclub, or any other venue that plays recorded music in New York.

The result is that radio stations may, for the first time in U.S. history, have to pay to play records, although the decision only applies to records produced prior to 1972. Records produced on or after February 15, 1972 are subject to federal law which explicitly states that sound recordings do not have performance rights except in respect of digital transmissions.

The New York federal court judge Colleen McMahon ruled: "In short, general principles of common law copyright dictate that public performance rights in pre-1972 sound recordings do exist." The judge based this conclusion on a series of New York court decisions that afforded public performance rights to holders of common law copyrights in works such as plays and films. She acknowledged that "the conspicuous lack of any jurisprudential history confirms that not paying royalties for public performances of sound recordings was an accepted fact of life in the broadcasting industry for the last century."

However, she discarded that history by observing, "... acquiescence by participants in the recording industry in a status quo where recording artists and producers were not paid royalties while songwriters were does not show that they lacked an enforceable right under the common law - only that they failed to act on it."

MacMahon rejected Sirius' request to dismiss the lawsuit and held that unless Sirius raises any factual issues requiring a trial by December 5th, she will rule outright for the plaintiff, Flo & Eddie, Inc. (ie, The Turtles), "and proceed to an inquest on damages."

In late September, a California federal judge, Philip Gutierrez, ruled that California state law also protected public performance rights in pre-72 recordings. In both the New York and California cases, the plaintiff (Flow & Eddie, Inc.) and the defendant (Sirius XM) were the same. Flo & Eddie, Inc. is a company controlled by founding The Turtles members Howard Kaylan and Mark Volman, and controls that band's catalog of recordings, including the hit "Happy Together."

Unlike New York, California has a specific statute that directly addresses pre-1972 sound recordings. Section 980(a)(2) of the California Civil Code states: "The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons except one who independently makes or duplicates another sound recording...."
Judge Gutierrez found "that copyright ownership of a sound recording under § 980(a)(2) includes the exclusive right to publicly perform that recording." His conclusion was largely based on the fact that neither the statute itself, nor the legislative history for Section 980(a)(2), specifically excluded public performance rights for sound recordings.

Judge McMahon's decision seems to encourage claims against terrestrial radio stations operating in both New York and California, given her observation that the historical absence of claims against radio stations for failing to pay for legacy recordings did not mean that the owners of those records do not have an "enforceable right." Indeed, she almost invites a claim against them by stating that such copyright owners do have an enforceable right that so far they have just "failed to act on." McMahon acknowledged that her decision could have far-reaching consequences, such as prompting other lawsuits or causing more states to change their copyright laws, but said "the broader policy problems are not for me to consider."

The natural first plaintiff against a terrestrial radio station would of course be Flo & Eddie, Inc. However, one can imagine more than a few class action litigators who may be thinking about bringing an action on behalf of a group of legacy artists against radio stations in New York and California, including networks such the ClearChannel.

Another possible consequence of these legal victories may be that the National Association of Broadasters (NAB) may finally be willing to compromise and agree to support legislation that would make terrestrial radio finally pay something for sound recordings.

As they say in the broadcast business, "Stay Tuned."

January 27, 2015

Alliance of Artists and Recording Companies Continues to Pursue Class Action Suit Against Car Companies for Unpaid Music Royalties

By Brittany Pont

What is the Alliance of Artists and Recording Companies (AARC)?

AARC is a nonprofit organization that collects and distributes both hometaping/private copy and rental/lending royalties generated from the Audio Home Recording Act of 1992 (AHRA). Founded in 1993, AARC is the sole administrator of this type of royalty in the United States, and while it initially just administered domestic royalties, its mandate was later expanded to administer foreign royalties as well. http://wp.aarcroyalties.com/what-is-aarc/

What is the AHRA?

Prior to 1992, private copying of music was illegal, but the music industry had no recourse for the monetary loss it suffered due to its widespread practice. To balance the right to use and own a device with the ability to record or copy audio material and the music industry's loss of revenue due to such technology, the AHRA added Chapter 10, "Digital Audio Recording Devices and Media", to title 17 of the United States Copyright Law. The Act defines a "digital audio recording device" (DARD) as a "machine or device ...the digital recording function of which is designed or marketed for the primary purpose of, and that is capable of, making a digital audio copied recording for private us." Royalties are generated by "the sales of blank CDs and personal audio devices, media centers, satellite radio devices, and car audio systems that have recording capabilities." The royalty compensates featured recording artists and recording copyright owners for the loss of record sales due to the public's use of the aforementioned technology.

http://copyright.gov/title17/92chap10.html
http://wp.aarcroyalties.com/what-is-aarc/

The Lawsuit

On July 25, 2014, AARC filed a class action lawsuit for unpaid music royalties against automobile companies Ford and General Motors, as well as electronic manufacturers Denso and Clarion. On November 14, 2014 AARC expanded the suit by filing another complaint against Chrysler and two Mitsubishi Electric companies. The issue at hand is whether devices included in vehicles manufactured by these companies, such as the Ford "Jukebox" and the GM "Hard Drive Device", fall under the definition of a DARD and are subject to the requirements of the AHRA, which includes paying a royalty fee to the Register of Copyrights. AARC claims that these devices fit the definition of a DARD and are subject to the requirements of the AHRA, but since the companies have failed to identify them as such they have not adhered to the requirements of the AHRA and paid the mandatory royalty fees. The defendants argue that while these devices may have copying and recording capabilities, that is neither their primary purpose, nor are they marketed as recording and/or copying devices. Both of these items are requirements for a DARD under the AHRA.

If the court finds that these devices do not qualify as DARDs, their implantation can continue without adherence to the AHRA. If it is found that these devices are DARDs, AARC is seeking various forms of relief, including actual damages for unpaid royalties equivalent to the amount of royalties and a half, plus statutory damages of $2,5000 per DARD "manufactured, imported or distributed by any Defendant" all during the three years prior to the filing of this lawsuit.

In a statement made by the Executive Director of AARC, Linda R Bocchi, Esq., during AARC's latest update of the lawsuit, the organization remains firm in its support of the AHRA and its application to the disputed devices in this case. In reference to the defendants, Ms. Bocchi states that "AARC will not stand by while they refuse to hold up their end of the deal." Unable to reach a settlement, the litigation remains ongoing.

http://cblr.columbia.edu/archives/13231
http://wp.aarcroyalties.com/aarc-files-federal-class-action-lawsuit-press-release/
http://wp.aarcroyalties.com/2014/11/14/aarc/

https://aarcroyalties.files.wordpress.com/2014/07/aarc-class-action-complaint.pdf

February 10, 2015

Grammys, Love, Angst, Striving, Synergy, Creativity & Copyright

By Bob Bernstein
https://robertjbernsteinblog.wordpress.com/2015/02/09/grammys-love-angst-striving-synergy-creativity-copyright/

I greatly enjoying Sunday's Grammys from a front-row seat in my favorite chair, feeling all the love and power of music to bring together different generations and cultural backgrounds with synergistic results. The power of music is so great, and the fragility of its remunerative distribution system so precarious in these times, that I only wish the important message of securing fair and deserving compensation for the creative blessings bestowed upon us by composers, lyricists, artists, performers, producers, designers and the entire panoply of persons responsible for such a great night of music had been delivered early and often rather than at the end of the broadcast.

There must be a more direct connection between, and an omnipresent awareness of, the connection between our enjoyment of musical treasures and the promotion of their creation. By ensuring that artists, musicians, songwriters and other creators enjoy the fruits of their glorious labors -- most of which are spent in arduous hours of striving before their works see the light of day and the love of their fans -- we invest wisely in the cultural wealth that makes living worthwhile. So let's show more love for what we receive from these modern Michelangelos, and work together to ensure that their livelihoods and those of emerging artists are unblemished by piracy, casual theft, or inadequate attention to appropriate distribution controls.

Music is a gift, but it is not free. The artists, composers and performers who work so hard to make the most of their gifts and who delight us with their creations are certainly no less entitled to receive the fruits of their labors than the butcher, baker or candlestick maker. Given the intangible character of copyright; the elusive but sublime combinations of melody, harmony, rhythm and lyrics that characterize our greatest songs; and the resulting far greater obstacles to keeping adequate track of their distribution in comparison to the butcher's inventory, we should be striving to ensure widespread societal recognition that, if we allow the songs to leave the barn before they enter the royalty stream, it will not only be the cows who have nothing to dance to.

February 23, 2015

The 11 Contracts Every Artist, Songwriter & Producer Should Know

The following is the first installment in a series of articles from entertainment industry attorney Steve Gordon. In each installment, Steve discusses a particular music industry form of agreement from the point of view of both parties (that is, artists, songwriters and/or producers on the one hand), and those they do business with (that is, record labels, music publishers, managers, etc. on the other). Steve is writing these blogs primarily for the benefit of indie musicians. His hope is that they will read this series in other outlets. EASL is publishing these because they may be of interest to attorneys, particularly attorneys with limited experience in music business transactions.

INTRODUCTION

Although there is no truly "standard" agreement, many music business contracts begin as "form" agreements before the terms are negotiated. Often, there are two versions of a form agreement: one that represents the best interests of creators, including artists, songwriters, and producers, and one that represents the best interests of the companies that do business with them, such as record labels, publishers, and managers.

These parties typically have adverse interests. For instance, while a record label will often attempt to secure rights in an artist's sources of income beyond mere record sales, such as touring, merchandising and publishing, it is usually in the artist's best interest to retain as much income from these secondary sources as possible. Other agreements, such as contracts between co-songwriters or band members, seek to delineate the rights and duties of similarly situated parties in order to avoid disputes that might otherwise arise.

In this upcoming series, I will review the form contracts that artists are most likely to encounter in their music careers and provide commentary on each provision.

My focus will be on the types of agreements typically offered to indie artists, songwriters and producers who are taking the step to the next level.

In the first installment, below, I take on management agreements. I have re-printed a standard "pro-manager" form of agreement and provide paragraph by paragraph commentary from the artist's point of view. I also include a complete pro-artist management form of agreement.

Future installments will tackle these agreements:

2. Indie record deals
3. Synch licenses for original music
4. Co-writer agreements
5. Producer agreements for the licensing and sale of beats
6. Band agreements
7. Investment agreements
8. Agreement for production of music for TV ad campaign
9. Synch rep deals for artists, producers, and songwriters
10. Merchandising agreements; and
11. Performance agreements with clubs and promoters.

It is my hope that this series will be used as one tool to educate and prepare artist and artists' attorneys for the negotiations that will help define music careers.

***************

1ST INSTALLMENT: MANAGEMENT AGREEMENTS

Managers have never played a more important role in the music business than they do today.

A good manager advances the career of his or her client in a variety of ways. Traditionally, a manager provided advice on all aspects on the artist's professional life, used his or her relationships to generate opportunities, negotiated deals when the opportunity to do so arose, and helped the artist select other members of the "team," such as accountants, lawyers, booking agents, and publicists. A manager's principal job was, however, searching for the "holy grail" --- shopping the artist to record labels, particularly the majors, with the hope of signing a lucrative recording agreement. Signing a record deal meant a payday for both the artist and the manager. Managers work on commission, so the goal was to sign with a major label and negotiate the largest advance possible. In the 90's, when I was a lawyer for Sony Music, we paid advances to new artists ranging from $250,000 to upwards of $500,000. If the artist caught fire, both the artist and the manager could become very wealthy from record sales alone. Those days are largely gone.

Starting in 1999, income from recorded music has declined more than 75%, accounting for inflation. As a result, the major labels (Sony, Universal, and Warner, along with their affiliates) sign fewer artists and pay those new artists far more modest advances. An artist may never get a deal, or may be dropped from the label's roster much faster than in the past, when labels had spare cash to support a developing artist. For instance, Bruce Springsteen did not catch fire until after Columbia (now a Sony affiliate) released two albums. However, Columbia had faith and supported him through the early disappointments. Today, with the major labels fighting just to survive, a story like that is far less likely to occur. Labels would rather put their resources behind already established acts, where a return on investment is more certain.

In these days of financial insecurity in the record business, the manager's role is more important than ever. In the past, once the artist was signed to the major label, the manager's primary function became to serve as liaison between the record company and the artist. The manager lobbied the label to do more, spend more, and focus more on his or her artist(s). However, due to budget cuts and massive layoffs at the labels, today's manager does much of the work that the label used to do. For example, the manager may take over social networking, search for opportunities to get the artist's music in movies or commercials, or find branding opportunities with sponsors. Furthermore, if the artist cannot find an acceptable record deal, the manager may become the artist's de facto label, and take on the responsibility of securing funding from investors or crowdfunding to produce records, arranging physical and digital distribution, and everything else the record companies traditionally do.

PRO-MANAGER AGREEMENT WITH PRO-ARTIST COMMENTARY: Forms-management.comp2.16.pdf

In this PDF, I critique a standard pro-management agreement and explain in the comments the changes an artist should negotiate. There are a number of important terms where the interests of the manager are directly adverse to the interests of the artist. For example, it is generally in the manager's interest to have a long initial term and several options to extend the duration of the agreement. The artist, conversely, will want to be able to get out of an agreement quickly if the manager is not meeting the artist's goals. This issue is addressed in the comments for the first paragraph of the pro-management agreement.

Most management agreements base the manager's commission on gross income that an artist earns from any activities in the entertainment business. It's crucial for the artist to insist that monies paid to the artist, or on the artist's behalf, for recording costs, touring expenses and other business expenses are not included in gross income. For instance, if a record company gives an artist an advance of $100,000, and the artist spends $80,000 on recording costs, the manager should not calculate his or her commission on $100,000. If the contract allowed her do so, she would be entitled to $20,000 and the artist would be left with nothing. This issue is addressed in the comments for subparagraphs 11(b) and (d).

Another very important provision is whether the manager has the right to receive a commission from any contract negotiated during the term -- even after the management contract terminates. Pro-manager agreements will usually include such a provision. The artist will want to terminate the manager's right to commission his or her income when the contract ends. However, the manager's position is that if the manger lands a multi-album deal or long-term publishing agreement, the manager should continue to receive money because he or she helped create that source of income. The compromise is called a "sunset clause." Under this clause, the manager still receives income from contracts negotiated during the term of the agreement, but that amount of income declines over time and eventually ends within a reasonable time. An example of a sunset provision is included in the comments for paragraph 13 in the pro-management agreement, and is also contained in the pro-artist agreement provided in this installment.

Other terms are mere boilerplate that are important to the agreement but equally protect the interests of both parties. I will point out these terms and explain their significance as well. One example is paragraph 29, which states that any amendment to the contract must be made in writing and signed by both parties.

PRO-ARTIST MANAGEMENT AGREEMENT: Forms-management.pro-artist.2.16.pdf

This PDF provides an example of a pro-artist management agreement. The contract a new manager presents to an artist will often start out resembling the pro-manager agreement, and the closer one can negotiate it to the pro-artist agreement, the better.

***************
Steve Gordon is an entertainment attorney with over 20 years of experience in the entertainment industry, including 10 years as Director of Business Affairs for Sony Music, attorney at a law firm representing Atlantic and Elektra Records, and in-house music counsel for a Hollywood studio. His clients include Time Life Films, Soul Train Holdings, Smithsonian Folkways, Music Choice, Maryland and Louisiana Public Broadcasting, and established and up and coming artists, producers, indie labels, and managers. He is the author of The Future of the Music Business (4th ed. 2015 Hal Leonard).

Steve Gordon gratefully acknowledges the assistance of Ryanne Perio and Anjana Puri in the preparation of this material. Ryanne Perio is a graduate of Columbia Law School and a former legal intern at Atlantic Records and SAG-AFTRA. She is currently an associate at Wilmer, Cutler, Pickering, Hale & Dorr, where she focuses on intellectual property litigation. Anjana Puri is a lawyer pending admission to the New York bar. She currently works as an associate of Mr. Gordon. She received her JD from Benjamin N. Cardozo School of Law (2014) and received her B.A. in International Development Studies from UCLA.
Disclaimer: The information in this series has been prepared for informational purposes only and does not constitute legal advice. This series should be used as a guide to understanding the law, not as a substitute for the advice of qualified counsel. You should consult an attorney before making any significant legal decisions.

March 16, 2015

Artist Agreements Part 1: Artists With Production Companies

The Agreement From Hell That An Artist Should Never Sign & How To Make It Fair

By Steve Gordon

INTRODUCTION

Part 1 will focus on production companies and their contracts with artists. Part 2 will tackle deals between artists and indie labels.

Production Companies Are Not Labels

Production companies usually consist of one or two individuals with limited resources who would like to make a few demos for an artist in order to shop him/her to a real record company. Unfortunately, more than occasionally, such a company will present an agreement that locks the artist into a long term deal, makes the company the artist's music publisher, and takes a substantial cut of all the income that the artist may make in the entire entertainment business, as well as other horrors.

The first agreement we will examine in this installment is typical of a contract offered to an artist by a production company masquerading as a "label." Be warned: This agreement is a terrible deal for artists. It presents all the negative terms typically contained in an exclusive recording agreement offered by a major label, including multiple options for additional albums that could extend the duration of the agreement indefinitely, and 360 provisions designed to give the company a significant portion of the artist's income from any of his/her activities in the entertainment business. (See discussion of 360 deals below, and How to Avoid Getting Completely Screwed by a 360 Degree Deal, available at www.digitalmusicnews.com/permalink/2013/07/02/threesixty). Yet the first agreement offers none of the benefits that a major label deal contains, such as a recording budget and advance.

There are many differences between a production company and a real label, but they have at least the following in common: Both production companies and labels own or have access to recording studios and equipment, and they both have producers on payroll or relationships with indie producers who they can call on to make professional recordings. A real label, however, has the following additional assets:

• Staffers and/or freelancers who provide both traditional marketing and publicity as well as online social networking support;

• Staffers and/or freelancers who continually pitch records to terrestrial radio - still a crucial element in breaking in a new artist, especially in pop, R&B, hip hop, rock, and country;

• A video department to produce, oversee and pay for the production of promo videos and electronic press kits (EPKs);

• Relationships with popular TV shows, such as Saturday Night Live, The Tonight Show and Last Call to help the artist garner invaluable exposure;

• Relationships with leading digital services to promote an artist - for instance, by continually lobbying iTunes to feature the artist on its home page;

• Relationships with music supervisors and ad agencies to secure placements in TV shows, movies and ad campaigns;

• Distribution channels through all the big-box chains, such as Walmart, Best Buy and Target to sell physical copies of records;

• The ability to coordinate digital distribution to hundreds of digital music services throughout the world;

• The money necessary to pay staffers and freelancers to do the all the work above; and

• Perhaps most importantly, the financial capacity to pay the artist an advance on top of production costs so that he/she can quit his/her day gig.

First Agreement: Production Company Posing As Label

This form agreement came from an actual production company that presented an agreement that only a real label should offer. As we just discussed, a production company has almost none of the resources of a true record label. The production company should have offered a "shopping deal" under which it would have a limited time to find a suitable label deal for the artist. Instead, this agreement includes provisions that are completely unfair and unjustifiable. Here is an overview of the key provisions and why they should be changed:

Term

The term of this agreement is an initial period of 15 months followed by options for the "delivery" of four additional albums. Since delivery depends on when the company decides to record each album, the contract could continue indefinitely. The artist could hire a lawyer to try to get out of this contract, but at the end of the day, the production company could contend that the contract was valid, which could impede the artist from securing another deal.

If a company is merely a production company and not a real label, it should offer a shopping deal under which it has a limited amount of time to produce at least five or six tracks (sometimes referred to as "demos") that feature the artist's best work, and shop those tracks to real labels to help the artist get to the next level. Generally, a production company has nine months to shop the demos. If the production company cannot secure such a deal, the artist should be free to terminate the agreement.

Album Options

A production company does not have the resources to help the artist as a real label could, and therefore, it should not try to trap an artist in a multiple album deal. On the other hand, if the production company secures a good deal for the artist with a reputable label, it should share with the artist in monies the record label pays to the artist, including advances and royalties for the artist's exclusive recording services. A fair deal may provide that the company will share in such revenues for the first several albums released by the label.

Royalty

A reasonable royalty for producing demos and shoppingg demos andfor a deal with a label is 5% to 20%. The percentage should be based on what the label pays the artist, so if the artist's advance is $100,000, the production company would receive $5,000 to $20,000. If the artist's royalty is 15%, then the production company would get 5% to 20% of that royalty, that is, .75% to 3%. The lower royalty of 5% would be appropriate for shopping an artist who already has professionally produced recordings and the production company doesn't have to do anything but shop the artist. The higher royalty of 20% would be appropriate when the production company has to produce all new demos and perhaps even release tracks on social networks, and possibly iTunes. Yet many production companies will try take to advantage of a naive artist and demand 40% or 50%, or even more. The production company's royalty should also be limited to advances and royalties payable by the label for the artist; in a terrible deal for the artist, such as the first one analyzed in this installment, the company will also try to secure a percentage of any income the artist receives in the entertainment business, including live performance and publishing.

It is fair, though, that a production company be compensated for expenses if it secures a suitable label deal. However, the company expenses should be reasonable, documented, and approved by the artist. In addition, the amount should be deductible if a new artist, which means that if the company's expenses were $10,000 and a label is paying an advance of $100,000 for the artist's recording services, the $10,000 should be deducted from the $100,000, and the company should receive 20% of $90,000 ($18,000), and the artist should receive 80% of $90,000 ($72,000). If the expenses are not taken off the top, the company would receive 20% of $100,000 and the $10,000, that is, $30,000. The artist would only receive 80% of the balance of $70,000, that is, $56,000. If the expenses are not taken off the top, the company would receive its 20% of $100,000.00 or $20,000, leaving $80,000 remaining from which the $10,000 in expenses would be deducted, leaving $70,000 for the artist.

360 Provisions

Since income from recorded music has drastically declined in the last 15 years, labels have changed their standard deals to share in money from other income streams, including merchandise, endorsements, live performances and touring, and even appearances in TV programs or movies. As labels wish to share in all of the artist's income streams, these deals are known as "360." A major label that can provide the marketing muscle to make an artist a household name arguably deserves to share in those income streams, but a production company has not earned that. However, if the production company actually does something to help the artist make money from other activities than record sales, there is nothing wrong in rewarding it for that success. For instance, if the company finds a good paying gig playing at a private event, the company may deserve a percentage of the fee payable to the artist.

Further, if the major record label demands 360 payments from various income streams, the production company and artist may be able to negotiate separate advances against all those income streams. For example, if the record company wanted a percentage of the artist's touring revenue, the production company and the artist could demand a significant advance payment from the record company in exchange for that royalty. In that case, both the production company and the artist would benefit from the advance.

Second Agreement: A Fair Shopping Agreement

Unlike the first contract, this agreement is an example of a shopping deal that is fair to both sides. The second contract provides a 20% royalty to the production company, but it also provides significant protections for the artist. Unlike the first contract, the second contract (i) gives the artist the right to approve the choice of the "Distributor" (that is, the label), participate in the negotiation of the deal, and approve all the terms of that deal; (ii) limits the Term to nine months unless the company find a suitable deal; and (iii) limits the company's royalty to income flowing from the label, and not from any other income that the artist may earn in the entertainment business.

AGREEMENT THAT AN ARTIST SHOULD NEVER SIGN


_______ Records, Inc.
______
Los Angeles, CA

Dated as of: ________ __, 2015

Mr. [Artist]

_______________
Hoboken, NJ


Dear Mr. ___________,

This agreement shall confirm and memorialize our discussions with reference to you and Company entering into an exclusive artist recording agreement regarding your performances as a musical recording artist. (You and Company are sometimes referred to herein as the "parties".) Although the parties contemplate the execution of a more formal long form recording agreement (the "Long Form Agreement"), this Letter Agreement, when signed by both you and Company, shall constitute a binding and enforceable agreement regardless of whether the Long Form Agreement is ultimately executed.

Following are the major terms and conditions which the parties agree shall form the basis of our contractual arrangement and which shall be incorporated in the Long Form Agreement (it being understood that such Long Form Agreement shall not be limited to these terms):

1) Artist: _________

2) Territory: World

3) Term: The "Initial Contract Period" shall run for fifteen (15) months from the completion and satisfactory delivery of the Initial Album hereunder. Each subsequent Contract Period, if any as provided for below, shall run for the longer of (i) 15 months from the completion and satisfactory delivery of the Masters to be delivered to Company during such Contract Period and (ii) 18 months from the commencement date of such respective Contract Period. At all times during the Term, you shall render your exclusive recording services to Company for the purpose of making Masters (as hereinafter defined) and for all other purposes as provided for herein.

As discussed in the introduction, most production companies consist of one or two individuals with some experience in the record business who may or may not be producers, but own or have access to a professional recording studio. Their goal is to land a deal for the Artist with a real label that has resources to provide the money and staff to properly market, promote, and distribute records and take the Artist to the next level or to the top.

Generally, a production company has nine months to shop demos to secure a deal. An album is not necessary to shop an artist for a label deal. Note that under the language in Paragraph 3, since delivery does not occur unless the Company records the Artist, delivery may never occur. Therefore this Agreement could go on indefinitely.

This provision needs to be altered to give the Company a reasonable time to find a suitable label deal. If it does not find one within that time, the Artist should have the right to terminate.

4) Recording Commitment/Future Options: During the Initial Contract Period, you shall record up to three (3) previously unreleased "singles" (the "Initial Track(s)"), the first of such Initial Tracks to be commercially released not later than five (5) months after the satisfactory delivery thereof (unless otherwise agreed by you and Company). During the period ending not later than nine (9) months after the commercial release of the Initial Track, Company shall have the right and option, in its sole discretion, to require you to record a full-length album comprised of not less than 10 songs (the "Initial Album"). Thereafter, Company shall have an option(s), to be exercised by Company in its sole discretion, for up to four (4) consecutive additional Contract Periods, comprised of one (1) full-length album during each Contract Period, each such option to be exercised, if at all, not later than the expiration of the then current Contract Period, subject to a ninety (90) day written notice and cure period in the event Company fails to exercise any such option. (The Initial Album, all additional audio only masters recorded by you during the Term hereunder, all audio-visual products, and all other recordings or other formats now or hereafter known embodying your musical performances are sometimes referred to individually and collectively herein as the "Master(s)".) Selection of the Masters to be recorded hereunder shall be subject to the mutual cooperation and agreement of the parties, it being understood and agreed that Company shall have the final word with respect to selection of Masters and for all other creative matters, including, but not limited to, the selection of the songs to be recorded, producers of Masters and album artwork.

A good shopping deal for an artist makes a production company adhere to a firm deadline. If they do not find a deal within nine months, for instance, the Artist can walk away. On the other hand, the company should have the right to share in the Artist's success from a record deal that the production company helped the Artist secure. A typical provision to address this would read as follows:

"The term of this agreement ("Term") shall commence upon the date of this Deal Memorandum and continue until the commercial release by a Distributor in the United States of the fourth (4th) full-length, studio album containing Artist's featured performances and delivered to such Distributor in fulfillment the Artist's recording obligation to the Distributor. Notwithstanding the foregoing, if an agreement for Artist's exclusive recording services between the Company and a Distributor (a "Distribution Agreement") has not been executed within nine (9) months from the date of completion of production of the Initial Masters hereunder (the "Shopping Period"), the Artist may terminate the Agreement."

5) Recording Costs/Advances: Company shall administer and pay all pre-approved recording costs in connection with the production of the Masters. All master recording costs, video production costs, independent marketing and promotion costs, all other sums paid by Company to you or on your behalf, (whether related to Other Music Activities or otherwise) and all other typically recoupable costs and expenses incurred by Company hereunder shall constitute "Advances", fully recoupable by Company from any royalties or other sums to be paid to you (or on your behalf) by us or any third party (excluding mechanical royalties) under this Agreement or any other agreement between you and Company.

There are two things wrong with this provision. First, "all recording costs" should only be expenses that are reasonable, documented, and, if possible, approved by the Artist. Second, in a real recording agreement, the Artist should receive a real advance so he/she can quit his/her day gig and move out of his/her parent's house.

6) Royalties: As your sole and complete consideration of your services rendered hereunder, Company shall pay you a sum equal to thirty five (35%) percent of the net revenues received by or credited to Company in connection with the exploitation of the Masters, after recoupment by Company of all Advances, recording costs and expenses and all other chargeable costs related to the distribution and/or exploitation of the Masters, including, but not limited to manufacturing costs, third party distribution fees and charges, and marketing and promotional expenses, it being understood that there shall be no so-called "double-dipping" and such recoupable expenses shall only be charged to your royalty account once. It is understood and agreed that Company's otherwise standard policies would apply to the calculation and payment of all royalties (e.g., free goods, program discounts, reserves, reductions, etc.). You acknowledge and agree that no royalties of any kind nor any other compensation (other than mechanical royalties, if any) shall be due to you except as provided in this paragraph. Company shall account and pay you any sums due not semi-annually, within ninety days after the end of each semi-annual period ending on June 29th and December 31st. Company shall be entitled to withhold any and all taxes as required by law with respect to any sums payable to you hereunder.

If the Company were a real label, a 35% percent royalty payable to the Artist on record sales would not be unfair. However, because the Company is only a production company, the goal is not to sell records but rather to secure a suitable label deal. When the production company achieves that, it should share in the revenues generated by the major label, but not 65%. The following clause should be added to the Royalties section of the agreement:

"Notwithstanding anything to the contrary above, If Company enters into Distribution Agreement, with your prior approval, the Company shall receive [5% to 20%] (see introduction) of any advances or royalties payable by the Distributor for the recording services of the Artist. The Artist shall receive the balance, that is, 80% of such Advances or royalties for the first four (4) Albums. Notwithstanding anything to the contrary above, company shall have the right to deduct its actual documented approved recording costs that have not already been recouped by Company."

7) Name and Likeness Rights/Website: Company shall have the perpetual right, which such right shall be exclusive during the term and non-exclusive thereafter, without liability to any person, to use and to authorize other persons to use your name, likeness and biographical material for purposes of advertising, marketing, promotion and trade in connection with making and/or exploitation of Maters, recordings, audio-visual materials, and all other materials hereunder. You hereby grant to Company the exclusive right, during the Term (and the non-exclusive right thereafter, with respect to an alternate name), to establish and maintain all Artist-branded digital sites and social networking sites, including a website having the URL "_________.com" or any similar designation based on or containing your professional name. You shall make yourself available at Company's reasonable request and expense and upon reasonable notice to appear for photographs, posters, cover art, interviews with representatives of the media and publicity personnel and to perform other reasonable promotional functions.

This clause should be added:

"Notwithstanding, anything to the contrary above, (i) Artist shall have the right to continue his YouTube and Facebook pages; and (ii) all content in Artist branded sites shall be subject to Artist's approval."

8) Representation/Warranty/Indemnity: You warrant and represent that you have been, are and shall continue to be possessed of the full right to enter into this agreement and perform hereunder and that your entering into this agreement and performing hereunder shall not infringe upon the rights of any person or entity. Upon the expiration or other termination of this Agreement, you agree not to re-record any composition embodied on a Master hereunder until the date that is the later of i) three years after the end of the Term and iii) five years from the completion of recording of such Master hereunder. You indemnify us against any losses or damage (including reasonable attorneys' fees) arising out of any claims by any third parties which are inconsistent with any warranty made by you herein or any condition contained herein. You shall promptly pay us on demand any sums for which you are liable under the proceeding sentence and, alternatively, Company shall be entitled to withhold any such sums from monies otherwise payable to you hereunder.

9) Ownership: The Masters (including, but not limited to, any audio-visual recordings related thereto), all duplicates and derivatives thereof, all records made therefrom or duplicates or derivatives (including the copyright and renewal and/or extension of such copyright), and all artwork and other intellectual property created or obtained by Company, together with the performances embodied therein, all in any form, manner, or medium now or hereafter known, shall be exclusively and perpetually property of Company, free from any claim whatsoever by you or any person deriving any rights from you. The Masters shall be deemed a work made for hire within the meanings of the United States Copyright Act. If the Masters are determined not to be a work made for hire, they will be deemed transferred to Company by this agreement, together with all rights in it. Accordingly, the Masters, together with yours and all the performances embodied on them, shall be the sole property of Company, its assignees and successors in perpetuity and throughout the world, free from any claims by you or any other person; and Company shall have the exclusive right to copyright the Master in its name as the author and owner thereof and to secure any and all renewals and extensions of such copyright throughout the world. You will execute and deliver to Company such instruments of transfer and other documents regarding the rights of Company in the Master as Company may reasonably request to carry out the purposes of this Agreement, and Company may sign such documents in your name and make appropriate disposition of them.

This paragraph states that all "Masters shall be deemed work for hire" for the company. Work for hire means that all the copyrights in the recordings are owned by the company, and that the company will have the right to use them for any purpose after the termination of the agreement. In a pro-artist agreement, the copyrights in the master recordings would be owned jointly by the Artist and the Company. This means that if the Agreement terminates, neither the Artist nor the company would have the right to exploit the master recordings without mutual approval.

Without limiting the generality of the foregoing, Company, or any person authorized by Company shall have the perpetual unlimited, exclusive right, throughout the world: (i) to manufacture records, video-records, and any derivatives thereof derived from the Master in any form, in any medium, and/or by any method now or hereafter known; (ii) to sell, transfer or otherwise deal in the same under any trademarks, trade names and labels; (iii) to reproduce, adapt, transmit, distribute, broadcast, perform, communicate and otherwise use the Master in any medium or in any manner, including but not limited to use in physical, digital, electronic, mobile and internet formats; (iv) to cause or permit the public performance of the Master, or derivatives thereof, through any and all media; (v) to add to, delete from, edit, mix and otherwise alter the Master without restriction; and (vi) to exploit the Master and derivatives therefrom through any and all means, whether now or hereafter known, all without payment of any compensation to you except the royalties as described in this Agreement. In the alternative Company may, at its election, refrain from doing any or all of the foregoing.

10) Mechanical License: With respect to any musical compositions embodied on the Masters which are owned or controlled by you or your designees, you hereby grant to us and our designees the irrevocable non-exclusive right to reproduce the Song on records (including digitally delivered reproductions) and to distribute any of those records in the United States and Canada. Mechanical royalties shall be payable on a maximum of ten (10) songs on each album, on net sales of such records at the following rates: (i) on such records sold in the United States, the rate shall be the United States mechanical rate. The "United States mechanical rate" shall mean the amount equal to seventy-five percent (75%) of the minimum statutory royalty rate (without regard to playing time) provided for in the United States Copyright Act which is applicable to the reproduction of musical compositions as of the date of initial release of the Master concerned; and (ii) on such records sold in Canada, the rate shall be the Canadian mechanical rate. The "Canadian mechanical rate" shall mean the amount equal to seventy-five percent (75%) of the minimum statutory royalty rate (without regard to playing time) provided for in the Canadian Copyright Act which is applicable to the reproduction of musical compositions as of the date of initial release of the Master concerned; (iii) the mechanical royalty rate for a Song contained on a mid-price record or budget record shall be three-fourths (3/4ths) of the United States mechanical rate or the Canadian mechanical rate; as applicable; and no mechanical royalties shall be payable on any phonograph records for which no royalties are payable by Company. If the copyright in a musical composition is owned or controlled by a person, firm or corporation other than you, you shall cause that person, firm or corporation to grant to us and our designees the same rights as you are required to grant to us and our designees hereunder. You hereby grant to us and our designees at no fee, royalty or other cost to us or our designees, the irrevocable, non-exclusive, worldwide right to reproduce and publicly perform each Song on audio-visual recordings, to distribute audio-visual records embodying those audio-visual recordings, and otherwise to exploit in any manner and through any media those audio-visual recordings. You grant to us and our designees, or shall cause to be granted to us, the irrevocable right to print and reproduce, at our election, the title and lyrics to the Song on the packaging of phonograph records embodying Masters throughout the world in perpetuity, without payment to you or any other person, firm or corporation of any monies or other consideration in connection therewith. Any assignment, license or other agreement made with respect to the Song shall be subject to the terms hereof.

This paragraph is known as the Controlled Composition Clause. It means that the Artist who writes his own songs does receive mechanical royalties from record sales by the Company, but the Company pays only ¾ of the statutory rate of 9.1 cents per song instead of the full rate. It is a standard clause in any major label or major indie deal and usually cannot be negotiated away unless the Artist has tremendous bargaining power. However in the context of this Agreement, it is usually irrelevant as the Company will probably not sell records, or if it does, perhaps only one or two tracks in order to spark a real label's interest in the Artist.

11) Co-Publishing. The parties agree that you (or your affiliated publishing company) and Company's designated publishing affiliate shall be co-publishers with respect to music and lyrics of all compositions written, owned and/or controlled by you during the Term. Accordingly, you (or your affiliated publishing company) hereby irrevocably and absolutely assign, convey and set over to Company (or its designee), or will cause Company (or its designee) to receive an assignment, of fifty (50%) percent of all right, title and interest (including the worldwide copyright and all extensions and renewals thereof) in and to each and every controlled composition which is recorded hereunder. Upon request, you agree to execute and deliver to Company, or to cause to be executed and delivered to Company (or its designee) a separate Co-publishing Agreement with respect to each such controlled composition in accordance with standard forms of such agreements. If you shall fail to promptly execute such agreements, you hereby grant to Company the right to sign same on your behalf, though Company's failure to exercise the rights granted to use such authority shall not diminish Company's rights as set forth within this Agreement. Company shall be the exclusive administrator of 100% of all rights in and to such controlled compositions, and it (and/or its designees) shall be entitled to exercise any and all rights with respect to the control, exploitation and administration of such compositions including, without limitation, the sole right to grant licenses, collect all income and to use the name, likeness and biographical material of each composer, lyricist and songwriter hereunder in connection with such composition for the full term of copyright (including all renewals and extensions thereof) in and to such Composition. From all sums actually earned and received by Company in the United States of America from the exploitation of such Composition throughout the world (the "Gross Receipts"), Company shall: (i) deduct and/or retain all out-of-pocket costs incurred by Company in connection with the exploitation and protection of such Composition; (ii) deduct and pay royalties payable to the writers (including you) of the Composition (which you warrant and represent shall not exceed fifty (50%) percent of the Gross Receipts); and (iii) pay to you an amount equal to fifty (50%) percent of the balance remaining after deducting the aggregate sums set forth in subparagraphs (i), (ii) and (iii) above, and the remaining fifty (50%) percent thereof shall be retained by Company for its sole use and benefit. Accountings for such royalties shall be rendered semi-annually subject to all the terms and provisions of Paragraph 11 hereof.

The Artist should delete this paragraph 11 completely. Since a production company is not a music publishing company, which is equipped to exploit songs and collect income from them all around the world, the Company should not become the Artist's music publishing company.

12) Other Music Activities. You shall pay to Company a sum equal to thirty (30%) percent of all OMA Income ("the OMA Payment", provided that the OMA Payment in connection with your touring and other live musical performances shall be deemed to be twenty (20%) percent). You authorize Company to collect all OMA Income on your behalf but to the extent such is not collected by Company, within fifteen (15) days of the end of each calendar quarter of the Term, you will send Company a detailed written account of all OMA Income received by you or on your behalf during such accounting period and the amount of the OMA Payment accordingly payable to Company. On receipt of each such accounting statement, Company will elect either to deduct the OMA Payment from monies (including royalties) due to you hereunder or to receive payment, in which case you shall pay the amounts shown to be due in each accounting statement within ten (10) days of the date of such statement. You agree to maintain complete and accurate books and records relating to OMA Income. At any time within two (2) years after any accounting statement is rendered to Company hereunder, Company shall have the right to inspect such books and records on reasonable notice but not more than once during each year. As used herein, "Other Music Activities" shall mean all of your professional activities connected to the entertainment industry including, without limitation, merchandising, advertising, sponsorship, endorsements and tie-ins, touring and all other live performances, and TV or film appearances (but specifically excluding music publishing, any fees or royalties you receive for acting as a "producer" of records for others, record royalties hereunder, and any other income payable to you which Company is otherwise participating in (i.e., there shall be no "double dipping" with respect to OMA Income). "OMA Income" shall mean all gross sums paid or payable to you with respect to your "Other Music Activities" during the Term or with respect to any and all agreements related thereto entered into during the Term and for a period of three months thereafter (whether received during the term or thereafter), after deduction of third party out-of-pocket expenses or deductions reasonably incurred in connection with the Other Music Activities, including booking agent commissions, monies payable to third party co-publishers and co-writers of musical compositions written by you and reimbursement for actual out-of-pocket expenses incurred by you in connection therewith (but which such deduction shall not apply to production, travel, musician, or other show related costs for your live performance activities or management commissions). Upon request by Company, you hereby agree to execute standard Letters of Direction authorizing and directing any third parties to pay any such OMA Payments directly to Company.

The Artist should delete this paragraph completely for the reasons discussed in the introduction to this installment (see 360 Provisions). Yet in fairness to the Company, if it does something to deserve ancillary revenues, there is nothing wrong with compensating it for its efforts. Here is an alternative to harsh 360 clauses compensating the Company if it actually helps the Artist make money:

Ancillary Rights.

(a) Company may, from time to time, secure and coordinate "synch" placements of any of the Artist's Songs in motion pictures, TV program, ad campaigns, video games etc. ("Company Synchs"). It is understood that Company is not a music publisher and shall not be required to procure any synchs for Artist. If Company does secure and coordinate any live personal appearance for the Artist, Company shall be entitled to collect all gross revenue from the Company Synchs. Company shall pay Artist seventy-five percent (75%) of gross revenue derived from such Company Synchs. Company shall make such payment to Artist within three (3) days of Company's receipt of such monies together with a comprehensive accounting statement. Notwithstanding anything to the contrary above, (i) Artist shall have the right to approve Company Synchs and the synch fee; (ii) Artist has no obligation to Company for any synch placement not secured by Company. Company shall have no other rights in Artist's songs except as set forth in this Subparagraph.

(b) Company may, from time to time, secure and coordinate live personal appearances for Artist and shall negotiate the Artist's compensation in connection therewith for concerts or live performances ("Company Shows"). It is understood that Company is not an employment agency or a talent agent and shall not be required to procure any employment for Artist, and that Company has not represented that it will procure employment for Artist. Any live personal appearance that Company does secure and coordinate for the Artist shall be incidental to its role as a record company. Company shall pay Artist seventy-five percent (75%) of Net Revenue derived from such Company Show. "Net Revenue" as used in this paragraph shall mean all gross revenue actually received by Company less documented reasonable expenses incurred by Company in connection with such Company Show such as lighting and sound. Company shall make such payment to Artist within three (3) days of Company's receipt of such Net Revenues together with a comprehensive accounting statement. Notwithstanding anything to the contrary above, (i) Artist shall have the right to pre-approve each Company show and her performance fee; (ii) Artist has no obligation to Company in connection with any live performance not secured by Company.


13) Miscellaneous. This agreement is the entire agreement between the parties with respect to the contents hereof, supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties, and shall not be modified, except by an instrument in writing, signed by each of the parties duly authorized to execute such modification. Company may assign its rights under this Agreement in whole or in part.

There is a great deal of boilerplate language here that may be legally necessary, but is not more favorable to one party than the other. Here is one truly insidious sentence: "Company may assign its rights under this Agreement in whole or in part."

This would mean that the Company could assign the agreement (together with the five albums that the Company is entitled to) to any other company or individual. The Company could thereby literally sell the Agreement. This sentence should be modified to allow the Artist to approve any assignment of the Agreement to a third party.

You may not assign this agreement or your rights or responsibilities hereunder without the prior approval of Company, such approval not to unreasonably withheld with respect to a so-called "furnishing company" owned or controlled by you which is exclusively entitled to your recording services. A waiver by either party of any term or condition of this agreement shall not be deemed or construed as a waiver of such term or condition for the future, or of any subsequent breach thereof. All remedies, rights, undertakings, obligations, and agreements contained herein shall be cumulative and none of them shall be in limitation of any other remedy, right, undertaking, obligation or agreement of either party. No breach of this agreement by either party shall be deemed material, unless the non-breaching party shall have given the other party notice of such breach and such breaching party shall fail to cure such breach within 30 days after receipt of such notice. If any part of this agreement shall be determined to be invalid or unenforceable, the remainder of this agreement shall remain in full force and effect. This Agreement has been entered into in the State of California and the validity, interpretation and legal effect of this Agreement shall be governed by the laws of California applicable to contracts entered into and performed entirely within California, with respect to the determination of any claim, dispute or disagreement which may arise out of the interpretation, performance or breach of this Agreement. All claims, disputes or disagreements which may arise out of the interpretation, performance or breach of this Agreement shall be submitted exclusively to the jurisdiction of the appropriate court in California. You acknowledge that Company has given you the right and opportunity to have this Agreement reviewed by an attorney of your choice having competence in the music industry, and you have done so. You further acknowledge that said attorney has reviewed with you the terms of this Agreement and that he/she has advised you as to all legal ramifications and consequences of your entering into this Agreement. You acknowledge that your services hereunder are of a special, unique, unusual, extraordinary and intellectual character and in the event of a breach by you of any material term, condition, representation, warranty or covenant herein, Company will be caused irreparable injury and damage. You expressly agree that Company shall be entitled to the remedies of injunction and other equitable relief to prevent or remedy a breach, which relief shall be in addition to any other rights or remedies, for damages or otherwise, which Company may have.

Under the last sentence above, the Company could seek a court to enjoin the Artist for recording for another record label.

If because of: an Act of God, inevitable accident; fire; lockout; strike or other labor dispute; riot or civil commotion; act of public enemy; enactment, rule, order or act of any government or governmental instrumentality (whether federal, state, local or foreign); failure or delay of transportation facilities; or other cause of a similar or different nature not reasonably within Company's control, Company is materially hampered in the recording, manufacture, distribution or sale of records, then, without limiting Company's rights, Company shall have the option by giving you notice to suspend the running of the then current Contract Period for the duration of any such contingency plus such additional time as is necessary so that Company shall have no less then sixty (60) days after the cessation of such contingency in which to exercise its option, if any, to extend the Term of this Agreement for the next following Option Period.

The parties agree that, upon both of our signatures below, this letter shall constitute a valid and binding agreement regarding the exclusive rights to your services. Notwithstanding the contemplation of the Long Form Agreement, all legal and equitable rights, obligations and remedies of both parties attach hereto with no limitation.

ACCEPTED AND AGREED TO:

__________ Records Inc. Artist


_____________________ ___________________
An Authorized Signatory SS#:


FAIR SHOPPING DEAL

___________ Productions, Inc.
c/o__________, Esq.
f/s/o _______ [Producer]
__________
New York, NY
As of ______, 2015

__________ Music, LLC
f/so __________ [Artist]
c/o __________, Esq. [Attorney]
Los Angeles, CA

Note that the Artist was represented by experienced counsel.

Re: Deal Memorandum

Ladies and Gentlemen:

The following sets forth the terms on which (i) ____________ Inc. ("Company") f/s/o _______ and ___________Music LLC ("you") furnishing the services of _______ ("Artist") agree to form a California limited liability company (the "Venture") to furnish the exclusive services of Artist to a Distributor (as defined herein), (ii) Artist will furnish her exclusive recording services to the Venture, and (iii) Company will furnish the services of _______ ("Producer") to the Venture to produce the Venture Masters (defined below).

This agreement was essentially between two individuals: an artist and a producer who owned a production company. "Company" is the name of the producer's corporation. The Artist entered into this agreement through a "furnishing" company as well. By entering into the deal as companies rather than individuals, both parties secured "limited liability" and certain tax advantages. Limited liability means that even if a company consists of only one individual, the personal assets of that individual (such as his/her personal bank account, house and car) are not be subject to liability.

As used herein, the term "Distributor" shall mean Sony Music, Universal Music and Warner Music, their wholly owned affiliated labels (collectively "Major Label"); a major independent record company, or an indie record label that is regularly distributed by a Major Label.

This Agreement uses the word "Distributor" to refer to the record company with which the Company is trying to secure a deal. The definition of "Distributor" will vary, but it is in the interest of the Artist to narrow this definition to the three major labels --- Warner, Sony, and Universal, and their wholly owned label affiliates, such as Atlantic, Epic, Columbia, Republic, and Interscope, or a major independent, such as Beggars Banquet (the Strokes), Big Machine (Taylor Swift), or Glassnotes (Mumford and Sons). Yet the Company may want a broader definition embracing companies with national distribution, such as RED, ADA, and Caroline, which are owned by the majors but are essentially distributors who seldom provide advances or marketing support.

The definition of "Distributor" is not as important in this Agreement as it could otherwise be because, as set forth in Para. 2, distribution shall be subject to the prior written approval" of the Artist.

1. Organization of the Venture. Contemporaneously with the execution of this Deal Memorandum, Company and you will cause to be filed Articles of Organization in the State of New Jersey organizing a limited liability company called "_______ LLC", such name deemed approved by both Company and you hereunder (or, if such name is not available, another name mutually agreed upon by Company and Artist). The Venture shall be owned 20% by Company and 80% by you.

Note that the Artist will receive 80% of any income; the Company's royalty is limited to 20% -- compared to 65% for the production company in the first agreement discussed above.

2. Artist Obligations. The term of this agreement ("Term") shall commence upon the date of this Deal Memorandum and continue until the commercial release by a Distributor in the United States of the fourth (4th) full-length, studio album containing Artist's featured performances and delivered to such Distributor in fulfillment the Venture's recording obligation to the Distributor. Notwithstanding the foregoing, if an agreement for Artist's exclusive recording services between the Venture and a Distributor (a "Distribution Agreement") has not been executed, or substantially negotiated, within nine (9) months from the date of completion of production of the Initial Masters hereunder (the "Shopping Period"), upon written notice, via registered mail, return receipt requested, by Artist given to Company, the parties' obligations hereunder shall terminate and Artist shall be released from any further obligations to the Venture.

The maximum duration of this Agreement is for four albums. Note that unless the Artist has approved a Distribution Agreement within nine months from the date of completion of production of the Initial Masters (six tracks), the Artist has the right to terminate the deal with the Company.

In such event, neither Company nor you shall have any right to exploit the Venture Masters without the express written permission of Company and you. All master recordings containing Artist's featured performances that are recorded during the Term, including without limitation the Initial Masters (defined below), shall be referred to as "Venture Masters" and shall be deemed "works made for hire" specially commissioned by the Venture.

If the contract terminates, neither the Company nor the Artist has the right to exploit the Initial Masters without mutual approval. Again, this is very favorable for the Artist. In a pro-company agreement, the Company would exclusively own the copyrights in the recordings and be able to exploit and/or license any masters made during the term. In this agreement the Venture (that is the Company and the Artist) jointly own the copyrights.

Notwithstanding the foregoing, if during the Shopping Period Venture receives a bona fide written offer from a Distributor to enter into a Distribution Agreement and the Distribution Agreement is not fully executed prior to the expiration of the Shopping Period, then Shopping Period shall automatically be extended for an additional ninety (90) days.

Company needs this provision in order to wrap up any negotiation that are ongoing as of the end of the nine month shopping period.

Further, notwithstanding anything to the contrary expressed in or implied by this Agreement, it is understood and agreed that the choice of the Distributor, as well as the terms and provisions of the Distribution Agreement, shall be subject to the prior written approval of Company and you, such approval not to be unreasonably withheld or delayed; further, Company and you agree that if you choose not to enter into a Distribution Agreement with a Distributor during the Shopping Period then you shall not directly or indirectly deal with such Distributor (or its affiliates) for a period of twelve (12) months following the expiration of the Shopping Period.

Here it is made clear that the Artist has the right to approve the terms of the Distribution Agreement as well as the Distributor. This is absolutely key. Without the right to approve the Distribution Agreement, the Company could enter into a deal that is bad for the Artist, and the Artist would be powerless to prevent it. The Company may argue that the Distributor will not finalize the deal if the Artist does not sign an "inducement" letter confirming his assent to the agreement. However, without the right to approve the deal, if the Artist did not sign the inducement letter, the Artist would arguably be in breach of the Agreement with the Company. The Artist should at least have approval of the major deal points including duration, number of options for additional albums, recording budget, advances, and royalties.

3. Company Obligations. Company agrees as follows:

a. Engagement. Promptly after the execution of this Deal memorandum, Company will cause Producer to record and deliver to the Venture six (6) Masters (the "Initial Masters"). In addition, provided that a Distribution Agreement is entered into or substantially negotiated during the Shopping Period, the Venture shall engage Company to, and Company will cause Producer to produce and deliver three (3) Venture Masters per album for potential inclusion on each of the first four (4) "commitment" albums to be delivered to the Distributor pursuant to the Distribution Agreement. For the purposes hereof, the Initial Masters and all other Venture Masters produced by Producer shall be referred to as "Produced Masters". The first four (4) "commitment" albums to be delivered to the Distributor pursuant to the Distribution Agreement are sometimes referred to as "First Album", "Second Album", "Third Album" and "Fourth Album", respectively.

In this Agreement, the Company was furnishing the services of a top notch producer. In addition to shopping the Artist to labels, the Agreement contemplates that the producer would also have a role in producing tracks for the Artist after he/she got signed.

b. Producer Advance; Costs. In respect of the Initial Masters and any other Produced Masters on the First Album, the Venture shall pay, or cause the Distributor to pay, to Company, as advances, recoupable against the Producer's Royalty (the "Producer Advances"), $15,000.00 per Master payable as follows: (1) $7,500.00 payable promptly upon execution of the Distribution Agreement, and (2) the balance promptly following delivery and acceptance by the Distributor of technically satisfactory Masters. In addition, use of Company's studio in recording, edition and/or mixing any Produced Masters shall be billed in accordance with a budget that has been approved by both you and Company, which budget is attached hereto as Exhibit "A" (the "Approved Budget").

This provision and the next does not require the label to use the producer's tracks, but does guarantee that the producer would receive advances and a royalty (also referred to as "points") on the first four albums.

c. Producer Royalty. The Venture shall pay Company (or cause the Distributor to pay to Company) a producer's royalty (the "Producer's Royalty") of three percent (3%) of SRLP in respect of net sales of full-priced records through normal retail channels in the United States ("USNRC") embodying solely the Produced Masters. Notwithstanding the foregoing, in no event shall the Producer Royalty hereunder be lower than the royalty equivalent of three produced tracks per album, through the fourth album. Producer's Royalty on all other sales and exploitations shall be reduced, adjusted, calculated and paid in the same proportion, and at the same times, as is the Venture's basic "all in" royalty. As to records not consisting entirely of the Produced Masters, the royalty rat shall be prorated by multiplying such royalty rate by a fraction, the numerator of which is the number of Produced Masters embodied thereon and the denominator of which is the total number of royalty bearing masters (including the Produced Masters) embodied thereon. Producer's Royalty shall be paid retroactive to the first record sold or other exploitation after recoupment of the recoupable portion of all recording costs incurred in connection with the Album on which they are embodied at the net artist rate (i.e., the "all in" royalty payable to the Venture less the Producer's Royalty payable to Company and the royalties payable to all other producers, mixers and engineers of such Masters), subject, however, to recoupment of the unrecouped portion of the Producer Advance. There shall be no reduction in the Producer's Royalty due to; (i) amounts payable to mixers or executive producers, or (ii) after delivery and acceptance of any Master, amounts payable to any third party producer. In calculating "recording costs" for recoupment purposes, "recording costs" shall not include any "in pocket" advances payable to the Venture or Artist. Producer's Royalty shall be paid directly to Company by the Distributor pursuant to an irrevocable letter of direction.

3% to 5% is a normal producer royalty.

d. Credit. The Venture shall instruct, and use reasonable efforts to cause, Distributor to accord Producer the following credit in all trade and consumer advertisements relating to any Produced Master of ½ page or larger, and in and on the outer packaging, label copy, liner notes and labels of all records embodying the Produced Master:

"Produced by ______"

The Venture shall instruct, and use its best efforts to cause, Distributor to include Company's logo (the "Company Logo") and Artist's Logo (the "Artist Logo") in all trade and consumer advertisements relating to any record embodying any Venture Master of ¼ page or larger, and in and on the outer packaging, label copy, liner notes and labels of all records (including promotional and commercial singles) embodying any Venture Master. Each such logo shall be no less prominent, and no smaller in size, than any other logos (including the other party's logo) included on such records or in such advertisements, including, without limitation, Distributor's logo. In the event that any Distributor will not agree to include both the Artist Logo and the Company Logo on such terms, Company and Artist shall negotiate in good faith to determine which logos, if any, will be so included.

e. Controlled Compositions. Producer's interest in any compositions embodied on any Produced Masters shall be subject to any so-called "controlled composition" provisions contained in the Distribution Agreement between the Venture and Distributor.

See comments for paragraph 10 in the first agreement.

4. Management, Voting and Control.

a. The business and affairs of the Venture shall be managed by Company and you. Company and you will have joint decision making authority and all decisions made regarding the business and affairs of the Venture must be mutually approved by you and the Company, in writing, including, without limitation, those decisions relating to: (i) determining which Distributor(s) with which to enter into Distribution Agreement(s), and (ii) the release and/or exploitation of any Master(s). For the avoidance of doubt, the Venture shall not enter into any agreements or other undertakings regarding any Venture Master prior to the execution of a Distribution Agreement, including, without limitation, any license agreement or otherwise, without unanimous written consent of you and Company.

b. Artist and Company further agree as follows: (i) Company's counsel and Artist's counsel and Artist shall jointly represent the Venture in connection with any Distribution Agreement(s) to be entered into by the Venture, and (ii) Artist's counsel shall represent Artist's interests in connection with any additional obligations that Artist may have to any Distributor (such as an obligation to deliver additional commitment albums). Company's counsel and Artist's counsel shall split any legal fees paid or reimbursed by any Distributor in connection with the Distribution Agreement and the Venture shall be responsible for paying, or shall make appropriate arrangements for discharging, all reasonable legal fees of Artist's counsel and Company's counsel in connection with any Distribution Agreement(s) that are not paid or reimbursed by the Distributor.

This is a very favorable provision for the Artist, as it not only gives him/her approval, but lets his/her attorney actively engage in negotiations with the label.

5. Allocations and Distributions.

a. All advances and royalties (including audit settlements) received by the Venture, or credited to the Venture against an advance previously paid to the Venture, shall be distributed as follows:

i. First, to the reimbursement of any actual out-of-pocket expenses incurred by the Venture, or by Artist or Company with the Venture's prior written approval, in connection with the Initial Masters, including the Approved Budget, and in soliciting or negotiating any Distribution Agreement (including, without limitation, legal fees incurred by the Venture pursuant to paragraph 4(b) above); and

ii. Then, after payment of any Producer Advances, Producing Royalty (subject always to recoupment of recording costs and/or the Producer Advances on the terms set forth above) and/or the Approved Budget amount due to Company, 80% to you and 20% to Company.

b. Company and Artist agree to require, as a condition of any Distribution Agreement, any Distributor to agree to account directly to: (i) Company for any Producer Royalties that may become payable, (ii) you for 80% of all royalties that may be payable to the Venture under any Distribution Agreement (net only of the Producer Royalties payable to Company, if any); and (iii) Company for 20% of all royalties that may be payable to Venture under any Distribution Agreement (net only of the Producer Royalties payable to Company, if any). For the avoidance of doubt, as between Company and Artist, subject to the payment of the Producer Advances due to Company pursuant to paragraph 3(b) above, 80% of all "in pocket" advances payable under any Distribution Agreement shall be payable to you.

Note that the Company's compensation is limited to monies payable by the label, not to any monies that the Artist may earn in the entertainment business. This is not a 360 deal, which is a good thing for the Artist.

c. Except as expressly otherwise provided herein, each of you and Company shall be responsible for payment of its own attorney's fees, personal management commissions and/or business management commissions out of its share of distributions and/or payments by the Venture. Under no circumstances shall the Venture be responsible for payment of commissions in respect of personal managers, business managers or other advisors engaged by Artist, Producer or Company unless such person was retained expressly to represent the Venture with the prior written consent of both Artist and Company.

6. Other.

a. The Venture shall maintain accurate books and records of all monies paid to or collected by the Venture pursuant to any Distribution Agreement(s). The Venture's books and records relating thereto may be inspected during regular business hours by a certified public accountant or attorney at law designated by Company or you and at the inspecting party's expense, at the place where same are regularly, maintained, upon thirty (30) days' written notice to the Venture; provided, however, that such examination shall not be permitted more than once a calendar year.

b. Neither party may assign, convey, sell, transfer, give, liquidate, encumber, or in any way alienate ("Transfer") all or any part of his or its respective membership interest in the Venture without the prior written consent of the non-transferring party, which consent may be given or withheld in the sole discretion of such non-transferring party. Any attempted Transfer of all or any part of a membership interest without the necessary consent, or as otherwise permitted hereunder, shall be null and void and shall have no effect whatsoever.

Unlike the first agreement, the Company is not trying to give itself the right to sell the contract.

7. Definitive Agreement. You and Company hereby acknowledge that it is the parties' mutual intent to enter into a more formal operating agreement (the "Operating Agreement"), as well as a long-form producer agreement (the "Producer Agreement") and a Furnishing Agreement, at a later date. You and Company hereby agree to negotiate in good faith the terms of such agreements, provided that such agreements shall not contain any provision contrary to any material provision set forth herein, unless mutually agreed in writing by both parties. Until such time, this Deal Memorandum shall serve as the operating agreement between the parties regarding the Venture.


ACCEPTED AND AGREED TO:

____________ PRODUCTIONS, INC.

____________


____________ MUSIC, LLC


_____________

Steve Gordon is an entertainment attorney with over 20 years of experience in the entertainment industry, including 10 years as Director of Business Affairs for Sony Music, attorney at a law firm representing Atlantic and Elektra Records, and in-house music counsel for a Hollywood Studio. He gratefully acknowledges the assistance of Ryanne Perio and Anjana Puri in the preparation of this material. Ryanne Perio is a graduate of Columbia Law School and a former legal intern at Atlantic Records and SAG-AFTRA. She is currently an associate at Wilmer, Cutler, Pickering, Hale & Dorr, where she focuses on intellectual property litigation. Anjana Puri is a lawyer pending admission to the New York bar. She currently works as an associate of Mr. Gordon. She received her JD from Benjamin N. Cardozo School of Law (2014) and received her B.A. in International Development Studies from UCLA.

Disclaimer: The information in this series has been prepared for informational purposes only and does not constitute legal advice. This series should be used as a guide to understanding the law, not as a substitute for the advice of qualified counsel. You should consult an attorney before making any significant legal decisions.

April 4, 2015

Distributor Hits Drake With Libel Lawsuit After Denouncing Upcoming Concert Film

By Adam Freedman

On March 19th, the distributor of the concert movie Drake's Homecoming: The Lost Footage, reportedly served Drake with a libel lawsuit after the multi-platinum artist took to social media to publicly denounce the film only a few days before its release. (Kennedy, John. "Distributor Sues Drake for Disavowing Concert Film." Global News Distributor Sues Drake for Disavowing Concert Film. March 19, 2015. http://globalnews.ca/news/1891438/distributor-sues-drake-for-disavowing-concert-film/.) The film's distributor, Specticast, is seeking damages and a declaration from the court confirming that the film's release was authorized.

The film depicts a 2009 sold-out concert performance in Toronto. Shortly after the show, Drake was signed to Lil Wayne's Young Money label and became a global superstar. However, the issue arose on March 16th, 2015, when Drake publicly disavowed any connection with the film by tweeting: "The Drake Homecoming film is not something OVO or Drake have any part in. I feel it is my responsibility to inform and protect my fans." (Id.) Drake continued to post further tweets using the hashtag #ProtectTheFans. (Id.) Specticast alleges that Drake's statements are false, and the rapper has harmed the value of the movie by encouraging his 21 million Twitter followers to boycott its release.

According to documents obtained by the Los Angeles Times, Drake signed a contract with Serious Entertainment, the promoters of the concert detailed in movie, in which he agreed to the concert's filming alongside a $15,000 cash fee and a 15% royalty on the film's profits. (Kennedy, Gerrick. "Drake, Producers Battling over 'Homecoming' Film Days before Release." Los Angeles Times. March 16, 2015. http://www.latimes.com/entertainment/music/posts/la-et-ms-drake-producers-disputing-homecoming-concert-film-20150316-story.html.) The contract also stipulated that, should Drake's 2009 concert sell out, he would be required to play another show for $5,000. (Id.) This second show has yet to take place. (Id.)

Under this set of facts, if Specticast can produce an enforceable contract, the distributor will have a strong case for libel. New York courts have explained that, "Under New York law, the elements of a defamation claim are a false statement, published without privilege or authorization to a third party, constituting fault . . . and it must neither cause special harm or constitute defamation per se." (Peters v. Baldwin Union Free Sch. Dist., 320 F.3d 164, 169 (2d Cir. 2003).)

A statement is defamatory "if it tends so to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating with him." (Restatement (Second) of Torts § 566.) Furthermore, a statement can only be defamatory if it includes a statement of fact, rather than opinion. (Id.) Drake's statements here allege facts -- that he never authorized the movie -- and Specticast's actions should deter third parties from associating with the company professionally.

Secondly, publication generally requires the written communication of a libel to a person other than the one defamed. <(em>Stella v. James J. Farley Assn., 122 N.Y.S.2d 322, 204 Misc. 998 (N.Y. Sup. Ct., 1953).) New York courts have already held that social media posts satisfy the publication requirement. (Angelotti, Ellyn. "How Courtney Love and U.S.'s First Twitter Libel Trial Could Impact Journalists." Poynter. January 14, 2014.) Here, Drake's tweets communicated the relevant facts to his fans, in a matter that they understood, making them analogous to other forms of written publication.

Third, Specticast's general theory is that Drake acted recklessly in publishing these tweets; Drake had a disregard for their truthfulness. Through public statements by representatives of Specticast, the company has already speculated that Drake knows that he is wrong, and he's simply trying to strong-arm them to prevent them from showing the film. (Kennedy, John. "Distributor Sues Drake for Disavowing Concert Film." Global News Distributor Sues Drake for Disavowing Concert Film. March 19, 2015. http://globalnews.ca/news/1891438/distributor-sues-drake-for-disavowing-concert-film/.)

The biggest issue will be for the plaintiffs to actually establish a concrete amount of damages that were caused by Drake's tweets. There is no set formula for valuing one's social media followers, and it will be a difficult task to determine whether Drake's statements proximately caused anyone to avoid seeing the movie as well. However, if the statement is found to be libel per se, then they will not have to prove damages, and may be awarded general damages.

A publication is libelous per se if it tends to subject one to hatred, distrust, ridicule, contempt or disgrace, or tends to injure one in his trade or profession, or if it imputes to another conduct, characteristics, or a condition incompatible with proper exercise of his lawful business, trade, profession or office. (Iiuffine v. South Shore Press, 2012 NY Slip Op 30169 (N.Y. Sup. Ct., 2012).)

In the case of Rinaldi v. Holt, Rinehart & Winston, Inc., a New York judge sued the Village Voice and its advertising agency for libel, after a Village Voice writer included Judge Rinaldi in its article entitled "The 10 Worst Judges in New York." (Rinaldi v. Holt, Rinehart & Winston, Inc., 42 N.Y.2d 369 (N.Y., 1977).) The court explained that the plaintiff had a strong case for libel per se, however, judges are considered public figures under New York law, therefore he must prove the additional element that the defamatory statement was published with actual malice. (Id.) Judge Rinaldi could not prove actual malice because the court determined that the article at issue was either opinion or a reasonable conclusion drawn from facts. (Id.)

Just as the statements in Rinaldi alleged that Judge Rinaldi could not serve reputably in his position, Drake's statements imply that Specticast is an unscrupulous business entity, presumably injuring Specticast in its business. Most likely, Specticast will not be found to be a public figure, nor will this be considered a matter of public concern, thereby not implicating the "actual malice" requirement. The issue of whether Drake authorized the film has no effect on the public.

The movie already premiered, so Specticast will likely pursue a negligence per se theory, due to the apparent difficulty in calculating damages. However, the case between Specticast and Drake will most likely settle, even though Drake presumably has greater financial means to survive a long drawn-out legal battle. However, the key elements of libel cases have yet to fully evolve to meet the realities of Twitter and social media, raising a host of additional questions, including:

- How will the courts determine status (who is a public figure) in the context of Twitter? What role does the number of followers play in determining this?

- What is "a matter of public concern" in the context of Twitter?

- What do the remedies for defamation look like in the age of Twitter? How can free speech be encouraged while deterring defamatory speech on Twitter?

Given that Specticast claims it can produce the original, enforceable contract, this only brings up more questions about Drake's motivation behind attacking the film. Does Drake really believe the film was unauthorized? Interestingly, Drake announced his OVO Music Festival on March 20th, and critics have speculated that this entire incident was simply intended to draw more attention around the festival.

May 27, 2015

A Simple Guide to Signing the Best Sync Deal Possible

By Steve Gordon

"The 11 Contracts Every Artist, Songwriter, and Producer Should Know" series includes terms and contracts that artists' attorneys should never allow their clients to sign. This is Part Three of the series.

_______________________________________________

This, the third installment of the 11-part series on basic music industry agreements, focuses on the use of music in audiovisual works such as movies, television, television commercials and video games. The Introduction, below, explains fundamental concepts, provides examples of the amounts of money an artist can expect to make, explains the role of Performing Rights Organizations (PROs) in collecting additional income on behalf of songwriters, discusses the key provisions in standard licenses and finally, briefly describes the role of publishers, synchronization (sync) reps, and other licensing agents.

This installment also provides comprehensive comments on the following three licenses. If one sees a similar deal, an attorney will know what to look out for, how to make the deal fairer, and, if the company that wants to use one's client's music won't negotiate, how to decide if it's still worth it:

(1) MTV's "Music Submission Form" - a terrible deal for any artist, songwriter or producer.

(2) A very favorable deal for a producer/songwriter involving music for a national commercial campaign.

(3) A fair, but not great, deal for a songwriter involving music in a made for television movie.

Introduction

Two Copyrights: Sound Recordings and Musical Works

Sync licenses are agreements for the use of music in audiovisual projects. Used in its strictest sense, a sync license refers to the use of a musical composition in an audiovisual work. The term "master use" license is sometimes used to refer to the use of a music recording (sometimes referred to as a master) in an audiovisual work. Sync and master use licenses can make money for songwriters, and master use licenses can make money for recording artists. It is possible for a license to include both a grant of rights in a song and a master if the same person wrote the song and produced the master.

The copyright law protects musical works, including songs and any accompanying words as well as orchestral works, librettos and other musical compositions. Copyright also protects sound recordings, that is, recordings of musical compositions. Indie artists/songwriters who record their own songs generally own the copyrights in their songs and masters. However, once that artist/songwriter enters into a music publishing agreement, he or she generally transfers the copyright in the songs to the publisher, and the publisher pays the songwriter a royalty from the commercial exploitation of the songs, including syncs. If the same artist/songwriter enters into a standard recording contract, any recording that he or she records during the term of the agreement is usually a work for hire for the record company. If that's the case, as explained below, the record company owns the copyright in the recordings, and pays royalties to the artist for both record sales and master use licenses.

However, in this installment of the series, sync and master use licenses are going to be looked at from the point of view of songwriters and artists who have not entered into any exclusive publishing or recording agreements. As an indie artist/songwriter does not have a publisher or label to negotiate sync and master licenses for him or her, he or she should have a lawyer, or at least have enough knowledge to avoid bad contracts. This author's goal in writing this installation, as with the series as a whole, is to educate indie artists, songwriters and producers of bad terms, what questions to ask, what they can do to make the contract they receive fairer, and when they should just walk away.

Indie Producers and Copyrights in Musical Compositions Contained in their Masters

For many years, producers generally did not create new music. They just recorded music created by songwriters and performed by artists. However, that has changed. Often in pop, R&B, and especially hip hop, producers do create new music by providing beats or even complete music floors over which an artist sings. In that case, the producer is creating two copyrights: 100% of the sound recording and a part of the musical composition.

Producers can and do sign publishing deals because the beats or instrumentals they create are musical compositions as well as sound recordings. In that case, the producer will generally have to transfer the copyright in any part of the musical composition that he or she contributed, such as the beat.

Sync and Master Use Fees

Generally, but by no means always, the company that wishes to use an indie musician's music for a movie, commercial, television show or video game will offer an up-front, one-time payment usually called a sync fee (even if the songwriter is transferring rights in both the song and the master). The amount of the fee, if any, will depend on a variety of factors including:

The professional standing of the musician. For instance, if an ad agency regularly turns to certain producers to create music for a client, it probably will have worked out a standard fee with that producer.

The nature of audiovisual work for which the music is sought and whether the song was a hit. For instance, a major motion picture will usually pay from $10,000 to $25,000 for a song or master by an indie writer, artist or producer.

In contrast, a pop hit in major studio movie can easily fetch $100,000 or more. Yet an indie filmmaker may only be able to afford $5,000 or less for any song or master. One shouldn't be surprised if the offer to the artist and/or songwriter is no more than a credit.

At the beginning of a musical career, a credit on the movie and in IMDB (an online database of information related to films, television programs, and video games, including cast, production crew, music composers and musicians, biographies, plot summaries, trivia and reviews) could be valuable.

Some other factors are:

(a) In the case of a movie, as discussed above, the most important issue with regard to fees is whether the movie is a major big-budget studio production or an indie, but other factors include how many times the song is played in a movie and if it's used over the beginning and/or end credits. In addition, there is usually an additional fee if the music is used in a trailer.

(b) In the case of a television spot, the biggest factor is whether the commercial is national (which may pay from several thousand dollars to over $10,000 for an indie song or master) or will only play in one or several markets (which may pay less). A hit song,h however, can garner a fee well in the six figure range and even more for a hit by a superstar artist such as the Rolling Stones.

(c) In the case of a television program, the most important factor is whether the program is network or basic cable. Usually, but not always, network shows will pay better than shows on basic cable. The money for an indie songwriter or producer could range from no more than the royalty payable to the songwriter by his or her PRO (see below) to $2,500 to more than $10,000, depending on how much the production company or network wants the music.

(d) In the case of a video game producer by a major game maker, the sync fee could be a few thousand dollars. An attorney can try to include a most favored nations (MFN) clause, which states that, if the producer pays a higher fee for another song different from the one under negotiation with the songwriter client, then the songwriter will get the same (higher) amount.

If the master and the song are owned by different parties; for instance, if a songwriter wrote the song, but a producer owns the track, then a license will be needed from both parties.

Additional Income for Public Performance

When music is publicly performed, for example, when broadcast as part of a television show or publicly performed online in an online computer game, the songwriter may earn public performance income from the songwriter's PRO (i.e., ASCAP, BMI, SESAC, or the recently organized Global Music Rights (GMR)). This income is in addition to the up-front sync fee, or it may be the only income that an indie songwriter receives.

Each PRO has rules that determine the amount of money that should be paid for a performance in an audiovisual work. The public performance income from a song in an audiovisual work can sometimes be substantial. For instance, if music is used in a national television commercial which airs on network television, the PRO royalty can exceed the sync fee. However, the public performance income can be very small in other situations -- for instance, when a small amount of a song is used in the background of a single scene in a basic cable program.

Where public performance income will be substantial, the songwriter may decide to accept a lower sync fee, rather than potentially losing the deal altogether. Note that we are only discussing the public performance income payable for the musical composition. The same considerations do not apply to the owner of the master recording -- i.e., an artist or a producer. Under U.S. copyright law, the owners of master recordings, unlike the owners of the underlying songs, are not entitled to public performance income for the broadcast of their recordings except via digital transmission such as Spotify, YouTube and Pandora. If a commercial is intended to play on network television, the commissioning company will generally try to get Internet rights for little or no additional compensation (see Media below).

SoundExchange, similar to the PROs for compositions, collects income for the public performance of music recordings but solely for audio-only Internet Radio services such as Pandora. The situation is different outside the U.S., as in many other countries, artists can earn performing rights royalties for the public performances of their master recordings on television as well as standard broadcast radio.

In short, the owner of the master recording's only source of U.S. income from the master use license will be the up-front master use fee which he or she receives from the company for a television commercial, movie, or television show.

If the owner of the master is not the songwriter, he or she will not be receiving any public performance income from the PRO's (or SoundExhange) so he or she may feel more of a need than the songwriter to negotiate the highest possible up-front fee.

Proper Registration of the Song with the PRO is Crucial

Each PRO has requirements that make writers responsible for properly registering their songs and for notifying them of any audiovisual projects that may generate performance income. I spent a year trying to get one PRO to pay for the theme song of a cable talk show because the writer did not provide a "cue sheet" before the broadcast of the series. A cue sheet is a schedule of the music contained in a film or television program or any other audiovisual work, and is the essential document for the PRO to distribute royalties for musical performances in audio-visual media. It is typically prepared by the production company, but the writer will not get paid unless the production company actually files it in a proper and timely manner.

(Here is an example of a cue sheet: http://www.ascap.com/~/media/files/pdf/members/payment/samplecuesheet.pdf)

Some licenses require a songwriter to yield all rights in a song to the company. In that case, the writer has no right to receive any PRO royalties. However, there are cases where the company requires the transfer of the copyright in the song, but allows the writer to receive the writer's share of performance rights income (that is, 50% of the total amount payable by the PRO). In that case, the writer has to make sure the company is properly registering the song, providing cue sheets to the PRO, and complying with any other forms that have to be completed.

Work for Hire vs. Non-Exclusive License

An issue as important, and in some cases more important than money, is whether a license is a work for hire. In a work for hire agreement, the songwriter, artist or producer loses all rights in his or her music, including the copyright and the right to use the music again for any purpose. If, on the other hand, the grant of rights to the company is a non-exclusive license, the creator retains the following rights: the copyright in his or her music, to distribute it as a record, and to make other deals. Here is a typical work for hire clause:

WORK FOR HIRE: Artist [Songwriter and/or Producer] agrees that all of the results and proceeds of his/her services shall be deemed a "work made for hire" for the Company under the U.S. Copyright. Accordingly, the Artist further acknowledges and agrees that Company is and shall be deemed to be the author and/or exclusive owner of all of the Recordings and Musical Compositions contained therein for all purposes and the exclusive owner throughout the world of all the rights of any kind comprised in the copyright(s) thereof and any renewal or extension rights in connection therewith, and of any and all other rights thereto, and that Company shall have the right to exploit any or all of the Recordings in any and all media, now known or hereafter devised, throughout the universe, in perpetuity, in all configurations as Record Company determines, including without limitation [name of movie, TV show, TV commercial etc.] In connection therewith Artist hereby grants to Company the right as attorney-in-fact to execute, acknowledge, deliver and record in the U.S. Copyright Office or elsewhere any and all such documents pertaining to the Recordings if he/she shall fail to execute same within five (5) days after so requested by Company.

It's always better when artists, songwriters and producers retain their copyrights. However, sometimes the work for hire clause will be non-negotiable, and then the creator has to ask him/herself: does the up-front money (and in the case of a songwriter who retains the writer's share, the potential PRO royalties) compensate for the loss of the right to use the music?

Other Basic Contract Terms

Assuming that the license is not a work for hire, other important terms in sync and master use licenses are as follows:

Duration (or Term): The company will usually want the right to exploit the following durations of use:

1. Theatrical Films: Generally for the life of the copyright. In other words, the company's right to use the music will last as long as the song is protected by copyright law: as long as the songwriter's life, plus 70 years.

2. Television: Generally, the same as above.

3. Commercials: Typically an initial term of one year, often with the option for the company to renew for another equal term upon payment of an additional licensing fee (which is usually the same as the original term, although one can try to negotiate for a higher fee, for instance, 125% of the original fee.)

4. Computer Games: Could be life of the copyright, or a briefer term, such as 3 to 5 years. There are few games which will have a life span of more than a year or two, so in most instances the company won't consider it that important to obtain a long term license.

Media: The company will want the right to exploit the audiovisual work as follows:

1. Theatrical Films: Generally, a movie producer, production company or studio will want the right to use a song or master in festivals for one year, with an option to exploit the movie, including the music, in all media, which are considered broad rights.

2. Television: Generally, the network or cable service will want all media rights, because a television show can be recycled in any number of platforms, including streaming, downloading, and home video. Attorneys should, however, try to negotiate a separate fee for home video, including downloading.

3. Commercials: This is typically limited to television and Internet, but the songwriter/artist/producer can try to secure an additional fee use of the commercial on radio.

4. Computer Games: Generally all media now or hereinafter developed.

Territory: The company will want the right to exploit the audiovisual work as follows:

1. Theatrical Films: Typically worldwide.

2. Television: The creator may be able to negotiate an additional fee for foreign use.

3. Commercials: Local, multiple U.S. markets, national or worldwide.

4. Computer Games: Worldwide.

The Role of Music Publishers and Labels

Once an exclusive recording and/or publisher deal is made, an artist's label and songwriter's publisher will negotiate sync and master use licenses on the artist/songwriter's behalf. The split is generally 50% payable to the label and 25% to 50% payable to the publisher after recoupment of any advances (including, in the case of a label, recording costs) that they paid to ethe artist/songwriter.

Reps and Licensing Agents

If one is familiar with the sync business, one understands that there are many companies, such as http://pumpaudio.com/, that may be willing to represent a music client's music for sync placements. Some are more selective than others, and some are more pro-active in shopping around music than others. For instance, music libraries such as http://www.apmmusic.com/ have steady clients, such as cable networks and ad agencies, that continually scan the library's collection for interstitial or background music. The reps' fees vary from 65% in the case of Pump Audio down to 20% or less if a rep really loves the music.

The biggest controversy in the sync licensing business is the exclusive versus non-exclusive issue. The best argument to let a rep have exclusive rights is that he or she may be more motivated to shop around your client's music. The best argument for non-exclusive is that an exclusive rep may lose interest in your client's music, and let it sit on a shelf for the duration of the agreement. The primary differences between a rep and a publisher are:

1. Reps rarely pay an advance, but;

2. Rep deals are usually limited to specific song or tracks. Standard publishing agreements cover any songs a songwriter creates during the term of the agreement.

Three Sync Licenses: The Bad, the Good, and the Not Too Ugly

Attached are three different sync licenses. The first is very pro-company (Forms-synch.comparison1stCONTRACT.MTV.pdf). The second is very pro-talent (Forms-synch.comparison2ndCONTRACT.GOODDEAL.pdf). The third is in between (Forms-synch.comparison3rdCONTRACT.pdf).

Each license covers a different situation. The first license, MTV's Music Submission Form, is for use of music in any website, show or television distributed by MTV or its parent company Viacom. The second is for use of new music in a single television commercial. The third license is for the use of a relatively old song in a docudrama. In each case, the agreement was drafted by the network, agency, and production company, respectively.

June 1, 2015

Flo & Eddie Class Certification

Here is the decision of the California federal court certifying a class of owners of pre-1972 recordings that have been performed without authorization since August 2009 by Sirius XM. Flo&EddieCaliforniaClassActiondec.pdf

The court has already granted Flo & Eddie's summary judgment motion and found Sirius XM liable. The class is being certified for damages.

The parallel state court litigation has been certified for appeal, but the federal case has not.

August 4, 2015

Happy Birthday

A fascinating new development has occurred in the "Happy Birthday" copyright infringement action by Warner, which apparently just produced in discovery, very belatedly, a smoking gun document that is now the subject of a July 27, 2015 motion by Good Morning To You Productions (Good Morning) for the Cal. District Court to consider this newly discovered evidence before ruling on pending summary judgment motions. The evidence consists of 1922 and 1927 sheet music publications of the song Happy Birthday (same lyrics and melody) in "The Everyday Song Book" - the kicker is that there is no copyright notice on the sheet music, which would invalidate any copyright under the 1909 Act.

Apparently, Warner previously claimed that the song was first published in 1935, but Good Morning argues that was only for a specific piano arrangement and not the actual original song.

https://www.techdirt.com/articles/20150727/16042931768/happy-birthday-copyright-bombshell-new-evidence-warner-music-previously-hid-shows-song-is-public-domain.shtml

August 18, 2015

Three Contracts Every Music Producer Should Know...

By Steve Gordon

Steve Gordon is an entertainment attorney with over 20 years of experience in the entertainment industry, including 10 years as Director of Business Affairs for Sony Music, attorney at a law firm representing Atlantic and Elektra Records, and in-house music counsel for a Hollywood studio. He is the author of The Future of the Music Business (Hal Leonard 4th Ed 2015).

Gordon gratefully acknowledges the assistance of Ryanne Perio in the preparation of this article. Ryanne is a graduate of Columbia Law School. She is currently an associate at Wilmer, Cutler, Pickering, Hale & Dorr, where she focuses on intellectual property litigation. He would also like to thank Alexandra Howard (Columbia University, BA 2017) and Evan Becker, Esq. for their assistance.

In this blog, we'll discuss music producer agreements in the context of the indie music business rather than standard producer agreements used by major labels. Producer who work on major label projects will generally have experienced music attorneys who will negotiate these deals on their behalves. Often, the upfront money that a small label or an indie artist can offer, if any at all, will not allow a producer to hire a lawyer. This is intended for producers in that situation, as well as for indie artists and small labels.

Major Label Producer Deals vs. Indie Producer Deals

To begin this installment of the series, it's useful to outline the differences in the agreements that major labels use for producers and the contracts that a producer may encounter in the indie world. A major label deal with a producer will generally include a producer fee ranging from several thousand dollars to much more, for a producer with a track record of making hits.

The producer would also usually receive a royalty of 3% to 5%, calculated in the same manner as the artist's royalty. For instance, if the artist's royalty is a percentage of the suggested retail price of a record, the producer's royalty will be as well. Like the artist's royalty (which typically ranges from 12% to 18%), the producer's royalty will be subject to multiple deductions, such as packaging costs and a reduced royalty for foreign sales. The producer's royalty will be deducted from the artist's royalty, in effect making the artist pay for the producer's royalty.

Unlike the artist, the producer usually receives his or her royalty from the first record sold after recoupment of recording costs. This means that once gross income exceeds production costs, the producer is paid for all prior records sales - the artist is not.

When an artist or small label hires a producer, the upfront fees are usually significantly less. In addition, since the label and the artist may be the same entity, it does not make sense in many cases to base the producer's royalty on the artist's royalty. In that case, the producer's royalty, if any, may be based on net receipts or "profits." (See the second and third contracts attached below.)

Beats

Many artists, particularly in hip hop and R&B but also in pop music, work with drum, digital or other percussive "beats" as core elements of their recordings. Often, an artist or indie label will search for the right beat on which to base a song. Although some beats are sampled, others are purchased or licensed from a producer who creates beats with digital drum machines or other studio equipment.

Some producers of beats, such as the Neptunes (Pharrell Williams and Chad Hugo), make more elaborate beats than just drum sounds. A Neptunes production has drum machine sounds and usually employs synthesizer riffs, sampling keyboard and other percussive sounds.

The Neptunes created some of the biggest hip hop, R&B and pop hits of the late 1990s and 2000s. Therefore, acquiring a beat from it or Pharrell himself could be very expensive. However, many new or emerging producers will offer their beats at low fees or maybe even waive upfront fees in exchange for royalties payable if the artist makes money from the song.

In the studio, a producer is ultimately responsible for the final sound of a recording. However, often, an artist will buy a beat or license it and finish the production themselves or with another producer.

Two Copyrights: 'Sound Recordings' and 'Musical Works'

As discussed in a previous blog about 'sync' licenses, copyright law protects 'musical works', including songs and any accompanying words as well as orchestral works, librettos, and other musical compositions. (http://nysbar.com/blogs/EASL/2015/05/a_simple_guide_to_signing_the.html) Copyright law also protects 'sound recordings,' that is, recordings of musical compositions. A beat is usually both a sound recording and a musical composition because the recording of a beat contains a separately copyrightable musical work.

For many years, producers generally did not create new music. They just recorded and tried to enhance songs created by a songwriter who may have been the artist. However, that has changed. Often in pop, R&B, and especially hip hop, producers are creating new music by providing beats or even complete music floors over which an artist sings or a rapper 'spits.' In that case, the producer is creating two copyrights: the sound recording and a part of the musical composition.

This is why producers sometimes enter into deals with music publishers (a future blog about music publishing agreements will be forthcoming).

Beats Agreements

Often, a producer will sell a beat outright. In that case, the buyer will have the exclusive right to use the beat. Other times however, a producer will give a non-exclusive license to use a beat, and reserve the right to use the beat for him or herself or license it to others.

Work for Hire vs. Non-Exclusive License

If the agreement is a sale, it will usually be structured as a 'work for hire.' In a work for hire agreement, the producer loses all rights in his or her beat, including the copyright and the right to use the beat again for any purpose. If, on the other hand, the grant of rights is a non-exclusive license, the producer keeps the copyright, and retains the right to use it or make other deals.

Here is a typical work for hire clause:

WORKS FOR HIRE: Producer agrees that all of the results and proceeds of his or her services shall be deemed a "work made for hire" for the Company [or Artist] under the U.S. Copyright. Accordingly, the Producer further acknowledges and agrees that Company is and shall be deemed to be the author and/or exclusive owner of the Beat inclusive of the underlying musical composition and sound recording contained in the Beat. Recordings and Musical Compositions contained therein for all purposes and the exclusive owner throughout the world of all the rights of any kind comprised in the copyright(s) thereof and any renewal or extension rights in connection therewith, and of any and all other rights thereto, and that Company shall have the right to exploit any or all of the Beat in any and all media, now known or hereafter devised, throughout the universe, in perpetuity, in all configurations as Company determines. In connection therewith Producer hereby grants to Company the right as attorney-in-fact to execute, acknowledge, deliver and record in the U.S. Copyright Office or elsewhere any and all such documents pertaining to the Beat if he or she shall fail to execute same within five (5) days after so requested by Company.

It's always in the producer's best interest to retain his or her copyrights. However, sometimes the work for hire clause will be non-negotiable, and then the producer has to determine whether the upfront money compensates for the loss of the right to use the beat. Generally, when an artist or indie label hires a producer to create a beat and fully produce one or more tracks, the agreement will be a work for hire, but the producer usually receives an upfront and can negotiate a "back-end" royalty.

Fees

The amount of the fee, if any, will depend on a variety of factors, including whether the deal is a sale or a license. A sale would generally be more expensive than a non-exclusive license under which the producer keeps the right to reuse the beat. The most important factor in determining the fee is the business reputation of the producer. A producer with a track record of some successful tracks can demand fees of several thousand dollars or more, and a producer with a track record of hits can command much higher amounts. Yet licensing, or even buying a beat, from a talented but unproven producer can be a few hundred dollars or less. If the producer receives a royalty in addition to the fee, the fee will be usually structured as an "advance", which will be recoupable prior to payment of the royalty.

Royalty

As noted above, a royalty for a producer hired by an artist or small label may be structured based on net receipts or net 'profits.' A traditional royalty for a producer who works with a big label is 3% to 5% based on the artist's royalty. Net profits should be defined fairly, for instance, as the gross monies received from the sale or license of the tracks minus the producer's fee and other production costs (see annotations for the last agreement attached below.)

Mechanicals

Even when an agreement is work for hire, it may be possible for the producer to retain the copyright in his or her contribution to the underlying musical work, as opposed to the sound recording. In that case, the label or artist will require the producer's permission to use that contribution so that it can exploit the recording.

In exchange for that permission, the producer usually receives a 'mechanical' royalty, i.e., a royalty tied to the use of the underlying musical composition contained in the record. Mechanical royalties are set by statute. The current mechanical rate is 9.1 cents per song per copy sold (or for songs over five minutes, 1.75 cents per minute or fraction thereof). Since the producer probably did not create 100% of the song, for instance, where someone else (perhaps the artist) wrote the lyrics, the producer's percentage ownership or "split" has to be negotiated.

If the producer's negotiated share is 50%, then he or she would receive 50% of 'stat' (i.e., 9.1 cents) for each sale of the record containing the song. This would be in addition to his or her producer royalty, which is tied to income derived from the record rather than the song.

Finally, the label usually asks the producer to accept a 3⁄4 of the stat rate (that is, 75% of 9.1 cents). This is called the 'Controlled Composition' clause. There is really no justification for it. All of the major labels have used it for many years to reduce their payout to artists who write their own material and to producers who contribute to the creation of songs. The only argument to justify this reduction is that it is an inducement for the label to use the song in the record.

Three Producer Agreements: Two Simple Agreements for a Beat and a Net Receipts Deal With an Indie Record Label

Re-printed below are three different producer deals that a producer working directly with an artist or an indie label may receive. The first license is a simple work for hire deal for the sale of a beat; the second is beat agreement in which the producer receives a royalty in connection with the sale or license of the recording as well as an up-front payment; and the third agreement not only provides a royalty for the recording, but also a royalty in connection with the producer's contribution to the underlying musical composition (the second and third agreements appear together).

The simple work for hire agreement for the acquisition of a beat is favorable to the person or company commissioning the beat. Since the agreement is work for hire, the producer transfers all his or her rights in the beat to the commissioning party, and that person or company in the beat - both the music and the sound recording.

Forms-producer.contract1.pdf
Forms-producer.contract2 (2) (2).pdf

August 20, 2015

"Sample" Clearance Issues

By Wallace E.J. Collins III

Wallace E.J. Collins III is an entertainment and intellectual property lawyer with more than 30 years of experience based in New York. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com.

Many clients ask about whether or not they can "sample" from an existing sound recording and how much is permissible to use, and whether or not they need permission to embody a sample in their new sound recording.

Sampling occurs when a portion of a prior sound recording or fixation of sound is incorporated into a new sound recording. When such a use occurs, two copyrights are involved: the copyright in the sound recording and in the underlying musical composition embodied in such recording. If sampling occurs without permission, copyright infringement of both the sound recording (usually owned by the record company and/or artist) and the song (usually owned by the publishing company and/or songwriter) have occurred.

In order to legally use a sample, one needs to contact both the owner of the sound recording and the copyright owner of the underlying musical work for permission. License fees for sampling vary greatly and depend on how much of the sample will likely be used, the perceived value of the recording from which the intended sample originates, and the intended use of the sample in the song. Although licenses can be granted "gratis", usually there is a fee, which is either a percentage of the record royalties and/or the mechanical royalties or for a flat fee paid upon execution of the sample license agreement (or a combination of both). There are no statutorily mandated rates for samples, so the copyright owner can charge whatever the copyright owner wants to charge, and does not have to grant permission to use the work at all.

Using samples without permission can lead to litigation where an infringer may be forced to pay damages to the copyright owner, which could amount to hundreds of thousands of dollars per infringement. A court can also order the user of the sample to recall and destroy all of the infringing copies and, in certain cases, can award the costs and legal fees incurred by the prevailing party in such a lawsuit.

Although the "2 Live Crew"/"Pretty Woman" infringement case turned on the issue of "fair use", I do not recommend to clients that they try to rely on that copyright law doctrine when they want to use samples in their works. Further, the idea that one can use a certain number of notes or seconds of someone's song without penalty is a myth.

The only proper way to use a sample of a prior recording in a recording is to get permission.

August 24, 2015

How Do I Get My Rights Back: Termination Rights Under U.S. Copyright Law


By Wallace Collins

Wallace Collins is an entertainment and intellectual property lawyer based in New York with more than 30 years of experience. He was a recording artist for Epic Records before receiving his law degree from Fordham Law School. Tel: (212) 661-3656; www.wallacecollins.com

The 1976 Copyright Act provides for the termination of copyright transfers. It entitles content creators to reclaim their copyrights - regardless of any contract stating otherwise - after certain time periods. Therefore, even if an author, artist, musician, photographer or songwriter signed a contract which purports to transfer all rights in a work for perpetuity, the Copyright Act provides that the author of the work (or the author's heirs) can terminate that grant and demand that the rights revert in a shorter period of time. Authors and creators are now entitled to terminate their contractual transfers and demand back control of their copyrights; authors can terminate their book publishing contracts, songwriters can demand return of their musical compositions from music publishers and recording artists and record producers can demand return of their sound recordings from the record companies.

Generally speaking, for copyright grants made on or after January 1, 1978 (the effective date of the 1976 Copyright Act) the termination period is 35 years under Section 203 of the Copyright Act. For pre-1978 works the termination period is 56 years after copyright was originally secured under Section 304(c)-(d). For grants on or after 1978, termination may be exercised any time during a five year period beginning at the end of 35 years from the execution of the grant or, if the grant concerns the right of publication of the work, then the period begins on the sooner of 35 years after publication or 40 years after execution of the grant. Although there are certain formalities which must be complied with to effectuate transfer, this essentially means that recording artists and songwriters were entitled to start exercising their right of termination on post-1978 works as of the start of 2013.

The big exception to the termination right is if a work was done as a "work for hire." Section 101 of the Copyright Act of 1976 delineates what types of works by their nature are incontestably works for hire. It is essentially a two part test: (1) was the work created by an employee within the scope of his or her employment, and; (2) if not, is it (a) one of the nine enumerated work-for-hire classes of works and (b) is there a written agreement signed by the author acknowledging the work for hire relationship. Included on the list of nine enumerated categories of works that are works for hire are collective works, compilations and motion pictures. Not included on this list are books, photographs, songs and sound recordings.

There are ongoing legal battles over how termination rights affect the book, comic book and motion picture fields. Not unexpectedly, the entertainment business companies are not pleased with the copyright termination provision and the inevitable ramifications thereof.

With respect to songs and music publishers, some litigation has already been decided. In Scorpio Music S.A. v. Willis (Case No. 11 CV 1557 (C.D. CA 2012), California Federal District Judge Moskowitz determined that original Village People member, Victor Willis, could terminate his transfers and recapture a direct copyright interest in many of his group's songs, including "YMCA." In this case, after Willis notified Scorpio that he was terminating the prior transfers, Scorpio sued, arguing that Willis could not terminate because a majority of each song's authors had not also agreed to terminate their transfers. The court sided with Willis, ruling that an author can unilaterally terminate the transfer of his or her share in a copyrighted work without his or her co-writers. Although the Scorpio decision addressed a fairly narrow point concerning multi-author transfers, the decision opens the way for most songwriters to get their composition copyrights returned and sets the stage for the bigger battles looming on the recorded music side of the business. The copyright termination procedures apply to the separate and equally lucrative sound recording copyrights transferred to record labels as part of typical recording artist contracts over the years. Since the term "sound recordings" is not explicitly contained in the enumerated work for hire category list, practitioners representing record companies will need to try to find other ways to justify any claim that sound recordings are indeed works for hire in order to preclude termination by artists.

The termination rights of the author of a copyrighted work are generally subject to a five year window. Termination must be made effective within the termination window or the right to terminate the grant is forfeited. To be effective, the author must serve a written notice of termination on the original record company or publisher (and/or any successors) no more than 10 and no less than two years prior to the effective date stated in the notice. The notice of termination must state the effective date of termination. Perfection of the termination requires that a copy of the written notice also be filed with the U.S. Copyright Office prior to the effective date of termination.

Although the termination rights of an artist under the 1976 Copyright Act would only be effective for the U.S. territory, the size of the U.S. consumer market still makes this a valuable right to reclaim.

August 27, 2015

The 11 Contracts Every Artist, Songwriter & Producer Should Know: Music Publishing Agreements



By Steve Gordon

The fifth installment of this 11-part series on basic music industry agreements focuses on music publishing. Before discussing the basic forms of agreement, I will answer these basic questions:

• WHAT is music publishing?
• WHAT is publishing income and what are the major sources of that income?
• WHAT is a publisher, and why would you need one?

1. WHAT IS MUSIC PUBLISHING?

Publishing is the commercial exploitation of a musical composition -- not the recording. At seminars, I usually hold up a CD to demonstrate the difference between songs or "musical works," as the Copyright Act refers to them, and the recording that contains them, i.e. "sound recordings." At my last presentation at the New Music Seminar, I brought an album by the great jazz musician Thelonious Monk. The label on the CD shows that Columbia Records is the record company. It also shows the titles of each song contained in the CD. The recording is owned by Columbia Records. Monk transferred the rights in his performance to Columbia when he signed his record deal, and Columbia Records owns the copyright in the recording. Yet Columbia did not gain the rights in the songs. For instance, "Ruby, My Dear," written by Monk, is one of the songs included in the album. Columbia owns Monk's recording of the song, but not the song itself. Publisher Music Sales currently administers the rights in this song on behalf of Monk's estate. The money that flows from the administration of the rights in that song, or any songs, is called publishing income.

2. WHAT ARE THE MAJOR SOURCES OF MUSIC PUBLISHING INCOME?

The major sources of publishing income are public performance royalties, mechanical royalties, and sync fees. Each is explained below. The next biggest source of publishing income, although tiny in comparison with the first three, is sheet music.

Public Performance Royalties

Any user of music who or that publicly performs a song must secure a license and pay a royalty to do so. Songwriters and their music publishers use Performing Rights Organizations (PROs) to collect these royalties. In the U.S. there are three: ASCAP, BMI and SESAC. A fourth PRO, recently launched by music industry mogul Irving Azoff, is Global Music Rights (or GMR). The PROs collect public performance royalties from radio, television, the Internet and other users of music, such as nightclubs and concert halls. Last year, ASCAP and BMI collected approximately one billion dollars each. As of 2014, SESAC's revenue had grown to $182 million (from $167 million the year prior).

Mechanical Royalties

Mechanical royalties are the monies that songwriters earn from the inclusion of their songs on records. The mechanical royalty rate is set by a tribunal called the Copyright Royalty Board, pursuant to the Copyright Act. The current rate is 9.1 cents per song per copy of each record sold (unless the song is longer than five minutes, in which case the rate is 1.75 cents per minute or fraction thereof). This means that if a record containing one song sells a million copies, the "stat" rate would add up to $91,000. With respect to interactive streaming services, such as Spotify, the rate is 10.5% of gross income minus what the service pays to ASCAP, BMI and SESAC (approximately 6%).

Sync Fees

A sync refers to the synchronization of a musical composition in an audiovisual work, such as a movie, TV show, commercial or video game. The amount of money for a sync placement varies widely depending on the nature of the project and the identity of the song. For instance, use of a classic pop hit in a major motion picture or TV ad campaign can fetch well over six figures. On the other hand, I recently represented a young producer/songwriter who was paid $12,000 for composing new music for a 30 second beer commercial. The use of an indie writer's song in a basic cable show could garner just a few hundred dollars, or nothing at all except public performance royalties paid to the writer by hos or her PRO.

Sheet music

Sheet music was once the primary source of publishing income. However, although sheet music now includes digital as well as physical media, it represents only a small fraction of total publishing income.

Summary

Altogether, these sources added up to approximately six billion dollars in 2014 worldwide. That amount is only slightly higher than the amount earned 10 years ago. Accounting for inflation, publishing income has eroded. The major reason is that record sales have declined dramatically, and consequently mechanical income has sharply declined.

3. WHAT IS A PUBLISHER?

A publisher is a company that collects the income discussed above on behalf of the writer. Generally, the publisher will take 25% to 50% of the writer's income. Why would a writer give up all that money? There are various reasons. The most important ones are explained below.

Advances and Royalties

Advances are upfront payments that are usually made to the songwriter as an inducement to enter into an exclusive deal in which the writer gives up the right to exploit his or her songs or license others to do so. For instance, I recently negotiated a publishing deal between a major publisher and a producer who created a beat (which is a musical work as well as a sound recording) for a major record label artist. The publisher offered $150,000 as an upfront advance. Advances are recoupable against royalties. The amount of the royalty varies depending upon the type of agreement. The publisher's share is 50% in a traditional publishing deal and generally 25% in a co-publishing deal (see below). The songwriter does not receive a royalty payment until the publisher "recoups," that is, when the amount of monies earned from the writer's songs exceeds the amount advanced to the songwriter.

Administration

Publishers provide administrative services, such as registering songs with the U.S. Copyright Office and collection societies in the U.S. and throughout the world. They also negotiate deals and get the best fees, because they are aware of the current rates for various songs in diverse projects. For instance, if a major ad agency wants to use a song in a national campaign, the publisher is in a better position than the writer to negotiate the most favorable terms, because the publisher is aware of what similar songs have received in similar circumstances. The publisher will do its best to collect all of the monies generated by a song from all sources (with the exception of the writer's share of performance monies, which is paid directly to the writer by his or her PRO).

Exploitation

The publisher is also supposed to exploit a writer's songs and find opportunities to generate additional income. For instance, publishers may encourage producers or artists to re-record the writer's songs. These re-recordings are known as "covers," and can generate a great deal of additional money. As an example, Whitney Houston's cover of "I Will Always Love You," which was written and originally recorded by Dolly Parton, was a much bigger hit than the original record. The publisher will also try to get songs placed in motion pictures, television shows, video games and ad campaigns, as well as ancillary uses, such as greeting cards and toys.

Foreign Income

Publishers have foreign affiliates that collect the money earned by a song in other countries. Major publishers, such as Sony ATV and Warner Chappell, have offices all over the world. Small publishers can also administer the rights in their songs throughout the world by using "sub publishers." Therefore, when a European singer re-records a song, and the song is successful in Benelux (Belgium, Holland and Luxembourg), the songwriter needs someone on the ground to collect monies from record sales, radio play and streaming in those countries.

BASIC PUBLISHING AGREEMENTS

The basic types of agreements that songwriters sign with music publishers are:

• Individual or Single Song Agreements;
• Exclusive Term Agreements;
• Co-Publishing Agreements; and
• Administration Agreements.

Single Song Agreement

Under this agreement, a writer transfers the copyright to one song or a limited group of identified compositions to a publisher. In return, the writer receives a portion of the income earned from uses of that composition or compositions, usually 50%.As the individual song contract applies only to the song or songs specifically included in the agreement, the writer can go to a number of different publishers with other songs and give each one only those songs that the writer is interested in promoting.

Exclusive Term Agreement

Under this deal, which was the most common kind of agreement for many years, the songwriter agrees to assign the exclusive right to administer all compositions that he or she writes during a specified term, for example, one or two years with several options that the publisher can use to extend the term of the agreement for additional one year periods. Sometimes the term is the longer of a period of time or delivery of a certain number of songs. The writer agrees to assign the copyrights in every song that he or she writes during the term. The publisher keeps the copyright in each song even after the termination of the agreement. (Under the Copyright Act, however, the writer or his or her estate has the right to terminate the assignment after 35 years). All publishing income is split on a 50-50 basis, although the agreement may allow the publisher to deduct defined expenses, such as the costs of producing demos. Generally, as discussed above, the publisher pays a songwriter an advance at the beginning of the contract which is recoupable against the writer's royalties. Additional advance payments are usually due if the publisher exercises options to extend the contract.

Co-Publishing

This form of agreement is basically the same as the traditional exclusive publishing agreement except that the writer only assigns 50% of the copyright in each song he or she writes during the term to the publisher, and the writer generally gets to keep 75% of the publishing income (that is, 100% of the "writer's share" and 50% of the publisher's share). This model became the standard form of deal as singer songwriters such as Bob Dylan, James Taylor and Simon and Garfunkel became more successful and thereby gained more leverage. An example of a typical co-publishing deal is the second agreement included below. It is a form used by a major music publishing company. The annotations, which contain suggested changes, demonstrate that an experienced legal adviser is essential when negotiating a publishing deal.

Administration Agreements

Under an administration agreement, the writer retains the copyrights in his or her songs. The publisher only receives the right to administer a composition or group of compositions for a specified period of time (e.g., three years, five years, etc.). In return for its services, the publisher usually receives an "administration fee" of from 10% to 25% of all income earned during the term of the agreement. This form of agreement is seldom offered to new writers and is generally reserved for those who have already had great commercial success.

SYNC REP DEALS

A variation of a normal publishing agreement is a sync rep deal. It's much more likely that a new or emerging songwriter will encounter this form of agreement rather than a full-blown publishing deal. Sync rep deals usually do not offer up-front advances and involve companies who specialize in "shopping" songs, including instrumental and lyric versions, for use in movies, TV shows, ad campaigns, and video games. In a sense, these deals are publishing agreements because they involve the exploitation of musical compositions. However, unlike true publishing deals, these agreements are intended only for the exploitation of the songs in audiovisual works. They usually do not authorize any other exploitation of the song, such as collecting audio mechanicals or licensing sheet music, or collecting public performance royalties from radio play. Of course, there are variations and exceptions. For instance, a sync rep license could include the right to license a song for an audio soundtrack accompanying a movie which includes the song.

It should be noted that there are certain sync reps who will attempt to secure all rights in a song - just like a publisher would. That deal should be avoided, unless the rep is able to exploit songs in all media, as a normal publisher would. In other words, some sync reps "pose" as publishers.

In a standard sync rep deal, the writer grants the rep sync rights in songs that are mutually approved by the writer and the rep. The term is generally limited to one or two years, with automatic renewal terms, subject to cancellation by either party. Again, there are exceptions to this standard structure. For instance, some sync reps will want a longer term or even perpetuity in their rights to exploit a song. Generally, however, all sync reps will want the right to enter into perpetual licenses during the term of the agreement. Therefore, for instance, a sync rep will be able to license a song during the term to a movie producer to use that song in the movie in perpetuity.

The most important issue in negotiating or signing a sync rep deal is exclusivity versus non-exclusivity. Sync reps who offer exclusive deals usually give these three reasons to justify exclusivity:

(1) Confusion as to whom to pay: The argument is that the writer's PRO may not be able to identify the correct party to pay. In a sync rep deal, the sync rep will usually be listed as the publisher of the song and is paid directly by the PRO. If there is more than one publisher, the PRO may not know who to pay.

This argument is rebutted by advocates of non-exclusive licenses who argue that, when the song is registered with a PRO, a suffix can be added to the title such as "Blue Skies -- #1," "Blue Skies -- #2, etc. The cue sheet reporting the use of a song in an audiovisual work, which all the PROs require, can identify the correct title and the right publisher will be paid.

(2) Motivation: The argument is that exclusive publishers will be more motivated if they have exclusive rights in a song.

The non-exclusive reps will argue that first, this is not necessarily true. Moreover, if the rep loses interest in a writer's songs, the writer has no chance to make money from his or her songs.

(3) Value Reduction: The argument is that a licensee may cause two sync reps to compete against each other and offer a discount, thereby decreasing the value of a song represented by two different companies.

The non-exclusive reps will argue this is not the case, as licensees such as ad agencies and music supervisors value their relationships with the reps with whom they work on a regular basis and would not jeopardize those relationships by going around a trusted rep to get a cheaper price for the same song.

In terms of compensation, sync rep deals vary from company to company. Fifty percent is not unusual. Some companies provide better terms to the songwriter; for instance, only taking 20% to 25% and paying the balance to the writer. That percentage is usually based on gross income, including sync fees and public performance monies generated by the transmission of audiovisual works on television or the Internet. An example of a non-exclusive sync rep deal with annotations below.

forms-publishing8.16K1 (1).pdf
forms-publishing8.16K2 (1).pdf

September 18, 2015

The 11 Contracts Every Artist, Songwriter and Producer Should Know -- Music and the Movies


By Steve Gordon and Robert Seigel

Steven R. Gordon, Esq. (steve@stevegordonlaw.com, www.stevegordonlaw.com) is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels, music publishers as well as TV and film producers, and digital music entrepreneurs. He provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is also the author of The Future of the Music Business (Hal Leonard 4th ed. 2015).

Robert L. Seigel, Esq. (rlsentlaw@aol.com, www.rlsentlaw.com) has more than twenty years experience in the counseling and representation of producers, writers, directors, distribution companies and foreign sales agents concerning development, production, marketing, distribution and exploitation of fiction and non-fiction film, television, publishing and new media projects. His clients' projects have appeared theatrically and on network, syndicated, public and cable television and have earned Academy Award and Emmy nominations and awards as well as prizes at major film festivals.

The authors gratefully acknowledge the assistance of Ryanne Perio, Esq. in the preparation of this article. Ryanne is an associate at Manatt, Phelps & Phillips, LLP where she focuses on intellectual property litigation. They would also like to thank Clémence Barbet-Gros, a graduate law student at Lyon University, France, and Sonia Hanson, a recent graduate of the University of Minnesota Law School.

The sixth installment of this 11-part series on basic music industry agreements focuses on music and the movies. We will discuss two different forms of agreement: composer deals for the creation of music to be used throughout a movie, and an agreement for the recording and licensing of a previously written but unreleased single song for a film. If you are a filmmaker seeking previously recorded and commercially released music, you may be interested in reading Part II of Steve Gordon's book The Future of the Music Business, which includes a comprehensive discussion on how to clear music for movies. Producers should be aware of at least one fact: licensing popular prerecorded music can be very expensive. For instance, one of the authors of this article recently received a quote of $50,000 for a Tom Petty song for a feature film, even though the movie was a low budget Dutch language production with extremely limited commercial potential. This quote was just for the song, or underlying musical composition (see the last installment in this series, Now You Know Everything about Music Publishing, for a discussion of the difference between musical works and sound recordings.) The client would have had to pay another $50,000 to use Petty's recording. This article is aimed at benefiting musicians who have been offered the opportunity to write new music for a film. But for filmmakers who read this article, know that hiring a composer to create music for your movie can save you a great deal of money.

COMPOSER AGREEMENTS

The key terms of a contract between a film producer and a composer are: (i) Whether the composer will be responsible for recording as well as writing the music; (ii) the fee payable to the composer; (iii) the time schedule for the delivery of the music; (iv) the composer's credit; (v) how a composer would be compensated if there is a soundtrack album; and importantly, (vi) the permitted use and ownership of the music itself.

Fees

In a conventional composer agreement, the composer is responsible for producing or supervising the production of the music as well as composing it. The composer is paid a fee for those services, and the filmmaker sometimes pays for costs associated with rendering those services, including studio time, compensation to engineers, mixers, arrangers and the rental of recording equipment. Alternatively, these costs may be built into the composer's fee. (See the discussion of the Package Deal below.) The composer's fee is generally paid in installments. Part of the fee may be payable upon the signing of the agreement or the commencement of "spotting" - i.e., when the production team and the composer screen the movie to determine where and what type of music should be used in the movie's score. Another portion of the fee may be payable upon the commencement of the recording of the score. A third installment of the fee may be payable upon completion of all services, including delivery of the master recording in a format specified in the contract, and the producer's acceptance (see below) of the master recording.

The Package Deal

With low budget movies, a producer and a composer often enter into a "package deal." The producer pays the composer a fee designed to compensate the composer, as well as cover costs associated with the recording of the score. The composer assumes responsibility for payments to musicians, arrangers, studio time, and instrument rentals, and retains any monies remaining after he or she pays these costs. However, if the composer incurs expenses in excess of the package fee deal, the composer assumes such costs.

There are, however, usually certain excluded costs in the "package deal", which the producer assumes. These costs include the licensing of any music not written by the composer, or if the producer hires another composer to re-write the score, and any re-scoring or re-recording costs required solely for creative reasons. The composer should try to limit the right of the producer to demand changes after delivery and to negotiate a "kill fee" in case the producer is dissatisfied with the score. (See Producer's Acceptance below and Paragraph 2(b) of the second contract analyzed in this blog.) Package deals often work well when a composer is using few instruments and relies on synthesizers and his or her own equipment and recording facilities.

Work for Hire vs. Exclusive License

A key provision in any composer agreement is the section that addresses the ownership rights in the music. In a typical composer agreement, the producer and the composer agree in a signed writing that the music created and recorded by the composer is deemed to be a "work for hire", and that the producer owns all rights in such, including both the underlying music and the recording. This provision also states that, if for any reason the music created and recorded by the composer is not deemed a "work for hire" under federal copyright law, the parties agree that the composer has transferred all rights in and to the music, as well as the recordings of the music, to the producer.

A work for hire contract gives the producer total control of the music and the recordings. The producer can use or modify the music in any manner, and include the music in the trailers, marketing materials, advertisements and any other form of promotion for the movie. In addition, the producer can act as a music publisher and label by licensing the music and the recordings to any third parties, whether or not such third parties have any connection to the movie. For instance, the producer could license the music and/or the recordings to a person or entity that may want to use it in a commercial or advertising campaign. Although the composer has no say in how the music is used and will not share in the income from licensing of the music to third parties, the composer may be entitled to compensation from at least one income stream, i.e., public performance.

A writer subject to a work for hire agreement usually gets paid for the public performance right. As discussed in previously in this series, the publisher's and songwriter's shares are generally divided on a 50/50 basis. Although the filmmaker receives the publisher's share for the music license, the composer retains the songwriter's share regardless, of who owns the rights in and to the music. In the U.S., there is no public performance income from performances of the movie in a theater, and there is no performance income from distribution of DVDs or permanent downloads. However, there are public performance royalties from broadcasting the movie on television and from Internet video on demand (VOD, e.g., Netflix). The composer should be very careful, however, that proper cue sheets are prepared and presented to his or her performance rights organization (PRO) to ensure that he or she will be credited by the PRO. As discussed in "A Simple Guide to Signing the Best Sync Deal Possible" in this series, a cue sheet is a log of all the music used in a production. (See http://www.bmi.com/creators/detail/what_is_a_cue_sheet, for an example.) Cue sheets are the primary means by which performing rights organizations track the use of music in films and TV. The composer will not be compensated by the PRO without first filing the cue sheet.

Work for hire agreements are standard and usually non-negotiable when a major studio engages composers, but majors generally pay significant fees. A composer who is approached by an independent producer whose offer is more financially modest may be able to retain the rights in his or music, or at least share in additional income streams aside from the writer's share of public performance royalties. In addition, if a producer cannot afford to pay a composer his or her customary fee, the composer may agree to a reduced fee, provided that the composer is permitted to share in the publishing rights (the underlying musical composition). For example, if the composer's music from the movie is licensed, the composer could negotiate to receive the full 50% (songwriter's fee) and perhaps one-half of the publisher's share, or 25%. In this scenario, the producer would retain the remaining 1/2 of the publisher's share (i.e, 25%).

Since producers are generally not music publishers, and may not have an interest in engaging music publishers to exploit the music rights on their behalves, a producer may offer a reduced fee to a composer and permit the composer to retain the publishing rights. In this scenario, the composer usually grants an exclusive license for use of the music in the movie as well as in any trailers, advertisements or other promotional materials for or related to the movie, but retains the copyright in his or her music and recordings, and the right to use them in other projects. In this case, the producer may also negotiate to secure the right to create and distribute a soundtrack album in connection with the movie. The composer agreement can go into extensive detail in calculating how a composer will be compensated for the use of his or her music and recorded performances on the soundtrack album, or the parties can agree to negotiate such terms in good faith at a later time if and when the possibility of a soundtrack album is more certain, such as when a distributor agrees to commercially release the movie.

If the producer agrees that the composer will retain rights in his or her music and recordings, the producer will usually require the composer to agree that he or she cannot use or cause others to use the music in any other movie, television program or other audio-visual project for a certain period of time, except with the producer's prior written consent. This period may be several years, either from the date of the initial commercial release of the movie, or from the signing of the composer agreement. After the agreed-upon period, the composer can place the music in any other movie, television program or audio-visual project, such as a video game.

The composer's agreement may also have a provision in which there is a limit to the amount of the movie's music that may be used in an album. This is to prevent an album containing the composer's music from becoming potentially competitive with the movie's soundtrack album, thereby undercutting the marketability and value of the actual soundtrack album. If a composer creates his or her own album and uses any portion of the movie's music, there will generally also be a requirement to credit the movie as the source of the music.

Producer's Acceptance

Prior to accepting the final score, the producer usually will retain the right to request certain changes, omissions or additions to the movie's music. In addition, the producer generally has the right to not use the composer's score in the final version of the movie provided that the composer has been fully compensated for creating and/or recording the score. This is known as a "play or pay" clause, and it is used in a wide variety of different forms of entertainment business agreements such an agreement for an actor's services. Play or pay provisions are usually non-negotiable because (i) they are inherently fair because they pre-suppose that the producer has paid one hundred percent of composer's fee, and (ii) it is overreaching to demand that the producer use the composer's score if the producer does not think it works for the movie.

To increase the likelihood that a composer and producer are on the same page regarding the movie's music, the two can agree that the composer will provide scoring and recording services for a portion of the score, at which point the producer can decide whether or not to continue to work with the composer on the remainder of the score. If the producer chooses to terminate the relationship, the composer would receive some agreed upon "kill fee," but the producer will generally retain the right to use the composer's music and recordings rendered during the trial period.

Credit

Composers should negotiate their credits carefully, because a good credit can be vital to getting higher fees for future work. A composer may request "single card" credit in the main credit sequence of the movie, whether the main credit sequence is at the beginning or the end of the movie. This means that his or her name and credit is the only one to appear on screen at a given time. The producer will usually only promise to provide a credit if it actually uses the music in the movie.

SINGLE SONG AGREEMENTS

Acquiring music for movies can take all kinds of forms. The last agreement that we analyze in this piece is for a single song that was previously written but unreleased. The filmmaker wanted the composer, who was also a record producer, to record the song so that he could put the recording in a music video that would be shown with the end credits. As the producer and composer both knew that the producer wanted to use the composer's pre-existing song, the composer had a great deal of leverage. As a consequence, the composer was able to negotiate a license rather than a work for hire. You could imagine a situation where the filmmaker wanted the composer to create and record an entirely original song. In that case the contract would look more like a work for hire.

THE CONTRACTS

The first contract analyzed below is a standard pro-film producer form of agreement. It makes all the music a composer creates and records a work for hire for the filmmaker. It also gives the filmmaker the right to demand that the composer make an unlimited number of changes and revisions in the music without obligating the film producer to pay any additional compensation to the composer.
The second agreement is much more composer-friendly. It is not a work for hire agreement. Instead, the composer merely grants the filmmaker the right to use the music in his movie and retains all other rights, except that the composer agrees not to license the music for another full length film for a period of time. In addition, the second contract limits the time that the filmmaker can make the composer make changes to two days after the composer delivers the final mix. It also provides for a "kill fee" if the filmmaker decides that the music delivered by the composer is unacceptable.
The last agreement is for the recording of a single song that the composer previously wrote but never recorded. Similar to the second agreement, the composer grants a non-exclusive license to the filmmaker and retains all other rights in the song and the recording. In this case, though, the composer also grants the filmmaker the right to use the recording in a promo video for the movie.

*******************************************************************************************************************************

FIRST AGREEMENT
[PRODUCTION COMPANY NAME] [PRODUCTION COMPANY ADDRESS] Dated as of August ___, 2015 [NAME OF COMPOSER] [COMPOSER ADDRESS]


Re: "[TITLE OF FILM]"/Composer Agreement

Dear ____________:

This letter, when executed by you and [PRODUCTION COMPANY NAME] (referred to as "Company" or "us"), will set forth the material terms of the agreement between you and us relating to your creation and delivery to us of musical score for the motion picture tentatively titled "[TITLE OF PICTURE]" (the "Picture").

All of Company's obligations herein are expressly conditioned upon Company's receipt of fully executed copies of this Agreement and the Certificate of Authorship attached hereto and incorporated herein.

1. Services. You will compose, conduct, perform, record, arrange, produce, and mix the score (hereinafter, the "Compositions" or the "Score") for the Picture in accordance with the schedule set forth below. Company hereby engages the services of Composer to write, compose, arrange, adapt, interpolate, orchestrate and conduct the recording of the Score for the Picture and to supervise the music editing, dubbing and so-called "sweetening" of the recording of the entire Score and to deliver a fully recorded and edited digital audio file or DAT or such form as Company requires for all original and duplicate master recordings embodying the Score (the "Master" or the "Masters") all for and as directed by Company. The Master shall be suitable for synchronization with the Picture and with audio-visual discs, cassettes and other audio-visual devices embodying the Picture or substantially all of the Picture ("AV devices") and, upon Company's request, for manufacture of audio products embodying the Score, upon and subject to the terms and conditions herein set forth. Without limiting the generality of the foregoing, but subject to the specific terms of this Agreement, Composer shall perform all services or duties customarily performed in the motion picture industry by a composer, scorer, conductor, arranger and adapter with respect to the Picture. Company shall have the right to require Composer to make such reasonable changes, modifications or additions to the Score, and to any and all musical compositions, production numbers, or special material composed by Composer hereunder as may be reasonably required by Company.

In this agreement, the composer is not only responsible for writing the score, he or she must deliver the recording of the music.

2. Term of Engagement: The term of Composer's engagement ("Term") hereof shall commence upon the date set forth above and shall continue until complete and satisfactory delivery of the Score. Composer shall deliver the Master in accordance with a schedule to be provided by Company and, subject to the terms herein, perform any re-writes, if any, requested by Company until a Score commercially and technically satisfactory to Company shall have been delivered.

This provision is very favorable to the filmmaker. It would allow him or her to order the composer to make an unlimited number of changes. An alternative is to limit the filmmaker to demand the composer make one round of changes with a payment schedule for additional changes. Further, see the next contract and the comments for Paragraph 3 for another alternative for the composer.

3. Compensation. In full and complete consideration for Composer's full and faithful performance of all services hereunder and for all rights granted to Company hereunder (including, without limitation, all right, title and interest in and to the results and proceeds of Composer's services rendered hereunder), provided Composer is not in material breach hereof and subject to Company's rights of suspension and/or termination in the event of force majeure, disability or default, Composer shall be entitled to be paid an "all-in" fee of ___________ Thousand Dollars ($___,000), payable in the following manner: (i) _______________ Thousand Dollars ($__, 000) upon signature of this Agreement by Composer and commencement of Composer's services; and (ii) ______________ Thousand Dollars ($___, 000) promptly following the satisfactory delivery of the Score as set forth herein.(Notwithstanding the foregoing, no synchronization fees, royalties or other consideration (excluding only mechanical royalties and any public performance fees, if applicable) shall be payable to Composer for the use of the Score, Master or the Compositions (collectively the "Work"), or any part thereof in the Picture or in connection with any advertising, publicizing or exploitation thereof, regardless of the method, media or types of devices utilized for the exhibition or exploitation thereof.

As confirmed in the next paragraph, this agreement is "all-in" meaning (i) the composer is responsible for any expenses such as studio time and musicians' fees; and (ii) the composer will make no more money than the fees in Paragraph 4 except for the "writer's share" of public performance royalties and use of some excerpts of the score in an album.

4. Recording Costs. You will be responsible for all recording costs incurred in connection with the Score and your services hereunder. You agree that you will be solely responsible for, and warrant that you pay, all such recording costs, even in the event such costs exceed the compensation payable to you pursuant to paragraph 4 above.

The composer must be careful not to accept a fee that is not adequate to compensate him or her for his or her time, plus paying for recording costs.

5. Ownership. Subject to the terms and conditions hereof, you hereby acknowledge and confirm that we shall own all right, title and interest in and to the Compositions of the Score (including, without limitation, the worldwide copyrights therein including any extensions and/or renewals thereof) and your performances thereon, throughout the universe and in perpetuity, and that we shall have the right to secure registration of copyright in the Score and the Masters (i.e., the individual master recordings comprising said Score) and the individual compositions comprising the Score (the "Compositions") and your performances thereon in our name, pursuant to the United States copyright laws, as "work made for hire." We shall have the exclusive right, insofar as you are concerned, to use and to authorize others to use the Score and any and all portions thereof throughout the world or any part thereof in any manner we see fit, and to refrain from any or all of the foregoing. If for any reason the results and proceeds of your services hereunder are not deemed to be a work made for hire, you shall and hereby do assign such results and proceeds and all rights therein and thereto to us, for use in any and all media (whether now known or hereafter devised), throughout the world, irrevocably and in perpetuity. The payments made by Company or its assignees under this Agreement are deemed to include sufficient remuneration for all so-called rental and lending rights pursuant to any directive, enabling or implementing legislation, laws and regulations enacted by any nation throughout the world, including the member nations of the European Union. You hereby waive all rights of "Droit Moral" or "Moral Rights of Authors" or any similar rights or principles of law which you may now or later have in the Work.

This is the "work for hire" clause that was discussed in the Introduction. If the composer cannot get a license deal instead, in which he or she gets to keep his or her copyright in the music, the composer can at least try to get more money for giving up his or her rights in the music.

6. Credit. Provided you fulfill your material obligations hereunder and further provided that the majority of the total background musical score embodied in the Picture as released in the United States consists of the Score, we will accord you the following credit: "Original Music by [NAME OF COMPOSER]." The foregoing credit shall appear in the main credit roll in the Movie. All other aspects of such credit, including size and placement, shall be determined by Licensee.

Credit is often a highly negotiated provision. In this agreement however, the obligation to provide any credit at all only applies if the "total background music" in the movie consists of the score. If another composer is brought in to contribute even incidental passages of music, the filmmaker is not obligated to credit the composer. Composers should seek a credit provision more like the one in Paragraph 12 of the next agreement.

7. Soundtrack Album.

(a) Should Company enter into an agreement with a record distributor ("Distributor") for the exploitation of the soundtrack album ("Soundtrack Album"), if any, and should the Soundtrack Album or any audio product embody any of the Score as performed by and/or conducted by Composer and/or the Compositions, then Company shall negotiate in good faith with Composer for a royalty with respect to such audio products manufactured and sold hereunder. Any "Artist's royalty" (as such term is customarily known in the music industry) payable to Composer for use of Composer's recorded performance of any composition on the soundtrack album for the Picture shall be computed, reduced and determined in a no less favorable manner as Company's basic royalty under its agreement with any recording company.

As indicated in the Introduction, instead of the composer agreement going into extensive detail in calculating how a composer shall be compensated for the use of his or her music and recorded performances on the soundtrack album, the parties agree to negotiate such terms in good faith at a later time if and when the possibility of a soundtrack album is more certain, such as when a distributor agrees to commercially release the movie.

(b) The parties acknowledge and agree that Composer shall have the right to include selections from the Score on any record album featuring Composer's solo work (with Company's prior written approval which shall not be unreasonably withheld by Company) provided that the following credit be placed by any of such composition's title: "Music from the motion picture feature [TITLE OF PICTURE]."

Although this is generally a pro-producer form, this provision is a big concession to the composer because, under a work for hire agreement, the composer generally has no rights in the music after delivering it to the producer.

8. Publishing. You acknowledge that we will be the sole owner of all right, title and interest to the Compositions, including (a) the worldwide copyrights therein and any renewals or extensions thereof, and (b) the sole, exclusive, perpetual worldwide rights of administration, exploitation and promotion associated therewith. Nothing in this agreement shall limit Composer's right to receive Composer's performing rights income derived from the exploitation of the Score, whether in whole or in part. Composer shall be entitled to receive the "writer's" share in and to the Compositions.

As discussed in the Introduction, this is the one form of income, aside from the inclusion of some of the music in a composer's own album, that the composer is entitled to under a work for hire agreement.

9. Use of Name, Likeness, Etc.: Company may use, and permit others to use, Composer's name, likeness, voice and biographical material in and in connection with the Picture, the Work, any project or product derived from the Picture, if any, and the sale, distribution, promotion and advertising thereof. Company and its assignees shall have the sole and exclusive right to issue publicity concerning the Picture and concerning Composer's services with respect thereto except for Composer's own publicity provided that there shall be no derogatory statements or references concerning the Picture or any party or entity associated with the Picture.

10. Music Cue Sheets: The music cue sheets for the Picture shall be filed with the proper performance rights societies by Company accurately reflecting Composer's ownership of all Compositions. The cue sheets shall be prepared in consultation with Composer, and Company shall promptly provide Composer with a copy upon its availability. Company will be responsible for submitting cue sheets to distributors (including non-US) and to broadcasters.

The composer should make sure the producer complies with this provision and files a proper cue sheet before the release of the movie on television or on Internet VOD.

11. No Obligation to Exploit: Company or its assigns shall not be obligated or required to print, publish, promote or otherwise exploit the Work or the Picture, or any part of them, in any manner or to exercise any of the rights granted to Company or its assigns hereunder.

12. Notices: All notices which either party is required or may desire to serve hereunder shall be in writing and shall be served to the addresses specified herein. A courtesy copy of such notices shall be sent to: ____________, Esq., ______________________; Tel: (_____) _____-______; E-Mail:_______________.

13. Federal Communications Act: Reference is made to Section 507 of the Federal Communications Act which makes it a criminal offense for any person in connection with the production or preparation of a picture or program intended for broadcasting to accept or pay, or agree to accept or pay, money, service or other valuable consideration for the inclusion of any matter or thing as a part of such picture or program, without disclosing the same to Company thereof prior to the telecast of such picture or program. Composer warrants and agrees that Composer has not and will not accept or pay any money, service, or other valuable consideration for the inclusion of any plug, reference, product identification, or other matter in any material prepared or performed by Composer hereunder.

14. Independent Contractor: Composer warrants that he or she is an independent contractor and is not an employee of Company. As an independent contractor, Composer is responsible and liable for any income tax, unemployment insurance, FICA (Social Security), or any other payment normally associated with an employee relationship.

15. Assignment: Company shall have the right to assign this Agreement at any time to any person or entity. Neither this Agreement nor any rights hereunder are assignable by Composer at any time to any person or entity. This Agreement inures to the benefit of Company's successors, assigns, licensees, grantees, and associated, affiliated and subsidiary companies.

16. Additional Covenants of Composer: Composer agrees that Composer shall:

(a) Not disclose to any party information relating to the subject matter of this Agreement or to the activities of Company with respect to the Picture or otherwise except: (i) to Composer's financial and legal advisors; and (ii) regarding any incidental and non-derogatory references by Composer to third parties concerning Composer's Score in connection with the Picture.

(b) Not incur any liability or expense on Company's account without Company's prior written approval (except as otherwise stated herein), and if such approval is given, Composer will provide Company with any information necessary to satisfy such obligation, including copies of any necessary agreements.

17. Governing Law; Dispute Resolution: This Agreement will in all respects be governed by and interpreted, construed and enforced in accordance with the laws of the State of New York. Any dispute or controversy arising under this Agreement (including, without limitation, the validity and enforce ability of this Agreement) shall be subject to arbitration in the State of New York in accordance with the Rules of the American Arbitration Association as decided by One (1) arbiter mutually approved by the parties and whose decision shall be binding, final and non-appealable and may be entered in a court of competent jurisdiction. The prevailing party shall be entitled to reasonable outside attorneys' fees and costs. For the purpose of enforcing such arbitrator's decision, any action arising out of or relating to this Agreement and its enforcement will have jurisdiction and venue in a state or federal court situated within the State of New York, and the parties consent and submit themselves to the personal jurisdiction of said courts for all such purposes.

18. Remedies: The parties acknowledge and agree that Composer's remedy for any breach of a term of this Agreement by Company shall be limited to monetary damages at law. Composer shall not have the right to rescind this Agreement or to any equitable or injunctive relief or otherwise in which there would be an interference or prevention of Company's right to finance, produce, market, distribute or otherwise exploit any and all rights in and to the Picture.

19. DVD/Blu-Ray and Soundtrack Album: Provided that Composer has rendered services as stated herein and Composer is not in breach of any material term stated herein, Company shall provide Composer with one (1) DVD or Blu-Ray copy and (1) soundtrack album CD (if and when available) of the Picture in its completed form which shall be used by Composer solely for private, non-commercial or resume reel use.

20. Entire Agreement; Modifications: This instrument constitutes the entire agreement of the parties hereto relating to the subject matter specified herein. This Agreement can be modified or terminated only by a written instrument executed by both Composer and Company or Company's successors and assigns. The parties acknowledge and agree that signatures may be by hand, facsimile, electronic or optically scanned (e.g., pdf) and any of these methods shall be deemed as binding on the parties.

21. Miscellaneous. You warrant and represent that neither the Score, the Masters or the Compositions shall infringe the rights of any third party, and that you are not under any disability, restriction or prohibition, whether contractual or otherwise, with respect to the performance of your services hereunder. Without limiting the foregoing, you specifically warrant and represent that (a) you have the full right, power, and authority to enter into this agreement, (b) you have obtained all requisite rights, clearances and permission to enter into this agreement from all applicable third parties, including, without limitation, [record company], [publishing company], and each of their respective affiliates, and (c) we shall not be required to make any payments of any nature for, or in connection with, the rendition of your services or the acquisition, exercise or exploitation of rights by us pursuant to this agreement, except as specifically provided herein (it being understood, for the avoidance of doubt, that you shall be solely responsible for any artist and other third party royalties or other sums payable arising out of our exploitation of the Masters, Compositions and other rights granted hereunder). You further warrant and represent that you have consulted with counsel with respect to the execution of this agreement. You agree to and do hereby indemnify, save and hold us harmless of and from any and all liability, loss, damage, cost or expense (including reasonable attorneys' fees) arising out of or connected with any breach or alleged breach of this letter agreement or any claim which is inconsistent with any of the warranties or representations made by you in this letter agreement.

If the foregoing terms are acceptable, kindly sign on the signature line set forth below and fax this letter to our attention for countersignature. This letter with the Certificate of Authorship, attached hereto, shall constitute the entire agreement between the parties and can only be modified in writing.

Very truly yours,
[PRODUCTION COMPANY NAME]

____________________________
An Authorized Signatory

ACCEPTED AND AGREED IN
ALL RESPECTS:

___________________________
COMPOSER S.S. No.: ________________


This bit of boilerplate drives home that the composer is indeed transferring the copyright in both the recording and music to the producer. The composer also waives "moral rights," which means that the producer can make any changes to the score that it wishes, regardless of whether the composer approves.

EXHIBIT "A"
CERTIFICATE OF AUTHORSHIP

For One Dollar ($1.00) and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby certifies that the undersigned will write or has written an original musical score (the "Score"), and will produce and record or has produced and recorded master recordings embodying the Score, each intended for initial use in the theatrical motion picture currently entitled "[TITLE OF PICTURE]" (the "Picture"), at the request of [PRODUCTION COMPANY NAME] ("Company") pursuant to a contract of employment between Company and the undersigned dated as of ____________, 2015 (the "Agreement") (the Score, the Masters and all other results and proceeds of the undersigned's services hereunder and under the Agreement are hereinafter referred to as the "Work"). The undersigned hereby acknowledges that the Work has been specially ordered or commissioned by Company for use as part of a contribution to a collective work or as part of the Picture or other audio-visual work, that the Work constitutes and shall constitute a work-made-for-hire as defined in the United States Copyright Act of 1976, as amended, that Company is and shall be the author of said work-made-for-hire and the owner of all rights in and to the Work, including, without limitation, the copyright therein and thereto throughout the universe for the initial term and any and all extensions and renewals thereof, and that Company has and shall have the right to make such changes therein and such uses thereof as it may deem necessary or desirable including but not limited, to the right to include the Work in the Picture in all media now and hereafter devised and on phonorecords and trailers, advertisements, promotions and co-promotions with respect thereto. To the extent that the Work is not deemed a work-made-for-hire, and to the extent that Company is not deemed to be the author thereof in any territory of the universe, the undersigned hereby irrevocably assigns the Work to Company (including the entire copyright therein and any extensions and/or renewals thereof), and grants to Company all rights therein, including, without limitation, any so-called "Rental and Lending Rights" and "Neighbouring Rights" pursuant to any European Economic Community directives and/or enabling or implementing legislation, laws or regulations (collectively, "EEC Rights"), throughout the universe in perpetuity, but in no event shall the period of the assignment of rights being granted to Company hereunder be less than the period of copyright and any renewals and extensions thereof.

Company's rights hereunder shall include, without limitation, the rights to authorize, prohibit and/or control the renting, lending, fixation, reproduction, performance and/or other exploitation of the Work in any and all media and by any and all means now known or hereafter devised, as such rights may be conferred upon the undersigned under any applicable laws, regulations or directives, including, without limitation, all so-called EEC Rights. The undersigned hereby acknowledges that the compensation paid hereunder and under the Agreement includes adequate and equitable remuneration for the EEC Rights and constitutes a complete buy-out of all EEC Rights. In connection with the foregoing, the undersigned hereby irrevocably grants to Company, throughout the universe, in perpetuity, the right to collect and retain for Company's own account any and all amounts payable to the undersigned with respect to EEC Rights and hereby irrevocably direct any collecting societies or other persons or entities receiving such amounts to pay such amounts to Company.

The undersigned hereby waives all rights of droit moral or "moral right of authors" or any similar rights or principles of law which the undersigned may now or later have in the Work. The undersigned warrants and represents that the undersigned has the right to execute this Certificate, that the Work is and shall be new and original with the undersigned and not an imitation or copy of any other material and that the Work is and shall be capable of copyright protection throughout the universe, does not and shall not, (i) violate the trademark, servicemark, or copyright of any third party; and (ii) to the best of undersigned's knowledge, violate or infringe upon any common law or statutory right of any party including, without limitation, contractual rights, and rights of privacy, or constitute unfair competition and is not and shall not be the subject of any litigation or of any claim that might give rise to litigation, including, without limitation, any claim by any copyright proprietor of any so-called "sampled" material contained in the Work. The undersigned further warrants and represents that the undersigned has attained the legal age of majority in the United States, and is at least eighteen (18) years of age. The undersigned further warrants and represents that, to the best of undersigned's knowledge, the undersigned will not utilize any persons who have not attained the legal age of majority and will not utilize the services of any undocumented alien in rendering services hereunder. The undersigned shall indemnify and hold Company, the corporations comprising Company, and its and their employees, officers, agents, assignees and licensees, harmless from and against any losses, costs, liabilities, claims, damages or expenses (including, without limitation, court costs and attorneys' fees, whether or not in connection with litigation) arising out of any claim or action by a third party which arises from a breach of any warranty or representation made by the undersigned in this Certificate or in the Agreement. The undersigned agrees to execute any documents consistent herewith and do any other acts consistent with this Agreement which may reasonably be required by Company or its assignees or licensees to further evidence or effectuate Company's rights as set forth in this Certificate or in the Agreement. Upon the undersigned's failure to do so after ten (10) business days of Company's written request, the undersigned hereby appoints Company as the undersigned's attorney-in-fact for such purposes (it being acknowledged by the undersigned that such appointment is irrevocable and shall be deemed a power coupled with an interest), with full power of substitution and delegation. Company shall promptly provide the undersigned with any documents exercised pursuant to the foregoing power of attorney.

The undersigned further acknowledges that in the event of any breach by Company of this Certificate, the undersigned will be limited to the undersigned's remedy at law for damages (if any) and will not have the right to terminate or rescind this Certificate or to enjoin the distribution, exploitation or advertising of the Picture or any materials in connection therewith, that nothing herein shall obligate Company to use the undersigned's services or the Work in the Picture or to produce, distribute or advertise the Picture, and that this Certificate shall be governed by the laws of the State of New York.

Company's rights with respect to the Work may be freely assigned and licensed and its rights shall be binding upon the undersigned and inure to the benefit of any such assignee or licensee.

The undersigned affirms and acknowledges that the undersigned has been advised and counseled with respect to the negotiation and execution of this document by an attorney of the undersigned's own choice or acknowledges waiver of such advice and counsel.

IN WITNESS WHEREOF, the undersigned has signed this Certificate as of ________________, 2015.

Signature
Printed Name: [NAME OF COMPOSER]
Social Security No.

AGREED AND ACCEPTED:

[PRODUCTION COMPANY NAME]

By: _____________________________
An Authorized Signatory


August ____, 2015

*******************************************************************************************************************************

SECOND AGREEMENT

[PRODUCTION COMPANY NAME]
[PRODUCTION COMPANY ADDRESS]

Dated as of _____ __, 2015
[NAME OF COMPOSER]
[COMPOSER ADDRESS]

RE: Original Music for the motion picture feature, currently entitled [TITLE OF PICTURE]

Dear Colleagues,

This letter shall confirm the agreement (the "Agreement") by and between [PRODUCTION COMPANY NAME] located at [ADDRESS] ("Company") at ____________________________, and [COMPOSER], at ___________________________ ("Composer") in connection with the motion picture feature presently entitled [TITLE OF PICTURE] (which together with all trailers, promotion, publicity, advertising and DVD supplemental material therefrom, is collectively referred to as the "Picture"). All of Company's obligations herein are expressly conditioned upon Company's receipt of fully executed copies of this Agreement.

1. Company hereby engages Composer to compose, arrange and produce original musical compositions (the "Compositions"), as further described in the attached Schedule A, for the score of the Picture, and to record and produce master recordings embodying the Compositions (the "Masters") used in the Picture. The music composed hereunder and all other results and proceeds of Composer's services are referred to herein as the "Work."

Similar to the first agreement, this deal requires the composer to produce as well as write the score.

2. Composer will render your services hereunder during the Term, as defined below, on a first priority basis. You will deliver to us the final mix of the Score no later than ______________, 2015.

This provision is favorable to the composer, as it does not require him or her to turn down other jobs while he or she is working on this movie.

3. Composer shall deliver the Work to Company pursuant to the following schedule (the
"Delivery Schedule"):

(a) Composer shall begin the production of the Work on approximately __________________, 2015; (or upon signing of the agreement and first payment, whichever comes first.)

(b) Composer shall essentially complete the work by ________________, 2015. Company shall be entitled to hear the Work prior to the final mix, which shall be subject to final approval by an individual designated by Company (or Company's designee) for such final approval. Composer agrees to be available for up to two (2) days of consultation, and shall make such revisions during that time in the Work as Company may reasonably require, provided that if after such revisions are made, Company does not accept the Work as acceptable, then Company shall pay Composer a "kill fee" of 25% of the total compensation otherwise payable under Paragraph 5 below in addition to the initial fee and Composer shall retain all rights in the Work and Company shall have no right to use the Work for any purpose.

This is far better than the first agreement in which the composer agrees to keep changing the music at the producer's request without limitation on the number of times the producer can demand changes.

(c) Upon Company's approval of final mixes of the fully produced Work, company shall make delivery ("Delivery") of the Work to ____________________ ("Company's Designee") via disc(s), DAT(s) or computer files (at Company's discretion). Simultaneously with Deliver of the Work or proper to Deliver, Composer shall submit a properly completed music cue sheet for the Picture, provided Composer shall not be responsible for procuring or providing information needed to complete the cue sheets related to third party licensed music. Company shall be responsible for filing final cue sheets to Composer's performance rights organization prior to the initial release of the Picture.

See the Introduction for explanation of a cue sheet and its importance.

(d) Composer shall deliver all Materials to Company's Designee, pursuant to the Delivery Schedule defined herein, to the following address and contact: _________________________

4. Composer shall be responsible for the production of the Work, the payment for all expenses related to the production of the Work, including, but not limited to, the hiring of musicians, the booking of recording sessions, the programmer and engineer. Composer shall not be responsible for a music editor. Company shall have approval over all stages of production of the Work and all constituent elements thereof including the final composition and orchestration. In addition, Composer shall consult with Company throughout the production of the Work.

As with the first agreement, this composer deal is "all-in," that is, the composer is responsible for expenses.

5. The term of this Agreement (the "Term") shall commence upon delivery of first payment and the signing of this agreement. The Term shall end upon delivery to Company of final Work (i.e., final mixes of the Masters), delivery of all documentation necessary for the full exercise of all rights granted hereunder and completion of all services required by Company hereunder but shall not extend past ___________, 2015. Time and full compliance of all delivery requirements are of the essence of this Agreement. During the Term, Composer shall not, without prior written consent of Company and/or Company's Designee, render or agree to render any services of any kind for any other person or entity which would or might conflict with, interfere with or prevent the complete rendition of the services required to be rendered by Composer hereunder. Notwithstanding the foregoing, the Work shall be delivered in accordance with Company's production schedule.

6. In consideration of the rights granted by Composer hereunder, Composer's services and the use by Company of the results and proceeds thereof, Company shall pay to Composer an aggregate amount of ______________ Thousand Dollars ($_____,000.00) (the "Fee"), which shall be inclusive of any and all expenses incurred by Composer in the production and delivery of the Work to Company, payable as follows: (i) $____,000.00 after (A) commencement of Composers' services hereunder and (B) receipt of an executed copy of the Agreement; (ii) the final $___,000 upon delivery to Company of the Materials. But Composer has agreed to defer the money due in ______________, 2015 until a mutually agreeable time not to exceed six months (________________, 2015). All payments made by Company and/or Company's Designee to Composer hereunder shall be inclusive of any sales tax or use taxes required to be paid by Composer to any governmental authority.

7. (a) It is expressly agreed that Composer is performing services hereunder as an Independent Contractor. Composer retains the copyright to the supplied Work but irrevocably grants Company, all synchronization, performance rights and licenses, the rights to secure copyrights throughout the world, the absolute and unrestricted right and permission to reproduce, adapt, edit, copyright, televise, exhibit, distribute, license, disseminate, display and otherwise exploit in any or all markets and media (collectively "use") the Compositions and Masters that Composer supplies to the production in the context of this film. This grant of rights is made without limitation upon time, circumstance, location, market or medium or use of this material in and related to the motion picture feature tentatively entitled "[TITLE OF PICTURE]."

Unlike the first agreement, here the composer retains his or her copyright in the music - both the underlying music and the recordings. This is a huge difference, as it allows the composer to re-use the music and make additional money from its exploitation.

(b) Notwithstanding the foregoing, Company acknowledges that Composer is a member of ASCAP and the worldwide non-dramatic public performance royalties in the Work shall be licensed through ASCAP. Company hereby acknowledges Composer's one hundred percent (100%) of the writer's share of the worldwide non-dramatic public performance royalties in the Work; and one hundred percent (100%) of the publisher's share of the worldwide non-dramatic public performance royalties in the Work with Composer's music publishing designee, _____________ (ASCAP).

Unlike the first agreement, the composer will collect 100% of the public performance royalties.

(c) Composer shall own and separately administrate one hundred percent (100%) of the publishing and one hundred percent (100%) of the so-called writer's share of the publishing rights in and to the Compositions. Composer shall own any and all rights in and to the Masters prepared in connection with the Picture subject to the terms stated herein.

(d) Company and its assigns, licensees, successors and designees shall have the unrestricted right of access to use the Compositions composed by Composer and the masters recorded by Composer in all media, now known or hereafter devised ,throughout the universe, in perpetuity in connection with the Picture.

(e) Without limiting the generality of the foregoing, Composer hereby acknowledges that Company shall have the right to synchronize, perform, and use the Work in the soundtrack of the Picture, and uses ancillary to the Picture, including, without limitation, in trailers, promotions and co-promotions, and advertisements for any or all of the foregoing, and in connection therewith, the parties acknowledge and agree that Company shall have the perpetual right, throughout the universe, to exploit the Work in or related to the Picture in all media including, but not limited to, theatrical release, subscription, satellite, pay/cable and free TV, audio-visual devices (including but not limited to video-cassettes and discs), trailers, advertisements and publicity therefore, any computer-assisted media including but not limited to CD-ROM, CD-I and similar disc systems, interactive cable and in all other uses associated with any new technology and media, whether now known or hereafter devised. Subject to the terms stated in this Agreement, any and all rights to the Work are owned by Composer.

(f) Company shall be free, at its sole discretion, to make any further use, recording, exploitation, publishing, and distribution of the Work and every arrangement, version, orchestration and adaptation thereof, and of recordings thereof as Company may desire in the Picture and any promotion or advertising for the Picture, free and clear of any and all claims by, or asserted, and all claims by, or asserted on behalf of, Composer or any third parties (including, without limitation, any and all composers, musicians and other persons who provide services, performances or materials in connection with the performance of the Work).

(g) Composer agrees to look solely to such society and/or Composer's music publishing designee for such royalties and waive any claim against Company for its publisher's share of such royalties received by Company. Notwithstanding the foregoing, if Company shall receive monies due to Composer, Composer's performing rights society or its publishing designee, then Company shall remit such monies promptly to Composer, Composer's performing rights society or its publishing designee.

(h) Composer shall have the right but not the obligation to exploit the Work in any other form or manner within Composer's sole discretion, throughout the universe and in perpetuity for any purpose except (i) in another feature length motion picture including documentary or "feature" motion picture for a period of three (3) years from the commercial release of the Picture, except with the prior written consent of Company; and (ii) use the Work in an album subject to subparagraph (i) below).

This pro-composer provision allows the composer to exploit the compositions and the masters for any other purpose except in another movie or full length album. For instance, the composer can license the compositions and masters for advertising campaigns or video games and collect 100% of the revenues.

(i) The parties acknowledge and agree that Composer shall have the right to include selections from the Work on any record album featuring Composer's solo work (with Company's prior written approval which shall not be unreasonably withheld by Company) provided that the following credit be placed by any of such composition's title: "Music from [Title of Picture]"

(j) Company, its successors and assigns shall have the right to make, distribute, or sell or authorize others to do the same, any phonorecords, including, without limitation, discs, tapes and devices of any speed or size of type, whether now known or hereafter devised, for the recording of the music material in any soundtrack album(s) for the Picture (the "Soundtrack Album"). The parties shall enter into negotiations in good faith terms for Composer's participation in such Soundtrack Album subject to record company's approval.

8. Company agrees not to exploit or use the Work other than as embodied in the soundtrack of Picture or in advertisements and promotional materials for the Picture. In connection with any other use or exploitation of the Work not set forth herein, Company shall consult with Composer in connection therewith; which such consent shall not be unreasonably withheld. In the case of a soundtrack album, Company shall consult with Composer whereby an agreement shall be negotiated in good faith.

9. The parties acknowledge and agree that Company is not and shall not be a signatory to any union, guild or collective bargaining organization concerning any musicians or performers who have rendered or shall render services in connection with the Work.

10. Composer hereby warrants, represents and covenants to Company as follows:

(a) Composer hereby represents and warrants to Company that Composer has the right to enter into this Agreement and perform all of its obligations pursuant to this Agreement.

(b) Composer shall be the sole author of all material contained in the Work; and that the Work shall be completely original with Composer and shall not infringe upon or violate any copyright, common law right or any other right, of any person, firm or corporation;

(c) That neither the Work nor any element of, or material contained in, the Work will infringe upon or violate the right of privacy of, or right of publicity of, or constitute a libel or slander against, or defame, or violate any copyright, trademark or service mark, common law or other right, of any person, firm or corporation or violate any other applicable law;

(d) Composer has acquired all rights necessary to its grant of rights to Company hereunder, including without limitation, all copyrights, music synchronization and music performance rights licenses;

(e) That no part of the rights herein granted to Company have been transferred to any third party and that said rights are free of any liens, claims and encumbrances whatsoever in favor of any other party, and that said rights and the full right to exercise the same, have not been in any way limited, diminished, or impaired; and that there are no claims, litigation or other proceedings pending, outstanding or threatened adversely affecting or that would or might in any way prejudice Company's rights hereunder.

11. (a) Composer assumes liability for, and hereby agrees to indemnify, defend, protect, save and hold harmless Company, its partners, divisions, subsidiary and affiliates, divisions and companies, distributors, assigns, licensees and the respective shareholders, directors, officers, employees and agents of the foregoing (the "Company's Indemnified Parties") from and against any and all claims, actions, suits, costs, liabilities, judgments, obligations, losses, penalties, expenses or damages (including, without limitation, reasonable legal fees and expenses) of whatsoever kind and nature imposed on, incurred by or asserted against any of Company's Indemnified Parties, arising out of any breach of any representation or warranty made by Composer herein or out of any other breach by Composer of this Agreement.

(b) Company assumes liability for, and shall indemnify, defend, protect, save and hold harmless Composer from and against any and all claims, actions, suits, costs, liabilities, judgments, obligations, losses, penalties, expenses or damages (including, without limitation, legal fees and expenses) of whatsoever kind and nature imposed on, incurred by or asserted against Composer arising out of any breach or alleged breach by Company of any representation, warranty or covenant made, or obligation assumed, by Company pursuant to this Agreement.

(c) In order to seek or receive indemnification hereunder:

(i) the party seeking indemnification must have promptly notified the other of any claim or litigation to which the indemnification relates; and

(ii) the party seeking indemnification must have afforded the other the opportunity to participate in any compromise, settlement, litigation or other resolution or disposition of such claim or litigation.

12. Provided that Composer fully performs all of her material obligations hereunder and is not in material breach of any of Composer's representations, warranties, obligations or agreements hereunder and the Work is synchronized to the Picture's visuals, Company shall accord Composer a credit substantially in the following form: "Original Music by [NAME OF COMPOSER]".

These credit provisions are much more favorable to the composer than the first agreement, and composers should seek to include these terms into any agreement they sign. A good credit can be essential in advancing a composer's career and securing higher fees in future projects.

(a) Such credit shall be on a separate card, in the main credit roll in the Picture.

(b) Credit in the same form as set forth herein shall be provided in any paid advertising and posters for the Picture, wherever the full billing block for the Picture appears.

The "billing block" is the list of names on the bottom portion of the official movie poster. In the layout of film posters and other film advertising, the billing block is usually set in a highly condensed typeface. A successful composer can negotiate for a larger size name.

(c) Except as set forth above, any and all other characteristics of Composer's credit shall be at Company's sole discretion. No casual or inadvertent failure to comply with the provisions of this Paragraph 11 nor any failure by third parties to comply with the credit provision shall constitute a breach of this agreement by Company. In the event of any failure by Company to comply with the foregoing credit provisions, and upon written notice from Composer thereof, Company shall take reasonable steps to prospectively cure any such failure which is economically practicable to cure (i.e., no recall of copies).

An established composer can negotiate for a credit in advertising any time the director or principal actors receive credit.

13. Composer and Company are independent contractors with respect to each other, and nothing herein shall create any association, partnership, joint venture or agency relationship between them. Composer shall be fully responsible for all persons employed by it, in connection with its performance hereunder, whether as independent contractors or as employees, and shall be fully responsible for them, for all compensation and/or withholding taxes, worker's compensation insurance or other required payments in connection with such persons, except as otherwise specifically and explicitly provided herein.

14. Company may use, and permit others to use, Composer's name, approved likeness, voice and approved biographical material (which shall not be unreasonably withheld or delayed by Composer) in and in connection with the Picture, the Work, any project or product derived from the Picture, if any, and the sale, distribution, promotion and advertising thereof. Except as otherwise stated under this Agreement, Company and its assignees shall have the sole and exclusive right to issue publicity concerning the Picture and concerning Composer's services with respect thereto except for Composer's own publicity provided that there shall be no derogatory statements or references concerning the Picture or any party or entity associated with the Picture

15. (a) All notices and other communications from either party to the other hereunder shall be in writing and shall be deemed received when delivered in person or five (5) days after deposited in the United States Mails, postage prepaid, certified or registered mail addressed to the other party at the address specified at the beginning of the Agreement, or at such other address as such other party may supply by written notice.

(b) Composer shall execute any and all further documents that Company may deem necessary and proper to carry out the purposes of this Agreement.

(c) This Agreement contains the full and complete understanding among the parties hereto, supersedes all prior agreements and understandings, whether written or oral pertaining thereto and cannot be modified except by a written instrument signed by each party hereto.

(d) This Agreement is to be governed by and construed in accordance with the laws of the State of New York, applicable to contracts entered into and to be fully performed therein. Any litigation, action or proceeding ensuing out of or relating to this agreement shall be instituted in a court of competent jurisdiction (whether state or federal) in New York.

(e) Composer shall not assign any of its rights or obligations hereunder without the prior written consent of Company, and any purported assignment without such prior written consent, shall be null and void and of no force and effect. Company shall have the right to assign this Agreement at any time to any person or entity, provided that person or entity which assumes Company's obligations in a writing signed by such assignee's duly authorized signatory.

(f) The parties acknowledge and agree that Composer's remedy for any breach of a term of this Agreement by Company shall be limited to monetary damages at law. Composer shall not have the right to rescind this Agreement or to any equitable or injunctive relief or otherwise in which there would be an interference or prevention of Company's right to finance, produce, market, distribute or otherwise exploit any and all rights in and to the Picture.

(g) Provided that Composer has rendered services as stated herein and Composer is not in breach of any material term stated herein, Company agrees to provide a DVD of the Picture in its completed form in a professional format (preferably mini-DV or Video DVD) for use solely as a sample of Composer's professional work, not for any commercial use or distribution.

(h) All representations and warranties contained herein or made in writing by Composer in connection herewith shall survive the execution, delivery, suspension and termination of this Agreement and any provision herein.

(i) No waiver by either party hereto, or any failure by any party hereto to keep or perform any covenant or condition of this Agreement, shall be deemed to be a waiver or breach of any preceding or succeeding covenant or condition.

(j) If any part of this Agreement shall be held to be void, invalid or unenforceable, it shall not affect the validity of the balance of this Agreement.

(k) The parties acknowledge and agree that this Agreement may be signed in counterparts (with the counterparts deemed to be one fully executed document) either manually, by facsimile or optical image scanner (e.g., pdf) and such signatures shall be deemed as binding upon the parties.

Kindly indicate your agreement to and acceptance of the foregoing by signing the enclosed copy of this Agreement where indicated below.

Company: [PRODUCTION COMPANY NAME]

By: __________________________________

Print Name: ___________________________

Its: __________________________________

Composer: ____________________

By: __________________________________

Print Name: ___________________________

Its: __________________________________ 


***************************************************************************************************************************
THIRD AGREEMENT

PRODUCTION, MUSIC SYNC, MASTER USE & VIDEO LICENSE AGREEMENT

This agreement (the "Agreement") is entered into as of May 11, 2015 (the "Effective Date") by _________ LLC (the "Licensee") with principal offices at ______________, and ______ ________ (the "Composer/Producer") with an address at ____________.

Licensee and Composer/Producer shall each be referred to as a "Party" or collectively be referred to as the "Parties".

For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows:

1. Production: The Composer/Producer shall produce a recording of a pre-exisint musical composition titled "__________" (the "Song") written by Composer/Producer. That recording shall be hereafter referred to as the "Recording" and shall be includive of the Song.The Recording will feature the vocal performance of Ms. __________ ("Artist") who is featured in the movie titled "____________" (the "Movie"). The recording shall take place on a date and time and at a location approved by Licensee.

Since the Composer/Producer is retaining rights in the Recording, he or she needs to have a separate agreement with the Artist so the Composer/Producer and the Artist know their respective rights and obligations with regard to the use of the Recording outside the movie.

2. Non-exclusive License.

(a) Composer/Producer hereby grants to Licensee a non-exclusive license to use the Recording, including the Song, in the Movie in any manner determined exclusively by Licensee, and to distribute the Movie in all media now known or hereby developed, throughout the world (the "Territory") for the duration of the Term (as defined below), as well as in advertising, publicity, and promotion of the Movie.

Since this is a non-exclusive license, the Composer/Producer retains the right to use the Recording, including the Song, outside the movie and retain all of the income. In this case, the Composer/Producer even retained the right to license the Song and Recording for use in another movie.

(b) Licensee shall be permitted to edit or modify the Recording or perform post-production mastering alterations to the Recording without the prior written consent of Composer/Producer. Nothing in this Agreement requires the Licensee to use the Recording in the Movie and the Licensee may use the Recording in whole or in part in Licensee's sole discretion. All rights in and to the Movie shall be owned solely by Licensee, and Composer/Producer shall have no rights therein.

3. Video.
Composer/Producer hereby grants to Licensee the non-exclusive right to use the Recording, inclusive of the Song, in a video to promote the Movie (the "Video"), and to distribute the Video in all media now known or hereby developed, throughout the world (the "Territory") for the duration of the Term (as defined below).

In this case, the Licensee movie producer wanted to make a video including the Recording to promote the Movie.

4. Publicity.

Licensee shall have the right to publish, advertise, announce and use the Composer/Producer's name, approved likeness and bio in connection with Licensee's exploitation of the Movie or the Video.

5. Consideration.

As complete and exclusive consideration for the services rendered and the rights granted to Licensee hereunder, Licensee is obligated to pay Composer/Producer the sum of __________ ($____) (the "Composer/Producer Fee"). The Composer/Producer Fee includes her travel to and accommodations in New York City. Composer/Producer hereby acknowledges that Licensee has paid the Composer/Producer Fee in full.

In this case the Composer/Producer had traveled from L.A. to New York and recorded the Song for the Licensee filmmaker and the Licensee had already paid her fee by the time I was asked to do the paperwork.

6. Term.

All licenses and rights granted in this Agreement shall commence on the Effective Date and extend for the duration of the copyrights in the Recording, the Song and the Video.

7. Limitations.

Composer/Producer reserves all of its right title and interest in the Recording and the Song not expressly granted herein.

8. Credit.

Licensee shall accord Composer/Producer screen credit in the Movie, substantially as set forth below, with respect to the Recording and the Song:

"[Name of Song]"
Words and Music by ________
Performed by [Artist]
Copyright (P) © 2015
Produced and arranged by ________

The foregoing credit shall appear in the main credit roll in the Movie. All other aspects of such credit, including size and placement, shall be determined by Licensee.

9. Cue Sheet.

Licensee agrees to prepare an accurate music cue sheet for the Movie and the Video and file the cue sheet with ASCAP, with a copy provided to Composer/Producer, within 30 days after completion of the Movie.

In this case, ASCAP was the Producer/Composer's PRO.

10. Notices.

Notice in regard to this Agreement shall be delivered by certified mail at to each Party at the addresses listed above or to a new address provided by either Party.

11. Representation and Warranty.

Composer/Producer and the Composer/Producer represent and warrant that Composer/Producer is the sole author of the Song, that the Song is completely original and contains no samples or other third party created content; that there are no liens or encumbrances on the Song and that Composer/Producer and the Composer/Producer have the full right, power and authority to enter into this Agreement and to grant the rights agreed to be granted hereunder.

12. Indemnity.

Composer/Producer and the Composer/Producer shall at all times indemnify and hold harmless Licensee from and against any and all third party claims, damages, liabilities, costs and expenses, including legal expenses and reasonable counsel fees, arising out of breach by Composer/Producer or the Composer/Producer of any warranty, representation or agreement made by them herein.

13. Miscellaneous.

Notwithstanding any provision of this Agreement to the contrary, nothing herein shall be construed to create a partnership or joint venture between the Parties, to authorize either Party to act as agent for the other, to permit either Party to undertake any agreement for the other, or to use the name or identifying mark of the other, all except as it is specifically provided herein. Neither Party shall be construed for any purpose to be an employee subject to the control or direction of the other. This Agreement is binding upon and shall inure to the benefit of the Parties' respective successors and assigns. Licensee may not assign any rights or obligations under this Agreement without the express written consent of Composer/Producer, which shall not be unreasonably withheld or delayed. This Agreement contains the entire understanding of the Parties relating to the subject matter hereof and supersedes any prior understanding or agreements. This Agreement may not be modified or amended except in writing signed by each of the Parties. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its principles of conflicts of laws. This Agreement can be signed in counterparts.

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the day and year first written above


Composer/Producer _______________ LLC


___________________ ___________________________
Authorized Signatory

Name: ______________________

Title: _______________________


September 30, 2015

Freedom to Engage in Cultural Activities and Other Legal Issues in Busking



By David Ma

Busking has gained popularity in Hong Kong, which has yet to implement a licensing scheme for such solicitation. This blog examines various laws that impact the right of buskers.

Playing Musical Instrument and Obstruction

The Summary Offences Ordinance (Cap 228) (SOO) creates the below offences punishable by a fine of $500 or to imprisonment for 3 months:

• Under §4(15), it is an offence for any person to without lawful authority or excuse play any musical instrument in any public street or road save under and in accordance with the conditions of any such general or special permit as the Commissioner of Police in his absolute discretion may issue. (emphasis added)

• Under §4(28), it is an offence for any person to without lawful authority or excuse do any act whereby injury or obstruction, whether directly or consequentially, may accrue to a public place. (emphasis added)

Under Article 34 of the Basic Law, Hong Kong residents have the freedom to engage in academic research, literary and artistic creation, and other cultural activities. The courts have held that the restrictions of such freedom under the SOO are rational and proportional for the purpose of public safety.

While §4(15) mentions that a permit to play musical instrument in public street may be secured from the Commissioner of Police, no information is available on the Hong Kong Police Force website. In Wong Chung Sing (HCMA 92/2015), Judge Li criticized the obscurity of the permit application process and the lack of appeal mechanism. It was held that playing an instrument without a police permit would not constitute an offence if there was a "lawful excuse" to do so.

In relation to "lawful excuse", the Court of Final Appeal held in Yeung May Wan ((2005) 8 HKCFAR 137) that the prosecution must show that the defendant had no lawful excuse to obstruct before there could be a conviction under §4(28). A person who obstructs a place "cannot be said to be acting without lawful excuse if his conduct involves a reasonable use of the...public place". ((2005) 8 HKCFAR 137 at paragraph 42) When assessing whether the obstruction is reasonable, the protection given by the Basic Law, such as the freedom to demonstrate under Article 27, must bear substantial weight.

It follows that when considering whether there is lawful excuse in playing an instrument in a public place under §4(15), the court must consider the reasonableness of the act with reference to the freedom to engage in cultural activities under Article 34. The prosecution would only succeed if it could show that the busker acted outside the scope of the lawful excuse by causing excessive obstruction or annoyance. Unfortunately, it appears that not all police and prosecution are mindful of this balancing exercise in performing their duties:

• Wong Chung Sing, a busking musician, was convicted under §4(15) on three individual occasions in 2008, 2009 and 2015. (HCMA 357/2008, HCMA161/2009 and HCMA 92/2015) He appealed each time by referring to his rights under Article 34, but only succeeded in the most recent case in which Judge Li quashed the conviction on the basis that the Magistrate erred in imposing the prosecution's burden of proof onto Wong and did not give substantially weight in considering Wong's freedom to engage in cultural activities under Article 34 (HCMA 92/2015);

• So Chun Chau, a busking acrobat, was charged by the police under section 4(28) and appeared in the Magistrate's Court in 2010. The magistrate held that So's act of tossing a diabolo high up in the air was reasonable when considered in light of Article 34 and did not constitute obstruction under §4(28) (ESS19669/2010);

• In Yeung May Wan, the Court of Appeal doubted whether the police officers, prosecution and magistrate appreciated that unreasonable impediment must be shown before conviction of the obstruction charge under §4(28). The Court of Appeal endorsed such view and quashed the convictions of the defendants. (This was not a busker case, but was about a Falun Gong demonstration.)

Place of Public Entertainment Licence

Section 4 of the Places of Public Entertainment Ordinance (Cap 172) (PPEO) sets out that it is an offence for a person to keep or use any place of public entertainment without a licence granted under the PPEO. Under §2 of the PPEO, a "place of public entertainment" is defined as "any place...capable of accommodating the public...in or on which a public entertainment is presented or carried on", and "public entertainment" is defined as any entertainment to which the general public is admitted with or without payment.

The case of T v Commissioner of Police(CACV 244/2012) involved a participant in the International Day Against Homophobia Demonstration (IDAHO) performance, which included recital and chanting of slogans and dance to pre-recorded music. The performance took place on a temporary stage and the open space in front of it on a Causeway Bay street which was designated as a pedestrian precinct at the relevant time. The performance was stopped after police intervention on the basis that the performers were using a place of public entertainment without a licence. In the appeal to the judicial review sought by T, the Court of Appeal referred to the UK case of R v Bow Street Magistrates' Court ex p McDonald ((1996) 93(15) L.S.G. 30), which involved a busking guitarist in Leicester Square. In that case, the UK Court of Appeal held that a guitarist did not require a licence under the London Government Act 1963, as it was the City Council, instead of the busker, which had control over Leicester Square to which the public had free access. In T, the Court of Appeal found that as the IDAHO organizers did not have the ability to control admission to the dance performance. Therefore, the location where the performance took place was not a "place of public entertainment", and T was not required to apply for a PPEO licence.

It would appear that a busker does not require a PPEO licence to perform in public unless the busker undertakes control and admission to the area of his or her performance, which is unlikely and probably impossible in most circumstances.

Begging

Section 26A of the SOO makes it an offence for a person to beg or gather alms in any public place or street. There are other laws against begging in relation to specific locations, for example section 14 of the Bathing Beaches Regulations (Cap 132E) and the §27 of the Pleasure Grounds Regulations (Cap 132BC).

The UK case of Gray v Chief Constable of Greater Manchester ([1983] Crim LR 45) held that a busking guitarist in a passageway who received tips from passersby was not guilty of the offence of begging under the Vagrancy Act 1824. This was because the busker gave value for money, and passersby were not forced to deal with the busker. This suggests that buskers should be safe from prosecution under laws against begging.

Other Laws

There are other laws which impact the right of a busker to perform. For example,

• Section 5 of the Noise Control Ordinance (Cap 400) makes it an offence for a person in any public place to play any musical or other instrument or uses any loudspeaker or other instrument which produces noise which is a source of annoyance to any person.

• Section 25 of the Pleasure Grounds Regulations (Cap132 BC) prohibits a person to play an instrument or sing in any public pleasure ground (as specified in the Fourth Schedule of the Public Health and Municipal Services Ordinance (Cap 132) excluding bathing beaches) to the annoyance of others unless a written permit is obtained from the Director of Leisure and Cultural Services. No details on such a licence are available on the website of the Leisure and Cultural Services Department. It is unclear as to how "annoyance" will be interpreted, but the protection given by Article 34 of the Basic Law should be taken into the assessment.

• By-laws, such as §26 of the Mass Transit Railway By-laws (Cap 556B), §24 of the Mass Transit Railway (North-West Railway) Bylaw (Cap 556H), and §31 of the Tung Chung Cable Car Bylaw (Cap 577A) prohibit the singing, dancing and playing of musical instruments on any part of the premises of these transportations.

Conclusion

The introduction of a proper busker licensing scheme by the Government and public transit operators would bring Hong Kong into line with other international cities that promote this art form. Until then, buskers should tread carefully so that they do not end up on the wrong side of the law.

October 5, 2015

Music Licensing Update



By Barry Skidelsky

On September 22, 2015, the Department of Justice requested further comments in connection with possible ASCAP and BMI consent decree reform (http://www.justice.gov/atr/antitrust-consent-decree-review-ascap-and-bmi-2015). On that same day, the Congressional Research Service released its report entitled "Copyright Licensing in Music Distribution, Reproduction and Public Performance" (https://www.fas.org/sgp/crs/misc/RL33631.pdf).

Both provide a useful outline of key concerns in music licensing law, and suggest where that piece of law might fit into the larger puzzle known as copyright reform. Meanwhile; Congress, the courts, and various stakeholders in the music business continue to struggle to apply existing copyright law to new and emerging technologies, ever hopeful that our country's historically balkanized approach to music licensing and other copyright issues may be modernized and simplified.

An experienced attorney and consultant, Barry is founder-owner of a nationally prominent private practice focused on representing and counseling individuals and entities directly or indirectly involved with traditional, online and mobile media, entertainment, advertising, marketing, telecommunications and technology, both domestically and abroad. Barry, a Berklee trained musician and former radio broadcaster, co-chairs the NYSBA EASL Television and Radio Committee. He also practicesinter alia before the Federal Communications Commission in Washington, D.C.
Contact: bskidelsky@mindspsring.com or 212-832-4800.

November 21, 2015

The 11 Contracts Every Artist, Songwriter & Producer Should Know - Live Performance & Touring

By Steve Gordon

Steven R. Gordon, Esq. (steve@stevegordonlaw.com) is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels, music publishers as well as TV and film producers, and digital music entrepreneurs. He also provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is the author of The Future of the Music Business (Hal Leonard 4th ed. 2015, futureofthemusicbusiness.com/)

The author gratefully acknowledges the assistance of Ryanne Perio, Esq. in the preparation of this blog. Ryanne is a litigation associate at WilmerHale law firm. He would also like to thank his intern Jena Terlip, 2L at Benjamin N. Cardozo School of Law, for her research and editing assistance.

The seventh installment of this 11-part series on basic music industry agreements focuses on the business of live music performances. We will focus on what an indie musician faces when starting out, as well as artists who are more advanced in their careers. We will discuss how it really works in the trenches, and how to navigate over that rough terrain for the best outcomes.

When an indie musician is just starting, playing for no money can be good exposure. Eventually, however, you will want to make money from your music so you can quit your day gig. Live performance is one of the income streams that can support indie musicians, in addition to other streams such as record sales, merchandising, synchronization placements and public performance royalties.

Part I of this blog is for artists just starting out, as well as those emerging as successful live bands or singer-songwriters. Part II discusses artists who are successful enough to work with booking agents, and includes an agreement from a booking agency's standard-form contract with a venue that is designed to be good for the artist and the agent. I add comments showing the changes that the venue would probably request. Part III deals with the way the Internet has converged with live performance to generate new revenue streams for both artists and venues, and includes a new "Revenue Share" program at Smalls nightclub in Manhattan, which offers artists the opportunity to make money by allowing off-site fans to listen to their live performances on demand.

PART I: NEW AND EMERGING ARTISTS

Passing the Hat - Tip Jar

There are many venues--such as small clubs and restaurants--that will allow musicians to book sets and entertain diners or drinkers for free, and then "pass the hat" after their sessions. For tips from Nashville based singer songwriter Jennifer Sullivan (www.facebook.com/jennifersullivanmusic/) on maximizing contributions to the "tip jar," see her comments in italics below. Performing in public places for gratuities, such as on the street or in subways, or "busking," is another way to make money from live performance. In fact, New York City has a special program that allows musicians to busk legally. Performers can audition for "Music Under New York (MUNY)" (blog.sonicbids.com/taking-it-to-the-streets-nyc-busking-basics), an official program that sets up schedules of performances and locations for MUNY members.

Jennifer's thoughts on the tip jar:

"I make an average of $50/hour in tips at these kinds of gigs. (I've never busked, so this only applies to live club performances.) The longer the gig (4 hours is typical for me now) and more frequent (I perform about 5 gigs a week) the better! Here's a few ways I maximize my tips.

1. You can't expect people to come up and give you a tip. Don't be afraid to ask for it! For example, "Thank you guys so much for being such a great audience! I'm going to come around and shake hands, see if you guys have any requests, and pass around this tip jug. This is how I/we make a living on Broadway, so if you like what you're hearing, please show your support and leave a tip, and if you don't like what you're hearing, put some love in the jug anyway and I'll take some lessons!" Usually makes people laugh.

2. Be funny and sincere. If people are being rude/awkward, just make them give you a high five at least and maybe you'll at least brighten their day. People remember things like that, and don't take it personally. Move on to your next fan. Which brings me to...

3. It's important when starting out to use these unpaid gigs as opportunities to make fans. Have an email list, have business cards ready, and make demos of your music. If you have CDs, always take them with you when you pass the hat. People are more likely to buy things they can touch and see. I sell mine for $5, and I notice people end up buying a couple extra to share with their friends. I definitely make extra income at gigs by selling CDs, and people have something to take away with them.

4. Having a CLEAR tip jar is key! Make your own with a gourd or a huge champagne glass or regular old bucket, decorate it, write TIPS on it. Make sure your tip jar is very clear and right in front of the stage, maybe on a stool. THERE IS NOTHING WRONG WITH WORKING FOR TIPS. I even ask for tips at my paid gigs, why not? It helps you make a lot more money, and as indie musicians, we need as much as we can get! But don't be desperate. Be charming, funny, and confident.

5. Last but not least, the MORE songs you know, the better chance you will make good tips. Be humble - if you're starting out and want people to hear your songs, that's great and all; but if you want to be a professional musician, you MUST be a good entertainer. And that means playing cover songs and requests. Know your audience and play to THEM in order to make the most tips. I ask for $20 per request. Know what songs work well with your original repertoire, and know your venue. Cover songs and sing-alongs are a great way to make fans AND tips!"

Dealing with Venues Directly

Beyond passing the hat, there are thousands upon thousands of small clubs in every city (and most towns) that actually charge admission to listen to live music. Some small jazz and singer-songwriter oriented clubs will pay non-established musicians a fistful of cash to show up for an evening (think $50 - $100 for a single musician and $100 to $250 for two or three, plus often a bar tab, and perhaps a free or discount for meals.). Other clubs offer a split at the door (i.e., money from fans who pay to see particular artists). Often they offer 40% to 60% in favor of the artist, and the venue keeps 100% of the revenue from the bar. Some clubs require 100% of ticket sales from the first certain number of people who come to see the band. Other clubs will deduct expenses for such things as sound and amps, in-house production staff, and even refreshments in the green room. If it sounds like this presents opportunities for clubs to be less transparent in paying artists, you would be correct. And if dealing with clubs directly sounds like a tough way to make a living, you would be right. Moreover, some clubs are worse than most, and others are total nightmares for artists. For instance, certain clubs will take a band's credit card at the beginning of the night -- unless a certain number of people pay at an inflated ticket price determined by the venue, the club will charge the band's card to make up the difference. For the details of good, bad, and very bad club deals, read "Should You Pay To Play? The Worst to Best Club Deals In the World" by Ari Herstand (www.digitalmusicnews.com/2014/04/16/should-you-pay-to-play) \. The article is based on a wealth of experience.

Jennifer's comments on clubs that require the artist to sell a minimum number of tickets:

"Okay, fuck this. I hate this style of promoting, it's such bullshit. Unless you are a highly established act, these kinds of performances make no money. Or unless you are with a legitimately good agency, but they don't usually sign you unless you have a proven track record of high profile live performances already under your belt. So getting started, usually how this works:
You want to play at "Darlene's Grocery." Darlene's has a 3rd party booker that books their Friday and Saturday nights, so you contact them. The booker agrees to book you, and your deal is they get the first 10 covers ($10/cover = $100) which they split 50/50 with Darlene's. You make 100% after that, which if you're a new artist just starting out, means you'll probably bring 8 people to pay $10 and you'll make zero money. And you might get one free drink at the bar, if you're lucky. And you'll do this so many times and keep failing and realize that this kind of deal is a waste of time."

Jennifer's comments on whether an artist should ever play for free:

"KNOW YOUR WORTH!!! If you are truly talented, driven, confident, humble, professional, and friendly, you can get paid gigs. Especially if you provide your own little PA / sound system, many dinner places and private events will hire you $300+ to provide your own sound and play for a few hours. Know your CRAFT! You need to be able to play 4 hours worth of original and cover music to be a full time, independent (unsigned) working musician. Until that big break comes along and you get signed and get to just play your music for stadiums of adoring fans, this is how you get started. Working your butt off at gigs. It ain't easy! But don't short yourself on what you can do. If you play an unpaid gig, agree to at least a bar tab and MAKE SURE that the venue has a built-in audience. If they expect you to bring all the people AND not pay you, there's a problem. One way to get around these annoying 3rd party promoters is to find the direct contact to the club and offer them a better deal. Instead of them splitting 50/50 with a booker and the venue only making $50, offer them a 70/30 deal, where at least if you bring $100, instead of seeing 0 you get $25!"

Promoters

One way a musician can enhance his or her chances of actually making some money--or increasing the amount of money he or she is likely to make--is working with a promoter rather than booking a club directly. This is due to the following:

Promoters know the ropes, meaning they often make better deals for artists because of their knowledge and experience. Venues are more likely to book artists represented by promoters because they trust the promoter's musical tastes from prior dealings and know that the promoters would not waste their time with artists who cannot draw a crowd; most importantly, promoters promote shows -- they use all of their skills and experience to bring the largest possible crowd to their artists' shows.

However, some promoters should be avoided. As Ari discussed with me in correspondence about this blog, there is an "entire new wave of 'promoters' who actually don't promote at all except upload one post on Facebook and rely on the artists to sell all their tickets." Ari also warned about "pay to play" promoters. These promoters require bands to pre-purchase tickets and then they split the money with the venues without guaranteeing any money for the artist. Since the promoter has already made money, there is little incentive for it to do much to promote the show.

Below are two interviews with legit promoters who work with both new as well as emerging artists. Before reading, a word about booking agents: like promoters, they book shows for their musician clients. However, booking agents usually only work with artists who have established followings, whereas promoters such as those interviewed for this blog can help you now.

We start out with an interview with a staffer at an indie promotion company who preferred to remain anonymous in order to provide full disclosure. The second interview is with seasoned promoter (and publicist) Fiona Bloom.

Interview with an Indie Rock Promoter

1SG: Tell us briefly about you and what you do.

I work for a small concert promotion company based in New York City. The company originated due to a growing need for a promoter in the local scene who would work solely on the agenda of nurturing rising talent. Although we work primarily with local talent, we also pride ourselves on having worked with talent both nationally and internationally, including bands from Japan and Sweden.

2SG: In general, what does a promoter do? And how is it different than a booking agency?

A promoter brings a show to the attention of the public and gets people to come by through a variety of means including social media, hand-outs, posters and flyers, and gets media attention and press for the event. A booking agent's main function is to book venues for an artist.

3SG: As a promoter, what unique things do you do for the artists you work with?

My promotion company serves as a platform for local bands to gain greater exposure, and to help those bands play bigger and better shows as long as they are talented and hardworking. The company primarily exposes bands to the music industry, to media, to new fans, and to other great acts in the New York region. In addition to the above, we work with prestigious mid-size venues in Manhattan, such as Gramercy Theatre and Irving Hall, and also promote shows at more intimate venues in Manhattan and Brooklyn.

I am the primary booker and promoter for my company. My role ranges from discovering new talent to serving as the liaison between the venue and the artist. If I decide to organize a show, I am responsible for setting dates with the venue, negotiating financial terms, and making sure the talent shows up on time--whether it's one band or six. I am also responsible for promoting the show on my company's website, on social media platforms, and at the venue. I make sure that all bands are made aware of their responsibilities before the show, including draw requirements (how many tickets they must sell before receiving a portion of the proceeds) and backline provisions (fees that the venue charges for equipment such as a microphone, sound amplification, instruments and security). In addition, I am also responsible for the show running smoothly, which includes handling any problems that may arise during load-in, show time, and load-out. I also "settle up" with the venue--meaning I pay for any expenses incurred, which are always agreed upon prior to the show--and pay remaining monies to my company, as well as to the artists after the show.

4SG: What kind of artists do you work with?

My company strictly books and promotes rock and metal bands. We feel that over the years, a void has grown in the rock and metal genres--at least in New York. So, we strive to support the talented bands pursuing a career in this genre. Our goal is to bring rock and metal back to New York City. My company also mainly works with "baby bands," which usually means they are not yet signed to a label. However, the range of experience these bands possess can vary from the recently-formed to the very experienced. We offer the more experienced bands great opportunities, such as getting them opening-act positions for nationally well-known bands.

5SG: Does your company have contracts with the artists? If not, do you confirm terms by email, or is everything done on a handshake basis?

We do not have formal contracts between the company and our artists. That being said, all of our communications with the artists are confirmed in writing; there are no oral agreements. Issues are avoided by simply making the bands aware of everything in writing ahead of time.

For example, if I were hosting a show, I would secure the talent for that show after securing the venue. This ensures that I will be able to convey, in writing, the requirements to the artists--I let the artists know, in writing, what the venue charges for room rental (if applicable), for sound, for lighting, and for security. I transmit, in writing, all of the expenses up front. That way, I can give the artists a presale arrangement--a ticket amount that the artist should sell prior to the show to ensure expenses are accounted for and to ensure the artist also gets paid. The number of tickets that must be sold presale will naturally vary depending on the price per ticket and the venue. And, for some local venues, the expenses are low enough that presale is not necessary. But in any event, everything will be in writing.

The most important concept to understand is that we maintain close relationships with the bands we work with. My company is not a "one-and-done" promotion company; we often have a continuing relationship with our artists. There are many artists we work with over and over again because they are hardworking, talented, and we have a mutually beneficial relationship with them. A certain level of trust is built so that a formal contract becomes unnecessary. While the same cannot be said for a band we are working with for the first time, we are still able to avoid misunderstandings by having everything in writing.

I think it's important to point out that we never require bands to work with us exclusively. In fact, we encourage bands to work with multiple local promotion companies. This will give the bands greater exposure. The only requirement we have regarding exclusivity is we ask that the band have at least three weeks of down time in between shows. For example, if Band X plays a show in NYC with another promoter on Week 1, we will not book Band X to play one of our shows in NYC until Week 4.

6SG: Same question regarding venues.

We usually do not have formal contracts with the venues, but, similar to when we work with artists, there are almost always emails confirming all terms. When working with smaller venues, all expenses are laid out when we secure the venue for the show date. This usually occurs two to three months before the show for a smaller venue, and four to five months in advance of a larger show. All communication with the venue is in writing, and we determine how much it will cost to rent the venue and how much it will cost for venue staff (i.e., lighting, security, door person). During these communications, we also negotiate whether or not there is a bar guarantee for the venue, meaning the minimum amount of money the bar has to make for the night. This is important because we often host shows on weekend nights, which can often result in a high bar guarantee ($1,500 to $3,500 for the evening). If we are not prepared for this, it is very easy to fall into a situation where the bar guarantee is not met by audience consumption and we end up having to pay the remainder out of pocket.

This leads me to discuss the reason local bands feel it is useful to have a promotion company running the show. Promoters are the cost-bearers. Anything and everything that could go wrong with a show and result in costs incurred gets placed directly on the shoulders of the promoters. Therefore, if bands decide to organize a show without a promoter, the bands can often incur these expenses and make very little money, if any, by failing to ask the venue the right questions. For example, there are many local bands who have fallen prey to excessive bar guarantees because they just didn't think to discuss with the venue whether or not a bar guarantee exists and who bears the cost of paying off the remainder if the minimum is not met. The promoter is the advocate for the artist by knowing the right questions to ask and negotiating a fair deal.

7SG: Can you tell us about the money--what the venue gets, what the artist gets and what the promoters take?

We typically make 40% of sales at the door, after expenses. The artist gets the other 60%. If the show is a flop, we ensure the bands get paid or at least don't wind up owing money to the club, and we bite the cost and pay the club the unrecouped expenses.
Our larger shows work in a similar manner--the company will only get paid after the venue's expenses are paid. Typically, we retain a 40% profit for these shows as well, and the artists receive 60%.

What the artist will actually make varies depending on the show. At a small local show (think "dive bar") expenses for the venue range from $250 to $350. Let's assume the expenses are $250, at $10 per ticket; thus, a band has to sell more than 25 tickets to break even. If they don't, neither the band nor the promoter gets paid. A band in the headlining slot(s) will generally sell around 35 tickets, and that may generate $400. But due to expenses there is no guarantee they will actually make money, and this is always conveyed to the bands before they agree to play a show.

At a larger show at a mid-size venue, the payouts are better because ticket prices are higher and more tickets are sold. Presale requirements for this type of show range from 75 to 200 depending on the band's slot in the show. At this type of show, the opening and closing bands will usually make $300 to $400 for the night, direct support bands will make $400 to $600 for the night, and the headliner will make $800 to $1,000 for the night.

When there is a promoter on the show, the venue does not pay the artist. The promoter(s) receive the payment for the show, then must distribute the payment to the artists, and then finally gets to pay itself.

8SG: Tell us about Sponsorships. Can an artist make more money if you get a sponsor?

Everyone makes more money with sponsors, but they are very hard to secure and my company has not been able to work with them in a long time.

I do know that securing a sponsor for the show results in a huge increase in pay to the bands. The amount of the sponsorship will depend on (1) the size of the venue, (2) whether the venue has an existing arrangement with the sponsor's brand, and (3) whether there is a requirement for a certain amount of product to sell at a show, along with varying other factors. Nevertheless, a sponsorship can really make or break a show. For example, most music festivals are only able to exist because of arrangement with one or more sponsors.

9SG: If you do get sponsorships, do you do contracts or just an email correspondence confirming terms?

As I said the company hasn't worked with sponsors in a long time so I don't have personal knowledge whether there were any contracts.

Interview with Fiona Bloom

1SG: Tell us briefly about you and what you do.

I own a branding/PR agency called The Bloom Effect--we offer a plethora of services including social media, publicity both traditional and digital, international consulting, event promo, product launches and shopping artists to record companies and publishers. Our specialty is looking after international acts in the U.S, and also giving them a platform for their debuts and performances.

2SG: In general, what does a promoter do?

A promoter should wear many hats. We work to secure talent, which initially involves researching and being "up" on all the hottest bands, as well as knowing the competition and what's happening in the music scene during the timeframe we're looking to bring in an act. We also publicize and promote talent via the usual methods of general publicity--print, digital, radio, local tv and social media--as well as create some visuals for the show or tour.

Promoters should also do text campaigns, email blasts and newsletters to their network or following to promote the show. In addition to this, my company offers ticket giveaways to radio stations and blogs, and allows for guest lists for VIP's and industry personnel where applicable. Furthermore, we work with other organizations to insure more ticket sales and the overall promotion of the venue and of the show.

A good promoter should have access to all venues and contacts in the various markets where they work. They should also have great relationships with artist managers, agents, and other live promotions companies. Great communication skills and the ability to follow-up with and maintain relationships are also key.

Personally, I work with all kinds of artists and in all genres of music. In fact I always like to say there are two genres--Good and Bad, and I work with the Good! Promoting has made my life more colorful, and there's variety to everything I do; I never treat any two projects the same. There is a set template of doing things, but the formula and ingredients change.

3SG: When you act as a promoter, what unique things do you do for the artists you work with?

Let's just say that in #2 I answered that because probably most promoters don't go all out like I do.

4SG: What kind of artists do you work with?

I try to work with great artists. The artists I work with must be very original, and they have to be pretty amazing live! Everything from DJ's to R&B, Hip Hop, Soul, Rock, Reggae, Folk, and Jazz--I've done it all, and I love all genres and all styles.

5SG: Does your company have contracts with the artists? If not, do you do email correspondence confirming terms or is everything done on a handshake basis?

It depends on the work. If I'm producing several shows with an artist then yes, we have contracts with the artists. If it's a one-off then we generally have an invoice for my services or an email confirming all of the terms for my services.

6SG: Same question regarding venues.

With the venue I have an offer sheet with all of the terms completely laid out with backline, tech riders, comps, guarantee versus door, bonus after X amount of revenue reached, the merchandising agreement, and anything else discussed.

7SG: Can you tell us about the money. Do you put up money to rent venues? Do you pay for any expenses such as travel or equipment rental? Do you work on a flat fee basis or a percentage? How much money does the artist make - if it's a percentage, what is the percentage? And what is it a percentage of? For instance, is it a percentage of ticket sales? How much does the venue make?

I try not to put up my own money. If there's costs involved, I work with vendors or sponsors who will pay for them, or an investor who takes it off the back-end. Sometimes we pay for hotels, MC's to host the show, and some equipment--although I like to get the equipment donated by the brand.

Depending on the specific deal and its outcome, I work on either flat fee or a percentage. However, I prefer the former.

The Artist either makes their guarantee, which can be anything you worked out beforehand that makes sense with the size and capacity of venue, or a percentage, which is usually anywhere from 60% to 75%, or on rare occasions, 80% of door. This percentage is compiled from ticket sales minus any venue expenses such as sound and/or security and backline costs. It all depends on what kind of deal and the sorts of terms you have.

The venue generally doesn't survive off of door sales, which are generally considered "extra" for them. Rather, the venue makes their money from the liquor, bar, and food costs for the night. Promoters and artists do not share in these costs.

8SG: Do you ever get sponsorships for shows? And if so how do you find them, what do they want from the artist or the show, and what are they willing to pay?

Yes, I love having sponsors. They help with financial costs and expenses as well as promoting the show, creating fliers and posters for the show, and the like.

I find sponsors by contacting like-minded brands. By "like-minded," I mean brands that attract the same demographic as the artist I am working with, have a "hipness factor" with said demographic, and who have worked in the area where the show will be held. By doing this, we can capitalize off of the good will, history, and interests of the brand.

I find these brands by researching them online (namely their Twitter, Facebook, or LinkedIn profiles), or through industry contacts, conferences, and referrals. Usually the brands want the artist to promote their shows hard, shout out the brand's name a few times, and, if the brand is clothing, shoes, or liquor, to wear the brand. Brands and sponsors can pay up to $5,000 or more a show; it depends on the market, the show's date, and how big the audience will be.

9SG: If you do get sponsorships do you do contracts or just email correspondence confirming terms?

Any work I do with sponsors will definitely be contractual. These are professional businesses we're dealing with who are a lot more conservative than the music industry. Thus, the agreements are always formal.

10SG: How can potential clients get in touch with you?

I'm always open to receiving new clients and it's very easy to get in touch. Find me on www.thebloomeffect.com. I can also be contacted directly at fiona@thebloomeffect.com
I'm open to phone, and potential clients can get in touch with me at 646-764-0004. Finally, I'm all over social media @fionabloom.

PART II : ARTISTS WORKING WITH BOOKING AGENTS

As noted above, booking agents work almost exclusively for artists with established followings. To do this, they usually negotiate with in-house "talent brokers" at the venues. Generally, booking agents negotiate a guaranteed amount of money for their artists, and the artist will occasionally earn more if they sell more than a certain number of tickets. Pasted below is a booker's standard agreement with venues. The italicized comments explain how the agreement is favorable to the artist and the changes that a venue will usually request.

PERFORMANCE ENGAGEMENT AGREEMENT

Date: October 1st, 2015
THIS CONTRACT for the personal services of the entertainer(s) on the engagement described below is made between the undersigned Promoter of Entertainment (herein called "Promoter") and the Artists' Representative (herein called "Agent"), designated below.

Promoter: ________, Hong Kong

Agent : _____ , NY, NY USA

The Artist is engaged in accordance with the terms and conditions on the face hereof. The Artist, by its undersigned leader, represents that the Artist has agreed to be bound by said terms and conditions. Each member of the Artist may enforce this agreement.

1. Artists, Place and Dates of Engagement:
[Name of Artist]
Place: TBD-¬‐
Date: December 19th, 2015 4:30 pm and 8:00 pm (two shows)
* Hours of Engagement: 100 minutes.
The venue would probably want to clarify that each show will be 100 minutes.

2. Compensation and Payment terms: The total compensation for services of the Artist
and flight travel expenses for the above is USD$35,000 (this is the net amount, free of taxes)

The initial deposit of US $17,500 is due upon signing the contract (non-¬‐refundable), No later than October 10th, 2015 to purchase air tickets to and from Hong Kong.
And the Balance of $17,500.-¬‐ is due on December 1st, 2015.
The Promoter will insist that the second payment will be contingent upon the Artist actually showing up and playing the gigs. So they will insist on changing December 1st to December 19th and specify that the second payment will be paid upon completion of the second show.

Payment must be made in cash or certified funds. If payment is not made as provided herein, Promoter is responsible for all costs and expenses, including, but not limited to, attorneys' fees and legal expenses incurred by the Artist in collecting the amount owed, whether or not suit is commenced. Said costs, expenses and attorneys' fees shall also include without limitation any such costs, expenses and fees in any proceeding under any present or future bankruptcy act or state receivership.

The Promoter would probably request an additional provision along the following lines: "If, for any reason, Artists cannot or does not perform due to no fault of Promoter, Artists shall refund the initial payment to Promoter no later than December 20, 2015."

DIRECT DEPOSIT BANK WIRE Instruction.

Please wire transfer the Deposits to the following account.

Account Name: ______
Bank Name: ______
Account Number: ________

3. Additional Terms and Conditions:

Promoter Agrees to Pay and Artists Rep. Agrees to ACCEPT the Guarantees set forth in this contract, plus, Artists Rep. also agrees to pay AIRFARES for all its members and crews of the ARTISTS.
The Promoter will want to clarify the exact additional amount that it will have to pay for the Artist's band, and it will want to know exactly what "crew" are coming and the reason for them coming at all.

Promoter agrees to provide First Class HOTEL accommodations, plus INTERNAL Ground. Hotel requirement details will be provided later.
The contract should make clear that this is for two nights. That clarification would be for the benefit of both parties, as it would avoid misunderstanding and a possible dispute.

Promoter shall provide and pay for First Class Sound and Lights, First Class Backline, and Any and All Rider Equipment.
Artists shall arrive in Hong Kong, no later than December 18th 2015. (Detailed Travel itinerary will be available on a later date)

4. Cancellation: Except as provided herein, this agreement may not be canceled for any reason or at any time by Promoter. Payment is due according to the payment schedule set forth above even if the event for which the Artist was retained is canceled for any reason. Promoter understands that this is a personal services contract and the Artist will not be offering its services to anyone else for the hours on the date of the engagement set forth above in reliance on this agreement to perform for the Promoter.
The venue will insist that the Artist cannot cancel the performance, and that if the Artist fails to perform for any reason, he or she will not be paid the second payment.

5. It is agreed and understood that the Promoter shall be responsible for the safety and security of the Artist and the Artist's representatives, crew, guests, their baggage and equipment for the duration of the engagement.
The venue will insist that the Promoter is not responsible for the actions or omissions of 3rd parties. So if a cabdriver gets the Artist into an accident, the Promoter can be held responsible

6. All artwork and/or use of the Artist's name/likeness is to be approved by the Artist.
The Promoter may want to insert a clause that if it provides artwork for the Artist's approval and the Artist does not notify the Promoter of disapproval within a certain number of days, approval may be assumed.

7. It is agreed and understood that this contract is only binding for a live performance. The ARTIST reserves the right for his/her merchandise and any other rights outside the field of live entertainment including without limitation any so-¬‐called audio records (in whatsoever formats) and/or audio visual devices (in whatsoever formats) embodying the Artist's performance whether in whole and/or in part.

8. It is agreed and understood that the Promoter shall provide and pay for all catering requirements for the band and crew. Artist/Artist's Tour Manager will advise Promoter of these requirements.

9. The Promoter agrees to provide, pay and be responsible for all visas, work permits, driving permits and other documentation, including payment of visa consulate fees that are necessary for the Artist to undertake the engagements herein. Any payments due are to be paid directly to the Artist or as advised by the Artist's Tour Manager. Once all the documents are prepared by the Promoter. It is is the Artist's responsibility to apply and obtain the visa stamps at the consulate in his/her own country of domicile.

10. Relationship: The Artist is retained by the Promoter only for the purposes and to the extent set forth in this agreement, and the Artist's relationship to the Promoter during the period of their engagement shall be that of independent contractors and not that of Employees of Promoter for any purpose whatsoever.

11. Jurisdiction: In accordance with the laws of the State of New York, the parties will submit every claim dispute, controversy or difference involving the entertainment services arising out of or connected with this contract and the engagement covered hereby for a determination and said determination shall be conclusive, final and binding upon the parties. In connection with the foregoing, the parties do hereby consent to the jurisdiction of the courts of the County of Manhattan, State of New York, USA.
In this case, the Promoter is in Hong Kong, and will probably argue that the jurisdiction and governing law should be changed to Hong Kong, as it is putting up the money for the Artist.

12. Recording: No performance or engagement shall be recorded, reproduced or transmitted from the place of performance in any manner or by any means whatsoever, in the absence of a specific written agreement with the Artist relating to and permitting such recording, reproduction or transmission.

13. Force Majeure: If a performance is prevented, rendered impossible or infeasible, by sickness, inability to perform, any act or regulation of any public authority or bureau, civil tumult, strike, epidemic, interruption in or delay of transportation services, weather, war conditions or emergencies, or any cause beyond the control of Artist, it is understood and agreed that there shall be no claim for damages by either party to this Agreement and Artist's obligation as to such performance shall be deemed waived. Provided, however, if such inability is caused or contributed to by Promoter, Promoter's obligation to make payment as provided in paragraph 6 above shall not be waived and Promoter shall be liable for the amount due and owing Artist.

14. Indemnity: Promoter agrees to indemnify, defend and hold the Artist harmless from and against any and all claims, costs or liability for damage, injury to any person or property during Artist's engagement, including time of set up and take down.
The Promoter will want the indemnity to be mutual.

WHERE AS, the AGENT, in signing this contract himself, or having same signed by a representative, acknowledges full authority and responsibility to do so and thereby assumes liability for the amount stated herein. and NO deposits will be returned.

WHERE AS, the Promoter shall conduct all its official communication to the Artist through the AGENT.

AS WITNESSED HEREOF THE PARTIES HERETO HAVE HEREUNTO SET THEIR HANDS THE DAY AND YEAR FIRST ABOVE WRITTEN.


PROMOTER: ______

___________________
Authorized signatory


AGENT ______

____________________
Authorized signatory

III: INTERNET'S IMPACT ON LIVE PERFORMANCE

Part III deals with the way the Internet has converged with live performance to generate new revenue streams for both artists and venues. As an example, we will focus on the new "Revenue Share" program at Smalls nightclub in Manhattan, which offers artists the opportunity to make money by allowing off-site fans to listen to their live performances both simultaneously and on demand.

Immediately below is my interview with owner Spike Wilner. The interview took place in 2014 and originally appears in the fourth edition of my book, The Future of the Music Business (Hal Leonard 2015, www.amazon.com/The-Future-Music-Business-Technologies/dp/1480360651\). In fall 2015, Spike launched the Revenue Share program. Following the interview is the actual contract that we drafted to implement the Revenue Share program.

Interview With Spike Wilner, Jazz Pianist And Co-Owner Of Smalls Jazz Club In NYC

Spike Wilner is an accomplished jazz pianist and the co-owner of SMALLS Jazz Club in New York City's Greenwich Village. He also has been using the Internet to expose the artists who play at SMALLS and their music to a worldwide audience by simulcasting live shows every night (click on "live video" at www.smallsjazzclub.com/). In addition, over seven years ago, he started creating an archive of recordings of the live music performed at the club. This interview provides Spike's experience with expanding SMALLS' audience by using the Internet, at he plans to do next, and his vision of the future.

SG: Give us a brief description of what happens at SMALLS, that is, the music and the artists featured there and what folks can expect if they visit the club.

SW: Smalls Jazz Club is generally open from 4:00 PM to 4:00 AM, with some exceptions. Normally we have 3 bands per night. We do two, two-set shows and then an "afterhours" set and then a jam session at the very end. Jam sessions are an important part of Smalls and there's traditionally a jam every night of the week quite late (sometimes not even starting until 2:00 AM). We also have afternoon jam sessions on Friday and Saturday. On Wednesday in the afternoon we host a tap dance jam session and the tap community comes out for that. On Wednesday and Thursdays we do a 9:30 PM "main show" which usually feature an important or famous musician or band. The same on the weekend but it starts at 10:30 PM. Our "afterhours" shows start either around midnight or 1 AM and are all seasoned veteran players hosting. Sundays we are open all day with a vocal workshop at 1PM, a showcase show at 4PM, a duet show at 7:30 PM and then at 10PM we have the legendary Johnny O'Neal who is in a permanent residence with his trio.

Smalls has a "no reservation" policy, first come first serve. Our cover is $20 until afterhours and then it's $10. We have a one-drink minimum for those seated or at the bar but standers in the back don't have to buy a drink. It gets crowded and the vibe changes as it gets later. The afterhours is the coolest vibe and not for everyone. But the music is always great at Smalls, from the beginning of the day to the end.

SG: You have been experimenting for some time now with harnessing the power of the Internet to create a broader audience for the music and artists who play at SMALLS. You are now simulcasting every show at SMALLS on the Web. Tell us more about your live simulcast including how you implement it, how many people are tuning in and the feedback you have been getting from fans and the artists themselves.

SW: I remember in my Jazz history that John Hammond, the great record producer, was driving to Chicago when he picked up a radio broadcast live from a Jazz club in Kansas City. The music blew his mind and he turned his car around and drove to Kansas City to sign whomever the artist was. It turned out to be Count Basie and the rest is history. What fascinates me about that story is the idea of a club putting a radio wire to transmit to the world. I wanted to do this and used the Internet. We started live streaming about seven years ago with a very simple system. As the years progressed, the technology for live streaming has grown in leaps and bounds. Now it's possible for anyone to very inexpensively create their own "television studio". We began to generate an enormous audience world wide, with Jazz fans checking in from literally all parts of the globe. I was in Italy last year and it shocked me how famous Smalls has become internationally. I attribute this to the Internet and doing a live broadcast every night of the week. The other thing is, I'm an archivist and firmly believe that the music being played nightly at Smalls will be of historic importance to future generations. Therefore my mission has been to record every single show and have it organized by a date, who the leader was and who was on the date. First thing I did was to install a recording device and began recording. This has evolved over the last seven years but we are currently up to about 8000 recordings in our library, which now includes our HD video.

SG: Recently you had a crowd funding campaign. What were your goals, did you succeed and what challenges did you face?

SW: Our goal with the crowd funding campaign was to raise money for new equipment for our live streaming (ie computers and cameras) as well as to buy a new piano. We were successful in this and hit our goal. We did buy a new Steinway for the club and installed an entirely new and up to date streaming system and in-house recording studio.

As far as the crowd funding experience - my thoughts are that it is a terrible way to fund a business. For one thing, you tap the good will of everyone that likes or supports you. Secondly, you can't do it again - it's a one-time shot. The other thing that nobody talks about is that if you do get your money there this huge tax liability at the end of the year in the form of a 1099. If you don't properly prepare for that and spend all the money then you're going to get hit. Furthermore, Indiegogo took a big chunk in fees. I don't like crowdfunding and hope it's just a passing fad.

SG: I understand that you would like to use the Internet to monetize your archive of recordings of the shows performed at the club in the last 7 years and share revenues with the artists.

SW: My idea is to build a website platform where we can disseminate our huge library of recordings and videos. This has proved more complex and expensive than I had planned. The plan is to do a full revenue share with all of the artists that are in our archive. We want to charge a small subscription rate for fans to access our ever-growing library. The revenue from the subscriptions is pooled and distributed to artists based on how much their work gets listened to. The more popular an artist is, the more they make - law of the jungle economics. This is a big system and what I realized I had to do and have since done is taken on partners to make SmallsLIVE LLC real. I've since partnered with two guys, one is a man who is a programmer and has his own successful website development company. The other partner is an investor to finance the building of this site. Once the site is up and launched we will be able to use it to accommodate an entire range of related media projects including our live stream and video library, as well as educational videos, downloads and merchandise.

SG: You now have over 4000 subscribers on your YouTube channel, and over 34,000 Facebook fans. What other social networks do you use? How much work does it take to maintain engagement with your fans through them, and is it worth it?

SW: We were, at first, excited about YouTube. It seemed amazing that you could have a CDN [Content Delivery Network] host your live stream for free. Well, it's not really free in the sense that you don't have real control over the content that you stream. YouTube screens your video and scans for illicit use of copyrighted material. In our case, when we play our iPod on breaks, we get flagged even though we are paying for the right to publicly perform that music to the appropriate music collection societies. But if you get flagged, YouTube will not allow you to stream any music including our live performances. It's was a headache. On the other hand, it's very affordable to rent time on a good CDN such as Bit Gravity. Then you have full control of your stream and the content that you're creating.

We have a large fan base on Facebook and also Twitter. We also have a rapidly growing email list and regularly do a newsletter and post to our social media. Facebook is great because it's very affordable to use and reaches a lot of people who you know are already interested in what you're doing.

THE SMALLSLIVE
ARTISTS REVENUE SHARE AGREEMENT

This Agreement (the "Agreement") is between SmallsLIVE LLC ("SmallsLIVE") and you in regard to the SmallsLIVE Archive and the Artist Revenue Share Project.

TERMS OF USE:

By accepting this Agreement, you also agree to SmallsLIVE's Terms of Use as they appear in the Site (as defined below). Should you have any questions concerning these Terms of Use or need technical support, you may contact us at info@smallslive.com.

PARTICIPATION IN THE ARCHIVE AND DOWNLOADING:

The Archive:

The SmallsLIVE Archive (the "Archive") consists of audio and audiovisual recordings (videos) produced by SmallsLIVE at the Smalls Jazz Club in the past (since 2007), now, or in the future.

Users of the SmallsLIVE's website ("Site") can access the Archive as subscribers ("Subscribers") and play (stream) the individual sets of multiple, combined musical performances ("Dates") by an individual artist and/or group ("Artist"). The Date may be audio only and/or audiovisual, and the embodiment of the Date in an audio or audiovisual medium shall hereafter be called the "Recording." Subscribers will pay SmallsLIVE a monthly subscription fee (the "Subscription Fee"), to be determined by SmallsLIVE. Subscribers will also have the option of downloading individual, artist approved, tracks embodied in the Recordings of each Date ("Tracks") for an additional fee to be determined by SmallsLIVE and sold as SmallsLIVE TRACKS.

Subscription fees will be placed in a revenue pool to be distributed to the Artists as specified in Paragraph 4 below ("Revenue Share"). Monies received by SmallsLIVE TRACKS from downloads of Tracks shall also be subject to the Revenue Share set forth in Paragraph 4 below.

Your approval of this Agreement applies to any Date past, present, or future in which you participated or will participate as a Leader or as a Side Musician as those terms are defined below.

ARTISTS' RIGHTS:

LEADERS & SIDE MUSICIANS: Each Date must have a designated leader ("Leader"), provided that in the event of a collective band, each member may be designated as a Leader. Any musician who plays on a Date who is not a Leader shall be deemed to be a "Side Musician."
PERFORMANCE FEE: The Leader is paid a performance fee for the Date at Smalls Jazz Club, under a separate booking agreement.
COPYRIGHT IN THE RECORDINGS: Except for SmallsLIVE's right, subject to paragraph 2(g) below, to include the Recording of each Date in the Archive as set forth herein the Leader of each Date shall retain all right, title and interest in and to each Recording including the copyright in the "sound recording" (as defined in the Copyright Act) in the Recording, and all renewals and extensions thereof, worldwide and for the full duration of the copyright. To effectuate this intent, SmallsLIVE and each Side Musician hereby transfer their interest in the copyright in each Recording to the Leader, including without limitation the authority to distribute or otherwise exploit each Recording as set forth in more detail in subparagraph 2(d) below. For avoidance of doubt, nothing in this Agreement will transfer the ownership or copyright in any underlying musical composition embedded in any Recording.

LEADER'S RIGHT TO EXPLOIT THE RECORDINGS: The Leader may use the Recording for any commercial or promotional purpose, including without limitation the right to sell, license or otherwise exploit the Recording or any portion thereof. The Leader shall have the exclusive obligation to make any payment required to the Side Musicians or any third parties, including any third party writers or owners of musical compositions. For the avoidance of doubt, SmallsLIVE shall not be responsible for any payments to or permission from any Side Musicians or any third parties.

ARTIST ACCOUNT: Every Leader and Side Musician will have an account (accessible by password) on the SmallsLIVE Site. From this account page, Leaders will be able to download their Recording(s) for personal use or commercial exploitation in accordance with Subparagraph d. above. Leaders may also use their account to "tag," i.e. add, the name of any Side Musician in regard to a Date for which SmallsLIVE inadvertently omits that Side Musician's name. Leaders and Side Musicians may also use the account to update personal info such as address, telephone, email, etc. Leaders and Side Musicians will also be able to set up their banking information to receive royalty payments from Subscription Fees and paid downloads and to see SmallsLIVE's metrics on usage and payout dates.

LEADER'S RIGHT TO KEEP DATES PRIVATE: Every Leader shall have the right to use his/her account to control which Recordings of Dates can be public, that is, accessed by Subscribers, and which Recordings of Dates shall remain private.

EDITING: Leaders shall have the right to "edit" their Recording(s) provided that any such edits shall be at their sole expense. SmallsLIVE is not responsible for editing, mixing and mastering of any Recording unless it is previously determined by SmallsLIVE and the Artist that the Date shall be a special project ("Special Project"). Special Projects are outside the terms of this Agreement and shall be subject to terms to be negotiated separately.

EDITED DATES: Leaders may "resubmit" their edited Recording for active use in the Archive, provided that the edited Recording must be a minimum of 20 minutes in length and must consist of at least two songs.

PAST DATES: You hereby agree to all the terms and conditions in this Agreement with regard to Recordings of Dates occurring prior to the date that you enter into this Agreement.

AUTHORIZED PAYEES: You shall have the right to assign your right to receive any income to you under this Agreement to any third party such as a business manager. Such authorization must be made in a writing signed by you and delivered to SmallsLIVE by certified mail. In case of your death or disability, monies earned under this Agreement shall be paid to your duly authorized representative after that representative has adduced any required legal documents confirming their authority.

SMALLSLIVE'S RIGHTS:

SmallsLIVE is hereby granted the non-exclusive perpetual right to include in the Archive any Recording of any Date in which the Leader or Side Musician participated or will participate in the future subject to the Leader's right to keep the Recording of any Date private in accordance with Subparagraph 2(g) above.

SmallsLIVE is hereby granted the right to live broadcast ("Webcast") each Date on the Site or any third party website or digital platform one time live and once as a rebroadcast. After that, a Recording of the Date, in Video/Audio will be added to the Archive for Leader's approval and use. SmallsLIVE shall have the right to make the Webcasts available for no charge to viewers or Subscribers, and to include advertising and accept sponsorship in conjunction with the Webcasts and the Videos.

No Leader or Side Musician may use "Smalls," "SmallsLIVE" or any logo or other mark associated with SmallsLIVE or Smalls Jazz Nightclub, in connection with the promotion, sale or license of any Recording, without the express prior written permission of SmallsLIVE.

You hereby give SmallsLIVE the right to use your name, image, likeness, and approved bio in the Site in connection with your Recordings, Webcasts and Videos, and in any advertising, promotion or marketing of such Recordings, Webcasts, Videos, the Site or the Archive.

Subscription revenue share & SmallsLIVE Tracks

Subscription Fees

All Subscription Fees collected from Subscribers for access to stream (but not download) the Archive shall be shared on a 50-50 basis between SmallsLIVE, on the one hand, and the Musicians (whether Leader or Side Musicians), on the other hand, after the deduction of operational Expenses (as defined below). All fees will be placed in a Revenue Pool.

The Musicians' share of the Revenue Pool will be determined by the number of minutes that the Recording of each Date is streamed within a pay period (either bi-annually or quarterly, to be determined by SmallLIVE). Each Musician who plays on any Date, whether as a Leader or as a Side Musician, will be credited the number of minutes that Subscribers listen to the Date(s). Musicians must be "Tagged" on the date to be credited with the Minutes. It is the responsibility of the Leader to tag all the Side Musicians on a date and the Side Musicians' responsibility to see that he or she does so.

The formula for determining a Musician's share of the Revenue Pool is:

Total Individual Musicians Minutes divided by the Total Archive usage minutes.
If, for Example in one three month period (pay period):
Peter gets 350 minutes listened to for all his dates in the Archive as Leader or Side Musician
Stacy gets 5000 minutes listened to for all of his date in the Archive as Leader or Side Musician
Grant gets 700 minutes listened to for all of his dates in the Archive as Leader or Side Musician
Tuomo gets 950 minutes listened to for all of his dates in the Archive as Leader or Side Musician
Miki gets 1200 minutes listened to for all of his dates in the Archive as Leader or Side Musician
Spike gets 30 minutes listened to for all of his dates in the Archive as Leader or Side Musician
Adding all these minutes together yields the Total Archive Usage, which in this example equals 8230 minutes.

To calculate the pay percentage attributable to each Musician ("Pay Percentage"), you must divide the individual minutes by the total usage.
Peter = .0425 (350/8230)
Stacy = .6075 (5000/8230)
Grant = .0851 (700/8230)
Tuomo = .1154 (950/8230)
Miki = .1458 (1200/8230)
Spike = .0036 (30/8230)
Payout = Revenue Pool Total X Individual Pay Percentage
Each Musician is paid an amount equal to the total amount collected from Subscription Fees (Revenue Pool) multiplied by his or her Pay Percentage.
If, by example, the Revenue Pool for the pay period is $500 then the payments would be:
Peter = $21.25 (500 X .0425)
Stacy = $303.75 (500 X .6075)
Grant = $42.55 (500 X .0851)
Tuomo = $57.70 (500 X .1154)
Miki = $72.90 (500 X .1458)
Spike = $1.80 (500 X .0036)
Use of the Archive will be measured in minutes rounded downward. For example, if a Subscriber listens to a Date for ten (10) minutes and thirty (30) seconds then Artist would be credited with 10 minutes.

Paid Downloads (SmallsLIVE TRACKS):

SmallsLIVE TRACKS is an Artist Curated Store for licensing and selling for download any Track(s) Leaders designate from their Archive recording. Any Leader of any Date may choose individual Tracks embodying one song to make available for paid download to Subscribers. Artist may edit the track themselves or ask SmallsLIVE to do so. Artist must provide Title, Composer and Publishing information. The MP3 will be offered to Subscribers at a price to be determined by SmallsLIVE in consultation with the Leader. The area of the site where such downloads will be available shall be called "SmallsLIVE TRACKS," although this name is subject to change in the discretion of SmallsLIVE.

SmallsLIVE shall share any monies it receives from such downloads with the Leader on a 50-50 basis after deducting any transaction costs.

The Leader shall be responsible for making any required payments to the Side Musicians, for mechanical royalties, or to any other necessary third parties.

The Revenue Share set forth in Subparagraphs 4.a and 4.b above, shall be the total compensation payable by SmallsLIVE for the rights granted under this Agreement.

SmallsLIVE retains the right to not publish a track for any reason and maintains the final decision on tracks placed in the SmallsLIVE TRACKS store.

EXPENSES:

SmallsLIVE will be allowed to deduct the following expenses from Subscription Fees:

Transaction costs (for examples, PayPal or credit card fees);
Licensing fees payable to performance rights organizations;
Hosting and bandwidth fees; and
Sales and local taxes, and other applicable taxes, levies or fees.
Other fees that may in the future become required for the continued operation of the streaming and download services set forth in this Agreement, including without limitation any fees to third party rights-holders.

TAXES:

Each Artist who receives any monies under the Agreement shall be solely responsible for paying any applicable taxes.

ACCOUNTING:

SmallsLIVE shall make payments to each Artist on a calendar quarterly basis 30 days after each quarter. Such payments shall be made by check or automatic deposit at the election of the Artist.
Notwithstanding anything to the contrary above, SmallsLIVE shall have no obligation to make a payment to an Artist if the amount due is less than ten dollars ($10) provided that when such monies exceed ten dollars ($10) any monies withheld will be paid after any pay period in which the total amount due to the Artist exceeds ten dollars ($10).

Every Musician will have access to on-line accounting pages by using a password to be assigned by SmallsLIVE. The accounting pages will set forth the amounts that have accrued for the Musician.

AUDIT:

At any time within two (2) years after any payment is received by any Leader or Side Musician hereunder, that Leader or Side Musician shall have the right to give SmallsLIVE written notice of their intention to examine SmallsLIVE's books and records with respect to such statement. Such examination shall be commenced within one (1) month after the date of such notice, at the sole expense of such Leader or Side Musician, by any certified public accountant or attorney designated by such Leader or Side Musician, provided he or she is not then engaged in an outstanding examination of SmallsLIVE's books and records on behalf of a person other than such Leader or Side Musician. Such examination shall be made during SmallsLIVE's usual business hours at the place where SmallsLIVE maintains the books and records which relate to such Leader or Side Musician and which are necessary to verify the accuracy of the statement or statements specified in the notice to SmallsLIVE and the examination shall be limited to the foregoing. A Leader or Side Musician's right to inspect SmallsLIVE's books and records shall be only as set forth in this subparagraph and SmallsLIVE shall have no obligation to produce such books and records more than once with respect to each statement.

Unless notice shall have been given to SmallsLIVE in accordance with subparagraph above, each payment rendered to Artist shall be final, conclusive and binding the Artist and shall constitute an account stated. Artist shall be foreclosed from maintaining any action, claim or proceeding against SmallsLIVE in any forum or tribunal with respect to any payment or accounting rendered hereunder unless such action, claim or proceeding is commenced against SmallsLIVE in a court of competent jurisdiction within three (3) years after the date such payment is received by Artist.

Artist acknowledges that SmallsLIVE's books and records contain confidential trade information. Neither Artist nor Artist's representatives will communicate to others or use on behalf of any other person any facts or information obtained as a result of such examination of SmallsLIVE's books and records, except as may be required by law or judicial decree.

TERM, TERRITORY, AND TERMINATION:

SmallsLIVE's non-exclusive rights as set forth herein shall be perpetual and shall extend throughout the world. You shall have a right to terminate this Agreement in regard to your grant of such non-exclusive rights upon notice of three months (3) months for future Dates only provided that SmallsLIVE reserves the right not to book you for future Dates. SmallsLIVE reserves the right to take down any Date from the Archive.

WARRANTIES AND INDEMNITIES:

You warrant and represent that:

You are under no disability, restriction or prohibition, whether contractual or otherwise, with respect to (A) your right to enter into this Agreement, and (B) convey the rights granted to SmallsLIVE hereunder, to perform each and every material term and provision hereof, and to record each and every musical composition hereunder;

To the extent of your contributions hereunder, SmallsLIVE shall not be required to make any payments of any nature for, or in connection with, the acquisition, exercise or exploitation of rights granted to SmallsLIVE by you pursuant to this Agreement, except as specifically provided in this Agreement;

To the extent of your contributions hereunder, neither the Materials (as defined immediately below) nor any use of the Materials by SmallsLIVE will violate or infringe upon the rights of any person. "Materials" as used in this subparagraph means any musical, artistic and literary materials, ideas and other intellectual properties furnished by you, including any copyright, trademarks or rights of publicity contained in or used in connection with any Recordings made hereunder, which have not been supplied by the SmallsLIVE. Among other obligations, you shall not sample any third party work without the express written approval of SmallsLIVE;

All of your representations and warranties shall be true and correct upon execution hereof, and shall remain in effect in perpetuity. SmallsLIVE's use of Recordings or Materials hereunder shall not constitute a waiver of any of your representations, warranties or agreements in respect thereof.

You shall at all times indemnify and hold harmless SmallsLIVE and any licensee of SmallsLIVE from and against any and all third party claims, damages, liabilities, costs and expenses, including legal expenses and reasonable counsel fees, arising out of breach by you of any warranty, representation or agreement made by you herein.

SmallsLIVE warrants and represents that:

SmallsLIVE is under no disability, restriction or prohibition, whether contractual or otherwise, with respect to its right to enter into this Agreement, and to perform each and every term and provision hereof;
All of SmallsLIVE's representations and warranties shall be true and correct upon execution hereof, and shall remain in effect in perpetuity.

ASSIGNMENT AND RIGHT TO EXPLOIT ARCHIVE:

SmallsLIVE shall only stream (in terms of the Archive) and sell downloads (in terms of SmallsLIVE TRACKS) exclusively from the SmallsLIVE website (www.smallslive.com). SmallsLIVE shall have no right to assign, transfer, sell or license this Agreement or any of its rights or obligations under this Agreement to any third party without consent of the Artist(s) and under a separate agreement.

AGREEMENT:

This Agreement shall be fully valid and enforceable by the Leader or Side Musicians by clicking the "Accept" button in the Site and providing all the information required by SmallsLIVE in the Site.

ESCROW:

If SmallsLIVE cannot locate any Leader or Side Musician at any time, it shall put any amount due to such Leader or Side Musician in escrow until the time that SmallsLIVE can find such person or he or she provides accurate information to SmallsLIVE.

NOTICE:
SmallsLIVE may provide notifications, whether such notifications are required by law or are for marketing or other business related purposes, to you via email, mobile text message, written or hard copy notice, or through conspicuous posting of such notice on Site, as determined by SmallsLIVE in its sole discretion. SmallsLIVE reserves the right to determine the form and means of providing notifications to you.

JURISDICTION:
This Agreement will be governed by the laws of the State of New York applying to contracts made and to be performed in New York. The exclusive jurisdiction for any claim, action or dispute with SmallsLIVE or relating in any way to your use of the Site will be in the state and federal courts of the State of New York.

MISCELLANEOUS:
Should you have any questions concerning this Agreement or need technical support, you may contact SmallsLIVE at the following email address:info@smallslive.com

YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT, UNDERSTAND IT AND WILL BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER ACKNOWLEDGE THAT THIS AGREEMENT, IN ADDITION TO THE SMALLSLIVE TERMS AND CONDITIONS, REPRESENTS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US AND THAT IT SUPERSEDES ANY PROPOSAL OR PRIOR AGREEMENT ORAL OR WRITTEN, AND ANY OTHER COMMUNICATIONS BETWEEN US RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.

December 2, 2015

THE FUTURE OF THE MUSIC BUSINESS, FOURTH EDITION- HOW TO SUCCEED WITH THE NEW DIGITAL TECHNOLOGIES

Reviewed by Keenan Popwell

The music industry, more than ever, is a maze of murky legal concepts, evolving business models and industry practices that continue to confound many outsiders. Steve Gordon's newly released fourth edition of his tome The Future of the Music Business provides the closest thing to a map.

Broadly speaking, The Future of the Music Business is structured similarly to a survey textbook. After an entertaining foreword by Amanda Palmer, in which she cheekily encourages those with insufficient commitment to try insurance sales instead, Mr. Gordon begins with a 10,000 foot view of the current state of the business.

In the chapters that follow, he employs clear, engaging prose to work through the structure of today's business. This includes concise explanations of practically important legal issues, such as copyright termination rights and fair use. The book covers anything from lyric licensing to 360 record deals, from pan-European music publishing licenses to net neutrality.

The exhaustive nature of Mr. Gordon's survey alone will prove useful for those readers seeking a broad understanding of the music industry. As a 12-year veteran of the music industry, that was certainly not my goal, but I enjoyed this book for its focused explanations of areas of the industry outside my expertise.

The survey textbook format runs the risk of relegating The Future of the Music Business to reference book status. However, every time I felt overrun with facts, Mr. Gordon shifted one of his many engaging interviews with industry luminaries and rising stars from all sectors of the business, thus ensuring that the book doubles as an engaging straight-through read.

Keennan Popwell is Sr. Corporate Counsel for Rhapsody International in New York City and a member of the New York Bar. Popwell represents Rhapsody on a broad range of matters, with a particular focus on label and publisher licensing.

Updates to the book are available at www.FutureoftheMusicBusiness.com
To purchase: www.amazon.com/Future-Music-Business-Succeed-Technologies/dp/1480360651/ref=sr_1_1?s=books&ie=UTF8&qid=1448398346&sr=1-1&keywords=future+of+the+music+business

January 7, 2016

Class Action Filed Against Spotify for Copyright Infringement

By Joel L. Hecker

David Lowery, individually and on behalf of others similarly situated, has filed a class action against Spotify USA, Inc.(Spotify), alleging that Spotify has, and continues to, unlawfully reproduce and/or distribute copyrighted musical compositions to more than 75 million users via its interactive commercial music streaming service, as well as its offline listening service.

The complaint was filed on December 28, 2015 in the United States District Court for the Central District of California, Civil Action Case Number 15-cv-09929 (BRO) (RAO), and seeks injunctive relief to enjoin Spotify from continuing such alleged copyright violations, to have a third party auditor appointed to identify the owners of the works reproduced and/or distributed by Spotify without Spotify's first obtaining a mechanical license prior to such reproduction and/or distribution, and to require Spotify to remove all such works from its services until it obtains proper licenses for them. The plaintiff also seeks restitution of Spotify's alleged unlawful proceeds, including Spotify's gross profits, compensatory damages in an amount to be ascertained at trial, statutory damages as authorized by the Copyright Act, as well as attorney fees and costs and pre- and post-judgement interest.

Statutory damages may be awarded in the court's discretion up to $30,000 for each infringed work and, if willful, up to $150,000 per infringed work, plus attorney's fees. Therefore, given the scope and breadth of the purported class, the potential damages may well exceed $100 million (of course, these are all just allegations subject to proof of liability and of damages, assuming that class action status is granted).

The plaintiff, David Lowery, alleges he has been a fixture of the music industry for decades, is a prolific songwriter and producer as well as the author or co-author of more than 150 songs for his popular groups Cracker and Camper Van Beethoven.

Spotify, the defendant, is an interactive commercial music streaming service (among other services) that operates an Internet website (www.spotify.com), which permits users to customize listening choices for recorded music and to create Internet "radio stations." It is alleged in the complaint that Spotify claims to have played over 25 billion listening hours of music since its launch seven years ago. Attached to the complaint to substantiate this claim is an announcement by Spotify to the public boasting of such broad reach.

The complaint further alleges that Spotify offers its services to the public via both free non-subscription and premium paid subscription bases. Paid subscribers enjoy numerous specified benefits and users of its premium service pay a monthly fee of $9.99. Specifics of these services can be found at Spotify's website.

The complaint also alleges that Spotify claimed in writing in an exhibit attached to the complaint that as of June 10, 2015, it has 75 million active users and 20 million paid subscribers, and that it has paid more than $3 billion in royalties. In addition, the complaint alleges that Spotify sells the right to advertise to users on its website and mobile applications to earn revenue above and beyond paid subscriptions.

Spotify's alleged "egregious and willful violations" of the plaintiff's and the class members' rights as contained in the complaint refer particularly to Spotify's recent admissions regarding its failure to obtain licenses for the musical works it distributes and reproduces, as well as its failure to compensate copyright owners for its use of their works. In support of these allegations, the plaintiff attaches as an exhibit to the complaint Spotify's May 23, 2014 Comments to the United States Copyright Office's Notice of Inquiry made in connection with the Copyright Office's Music Licensing Study. In those comments, Spotify admits, it is alleged, that in some instances, "Spotify may not be able to identify the copyright owners from the sound recordings provided to Spotify". In addition, it is alleged that Spotify failed to pay songwriter royalties to a publishing company approximately 21% of the time.

One of the major issues raised by this complaint is the system in the U.S. for licensing music, which predates the Internet and all that it entails concerning distribution of music in mobile, streaming and other formats. The inability or difficulty to obtain consents from many of the varied owners of music rights has brought to the fore the tension between the presumed right of the public to gain access to the music, and the copyright owners' right to control the reproduction and distribution of their copyrighted works. A final solution probably should involve federal legislation, but given the mood of Congress these days, that seems highly unlikely, to say the least.


January 20, 2016

The 11 Contracts Every Artist, Songwriter & Producer Should Know: Video Production

By Steven R. Gordon

Steven R. Gordon (steve@stevegordonlaw.com, www.stevegordonlaw.com) is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels and music publishers as well as TV and film producers and digital music entrepreneurs. He also provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is the author of The Future of the Music Business [www.futureofthemusicbusiness.com/] (Hal Leonard 4th ed. 2015).

The author gratefully acknowledges the assistance of Ryanne Perio, Esq. in the preparation of this article. Ryanne is a litigation associate at the WilmerHale law firm. He would also like to thank his intern Jena Terlip, 2L at Benjamin N. Cardozo School of Law, for her research and editing assistance.

DISCLAIMER
This series of articles and the forms included in them have been created for informational purposes only and do not constitute legal advice. This article and other articles in this series should be used as a guide to understanding the law, not as a substitute for the advice of qualified counsel. You should consult an attorney before making any significant legal decisions.

The eighth installment of this 11-part series on basic music industry agreements focuses on the business of producing music videos. This article contains a form agreement that can be used to hire a video producer, as well as releases for people and locations appearing in videos. Although MTV does not play many anymore, music videos have become more important in breaking new artists than ever before. Before making your own video, though, it's important to know the legal ins and outs of producing them.

INTRODUCTION

In the first part of this Introduction, I give a brief history of music video followed by a survey of how successful artists have used and continue to use them to launch their careers. The second part of the Introduction offers a summary of business considerations in producing videos.

PART I: HISTORY & CONTINUING IMPORTANCE OF MUSIC VIDEOS

1. Before Music Videos
Audiovisual presentations of music have existed since the first motion pictures containing sound. In fact, the first Hollywood "talkie," released in 1927, was a musical featuring Al Jolson called "The Jazz Singer." Before the invention of the video cameras, there were many musical short films featuring the performance of single songs, such as Frank Sinatra's patriotic "The House I Live In (That's America To Me.)" (https://www.youtube.com/watch?v=EWxW2Z5znWQ) These films were sometimes shown before main features at movie theatres. In the 1960s, artists like the Rolling Stones and the Beatles started to make short form films of individual songs to promote their albums. The dawn of what we think of as music videos began in the 1970s. For example, in 1975, Queen commissioned the production of a video for its new single, "Bohemian Rhapsody," to show on Top of the Pops, a popular British TV show showcasing the week's top hit songs. In the U.S., Video Concert Hall was launched on November 1, 1979 as the first nationwide video music program on American television, predating MTV by almost three years.

2. MTV and the Birth of the Era of Music Videos on Television
In 1981, MTV launched by airing "Video Killed the Radio Star," and began an era of 24-hour-a-day music videos on television.

The founders of MTV, including Robert Pitman (current chairman and CEO of iHeartMedia, Inc. (formerly Clear Channel)), convinced record labels to produce more videos and give them to MTV for free, just as they gave free records to radio stations. The pitch was that the videos would promote the labels' records and increase sales. The only money MTV paid to the labels was a relatively small fee to secure exclusive rights to play select videos for a limited period of time. For instance, MTV paid Sony Music $4 million a year for such rights.

By the mid-1980s, MTV grew to play a central role in marketing pop and rock music. Many important acts of this period-- most notably Madonna, Aerosmith, The Who, Phil Collins, John Mellencamp, Phil Collins and Billy Idol-- owe a great deal of their successes to the seductive appeal of their videos. After years of controversy regarding the lack of diversity among artists on the network, MTV aired Michael Jackson's "Billie Jean," "Thriller" and other videos, which helped Jackson become the best-selling pop artist of all time.

However, by the late 1990s, MTV sharply decreased the number of videos it showed on its airways. Former MTV president Van Toeffler explained: "Clearly, the novelty of just showing music videos has worn off. It's required us to reinvent ourselves to a contemporary audience." A decade later, MTV was playing an average of just three hours of music videos per day, preferring cartoons such Beavis and Butt-Head and, later, unscripted reality shows, such as Jersey Shore. MTV continued to play some music videos instead of relegating them exclusively to its sister channels (such as MTV Hits), but around this time, the channel began to air music videos only in the early morning hours and in Total Request Live , which aired the 10 most requested music videos of the day. As a result of these programming changes, Justin Timberlake implored MTV to "play more damn videos!" while giving an acceptance speech at the 2007 Video Music Awards. Despite the challenge from Timberlake, MTV continued to decrease its total rotation time for music videos in 2007 and shut down TRL in 2008.

3. YouTube and the Rise of Cover Videos
YouTube was created by three former PayPal employees in February 2005. In November 2006, it was bought by Google for $1.65 billion. The online video sharing site is this generation's MTV. Artists like Beyoncé and Taylor Swift regularly have hundreds of millions of views for new videos, and their record companies and music publishers monetize them by allowing ads. YouTube keeps approximately 40% of the ad income, although the details of its formulas for arriving at the exact amount is not public record, and the balance is paid to the copyright owners.

YouTube allows you to share your videos with a worldwide audience. However, the thing that makes YouTube great for new artists--that it's so easy to upload and reach a huge audience--also makes it incredibly competitive. YouTube reports that hundreds of hours of video content are uploaded to its servers each minute. Unfortunately, therefore, although you have a potential audience of millions who you can directly reach with your video, standing out in the sea of other content is a huge challenge.

One way new artists have used YouTube to attract attention is to "cover," that is, re-record hit songs. A good example of an artist who was discovered from making covers is Justin Bieber. Before he was the erratic "bad boy" that many love to hate, Justin Bieber was just a kid from Stratford, Ontario. At age 12 Bieber began to regularly post covers of hit R&B songs on his YouTube channel under the username "kidrauhl."

As his videos got more and more views, he was eventually discovered by talent manager Scooter Braun. After tracking Bieber down, Braun flew the then-13 year old to Atlanta to record some demo tapes. Braun introduced Bieber to Usher, who reportedly beat out Justin Timberlake in a bidding war to sign the young YouTube star. After being signed by Usher, Bieber recorded his first album, released the single "One Time," and proceeded to have his face put up on tween bedroom walls everywhere. He's had three multi-platinum albums that have all reached number one on the charts, and continues to play to sold-out arenas all across the world.

Another example of how cover videos have launched careers is Vazquez Sound, a musical trio known for its covers of hits, including Adele's "Rolling in the Deep," which has garnered over 172 million views. In September 2014, Vazquez Sounds released its first original album, which was an instant hit that earned a nomination at the 2015 Latin GRAMMYs for "Best New Artist." Another example is the pop duo, Karmin. Karmin broke a couple of years ago with a string of clever, sassy covers of hits by acts such as Lil Wayne, Nicki Minaj, and Katy Perry. Alessia Cara, a 19 year old Canadian singer and songwriter, is another example. She is currently signed to Def Jam and is best known for hit single "Here," which reached the Top 20 in the United States. Before her original album was released, though, Cara was known for her acoustic song covers on YouTube.

4. YouTube Musical Celebrities
Other artists have made careers by producing original content for their YouTube channels. A prime example is Lindsey Stirling. She plays the violin, dances and then does them both at the same time. Stirling began posting videos of herself performing in 2007 after failing to be signed by a major record label. Now, she claims they are begging to sign her, but it's too late--she doesn't need them anymore. Explains Stirling: "It's a very loyal fan base that wants you to succeed because they found you. It wasn't some big radio station or record label that shoved art down someone's throat." Coming in fourth in Forbes' round-up of the most financially successful YouTube personalities, Stirling raked in $6 million in earnings last year. She has also released two albums, "Shatter Me" and "Lindsey Stirling", scored a book deal, and developed a lucrative touring career.

5. YouTube's New Subscription Service
YouTube recently unveiled its long-discussed paid subscription service, "YouTube Red." The new service offers ad-free versions of all current YouTube videos and additional exclusive content from some of the site's top creators, including PewDiePie and Lilly Singh, both of whom perform music as well as comedy. It launched on October 28, 2015 and costs $9.99 per month. YouTube Red will have a big emphasis on music, providing access to music streaming service Google Play Music and a new app called YouTube Music, which offers a Pandora-like personalized playlist based on a selected song or artist. Both music apps also have ad-supported versions that non-Red users can access.

6. Self-Made Indie Videos Launching Careers On Social Media Such As Vine & Instagram
Over the past several years, with the advent of smart phones with video capability, as well as greater connectivity across social platforms, an entirely new phenomenon has occurred with singer songwriters as well as rappers catapulting themselves to recognition and commercial success. They use self-contained performances on social media in addition to, or other than, YouTube. One example is Shawn Mendes. In 2013, when he was 15, Shawn Mendes began posting cover videos on Vine and picked up millions of views. The next year he was signed to Island Records and became the youngest artist to debut in the Top 25 with a song on the Billboard Hot 100.

PART II: LEGAL AND BUSINESS ISSUES

1. Cover Videos
It is legally necessary to get a license from the owner of the song before making a cover video. However, YouTube has developed a system Content ID that deals with this issue. The system recognizes the identity of the cover song and then notifies the publisher. The publisher can then choose to order YouTube to take down the video, or let the video continue to play and "monetize" it. If the latter is chosen, YouTube splits the advertising revenue with the publisher. It is important to note that if the publisher chooses the second option, the artist performing the cover will not receive any of the fees generated by advertising. This, however, is to be weighed against the possibility of worldwide recognition discussed above.

Although Vine and Instagram do not employ Content ID, the music publishers have not, so far, cracked down on covers on these social networks. An argument could be made that the snippets played in these services are "de minimis," i.e., too trivial to amount to copyright infringement. It can also be argued in a litigation defense that these brief videos are "fair use." The argument would be that, under the doctrine of fair use, a person can use a brief excerpt of a copyrighted work if the new work is "transformative" of the original.

2. Work For Hire Production Contract
I was the Director of Business Affairs for TV & Video at Sony Music from 1991 to 2001. We produced over 250 videos each year that I worked there, and every video that Sony commissioned was a "work for hire." Under the copyright law, a work for hire is defined as follows:

(1) a work prepared by an employee within the scope of his or her employment; or
(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

In the case of works made for hire, "the employer or other person for whom the work was prepared is considered the author ...[and] owns all of the rights comprised in the copyright."

Recently I worked with a small book publishing company that wished to produce a series of music videos to promote the new edition on one of its religious text books. The videos will feature songs by 12 different Christian rock acts. The agreement that we used to commission the videos was basically the same as Sony's work for hire agreement. I recommend to my artist clients the same business format for the production of their music videos. Re-published below is sample work for hire contract for producing a music video.

3. Releases
If you are either a new artist or a small label, and you wish to create a music video, in addition to using a work for hire agreement, you should also make sure that you will not have legal problems associated later on with any person or location depicted in your video. Although you should always have every side artist, model, dancer or actor in your video sign a release, some judgment is required when determining whether to secure a location release.

Personal Releases: If a label is commissioning a video, the artist's appearance in the video will generally be covered by the recording agreement between the artist and the label, which usually includes a provision specifically addressing music videos and giving the label the right to use the video for any promotional or commercial purpose. If an indie artist is appearing in a video, obviously he or she will not need a release for his or her own performance. Regardless of whether the commissioning party is a label or an artist, it will want to have any other person appearing or performing in the video sign a personal release giving the label or the artist, as the case may be, the right to use the video, including that person's appearance and/or performance in any and all media. Usually, the production company will handle this responsibility.

An example of a personal release is included below. Personal releases do not vary very much, although some contain more legalese than others. The basic point of any personal release, however, is that the person signing the release grants the artist or label all rights to use his or her appearance and/or performance in the video.

Note that the person signing such a release may have recorded the audio performance as a background vocalist or musician. A separate contract usually covers that audio recording, but the release contained below would cover that audio performance as well. Please also note that the release usually does not include financial remuneration; but if a musician, dancer or actor contributed a performance in the underlying audio track, there may be a separate agreement in which that person is compensated.

A cautionary tale about failing to secure proper releases: The producer of a video for an artist at a major record label used a picture of an old girlfriend from her Facebook profile in a spilt second of a still titled "Missing Persons" in a video featuring the artist singing about a romantic break-up. The ex-girlfriend noticed and was not pleased. She retained a lawyer who was able to negotiate a significant settlement.

Crowds and Audiences: If you are shooting in a public place, releases should be given to anyone wandering into the scene if anyone is are recognizable. If a person doesn't want to sign the release, you should avoid using that footage. If you are shooting in front of a live audience, you can use one or more signs at the entrance to the performance area informing the audience members that, by entering, they consent to appearing in the video. The sign (or signs) should be large enough and displayed in a place prominent enough that anyone entering will notice. However, if a person from the audience is featured, or especially if he or she appears on stage, a personal release should be signed.

Location Release: The location release at the end of this article is for a venue that agrees to let you shoot your video at the location without a fee. It is particularly useful if there is a sign or logo that people would recognize. The release will make it clear that no consideration was expected for the use of the location. Of course, sometimes a location, such as a restaurant or bar, will require a fee. In that case, the amount to be paid can be inserted in the release.

Public Places: Generally, if public venues and landmarks, such as the Empire State Building appear in the video, you do not need a release if the location is incidental to the action in the video. If, however, you are shooting in front of a well-known place, such as Nathan's hotdog restaurant in Coney Island, and its name appears prominently in the video, it would be wise to have the manager sign a location release.

4. Trademarks
The use of a trademark in a music video is generally protected by the First Amendment, but not always.

Likelihood of Confusion Test: The limited purpose of trademark protection set forth in the Lanham Trademark Act (15 U.S.C. § 1051 et. seq.) is to avoid confusion in the marketplace by allowing a trademark owner to prevent others from duping consumers into buying a product or using a service they mistakenly believe is sponsored by the trademark owner. Trademark law aims to protect trademark owners from a false perception that they are associated with or endorse a product or service. Generally, to assess whether a defendant has infringed upon a plaintiff's trademark, the courts apply a "likelihood of confusion" test that asks whether use of the plaintiff's trademark by the defendant is likely to cause confusion or mistake, or to deceive as to the affiliation, connection, or association of plaintiff's brand with defendant's product or service.

Applying these principles to music videos, the bottom line is that if a trademark is used in such a way that it is not likely to confuse a viewer into thinking that the brand sponsored the video, the producer may have a First Amendment right to use the mark (notwithstanding any licensing issues). The classic example is a rapper wearing a baseball cap or t-shirt. Just because the singer may be wearing a Yankees cap or Baltimore Orioles t-shirt doesn't mean that a reasonable person would think that the Yankees or Orioles sponsored or produced the video.

On the other hand, where a trademark is prominently featured, it may be reasonable to think that a brand is sponsoring the video. For instance, a number of brands are featured in the video for "Telephone" featuring Beyoncé and Lady Gaga. Yet in that case, the brands were actually sponsoring the video by paying for product placement. In fact, these days, many indie artists use brands to help pay for or at least defray the costs of their videos. However, if you have not received approval or received a sponsorship from a brand, it is important not to lead your viewers to believe that you have by drawing too much attention to the brand in your video.

Product Disparagement: This is also called product defamation, trade libel, or slander of goods; product disparagement is any statement about a brand that is false and likely to adversely affect its profits. Product disparagement includes negative statements about a product or service, false comparisons of competing consumer products or services, and statements harming the reputation of an artist.

When applying these principals to a music video, it is important to note that showing a brand's name or logo in a negative context could prompt a demand that the video be changed or not shown at all. Consider this real world example: A record label made a video in the early 1990s, when MTV was still playing videos, of a toy train running off the track and smashing into small models of people made of clay. During the video, close-ups of the artist as the conductor of the wayward train would appear. The video was lighthearted, and no one would think that the artist/conductor was actually running over real people. However, the name of the well-known U.S. railroad appeared on the toy train, and its representatives were less than amused. In fact, they sent a letter to MTV demanding that it stop playing the video. The label agreed to take the name off the toy train by blurring it, but the railroad still insisted that the video be banned because the color of the toy train--a particular shade of yellow--was the same color as its actual trains. The label reacted by changing the entire color of the video to sepia, which made the toy trains a different shade of yellow. Yet the railroad still had a problem because the cars were still yellow. The label defiantly re-released the video. However, the railroad company initiated a lawsuit against the label and was able to persuade a federal judge to permanently enjoin the further exhibition of the video on MTV and any other outlet. Later, the label settled the suit by paying damages to the railroad, in addition to agreeing to never use the video for any purpose again.

5. Artwork and Other Copyrighted Works
A best practice is to avoid using material protected by copyright. This will save you a lot of headaches, and possibly money. The case of Ringgold v. Black Entertainment Television is an important case in this regard. In the late 1990s, Faith Ringgold, a successful contemporary artist, sued BET for airing an episode of a television series called ROC in which a poster containing her artwork appeared. In the scene, at least a portion of the poster was shown a total of nine times. In some of those instances, the poster was at the center of the screen, although nothing in the dialogue, action, or camera work particularly called the viewer's attention to it. The nine sequences in which a portion of the poster was visible ranged in duration from a little more than one to four seconds. The aggregate duration of all nine sequences was approximately 27 seconds.

The case was decided by a federal appeals court in New York. The court found BET liable, rejecting the de minimis defense. As already noted in the section on "Cover Videos" above, if the amount of a work copied is so trivial as to fall below the quantitative threshold of substantial similarity, the copying is de minimis, and does not constitute copyright infringement. However, the court found that in addition to its appearance in the scene, there was also a qualitative connection between the poster and the show. The poster included a painting depicting a Sunday school picnic held by the Freedom Baptist Church in Atlanta, Georgia in 1909, and was intended to convey "aspects of the African-American experience in the early 1900s." ROC was a television sitcom series about a middle-class African-American family living in Baltimore, and the scene in question was of a gathering in a church hall with a minister.

In contrast to Ringgold, the case of Sandoval vs. New Line Cinema Corp stands for the proposition that use of copyrighted artwork in the background of a scene may be de minimis.

In Sandoval, the same court that decided the Ringgold case, found that the use of the plaintiff's copyrighted photographs in the motion picture "Seven" was de minimis and therefore not actionable. The photographs appeared in the film for a total of 35.6 seconds, but they were always in the background and never in focus. The court found that the "photographs as used in the movie [were] not displayed with sufficient detail for the average lay observer to identify even the subject matter of the photographs, much less the style used in creating them." The court distinguished the facts from Ringgold because there was no substantive connection between the appearance of the photos and the subject matter of the scene.  

---------------------------------------------------------------------------------------------------------------------------------

The agreement below contemplates that an artist is hiring a production company to produce a promotional video. The same form of agreement may be used by a record company. An artist may consider forming a corporate entity (i.e., C corporation, Subchapter S or LLC) in order to avoid any personal liability in regard to any agreement including a video production agreement. In addition, an artist would be wise to consult with an accountant or attorney about forming an LLC or S corporation for tax purposes including eligibility to deduct video expenses from his or her personal income.

DISCLAIMER
This form has been created for informational purposes only and does not constitute legal advice. You should consult an attorney before making any such legal agreements.


VIDEO PRODUCTION AGREEMENT


This agreement ("Agreement"), effective as of _____, 2016, is between __________ ("Artist") with an address of __________________, and _____________ ("Producer"), with an address at _____________________________.

WITNESSETH:

WHEREAS, Producer has recognized expertise in video production; and

WHEREAS, Artist wishes to engage Producer to record a music video featuring Artist performing a song titled "_____________" (the "Video").

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

1. PRODUCTION SERVICES

1.1. Producer shall provide Artist with the video recording and production services (hereinafter "Production Services") described within this Agreement.

1.2. Principal photography shall begin on ____________, 2016. Producer shall make Delivery, as defined herein, of the Video to Artist no later than _________, 2016. "Delivery" shall consist of delivery of (i) a fully edited sound synchronized video master, and (ii) all other recorded elements created during production, including but not limited to all audio tracks, video footage and outtakes. Delivery will not be deemed to have occurred until Artist accepts the Video as suitable for commercial exploitation.

1.3. Producer shall provide the Production Services to Artist promptly with the degree of skill, attention and due care that is standard practice within the professional Production Services industry.

1.4. Producer and Artist agree that the budget attached in Schedule A shall represent 100% of the funds required to produce the Video (hereinafter "Budget"). This amount represents the Producer's total anticipated costs and profit.

The Budget should include all costs for producing the video including producer and director fees as well as post production editing costs. For examples of music video budgets ranging from "shoestring" to "commercial/studio" budgets, see http://garrettgibbons.com/music-video-budgets.


1.5. If the Producer hires a director (hereinafter "Director"), the Director shall be an employee of the Producer for purposes of the production and Delivery of the Video.

1.6. All employees and representatives of Producer providing the Production Services hereunder to Artist during the Term of this Agreement shall be deemed for all purposes (including all compensation, taxes and employee benefits) to be employees or representatives solely of Producer, and not to be employees or representatives of Artist or to be independent contractors of Artist.

1.7. The Video shall depict content to be included in a treatment or script to be approved by Artist prior to principal photography.

2. GRANT OF RIGHT: WORK MADE FOR HIRE

This clause transfers all rights to the person (or company as the case may be) commissioning the Video.


2.1. Production Services provided by the Producer and any other person providing such Services shall be deemed to be provided on a "work made for hire" basis as that term is defined under the U.S. copyright law. The Video and all other materials created or contributed by the Producer including all footage, outtakes and audio tracks (the "Materials"), shall be the sole property of Artist throughout the universe, free from any claims whatsoever by Producer; and Artist shall have the exclusive right to register the copyright(s) in such Materials in her name as the owner and author thereof and to secure any and all renewals and extensions of such copyright(s).

2.2. Without limiting the generality of the foregoing, Artist and any person authorized by Artist shall have the unlimited exclusive right, throughout the universe, to manufacture or create copies of the Video or any other Materials by any method now or hereafter known, or any work derived from the Video or the Materials and to sell, market, transfer or otherwise deal in same under any trademarks, trade names and labels, or to refrain from such manufacture, sale and dealing.

2.3 Artist or any Person authorized by Artist shall have the right throughout the universe, and may grant to others the right, to reproduce, print, publish, or disseminate in any medium the name, portraits, pictures, likenesses and biographical material concerning Producer and Director any other person providing Production Services, as news or information, or for the purposes of trade, or for advertising purposes, in connection with promotion marketing and sale of the Video. As used in this Agreement, "name" shall include, without limitation, any professional names.

3. COMPENSATION

3.1. The Parties agree that the Effective Date of this Agreement shall be as set forth at the beginning of this Agreement (hereinafter "Effective Date"). The parties acknowledge that the total amount of the attached Budget is___________ Dollars ($_____). Within five (5) days of the Effective Date, Artist shall pay Producer 50% of the Budget, that is, _________ Dollars ($_____). The second payment of 25%, that is, _________ Dollars ($_____), shall be due upon completion of principal photography. The third and last 25% payment of ________ Dollars ($_____) shall be due upon Delivery of the Video and other Materials to Artist.

3.2. Overages. In regard to overages to the Budget, Producer shall not charge Artist any monies in addition to the approved Budget without Artist's prior written approval.

4. NOTICES

Notices, reports, accountings or other communication which Producer or Artist may require or desire to send to the other must be delivered either by:

Certified mail, return receipt requested to the parties at the addresses first written above or other address to be designated by Producer or Artist as the case may be; or

Electronic mail at the following addresses:

(i) for Artist: _________@___.com
(ii) for Producer: ___________@___.com

5. ASSIGNMENT

Producer may not assign this Agreement or any right or obligations under this Agreement. Artist may assign this Agreement or any of her rights or obligations hereunder to any person, firm, or corporation including a corporation in which Artist is a principal, provided that (i) Artist shall remain responsible for any payments required to be made under this Agreement, and (ii) the assignee has the necessary cash on hand to make any payments required under this Agreement.

6. WARRANTIES AND INDEMNIFICATION

6.1. Producer warrants and represents that he has the legal right to enter into this Agreement including the legal right to sign on behalf of the Director. Producer further warrants and represents that (a) all content contributed by the Producer shall be original and not interfere with or violate any rights of any third party; and (b) no content appearing in the Video, including artwork or photography, will interfere with or violate any rights of any third party.

6.2 Producer warrants and represents that he shall provide valid signed releases from any third party performing or appearing in the video, and that he shall, if legally required, secure valid signed location releases from any location appearing in the video. Acceptable forms of release are attached hereto as Schedule "A" and "B" respectively.

The attached releases may be used as Schedules A and B. Note that the releases allow the Producer to assign the rights secured in the releases to the Artist.

6.3. Producer and each of his representatives, employees, contractors, agents and representatives hereby release, indemnify and agree to hold harmless Artist and her agents and representatives from and against any and all losses and/or damages which arise out of the Production Services.

7. TERMINATION

Artist may terminate this Agreement upon written notice in the event of a material breach by Producer, including late delivery of the Video, if such breach is not cured within __ days of notice thereof. If such breach is not cured within that time, Producer shall not be entitled to any additional payments and, upon notice by Artist, Producer shall refund to Artist any monies previously paid.

8. MISCELLANEOUS

8.1. Governing Law. This Agreement shall be interpreted under the laws of the state of ________ without regard to its choice-of-law rules, and the parties shall submit to the exclusive jurisdiction of the courts of that state.

Since the Artist is the party paying money in this Agreement, the Artist should have the right to decide in which state any dispute arising from the Agreement should be litigated.

8.2. Relationship of Parties. Producer and Artist shall have the relationship of independent contractors. Nothing herein shall be construed to place Producer and Artist in the relationship of principal and agent, employer and employee, master and servant, partners, or joint venturers, and neither party shall, either expressly or by implication, have represented themselves as having any authority to make contracts in the name of, or binding on, each other, or to obligate the other in any manner.

8.3. Complete Agreement. Producer and Artist acknowledge that this Agreement represents the complete and exclusive statement of the agreement between the Producer and Artist with regard to the subject matter herein, and that it supersedes any proposal or prior agreement, whether oral or written, and any other communications between the Parties relating to the subject matter of this agreement.

8.4. Enforcement. If any provision of this Agreement shall be found invalid or unenforceable, then such provision shall not invalidate or in any way affect the enforceability of the remainder of this Agreement.

UNDERSTOOD AND AGREED:

[ARTIST's NAME]

_______________________________


[NAME OF PRODUCER]

_______________________________

SS #____________________________


If the Producer is a production company or LLC ("Production Company"), the president or managing partner should sign the personal guarantee below:


In order to induce Artist to enter into this Agreement, I hereby agree and acknowledge that (a) I have read all of the terms and conditions set forth in this Agreement; and (b) I shall be personally bound by all the terms and conditions in this Agreement applying to the Production Company, and that I shall be personally liable for any breach of this Agreement by Production Company.

PRESIDENT OR MANAGING PARTNER

_______________________________
Print Name: _____________________
Position: ________________________

PERSONAL RELEASE

To ______________ ("Producer")
Address

I understand that Producer is producing a video containing the performance of a song titled "_____________" (the "Video").

For good and valuable consideration, including my desire to appear in the Video, I irrevocably grant to Producer, his licensees and assigns the right to film, videotape, portray and photograph me, my likeness and my performance, and to record my voice and other sound effects, and the right to use them or any portion thereof, and my name and any biographical facts which may have been provided to Producer, in connection with the production of the Video and the advertising, promotion and publicity therefor, and all rights of every nature whatsoever in and to all films, video, portrayals, photographs, performances and recordings produced hereunder ("Material"), including without limitation all copyrights therein and renewals and extensions thereof, and the exclusive right to reproduce, exhibit, distribute and otherwise exploit the Material in whole or in part in perpetuity throughout the universe in all languages, in any and all versions (including digitized versions) and forms, and in any and all media now known or hereafter devised. Independently and apart from any consideration accruing to me hereunder, I hereby release Producer and Producer's authorized designees from, and covenant not to sue Producer and Producer's authorized designees for any claim or cause of action, whether known or unknown, for libel, slander, invasion of right of privacy, publicity or personality, or any other claim or cause of action, based upon or relating to the exercise of any of the rights referred to herein. I understand that nothing herein will require Producer or Producer's designees actually to produce or utilize any Material hereunder.

This grant is irrevocable so that Producer may proceed in reliance thereon. This instrument contains the entire understanding of the parties, may not be changed or terminated except by an instrument by Producer and me and will be construed in accordance with the laws of the State of ______, provided that the courts of the state of __________ shall have exclusive jurisdiction to resolve any disputes arising from this Release.


Dated:______________________

Authorized Signature

______________________________
[Print name]


LOCATION RELEASE

Property Owner: [Name]
Address: ___________________________ _
Phone: ____________________________ Fax: _______________________________
Email: _____________________________ Contact: ____________________________

Producer: [Name]
Address: _____________________________
Phone: _____________________________ Fax: ______________________________
Email: ______________________________ Contact: _____________________________

Your signature in the space provided below as owner or agent, will confirm the following agreement ("Agreement") between you as the Property Owner ("Owner") and Producer regarding filming of your property (the "Premises") described below in connection with a video containing the performance of a song titled "_____________" (the "Video").

1. For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Owner hereby grants to Producer the right during the Term (as defined below) hereof to photograph and record at, the Premises (including, without limitation, the right to photograph and record both the real and personal property, all of the signs, displays, exteriors, and the like appearing therein, if any) for the period specified below.

2. As used herein, the term "Premises" refers to the premises located at: __________________________________________________________________

3. The term hereof (the "Term") shall commence from __________am/pm to ____________ am/pm on or about ____________________________ and shall continue until _________________________, unless modified by the parties. The Term shall be subject to modification due to changes in production schedules. Owner agrees to consult closely with Producer's representatives to ensure scheduling is arranged which will allow for completion of the scenes planned to be included in the Video using the Premises. Owner acknowledges that Producer is incurring significant expenses in reliance on Owner's cooperation and participation in connection with this Agreement and that Owner may be held responsible for the actual and/or consequential damages incurred by any breach of this agreement.

4. Owner represents and warrants that: (a) Owner has the right and authority to make and enter into this Agreement and to grant Producer the rights set forth herein, without obtaining any consents or permissions from any third party; and (b) Owner shall take no action, nor allow or authorize any third party to take any action which might interfere with Producer's authorized use of the Premises. Owner hereby waives all rights of privacy or other rights of a similar nature with respect to Producer's use of the Premises. Owner shall indemnify Producer, his licensees and assigns, and their parent, affiliate, and related entities, shareholders, directors, officers and employees from and against any breach or claim of breach by Owner of any representation, warranty, agreement or obligation herein.

5. Producer shall leave the Property in as good condition as when received, reasonable wear and tear to be expected. Producer shall remove all of his material, equipment and personnel from the Property.

6. Producer agrees to indemnify and hold Owner harmless from damage to the Premises and property located thereon and for personal injury occurring on the Premises during the Term and from any liability and loss which Owner may incur by reason of any accidents, injuries, death or other damage to the Premises directly caused by Producer's negligence in connection with his use of the Premises. In connection therewith Owner must submit to Producer, within three (3) days after Producer vacates the Premises, a detailed list of any property damage or personal injuries which Owner feels Producer is responsible, failing which Owner will be deemed to have acknowledged that there is no property damage or personal injuries for which Producer is responsible. Owner shall permit Producer's representatives to inspect any damaged property and to verify any claims for damages by Owner.

7. Nothing shall obligate Producer to photograph, to use such photography, or to otherwise use the Premises. Producer shall have the right to photograph, record and depict the Premises and/or any part or parts thereof, accurately or otherwise, as Producer may choose, using and/or reproducing the actual name, signs, logos, trademarks and other identifying features thereof and/or without regard to the actual appearance or name of the Premises or any part or parts thereof, in connection with the Video.

8. a. Owner acknowledges that, as between Owner and Producer, Producer is the copyright owner of the photography and/or recordings of the Premises, and that Producer, his successors and assigns have the irrevocable and perpetual right, throughout the universe, in any matter and in any media to use and exploit the films, photographs, and recordings made of or on the Premises in such manner and to such extent as Producer desires in his sole discretion without payment of additional compensation to Owner. Producer and his licensees, assigns and successors shall be the sole and exclusive owner of all rights of whatever nature, including all copyrights, in and to all films, programs, products (including interactive and multimedia products), photographs, and recordings made on or of the Premises, and in the advertising and publicity thereof, in perpetuity throughout the universe.

b. The Owner hereby gives to Producer, his assigns, agents, licensees, affiliates, clients, principals, and representatives the absolute right to use any names associated with the Property in the Video, or to promote the Video, all without inspection or further consent or approval by the Owner.

9. Producer may assign or transfer this Agreement or all or any part of his rights hereunder to any person, film or corporation; Owner agrees that Owner shall not have the right to assign or transfer this Agreement.

10. From the date of execution of this Agreement, through and including the date this Agreement may be terminated, Producer shall keep or cause to be kept in force the following insurance:
Commercial General Liability Insurance, including public liability, contractual liability, bodily injury, and property damage insurance, each policy with a combined single limit of bodily injury and property damage liability of $1,000,000.00 per accident or occurrence. Owner shall be an additional insured. The policies shall provide that they cannot be canceled or reduced without thirty (30) days prior written notice to Owner.

All insurance policies required hereunder shall be with companies having at least a Best A+10 rating as of the date of issuance of the policy, and shall contain language to the extent obtainable, to the effect that (i) any loss shall be payable notwithstanding any act or negligence of Owner that might otherwise result in a forfeiture of the insurance, (ii) that the insurer waives the right to subrogation against Owner and against Owner's agents and representatives, including Owner's insurers, (iii) that the policies are primary and non-contributing with any insurance that may be carried by Owner. Producer shall furnish Owner with certificates evidencing the insurance on or before ______________________. All certificates of insurance required herein, and exclusions from coverage in all policies, and the actual liability policies are subject to the approval of Owner's counsel.

Insurance should be obtained if shooting is to occur inside a location such as a store or someone's house. The cost of the insurance should be included in the Budget for the Video.

11. This Agreement constitutes a binding agreement and is the entire agreement among Producer and Owner and supersedes all prior negotiations and communications, whether written or oral; representations and warranties, whether written or oral; and documents and writings, whether signed or unsigned, with respect to the subject matter hereof.

APPROVED AND ACCEPTED:

Owner or Owner Representative
Signature: _________________________
Print Name: _________________________

Producer or Producer Representative
Signature: _________________________
Print Name: _________________________

January 27, 2016

Hip Hop Artist's Copyright Ownership Claim Time Barred

By Barry Werbin

Hip hop artist Tyrone Simmons could not rap his way out of his delay in pursuing a claim of ownership of exclusive copyright licensing rights against hip hop producer William C. Stanberry, Jr., rapper 50 Cent, and several entities that had been involved with producing and distributing a song called "I Get Money" that was released in 2007. On January 15, 2016, the Second Circuit held (per curium) in Simmons v. Stanberry, that Simmons' claim was time-barred under the Copyright Act's three year statute of limitations because he became aware of Stanberry's repudiation of his license rights and release of the song more than three years before suit was filed.(2d Cir. 1/15/2016)

The Court applied its prior decision on copyright ownership in Kwan v. Schlein (634 F.3d 224 (2d Cir. 2011)), where it held that where a claim for ownership was time-barred, so too were any attendant infringement claims. The Court held that the exclusive license allegedly held by Simmons was legally equivalent to copyright ownership because Section 101 of the Copyright Act "recognizes that an exclusive license is effectively a transfer of ownership over the rights licensed. The Act includes exclusive licenses among the list of transactions that can effect a "transfer of copyright ownership...."

The case reinforces the risk of delay in pursuing claims of copyright ownership in the face of an express repudiation of rights. It further highlights the distinction as to how the Copyright Act's three year statute of limitations is applied differently with respect to ownership claims versus infringement claims. With respect to infringement claims where ownership is not in issue, the three year limitations period only bars damages going back more than three years preceding the filing of the complaint, where an infringement is ongoing.

February 12, 2016

Darlene Love v. Google Are Publicity Rights Needed in Addition to Master & Synchronization Licenses?

By David Jacob
Marc Jacobson, P.C.
http://www.marcjacobson.com/team/

A recent lawsuit filed on behalf of Darlene Love against Google and its ad agency, 72 & Sunny, may have far-reaching implications on long-standing music licensing practices. When ad agencies or brands want to use a song in a commercial, U.S. copyright law requires them to obtain a master use license (from the label) and a synchronization license (from the publisher). These licenses allow the reproduction of the master recording and musical composition. However, in Love's lawsuit, there is no copyright infringement claim. She does not allege that Google or its ad agency failed to obtain these licenses (it should be noted that 72 & Sunny claims that it was not involved in the production or licensing of the advertisement that is the basis of the lawsuit). Instead, she claims a violation of her right of publicity under California law. Therefore the issue arises as to whether ad agencies and brands need additional consent from artists, even if they already have master use and licenses from the applicable label and publisher.

Love's lawsuit alleges that the defendants infringed on her right of publicity under California common law. The California courts have developed the following four-step test (White v. Samsung, 971 F.2d 1395, 1397 (9th Cir. 1992)), in which Love must allege:

1. The defendant used plaintiff's "identity";
2. Defendant appropriated plaintiff's name or likeness to defendant's advantage, commercially or otherwise;
3. Lack of consent; and
4. Resulting injury.

For the sake of discussion, let's assume the use of the licensed song satisfies step 1 & 2, and that Love was injured by not having an approval right or not being paid a fee for her right of publicity. If that is the case, then the issue may come down to whether the master use license was sufficient to grant this permission. This may be a question of fact that is dependent on the terms of Love's original recording agreement.

The recording at the center of the dispute is "It's a Marshmallow World" recorded by Love in 1963 for the album, A Christmas Gift for You From Phil Spector. Most major recording agreements will include some clause clarifying that the label has the right to use the artist's name and likeness in connection with the promotion and sale of the works created under such agreement. Therefore, the question may come down to whether Love's original recording agreement included a broad enough provision to cover the use of the artist's voice for commercial purposes in connection with the work. If so, then its reasonable to assume that the record label can provide the necessary consent, and the artist's permission is not needed to further exploit the work. If the recording agreement is silent on the matter, Love may have a stronger argument.

Another wrinkle in this dispute is Love's statement that she "and virtually every successful recording artist records with labels which are signatories to the AFTRA collective bargaining agreement..." Perhaps Love's main complaint may be that the AFTRA Phono Code did not require the label to get artist approval right before it can license the work for a commercial. Most modern publishing agreements and recording agreements will require the artist's written approval for certain commercial uses. If an artist approves such a use with its label or publisher, or if the recording agreement explicitly grants the label the artist's right of publicity in connection with sales or licenses of the Work, it would be very difficult for that artist to claim there was an infringement on his or her right of publicity. Similarly, the decision may rest on whether the AFTRA Phono Code includes any provisions regarding the use of any artist's name or likeness in connection with the promotion or sale of a work.

Another complicated issue briefly mentioned in an article by Eriq Gardner in The Hollywood Reporter (http://www.hollywoodreporter.com/thr-esq/darlene-love-sues-google-using-857220) is whether federal law should preempt the state law claim. In most circumstances, federal copyright law will preempt a right of publicity claim if the allegedly infringing use is based on the use of a sound recording. The use of a sound recording alone, without appropriating any other aspect of that individual's identity, should be a claim based in copyright law. However, in Gardner's article, Love's attorney argue: "This is a pre-1972 recording and under 17 USC § 301(c), there is no preemption of state law until 2067." This argument may limit the scope of the issue only to the use of pre-1972 recordings. If the claim were based on the use of a properly licensed recording from 1972 or after, the claim would certainly fail and be preempted by federal copyright laws.

Regardless of how this lawsuit shakes out, labels would be wise to ensure that their contracts include the right to use the artist's name, voice and likeness in connection with all sales or licenses of the work. Similarly, ad agencies and brands should ensure that these rights are included in their master use licenses, along with an indemnification provision against any third party claims, including but not limited to copyright infringement and right of publicity claims.

March 7, 2016

Urgent Warning: Beware Of NBC/Universal's "SONGLAND" Submission Form

By Wallace Collins
www.wallacecollins.com

The NBC/Universal submission agreement for the "Songland" TV show states that NBC will own all rights to use and exploit all of your songs involved in the show including the songs you submit in the initial application. You would also purportedly be giving up your song even if you do not get selected to be on the Songland TV show (so whatever songs you use to audition would arguably become theirs to use and exploit even if they do not choose you). It also states that you waive your rights to claim any royalties from the songs whatsoever. On top of that, it states that you waive your right to sue NBC Songland (e.g., in case you didn't read the contract upon signing).

There is no way to know if NBC/Universal would actually pursue such a course of action and claim to be able to use and exploit all of the submitted songs without paying songwriters - the only thing I am addressing here is the language in the submission agreement. This is by far one of the most onerous such television contest submission agreements I have encountered. There is no warning of what the contract entails until the final part of the submission application, and what they are offering is crippling for songwriters. Most songwriters make their life's savings off of just a few big hits, and to be required to give away your best work like this for free is quite extreme.

Below are some relevant portions of the Songland submission contract:

- "I further agree that the Released Parties exclusively own all right, title, and interest (including, without limitation, all copyrights) in and to any and all recordings made by them and in and to any and all video that I have provided in connection with my application and any other materials that I have provided or may provide in connection with my application or the Program"

- "Without in any way limiting the waivers and releases set forth herein, I waive any claims to royalties of any kind, whether accruing now or in the future, from Producer and NBCUniversal for the use of any such Music or any other music, including, without limitation, any applicable copyright, public performance, mechanical and synchronization royalties."

- "I grant the rights hereunder whether or not I am selected to participate in the Program in any manner whatsoever. "

- "The term "Released Parties" shall mean and refer to Producer, NBCUniversal Media, LLC ("Network"), all entities and platforms of Network, Comcast Corporation, any other licensees or assignees of the Program or the Materials, the other participants in the Program, all other persons and entities connected with the Program, all parent, subsidiary, related and affiliated entities, licensees, successors, assigns, sponsors and advertisers of each of the foregoing, all of the respective directors, officers, principals, executives, on-air talent, employees, agents, contractors, partners, shareholders, representatives and members of each of the foregoing, and the respective heirs, next of kin, spouses, guardians, representatives, executors, administrators, successors, licensees and assigns of each of the foregoing."

Now, to be impartial, maybe the NBC/Universal lawyers did not mean for it to be so onerous and were merely drafting broad language to cover all contingencies and protect their client. Normally, one side's lawyers might draft a contract like this and the other side's lawyer would review it and clean up the most egregious language in order to protect the client. Here, however, there is no negotiation - this is technically known as a "contract of adhesion" in legal terminology.

So be warned that you should always read all of the language in such agreements and decide if the risk is worth the reward. Although it might be deemed overreaching vis-a-vis an adhesion contract if NBC were to try to enforce this against all songwriters who submit, it is better not to go down that road.

March 8, 2016

NBC Universal Changes Language in Songland Submission Form

By Wallace Collins

After my statements went viral and there was a big outcry from songwriters, NBC announced that it would change the language:

http://www.thewrap.com/nbc-changes-contract-to-adam-levines-songland-after-claim-of-rights-overreach/

It started with just one voice, but then tens of thousands of songwriters and musicians joined in, and it made a difference!

March 10, 2016

Beastie Boys & UMG Awarded Attorney's Fees In TufAmerica Copyright Action

By Jordan Greenberger

The SDNY awarded the Beastie Boys and their label, UMG, attorney's fees under section 505 of the Copyright Act, after they successfully defeated the plaintiff's infringement claims at summary judgment. The question at summary judgment was whether the plaintiff had standing (it did not), and the court found that awarding fees furthered the objectives of the Copyright Act by deterring the filing and pursuit of lawsuits in which chain of title has not been properly investigated by the plaintiff. The court reduced the Beastie Boys' lawyer's fees by 10% for some vague billing entries and duplicative work; 15% was reduced from the label's lawyer's fees based on vague and sparse entries. The Beastie Boys and UMG were also awarded costs. The totals were: Beastie Boys: approx. $591k fees, approx. $11k costs, and UMG: appox. $234k fees, approx $8k costs.

TufAmerica, Inc. v. Diamond et al., No. 12-cv-3529 (S.D.N.Y. filed Mar. 9, 2016).

May 3, 2016

The 11 Contracts Every Artist, Songwriter & Producer Should Know: Band Agreements and Business Decisions a Band Can and Should Take Without an Attorney

By Steven R. Gordon
www.stevegordonlaw.com

Steve Gordon is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels and music publishers as well as TV and film producers and digital music entrepreneurs. He also provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is the author of The Future of the Music Business (www.futureofthemusicbusiness.com (Hal Leonard 4th ed. 2015)).

The author would like to thank attorney Wallace Collins for contributing a model band agreement contained in this article. He also gratefully acknowledges the assistance of Ryanne Perio, Esq. in the preparation of this article.

DISCLAIMER

This series of articles and the forms included in them have been created for informational purposes only and do not constitute legal advice. This article and other articles in this series should be used as a guide to understanding the law, not as a substitute for the advice of qualified counsel. You should consult an attorney before making any significant legal decisions.

INTRODUCTION

This is the ninth installment of an 11-part series on basic music industry agreements. It includes two different, though related, discussions. The first part of the article discusses business actions a band should take, and can take at no or little cost, without the services of an attorney. The second part of the article examines the elements and benefits of an agreement between members of a band or musical group pertaining to important issues, such as decision making, division of money (including performance and recording revenues), treatment of departing members, and ownership of band property (such as the band's name, songs, and masters).

Band agreements usually require the services of an experienced music attorney to draft a legally enforceable contract. A sample band agreement provided by my friend and colleague, veteran music attorney Wallace Collins, is included in this article. If you take just a brief glimpse at it, you will see it takes a lot of thought and work. Many experts, especially lawyers, advise clients to prepare and enter into a band agreement as soon as possible after the band's formation. The reason, they argue, is that's the time when everyone in the band is getting along well, whereas it would be difficult to complete an agreement if there is already a dispute among the members. On the other hand, the vast majority of bands and music groups rehearse and perform at clubs and other venues on a part-time basis, and make little if any money at the beginning of their careers. It may not be worthwhile (i) to spend the time needed to discuss and reach consensus on all the complicated issues usually covered by a band agreement, and (ii) spend the money on an experienced lawyer to draft an enforceable agreement.

The bottom line is, if there comes a time when a band starts making good money and it looks as if it has a real future, then that is the right time to consider taking the time and spending the money to create an enforceable band agreement. In the meantime, any band or musical group can and should take these basic business actions discussed in Section I below.

I. ESSENTIAL BUSINESS ACTIONS ANY BAND OR MUSICAL GROUP SHOULD & CAN DO WITHOUT INCURRING LEGAL FEES:

These are the actions a band can do without using a lawyer:

• Sign a "split sheet" for every song written by more than one individual;
• Register all songs and masters with the U.S. Copyright Office;
• Register every song with the appropriate Performing Rights Organization (PRO);
• Upload the set list of any live performance containing original songs for payment by its PRO;
• Write up a simple agreement that no departing member can use the name of the band without permission.

DO A SPLIT SHEET FOR EVERY SONG

What is a Split Sheet?

A split sheet is a document that states who owns what percentage of a song and sets forth the credit each person should have. A sample split sheet is provided at the end of this section. A split sheet should be created for each and every song that was created by more than one person, and should be filled out and signed by all the writers before ever shopping it to a third party or trying to license it for placements. Every day around the world, songwriters collaborate on songs and never clarify who wrote what. If a songwriter is ever fortunate enough to license a song for a commercial, movie, or TV show, the writer may find him or herself fighting over who owns what percentage of the revenues generated from the song.

Most songwriters and artists just want to create great music, and it may feel uncomfortable to introduce a split sheet and start dividing up shares of publishing when trying to be creative. Yet it's a necessary part of the songwriting process. It's important to have a meeting about split sheets prior to hitting the studio; this way everyone understands that it's not personal, it's just business. Doing this makes everyone feel as though their interests are protected, which can enhance creativity rather than inhibiting it.

How to Complete a Split Sheet

Split sheets should contain the following information:

- The name of each writer.
- Percent of ownership. This is key. If the song makes money, this will determine how much each writer will receive.
- Credit for each writer, including who wrote the lyrics and who composed the underlying music.
- Everyone's signature.

Below is a sample split sheet:

Single Song Writers' Split Letter


Date: _______________

This is to confirm that we, the sole writers of the composition listed below, hereby agree among ourselves to the following writers' divisions:

Song Title: "_____________________"

Writers & % Ownership:

Writer Name: ________________ Ownership % _____________

Writer Name: ________________ Ownership % _____________

Writer Name: ________________ Ownership % _____________

Writer Name: ________________ Ownership % _____________

Credits:

Lyrics by: __________, ___________

Music by: __________, ___________

Produced by: __________, ___________


If any samples are contained on this song for which the sampled writer(s)/ publisher(s) are to receive a copyright interest in and to the Composition and/ or payment of monies attributable to the Composition, then we agree that our own shares in the copyright and/or monies attributable to the Composition shall be reduced proportionately.

The following list of samples represents all of those samples embodied in the above composition:

Name of Song by Name of Writer
________________________________
________________________________
________________________________

This Agreement contains the entire understanding of the parties hereto relating to the subject matter hereof and cannot be changed or terminated except by an instrument signed by all of the parties hereunder. The validity, interpretation and legal effect of this Agreement shall be governed by the laws of the State of _____ applicable to contracts wholly entered into and performed entirely within the State of _____.

Signature below will indicate agreement of the above.

Read and Agreed: Read and Agreed:

Read and Agreed: Read and Agreed:

REGISTER SONGS & MASTERS WITH THE U.S. COPYRIGHT OFFICE

Why Register?

Registration is not a prerequisite for copyright protection. Under the Copyright Act of 1976, a copyright comes into existence as soon as a work is fixed in a tangible medium of expression, and registration is not a condition of protection. However, registration provides crucial benefits to copyright owners. Those benefits, which are set forth in the U.S. Copyright Office's website at www.copyright.gov/circs/circ01.pdf, include the following:

1. Registration establishes a public record of the copyright claim.

2. Before an infringement suit may be filed in court, registration is necessary for works of U.S. origin.

3. If made before or within five years of publication, registration will establish prima facie evidence in court of the validity of the copyright and of the facts stated in the certificate.

4. If registration is made within three months after publication of the work or prior to an infringement of the work, statutory damages and attorney's fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner.

5. Registration allows the owner of the copyright to record the registration with the U.S. Customs Service for protection against the importation of infringing copies.

Of the reasons to register set forth above, the most important are that a copyright owner (i) cannot start a lawsuit for copyright infringement before registering, and (ii) cannot secure statutory damages or attorneys' fees without registering. With respect to (ii), the Copyright Act provides for statutory damages of up to $150,000 per infringement and attorneys fees. It is crucial that if the work has been published, the registration occurs prior to any infringement. Otherwise, the plaintiff must prove actual damages, which can be difficult to quantify, or may equal a negligible amount unless the defendant earned a lot of money from the infringing work. Further, attorneys fees are only available for published works that are registered prior to the infringement. Similar to other litigation, a lawsuit for copyright infringement can take a great deal of work and time on the part of the attorney. That is why attorney fees can add up. It would be difficult or impossible to retain the services of an experienced copyright litigator without the potential for recovering fees.

Note that the only way to secure the benefits of copyright registration is to register with the U.S. Copyright Office. These benefits, contrary to a popular myth, cannot be obtained by sending a copy of one's song or master to oneself (even by certified or registered mail).

How to Register

To register a work, including a song or a master, a completed application form, a nonrefundable filing fee, and a nonreturnable copy of the work. must be submitted Here are answers to the most important questions regarding registration:

Where to apply? Find and complete the copyright registration application online at http://www.copyright.gov/eco (eco is an acronym for Electronic Copyright Office).

How much will it cost? The basic fee for registering any work, including a song or master, was raised from $35 to $55 in May 2014. However, the fee is still $35 for registering a single work by a single author.

What else needs to be done? It is also necessary to provide a "deposit" of the work. This can be done by uploading an MP3, or print out a "shipping slip" to be enclosed with a CD and mail it to the Copyright Office within 30 days of applying for the registration.

Is it possible to register a sound recording and a song in one application? Yes. To register a master and a song in one application, click on "Sound Recording" in the drop down menu in the part of the application asking for the type of work to be registered. Later in the application, there will be a page allowing you to claim music and lyrics as well as the sound recording.

The U.S. Copyright Office's website (www.copyright.gov) is an invaluable source of information not only on registration, but also on how copyright law protects songs and masters.

Multiple Writers and/or Producers

Any signatory to the split sheet can register the copyright in a song and/or master. All the other signatories to the spreadsheet should be included as joint "authors" in the application.

REGISTER WITH A PRO & UPLOAD SET LISTS FROM LIVE SHOWS TO MAKE SOME MONEY

What is a PRO?

Any user of music that publicly performs a song must secure a license and pay a royalty to do so. Songwriters and their music publishers use PROs to collect these royalties. In the U.S. there are three: ASCAP, BMI, and SESAC. A fourth PRO, recently launched by music industry mogul Irving Azoff, is Global Music Rights (GMR).

The PROs collect public performance royalties from radio, television, the Internet, as well as physical venues, such as bars, nightclubs, concert halls, arenas, and other places where live or recorded music is played.

In order to collect public performance monies, one must be a member of a PRO. Anyone can join ASCAP or BMI. SESAC, the smallest of the three, is selective.

When a song is registered with one of the PROs, the PRO will require the person registering the song to indicate the percent ownership of each writer. If the band has a manager, he or she can perform this function. The registration should reflect the breakdown of ownership in the split sheet. Even if no split sheet was ever signed, the registration will itself be a record of the percent ownership of each member in the band. That's why each member with an interest in a song should check to see if the information supplied to the PRO is accurate.

Live Performance Payments

Each of the PROs pays its writer and publisher affiliates for live performances at venues across the U.S. Basically, all the songwriter, who may also be an artist, has to do is submit a set list of songs performed at any venue showing which songs were written by him or her. Generally, he or she must also provide the venue name, address, size of venue and the dates of the performance. The songs must be registered first in order to complete this process. More information on each of the PROs' live performance programs is available at

- www.sesac.com/WritersPublishers/HowWePay/liveperformances.aspx
- www.bmi.com/creators/royalty/live_concert_royalties
- www.ascap.com/members/onstage.aspx

Anecdotally, I know a singer/songwriter in New York City who played shows at bars and restaurants and made about $200 a gig from passing the hat. She made $1,250 from SESAC by reporting her set lists for a single calendar quarter.

PROTECTING THE BAND NAME

Make Everyone Agree That Departing Members Will Not Be Able To Use the Band Name

Even in the absence of a full band agreement, a band or musical group can handle the issue of who owns the name by using a form such as this:

Band Name Agreement

Date: _______________

Re "__________" [Name of band]

This is to confirm that we, the sole members the above referenced band, hereby agree among ourselves that each member of the band is a joint owner of the name of the band, provided that no leaving member, whether that member leaves voluntarily or not, shall be able to use the name of the band in connection with the entertainment industry including the music business.

This Agreement contains the entire understanding of the parties hereto relating to the subject matter hereof and cannot be changed or terminated except by an instrument signed by all of the parties hereunder. The validity, interpretation and legal effect of this Agreement shall be governed by the laws of the State of _____ applicable to contracts wholly entered into and performed entirely within the State of _____. [Use the state where the band members reside]

Signature below will indicate agreement of the above.

Signature below will indicate agreement of the above.

Read and Agreed: Read and Agreed:

Read and Agreed: Read and Agreed:



Note that sometimes a band will want to handle ownership of the band's name in a different manner than in the sample agreement. For instance, where two of the members founded the band and then added a third or more members later, the founders may want to exclusively own the rights in the name, or they may wish to allow departing members the right to use the band's name, provided that the leaving member uses the words "formally of". For a band that wishes to treat the ownership or use of the band's name in a different manner than the sample agreement, it may be wise to hire a lawyer.

Consider Registration of the Band Name with the U.S. Trademark Office

A band should also consider registering its name as a trademark with the U.S. Patent and Trademark Office (PTO, www.uspto.gov/trademark). In the U.S., it isn't necessary to register a mark to obtain protectable rights. You can establish "common law" rights in a mark based solely on use of the mark in commerce without a registration. However, owning a federal trademark registration provides a number of significant advantages over common law rights alone, including:

1. A legal presumption of ownership of the mark and exclusive right to use the mark nationwide.

2. The ability to bring an action concerning the mark in federal court.

3. The use of the U.S. registration as a basis to obtain registration in foreign countries.

Registration fees depend on the kind of form used and the number of International Classes listed in the application. International Classes refer to good and services for which the mark is used. A band would always want to file under International Class 41, which includes entertainment services. Another possibility may be to consider filing for International Class 25, which includes clothing, such as t-shirts and hats. The cheapest form is called "Trademark Electronic Application System (TEAS) Plus" and costs $225 per class. However, this form requires somewhat more information and is slightly more difficult to complete than two other possible forms: TEAS Reduced Fee (which costs $275 per class), and TEAS Regular Filing (which has the least number of requirements, and costs $325 per class). Of course, these fees only apply to marks in use in commerce. Additional fees apply if one is filing an Intent to Use.

Unlike the other recommended business actions previously discussed in this article, it is advisable to use an attorney in this situation. Filing a trademark application, or even deciding on the right form to use, is a bit tricky, and experience in filling out the appropriate application and dealing with the PTO is important. For instance, a failure to correctly list the goods/services with which the mark is used, or intended to be used, may prevent one from registration, and no refund of any fees paid is possible.

II. BAND AGREEMENTS

WHY BOTHER?

When two or more people associate for the purpose doing business, arguably they create a partnership in the eyes of the law. General partnership law applies to the association unless a written agreement states otherwise. General partnership law provides, among other things, that all partners equally own partnership property and share in profits and losses, that any partner can bind the partnership, and that each partner is fully liable for the debts of the partnership. In the case of most musical groups, a written agreement setting forth the arrangement between the group members as partners is preferable to general partnership law.

For instance, if one person creates a band and comes up with the band's name, he or she may want exclusive rights to make the band's decisions and the right to fire any new band member. That person may also want a bigger percentage of band profits, especially if he or she pays more money than other band members for touring or studio time. As an example, I represent one person who started a band in China. He created the name and moved to the U.S., where he selected all new band members. He's the lead singer and writes all the songs. In this situation, it may be better to simply employ the other band members as freelancers and pay them a certain percentage of money from live gigs, but stipulate that he can replace them at will.

WHEN TO DO IT?

When a time comes that a band is beginning to make decent money and it's clear that it actually has a future, that may be a good time to take the plunge. It will involve considering the issues discussed below, coming to a consensus among all the members of the band, and then hiring an attorney to draft an enforceable agreement.

BASIC ELEMENTS

A band agreement is an agreement between/among the members of a band that covers basic business issues. The most important issues are:

- Decision making
- Hiring and firing
- Profits and Losses
- Treatment of Leaving Members
- Band name
- Ownership of Songs and Masters


Decision Making

The issue of control is very important. In most cases, each member will have an equal vote and a majority will rule. However, as set forth in the sample agreement provided by Wallace Collins below, a particular member may have two votes, and the manager may have a tie-breaking vote. The agreement may also provide that certain matters, such as requiring financial contributions from group members or incurring debts on behalf of the band, require a unanimous vote. Again, there are endless variations, including situations where a particular member makes all of the decisions, or where new members do not have a vote on band business. For instance, a band could agree on what might be called a "reverse democracy"; each member has one vote, but if any member votes against doing something, then the band would not do it. In other words, this arrangement requires unanimous consent to proceed with an activity.

Hiring and Firing of Band Members

Another issue of control that must be decided concerns the hiring and firing of band members: How votes are calculated (e.g., will each member get one vote or will a particular member's vote count double or more) and how many votes are needed (e.g., a majority or a unanimous vote) to fire a group member and/or hire a new member. In most cases, a new member voted into the group will then be required to sign the band agreement. It must also be decided how to vote on any amendments to the band agreement, since this may materially affect the relationship between/among the members after the group has started. In most cases, a majority vote will be deemed determinative, but some members may prefer a unanimous vote on such things as amending the agreement (as well as hiring or firing). This will have to be decided between and among the members of the group.

Profits and Losses

The band agreement should contain provisions regarding the sharing of profits and losses. One provision may pertain to revenues earned during the term while each member is in the group, and another may pertain to after the departure of a member or the break-up of the group. In most cases, a new group will have a provision that all profits from the group are shared equally between all members with an exclusion for songwriting monies (which each of the respective songwriter members would keep). Where an established group adds new members, the provision may provide that a new member gets a smaller percentage than the founding members.

Treatment of Departing Members

The more complicated problem of revenue division arises after a member departs. The agreement may provide that the leaving member is entitled to his or her full partnership share of profits earned during his or her tenure, with a reduced percentage (or no percentage) of profits derived from activities after the departure; or the agreement may provide for a reduced percentage for a short period of time after departure (e.g., 90 days), and then nothing thereafter. This is an easier issue to deal with regarding live performances than record royalties. In most cases, bands will agree that leaving members should receive their shares of live performance during the time when the members were in the band, even if the shares are received after a departure. The group also needs to determine what happens, for example, when a member performs on three albums, but leaves before the fourth album is recorded. Although it might be acceptable to refuse to pay the departing member any royalties on the fourth and future albums recorded by the group under a record contract the leaving member signed as part of the group, it might not be fair to refuse to pay that individual his or her share of royalties from the three albums that were recorded with the band. Of course, this might vary depending on whether the leaving member quit or was fired.

Another important financial issue is the question of the departing member's share of partnership property, such as band recording equipment or a sound system. Again, the agreement might specify a monetary payout to the leaving member if he or she is terminated, but a forfeiture if the leaving member quits. If merchandise with the departing member's name and likeness is in inventory and sold after the member leaves, a decision will have to be made about whether and how much the departed member might receive for the use of his or her name and likeness.

Buy-out/Pay-out Provisions

A band contract should contain a comprehensive Buy-out/Pay-out provision that deals with departing members. Whether the leaving member quits or is fired, the agreement may provide that that individual waives all rights in the intangible assets of the partnership (e.g., the group name, the group contracts, etc.). If the member quits, he or she may waive any right to and benefit derived from the hard assets, such as band sound equipment. If the leaving member is fired, the agreement might provide that he or she is entitled to the pro rata percentage of the current value of the hard assets. With respect to this payout, the band contract may provide that if the valuation exceeds a certain amount or would put the partnership in financial distress, the payout would be in a certain number of equal monthly installments.

Again, this Buy-out/Pay-out provision can be as simple or as complicated as the band members deem necessary. There are as many variations in this as there are differences in personalities between the members of a group. Each member and each group, with the help of an attorney, has to find its own solutions.

Band Name

As previously discussed, an important issue is who owns the group name if one member leaves or if a group disbands. Under partnership law, the partners would be the owners of the name, and any member would arguably be permitted to use the name. Trademark rights are determined based on the 'use' of a mark, not on who thought of it, so each of the members of the group would be an equal co-owner of the group name under trademark law (this of course depends on how the application was completed; whether the band members were listed as co-owners, or whether the partnership or other business entity owned the mark). The end result could be chaos, with several bands all with the same name but different players.

One solution would be to use the brief agreement previously discussed. The matter can also be handled in the context of a full scale band agreement. In most cases, the band agreement will state, as the short form agreement previously discussed, that if a particular member leaves the band, either because he or she quits or is fired, that person will not be entitled to use the band name. The band agreement could fine tune this provision by stating that the leaving member may describe him or herself as a "former member" of the band.

However, if one member thought up the group name, then the band agreement may state that only a group including that member can use the name. This will apply whether one other member leaves or if the group disbands and only the founding member creates a new band.

Rights in the group name may also concern revenues in addition to the use rights, specifically as they concern merchandise, such as t-shirts, caps, buttons, and posters. The band agreement may deal with how much each member of the band will receive from sales of such merchandise.

Ownership of Songs and Masters

It was previously discussed how important it is to confirm who are the writers of a band's songs, and that a split sheet can be used to confirm ownership. The band agreement could include a provision incorporating split sheets, or provide that any song created by any member of the band would be jointly owned by all the band members. This last example would only make sense where the band operates as a collective, and every member is invited to and makes contributions to the creation of each song.

The band agreement could also confirm that every member of the band is a joint owner of any recordings made during the life of the band. This makes sense if each member of the band is performing on recorded tracks.

Advantages of Forming a Limited Liability Company and entering into an "Operating Agreement instead of a Band Agreement

An alternative to a traditional band agreement would be forming a limited liability company (LLC) and then drafting an Operating Agreement that would look pretty much the same as a band agreement, except that each member of the band would be a Member. The advantage to this approach is that when the band enters into agreements with third parties, such as investors, the personal assets of the band members would not be at risk.

Role of the Lawyer

If each member of a band or music group could afford his or her own lawyer, then the lawyers could work out an arrangement on behalf of their clients, which doesn't often occur. Instead, after a band decides on the issues discussed above, it should engage an attorney to review its decisions and write up a legally enforceable agreement. An attorney cannot represent each member of the band. That would create a conflict of interest; however, an attorney can be a "scribe" who enforces the decisions of the band by preparing an agreement that is legally enforceable. Fees can range from a $1,000 to $5,000 or more, depending on the lawyer and the complexity of the deal.

The below model band agreement has been graciously provided by Wallace Collins, Esq. (www.wallacecollins.com). Wallace is an entertainment and intellectual property lawyer. He was a recording artist for Epic Records before attending Fordham law school.

BAND PARTNERSHIP AGREEMENT

This agreement is made and entered into this ___ day of April, 2015, by and among the following persons:

[name/address]

The foregoing individuals are hereinafter each individually referred to as "Partner" and in the plural as "Partners".
With respect to any gender reference in this Agreement, wherever required in this Agreement, the singular shall include the plural, and the masculine gender shall include the feminine and neuter.

1. THE PARTNERSHIP.

The Partners hereby constitute themselves as a general partnership (the "Partnership") to be known as "_____" (the "Group") under the laws of the State of_______________ for the purposes of live performances, creating sound recordings for use and commercial exploitation in all mediums and by any means whether now or hereafter devised of recording musical performances for reproduction ("Recordings"), exploiting and merchandising the names (both legal and professional) and likenesses of the Group and the members of the Group, using and commercially exploitation musical compositions composed by any Partner individually or jointly with any other person and recorded by the Group for the purpose of exploiting Recordings (the "Group Compositions"), and all other present and future activities of the Partners as members of the Group in the entertainment field during the term of this Agreement. Except as otherwise expressly provided herein, the Partnership shall have the exclusive right to the services of each Partner as a member of the Group in the entertainment field. The principal place of business of the Partnership shall be at such place as the Partners may determine pursuant to the provisions of this Agreement.

2. THE NAME.

The Partnership shall do business as "_____" (the "Group Name") and any and all trademarks and related intellectual property rights therein and thereto shall be the sole and exclusive property of the Group.

3. DURATION OF PARTNERSHIP.

The term for which this Partnership is to exist shall commence as of the effective date hereof and shall continue until dissolved in any manner provided herein.

4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

Each of the Partners warrants and represents to each of the other Partners that he is free to enter into this Agreement, and that he is under no disability, restriction or prohibition which will interfere in any way with his full compliance with all of his obligations under this Agreement. Each Partner warrants and represents that he has not done nor will he do any act or thing that will or might impair the full enjoyment by the Partnership of any of the rights granted to it under this Agreement or the commencement or continuation of the Partnership business in the manner herein contemplated. Each Partner further warrants and represents that he will not sell, assign, transfer or hypothecate any right, title or interest in or to any asset of the Partnership without the prior written consent of all other Partners. Each Partner covenants and agrees that he will perform the services provided to be performed by him hereunder diligently, fully and to the best of his ability during the Term of this Agreement, in a competent and professional manner, and will refrain from participating in activities which with reasonable foreseeability could limit or prohibit him from so performing. Each of the Partners acknowledges that preservation and enhancement of the value of the Partnership may be hindered by the failure of an individual Partner to apply himself diligently to the business of the Partnership or by actions in a manner injurious to the rights of the other Partners.

5. CONTRIBUTION.

As a contribution to the Partnership, each Partner is contributing his exclusive services as a recording artist with respect to Recordings embodying musical performances of the Group, his exclusive services as a musical performer in all media and on the live stage with respect to his activities as a member of the Group, his Merchandising Rights with respect to his activities as a member of the Group, his exclusive services as a songwriter and publisher with respect to the Group Compositions, and generally his exclusive services as a member of the Group within the entertainment field. No Partner shall be required to make any capital contributions except upon the unanimous agreement of the Partners.

6. PROFITS AND LOSSES.

(a) Subject to Paragraph 6(b) below, and unless agreed otherwise in writing by all of the Partners, the Partners shall share equally in all of the profits, losses, rights and obligations of the Partnership. Should any Partner at any time bear or satisfy a disproportionate share of the financial obligations of the Partnership, he shall be entitled to reimbursement therefore from the other Partners proportionately out of sums otherwise distributable to them as Partners. "Net profits" (as hereinafter defined) shall be distributed in cash to the Partners from time to time, but only as expressly authorized by a vote of a majority of the then-existing Partners. "Net profits" as used herein shall mean all commissions, royalties (including Recording royalties but excluding the so-called "songwriter's share" and "publisher's share" of music publishing royalties), bonuses, payments (other than repayment of loans), fees (including synchronization fees), dividends, stock bonuses, interests or monies of any kind or nature which shall be paid to the Partnership or to any Partner as a result of the Partnership activities after deducting the sum total of all reasonable salaries, rent, promotional costs, travel costs, office expenditures, telephone costs, accounting and legal fees, entertainment costs, and any and all legitimate Partnership expenses incurred by the Partnership while conducting Partnership business. No Partner shall receive any salary, bonus or goods or other assets of the Partnership in excess of that received by any other Partner, except as set forth herein or otherwise upon the unanimous vote of all of the Partners.
(b) Notwithstanding anything to the contrary contained herein, and unless agreed otherwise in writing by all of the Partners, net profits arising from the copyrighting, publishing and exploiting of a particular Group Composition ("Publishing Profits," which includes, without limitation, the so-called "songwriter's share" and publisher's share" of music publishing royalties) shall be shared solely among the Partners who are the authors of such Group Compositions.

7. MANAGEMENT.

(a) Each Partner shall have the right to participate equally in the control, management and direction of the business of the Partnership. In exercising this control, management and direction, each Partner shall have the same vote as each other Partner. No Partner shall have the right to make any expenditure in excess of $100 or incur any major obligation (including, without limitation, borrow or lend money, make, deliver, accept or endorse any commercial paper, compromise or release debts owing to the Partnership, sell, lease, license, assign or hypothecate any Partnership property or enter into any contract for any purpose) on behalf of the Partnership, except as expressly authorized by a vote of three-fifths (3/5) of the then-existing Partners. No Partner shall hold or accept from any third party any gratuity or other consideration in consideration of his exercising or declining to exercise his rights hereunder in any manner. The Partners may, by 3/5 vote, delegate all or any of their management functions to one or more professional managers upon such terms and conditions as the Partners so voting shall designate.
(b) Notwithstanding anything to the contrary contained herein, but subject to any future agreement, if any, between the Partnership and a third-party co-publisher or administrator, the Partner(s) who is/are credited as the writer(s) of a particular Composition shall have the exclusive right to sell or grant rights (by means of license or otherwise) in respect to such Composition in his/their sole reasonable discretion; provided that any Partner disassociated from the Partnership pursuant to Paragraph 11 hereof shall thereafter retain the right to sell or grant rights in respect to any Composition for which he is credited as a writer, subject to Paragraphs 7(b)(i) and (ii) hereof and the continuing rights of the other Partners in any net profits derived therefrom as provided in Paragraph 6 hereof. A disassociated Partner shall keep the Partnership informed as to his address and telephone number for the purpose of transacting business in respect to the Compositions. If a Composition is co-written by a remaining Partner and a disassociated Partner and the remaining Partner seeks to pursue a commercial opportunity in respect to such Composition, he shall send the disassociated Partner written notice thereof by certified mail, return receipt requested. If the disassociated Partner does not respond within fourteen (14) days after the date of such notice, then the remaining partner shall have the authority to grant rights in such composition to a third party, subject to the disassociated Partner's right to share in any net profits in respect thereto as provided herein.
(c) Notwithstanding the foregoing, the Partner or Partners who are the authors of any Group Composition hereby grant the Group a mechanical license for use of the Compositions in any Group Recording at the full statutory mechanical rate.

8. BOOKS OF ACCOUNTS AND RECORDS.

The Partnership books and records, together with all other documents and papers pertaining to the business of the Partnership, shall be maintained at its principal place of business or at such other place as shall be designated by the Partners, and shall be available for inspection at all reasonable times by any Partner or any designated representative of any Partner. The maintenance of such books and records shall be in accordance with generally accepted accounting practices and principles, consistently applied, and at the cost of the Partners, pro rata. The fiscal year of the Partnership shall end on December 31. The Partnership shall render yearly accountings to each Partner on the first day of February in every year during the term of the Partnership. At the sole cost and expense of the Partners, the Partners may retain any duly licensed firm of accountants and/or attorneys in connection with the business of the Partnership, including the rendition of said accountings.

9. DISSOLUTION.

(a) This Agreement shall terminate, and the Partnership shall be dissolved, upon the first to occur of the following events:
(i) The written agreement of all of the Partners to dissolve the Partnership; or
(ii) By operation of law, except as otherwise provided herein. The addition of a new Partner (as provided in Paragraph 10 hereof) or the disassociation of a Partner (as provided in Paragraph 11 hereof) shall not terminate this Agreement, and it shall remain in full force and effect among the remaining Partners.
(b) Upon termination of the Partnership, the Partnership's receivables shall be collected and its assets liquidated forthwith (except as provided in subparagraphs (d) and (e) below). The proceeds from the liquidation of the Partnership assets and collection of the Partnership receivables shall be applied in the following order:
(i) First, to the expense of liquidation and debts of the Partnership other than debts owing to any of the Partners;
(ii) Next, to the debts owing to any of the Partners, including debts arising from loans made to or for such Partners, except that if the amount of such proceeds is insufficient to pay such debts in full, payment shall be made on a pro rata basis;
(iii) Next, in payment to each Partner of any financial capital investment made by him in the Partnership belonging to him, except that if the amount of such proceeds is insufficient to pay such financial capital investment in full, payment shall be made on a pro rata basis;
(iv) Next, in payment to each Partner on a pro rata basis of any of such proceeds remaining.
(c) The Partners shall execute all such instruments for facilitating the collection of the Partnership receivables and liquidation of the Partnership assets, and for the mutual indemnity or release of the Partners as may be appropriate under all then-present circumstances.
(d) Any property, including, but not limited to, the Group Name, all rights and interests in contracts, agreements, options, choses in actions and Merchandising Rights, owned or controlled by the Partnership at the time of dissolution from which income is being derived, shall not be sold, but shall be retained and distributed in the manner hereinafter set forth. After the payments provided for in Paragraph 9(b)(i), (ii) and (iii) have been made in full, any such property owned by the Partnership and the continuing earnings received as a result of the exploitation thereof shall be valuated by an accountant selected by the Partners who is experienced in the music industry. Said property shall then be distributed, as nearly as possible, among the Partners in a manner consistent with the terms set forth in Paragraph 6 hereof.

10. ADDITION OF A PARTNER.
A new partner may be admitted to the Partnership but only with the written consent of all of the Partners. Each new Partner shall be admitted only if he shall have executed an agreement with the Partnership under the terms of which such Partner agrees to be bound by all of the provisions hereof, as amended, as if a signatory hereto. Notwithstanding anything to the contrary contained herein, such new Partner shall have no right, title or interest in any of the assets or property of the Partnership existing at the time of his admission to the Partnership ("existing property") or in any of the proceeds derived from such existing property or from the sale, exchange, or liquidation thereof. Such new Partner shall have no interest whatsoever in the Group Name apart from the limited right to be known as a member of the Group, and upon the termination of the Partnership his interest in any assets, property, net profits and losses of the Partnership shall attach only to such assets, property, net profits and losses acquired by the Partnership after his admission to the Partnership. Such new Partner's capital contribution, if any, and share of the Partnership's net profits and losses shall be set forth in the written consent of all of the Partners approving the admission of the new Partner.

11. DISASSOCIATION.
(a) A Partner may become disassociated from the Partnership by reason of his death, his disability, his resignation or by the written vote of all of the other Partners. For purposes of this Agreement, a Partner shall be deemed disabled if he is unable to perform services as required hereunder for any reason for a period in excess of one hundred eighty (180) consecutive days, or two hundred seventy (270) days out of the year. If a Partner resigns, he shall give thirty (30) days prior written notice of such resignation to each of the other Partners. A Partner (or, in the event of disassociation by death, his executor or personal representative) who is disassociated shall be entitled to receive an amount equal to his proportionate share of the net worth of the Partnership as of the date of his disassociation, exclusive of any value attributable to the Group Name, but he shall not be entitled to any of the earnings of the Partnership received thereafter or any interest in the Group Name, nor shall he be subject to any of the liabilities of the Partnership incurred thereafter; provided, however, that such Partner shall be entitled to receive his applicable proportionate share (as set forth in Paragraph 6 hereof) of any royalties (other than any share of Publishing Profits provided for in Paragraph 6(b)(ii)(A) in respect to Group Compositions which are not written, in whole or in part, by the disassociated Partner(s)) earned from the exploitation of (a) any Recording recorded hereunder and embodying his performances, and (b) the Group Compositions which have been recorded by the Group prior to the date of his disassociation, as and when such profits are actually received by the Partnership, less his pro rata or other agreed share of any expenses and/or liabilities relating thereto.
(b) The net worth of the Partnership shall be determined as of the date of the disassociation by an accountant selected by the remaining Partner(s) other than the Partnership's regular accountant, and other than the personal accountant of any Partner, which accountant shall be familiar with the music industry. The accountant shall make said determination in accordance with generally accepted accounting practices and principles, taking into consideration, among other factors, the fair market value of the assets of the Partnership other than the Group Name, its liabilities (including the disassociated Partner's entitlement to future royalties as provided in subparagraph (a) hereinabove), its past profits and losses. In the event of voluntary resignation, the determination of said accountant shall be final. However, if the disassociated Partner or his legal representative should disagree with the accountant's determination in the event of disassociation for any other reason, the disassociated Partner or such representative may within thirty (30) days after receipt of the accountant's determination submit the issue of the fair market value of the Partnership to arbitration in New York, under the applicable rules of the American Arbitration Association by one (1) arbitrator selected by such organization from its panel of arbitrators in accordance with its usual procedures. Unless the remaining Partner(s) elect to pay the disassociated Partner's share of the value of the Partnership sooner, said share shall be payable (without any interest accruing thereon) in twelve (12) approximately equal monthly installments commencing one month following the date of the final determination of said net worth; provided however, that if said share is in excess of $10,000 but less than $25,000, the remaining Partner(s) may elect to pay same in twenty-four (24) approximately equal monthly installments, and provided further, that if said share is in excess of $25,000, the remaining Partner(s) may elect to pay same in thirty-six (36) approximately equal monthly installments.

12. NOTICES.
All accountings and notices to be given hereunder, and notices of any action by the Partnership which has the effect of altering any Partner's share of profits or losses shall be given in writing, by personal delivery or by mail or by telegram at the respective addresses of the Partners set forth above, or at such other addresses as may be designated in writing by registered mail by any Partner. Notice given by mail or by telegram shall be deemed given on the date of mailing thereof or on the date of delivery of such telegram to a telegraph office, charged prepaid or to be billed.

13. PARTNERSHIP BANK ACCOUNTS.
One or more Partnership bank accounts may be opened and maintained by the Partners with such bank or banks as the Partners may determine and any checks or withdrawals from or against any bank account or accounts shall be upon the signature of any of any person as the Partners may unanimously select; provided, however, that such checks or withdrawals shall be subject to the approval process set forth in Paragraph 7 hereinabove.

14. ASSIGNMENT OF PARTNERS' INTEREST.
No Partner, or executor or administrator of a deceased Partner, shall sell, assign or transfer all or any portion of his financial or other interest in the Partnership or right to receive a share of Partnership assets, profits or other distribution without the prior written consent of all of the other Partners and any such purported sale, assignment or transfer in contravention of the foregoing shall be null and void. The Partners acknowledge that a part of the capital contribution of each Partner is the unique personal services required to be rendered for the exclusive account of the Partnership by each Partner, for which no presently adequate substitute exists; and that the other Partners are the sole and exclusive judges of the adequacy of any future substitution.

15. GENERAL PROVISIONS.
(a) Liability. The liability of the Partnership or the Partners arising out of any activities of the Partnership shall to the extent possible be covered by appropriate policies of insurance. In the event that any liability shall not adequately be covered by insurance, the amount of liability not so insured against shall first be satisfied out of the assets of the Partnership.
(b) Indemnity. Each Partner hereby indemnifies the other Partner(s) and holds such other Partner(s) harmless against and from all claims, demands, actions and rights of action which shall or may arise by virtue of anything done or admitted to be done by him (through or by agents, employees or other representatives) outside the scope of or in breach of the terms of this Agreement. Each Partner shall promptly notify the other Partner(s) if such Partner knows of the existence of a claim, demand, action or right of action.
(c) Successors and Assigns. Subject to the restrictions on assignments set forth in this Agreement, the provisions of this Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, successors and assigns of the Partners.
(d) Severability. If any term, provision, covenant or condition of this Agreement is held to be illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.

16. CONSTRUCTION.
This Agreement shall be governed by and construed in accordance with the laws of the State of New York. In the event of any action, arbitration, suit or proceeding arising from or under this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees and costs of said action, suit, arbitration or proceeding. This is the entire understanding of the parties relating to the subject matter hereof and supersedes all prior and collateral agreements, understandings, and negotiations of the parties. Each party acknowledges that no representations, inducements, promises, understandings or agreements, oral or written, with reference to the subject matter hereof have been made other than as expressly set forth herein. Each Partner acknowledges that he has consulted with legal counsel of his choice with respect to the contents of this Agreement prior to execution hereof, and has been advised by such counsel with respect to the meaning and consequences hereof. This Agreement cannot be changed, rescinded or terminated except by a writing signed by each of the Partners. The titles of the paragraphs of this Agreement are for convenience only, and shall not in any way affect the interpretation of any paragraphs of this Agreement or of the Agreement itself.

NOTWITHSTANDING THE REPRESENTATION OF THE PARTNERSHIP BY WALLACE COLLINS AS LEGAL COUNSEL, EACH OF THE PARTNERS HAS BEEN ADVISED OF THEIR RIGHT TO RETAIN INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS LEGAL DOCUMENT AND EACH PARTNER HAS EITHER RETAINED AND BEEN REPRESENTED BY SUCH LEGAL COUNSEL OR HAS KNOWINGLY AND VOLUNTARILY WAIVED RIGHT TO SUCH LEGAL COUNSEL.

IN WITNESS WHEREOF, the parties hereto have executed and sealed this agreement on the date first above written. "PARTNERS"

________________________

May 23, 2016

Heirs Go Crazy: Prince's Estate and Copyright's Termination of Transfer

By Britton Payne
https://paynebritton.wordpress.com/about/

The fight over Prince's estate will dig deep into copyright law for a very long time.

When Prince passed away on April 21, 2016, he left no will, and now his heirs appear ready for a long fight over his estate. Apparently, their first meeting about the estate ended in shouting. Heirs can battle over any substantial estate, and there are particular complications when it involves an artist. Some of what Prince's heirs are fighting over is the ownership of his works -- his published and unpublished music compositions and recordings. Copyright law will have a significant impact on who has what rights, and for how long. Three particular areas affecting their rights are: the termination of transfer (17 U.S.C. § 203), the term of copyright for published and unpublished works (17 U.S.C. § 302), and the contracts already in place. The drafting of a will for an artist, or the administration of a late artist's estate, should include a consult from an attorney for copyright due diligence.

After 35 Years, Artists and their Estates Get Another Bite at the Apple

There is an inherent feeling of unfairness for artists when they sign away the rights to their works, which against all odds go on to become popular and make a fortune for the rightsholders -- but not the artists. To address this, the Copyright Act built in a "termination of transfer" provision that gives an author an opportunity to claw back the work after 35 years, essentially giving the artist "another bite at the apple." (17 U.S.C. § 203.) There are court cases about termination of transfer for "Santa Claus is Coming to Town," Winnie the Pooh, Archie Comics, Ray Charles, the Village People and a few others, but there aren't very many published opinions offering guidance about interpreting the law. The battles over the Prince estate may explore these issues for decades.

Most of Prince's Works are Owned by the Estate and Licensed to Warner Bros.

Prince's first album For You was released in 1978, but still earns money for its publisher Warner Bros. Records to this day. Had Prince wanted to, in 2013 he could have rescinded the rights to distribute his 1978 album from Warner Bros. In 2014, he could have terminated the transfer of his 1978 or 1979 albums, and reclaimed control over them. Had he wanted, he could have kept terminating transfers as his most popular albums hit their 35 year marks: Controversy (2016), 1999 (2017), Purple Rain (2019), Around the World in a Day (2020), Parade (2021), Sign o' the Times (2022), Lovesexy (2023), Batman (2024), Graffiti Bridge (2025), Diamonds and Pearls (2026) and so on. Instead, in 2014 Prince and Warner Bros. Records redid their deal, which apparently resulted in Prince's reclaiming ownership in his back catalogue, and Warner Bros. retaining certain rights to distribute his music. This effectively resets the clock on the termination right, which can't be exercised against Warner Bros. for the works covered by this agreement until 2049. Warner Bros. and other record labels appear to be quite flexible in redoing deals with their artists with still-popular back catalogues that are approaching their 35-year termination of transfer dates. Musicians are finding that the evolution of digital recording and distribution give them much more of an ability to exploit their works without the help of a record label, which gives them more leverage to get even more favorable deals if they renegotiate. The termination of transfer right and technological advances are giving artists just the second bite at the apple envisioned by the termination of transfer clause's authors -- as long as the artists and their heirs have the legal counsel to help them take advantage of it. Warner Bros. chose to do what it could to lock up Prince's most lucrative works in the face of a termination of transfer.

Prince's Estate can Already Claw Back Some of His Other Works, and More Every Year

However, there may be other licenses and transfers of rights in Prince's works that were not affected by the Warner Bros. agreement. The oldest of these licenses and transfers are eligible for termination, and more will be in the coming years. The mechanics of the termination are a bit complicated, but are based on the passage of 35 years since the initial transfer of copyright. For the purposes of illustration, imagine that shortly after Prince released "Purple Rain" in 1984, he licensed the song to Hallmark for exclusive use in musical greeting cards. Even if the contract said that Hallmark had the right to make "Purple Rain" greeting cards for the entire duration of copyright, Section 203 allows Prince to terminate that license after 35 years. The termination can take place as early as 2019, or within five years after that in 2024. It's a five-year window to terminate -- after that, Prince would lose his chance. To terminate a transfer related to "Purple Rain" as early as possible in 2019, Prince would need to notify Hallmark between 2009 and 2017, since the law calls for written notice no more than 10 and no less than two years before the termination would take effect. During that time between the notice and the termination, the original parties can renegotiate their deal, in this case Prince and Hallmark. If they couldn't come to an agreement, the termination takes effect, and the greeting card rights to "Purple Rain" would revert to Prince. Only after the termination took effect could Prince make a new deal with another party for "Purple Rain" greeting cards. There are many other contours to the law, and there is very little caselaw on how it works, so it is ripe for controversy and error without the guidance of an attorney who understands the process. As Prince has passed away, there is the further question of who (if anyone) can terminate a transfer in the first place.

Who can Pull the Trigger? Not Prince's Siblings

There may end up being an interesting split between who owns the copyright to Prince's work, and who has the right to terminate a transfer. Under Minnesota state law, Prince's estate, including his copyrights, will descend to his sister Tyka Nelson and their five living half-siblings. (More than 700 people have claimed to be Prince's half-sibling, but none have yet been recognized by the court.) Yet under the termination of transfer law, siblings of the author do not have the right to terminate. Section 203 says that widows/widowers, children and grandchildren are the family members who have termination rights. Prince left no living widow, children, or grandchildren, so none of that applies to his works. According to the termination law, siblings are not next in line -- "In the event that the author's widow or widower, children, and grandchildren are not living, the author's executor, administrator, personal representative, or trustee shall own the author's entire termination interest." So who will "inherit" Prince's right to terminate the transfers in his works? Who will actually get the second bite at the apple?

The Fight to be the Administrator

As of this writing, the termination of transfer right is owned by the court-appointed "special administrator" the Bremer Trust, which provided financial services to Prince for many years. "Administrator" is one of the entities recognized by the termination of transfer law. The Bremer Trust was appointed special administrator by request of Prince's sister Tyka Nelson. The Bremer Trust could exercise Prince's termination rights for older works now, and may even find it necessary to do so given the strict deadlines of the termination right. However, the special administrator should be replaced within six months by a more permanent representative. Tyka or any of the other siblings could seek to be named Prince's administrator, and the court could also name the Bremer Trust or another neutral party. An administrator is typically thought of as being a functional role, carrying out the best interests of the estate, distributing property by function of law and not operating for its own benefit. However, the termination of transfer creates a strange situation where the administrator him or herself becomes the owner of the terminated right (or work, if it was transferred in its entirety). It is not clear whether the administrator is required to redistribute any terminated rights to Prince's heirs, all of whom would be well-advised to raise these issues before the permanent administrator is appointed by the court. There may be a contractual agreement among the administrator and the heirs or a court order concerning the exercise of the termination of transfer right, but the actual termination must be made by the court-appointed administrator, the only party recognized by the Copyright Act. Unless addressed by the court, this means that the heirs who own Prince's works by the mechanics of estate law could lose their rights to their own administrator slowly over time through termination of transfer. There will certainly be a struggle among the parties over the selection of a favorable administrator, who may not be bound by any restriction with regards to termination of transfer. There could be a contractual agreement between the heirs and the administrator, but the statute may make such an agreement unenforceable. The court's order in establishing the administrator -- and its interpretation of the statute -- could be worth a fortune.

Most of Prince's Works are Protected through 2086

The fight will likely go on for a long time, but will come to an end on a date certain for most of Prince's works. It is very unusual for works to be commercially valuable through their entire terms of copyright. There are millions of works in the Copyright Office registry that have been all but forgotten. However, Prince is the kind of iconic, transformational artist whose works could very well still be earning money for generations. Under current law, the term of copyright protection is the life of the author plus 70 years, which in Prince's case is 2086. This applies to both Prince's published and unpublished works.

Who is Alexander Nevermind?

Prince also wrote under several pseudonyms, including Jamie Starr, Joey Coco, Alexander Nevermind and Christopher, and occasionally used those names for the copyright registration. Copyright for pseudonymous works lasts for 95 years from publication, or 120 years from creation, whichever expires first. (17 U.S.C. 302(c).) Some of these were registered with the Copyright Office to Prince, even though they were publicly credited to one of his pseudonyms. However, if a simple supplement is filed with the Copyright Office, the term of copyright and the termination of transfer rights remain the same, as if Prince had been credited as the author in the first place. (17 U.S.C. 302(c), § 408(a), (d).) This has already been done for many of these pseudonymous works, such as "Manic Monday." The heirs could choose to leave the registration pseudonymous, but that would likely result in a shorter term of copyright. Prince used pseudonyms primarily in the early part of his career, and works published pseudonymously before 1991 and left unclaimed would expire earlier than the 2086 expiration of works credited to Prince.

Some of Prince's Jointly Authored Works Will be Protected Even Longer

In the case of a joint work prepared by two or more authors who did not work for hire, the copyright endures for a term consisting of the life of the last surviving author and 70 years after such last surviving author's death. (17 USC 302(b).) Prince occasionally wrote with co-authors who have also passed, so the copyright in those songs will last (under current law) until 2086. Many of Prince's co-authors are still alive, such as Madonna for "Love Song," so the copyright expiration cannot yet be determined, but will last beyond 2086.

The Works Made for Hire Battleground

Prince's heirs may challenge any assertion that any of Prince's works were "works made for hire." When a company hires an artist to create a certain kind work and follows certain statutory requirements, the company is considered the author of the work as a work for hire. For a work for hire, term of copyright is 95 years from publication or 120 years from creation, whichever expires first. Songs like Prince's embody two copyrights: the copyright in the composition, and the copyright in the recording. Record contracts typically provide that the recording is a work for hire created by the record label as author, not the artist. As such, the termination of transfer is unavailable for works made for hire. However, that status has been regularly challenged in courts, and it may turn out that despite the language of a particular record contract, Prince's recordings were authored by Prince and transferred to the record label, rather than considered authored by the record label as works for hire. Although this determination affects the term of copyright, it is more impactful on the termination of transfer right, and likely to be a source of litigation as the termination rights in Prince's works mature over the next seventy years.

Joint Authorship Will Complicate Everything

Most Prince songs are credited in the copyright registration solely to Prince, like "Purple Rain" and "1999." Other songs have multiple authors. The Prince and the New Power Generation song "7" has three authors -- Prince and the late blues musicians Lowell Fulsom (d. 1999) and Jimmy McCracklin (d. 2012). Joint authorship affects both the term of copyright and the termination of transfer.

The termination of transfer is granted to any majority block of owners of the right to terminate. If Prince wrote a song with one other living co-author, then termination can only be affected by the co-author plus Prince's administrator. Where Prince is co-author with more than one person, the transfer could be terminated without Prince's administrator's participation. However, even if Prince's heirs and administrator object to such a termination, they are entitled to an equal share of any further exploitation of such works.

It gets more complicated where Prince's collaborators are also deceased. Prince co-authored some songs with his jazz musician father, the late John L. Nelson, such as "Computer Blue" from the Purple Rain album. In such a case, the termination of transfer will depend on both Prince's administrator and his father's heirs. John L. Nelson has several living children (Prince's siblings) and grandchildren who could claim an equal part of the right to terminate transfer. Whichever of them (or their descendants) is alive at the time of the maturation of the right to terminate a transfer of one of those co-authored songs will need to cobble together a majority group of Nelson's children and grandchildren that owns the right to terminate, and also Prince's administrator. This complexity is multiplied where there are multiple deceased authors, as with the song "7." It is possible that heirs who were shut out of a will would nonetheless own or share the late author's right of termination. These rights can be organized by an attorney in the present, even if they can't be exercised until some future date.

Post Mortem Rights of Publicity

Although not a part of copyright law, the right to exercise certain copyright rights will intersect with Prince's rights of publicity. Certain states have laws or court decisions that allow people to protect the use of their personas in commerce. As of this writing, Minnesota protects rights of publicity through court rulings (Lake v. Wal-Mart Stores, Inc., 582 N.W.2d 231 (Minn. 1998); Ventura v. Titan Sports, Inc., 65 F.3d 725 (8th Cir. 1995)), but does not have a right of publicity statute, and is silent on whether those rights exist after the celebrity has passed. However, Minnesota's Senate and House of Representatives recently introduced a new bill that would establish a broad right of publicity that would cover Prince -- the Personal Rights in Names Can Endure (PRINCE) Act. The PRINCE Act would grant extended publicity control to the artist's estate and limit commercial use of his name and likeness by others. It would last for the celebrity's life plus at least 50 years, thereafter for as long as it is still in use, and would apply retroactively to celebrities who died within 50 years before the law's passage. In Prince's case, the right would descend to his siblings, and be further sellable or descendible by them, until at least 2066. Any exercise of copyright in Prince's work would likely be accompanied by a consideration of his post mortem rights of publicity.

Change in Copyright Law will Likely Benefit Prince's Heirs

As we're talking about such a long time, copyright law itself may change. It has gone through major revisions in the United States that have affected the term of copyright. Each copyright regime has stayed in place for decades since the first Copyright Act of 1790. Major changes came in 1831 (which was essentially preserved in the Confederacy under 1861 and 1863 Confederate acts, and honored after the war) and again in 1909. The current regime is the Copyright Act of 1976, which federalized copyright law, removed formalities, and came into effect on January 1, 1978 -- coincidentally at the dawn of Prince's career. Each of these revisions expanded the rights of authors and more forcefully protected intellectual property. This gradual increase in copyright protection is not surprising, as the United States evolved from a country that largely imported the creative works it consumed, into the world's largest exporter of intellectual property. One recent change in copyright law added the administrator as a possible claimant for termination of transfer -- previously, it had only been children or grandchildren. We can expect another change in the law between now and the expiration of copyright in Prince's works in 2086. We can further expect that such a change will increase protection of his works, either in length of term or some unforeseen manner.

Prince as a Model for Future Application of Copyright Law

Due to the administrator's ownership of the right to terminate, there must be an administrator in power at least through 2086, when Prince's works finally enter the public domain. The administrator will have responsibilities beyond 2086, to exercise the termination rights for works Prince co-authored with collaborators who have not yet passed as of 2016. During his lifetime, Prince was a tireless advocate of his rights as an artist, using copyright law to control and protect his artistic footprint, even when it seemed like it would cost him more than it would gain. For different reasons, it appears that more contentious exploration of copyright law will continue to be part of his legacy. Needless to say, it will be a long time before Prince's estate is fully settled. Any successful artist would be wise to consult with an attorney about the effect of copyright law on their estate, and not leave behind the uncertainty faced by the Prince heirs.

June 15, 2016

BEWARE: Recent Decision in CBS Lawsuit Over Pre-1972 Sound Recording Could Wreak Havoc In The Copyright World

By Wallace Collins

Wallace Collins is an entertainment lawyer and intellectual property attorney with more than 30 years of entertainment business experience. He was a songwriter and recording artist for Epic Records before receiving his law degree from Fordham Law School. T: (212) 661-3656; www.wallacecollins.com

The recording artist and songwriter communities should take note of a recent decision in ABS Entertainment, Inc. v. CBS Corporation, et al., a case concerning pre-1972 copyrights - and raise an outcry! The judge in this case held that remastered versions of old songs are entitled to a new copyright, and owners of the originals are not allowed to stop the public performance of them.

Over the past few years, the public performance of songs authored before sound recordings fell under Federal copyright law has become a contentious legal issue. This ABS v. CBS ruling could help immunize terrestrial radio operators and others from lawsuits and disturb many preconceived notions about copyright law. The case arose from a dispute between ABS, owner of recordings by Al Green and others, and CBS Radio, which was dragged into court in this case after other plaintiffs had been successful litigating the theory that pre-1972 songs are protected under State law and could not be broadcast without permission. The ABS lawsuit cut against decades of precedent that songs on the radio served promotional purposes and should not generate compensation for owners. As times have changed, with sales becoming less meaningful to artists, owners have pushed lawsuits and lobbying efforts to shake up the system.

As its defense to the ABS lawsuit, CBS argued that it was not broadcasting the original analog recordings, but rather remastered versions that came out after 1972. Under this specious argument, the specifically performed works would not be protected by State law and CBS would not have to pay anything. ABS argued that what sound engineers accomplish by tweaking timbre, balance and loudness is "mechanical", and not sufficiently original to be entitled to copyright protection. ABS further argued that to accept otherwise would mean that owners of sound recordings would enjoy perpetual copyright over works.

Incredibly, the judge accepted the position of CBS. On the issue of originality, the judge gave credence to the CBS expert, an acoustic engineer and research scientist specializing in forensic investigation of audio evidence, and held that the plaintiffs' pre-1972 sound recordings "have undergone sufficient changes during the remastering process to qualify for federal copyright protection," adding that ABS did not offer sufficient evidence to even make this a contestable point for a jury to decide. As a specific example, the judge referred to the remastered version of Ace Cannon's 1961 recording "Tuff," which the expert found had additional reverberation, was played in a different musical key and at a faster tempo. The judge accepted the proposition that these were not merely "mechanical changes or processes ... such as a change in format, de-clicking and noise reduction," nor were the changes "trivial," making note of the fact that experienced sound engineers were brought in for a reason. "Instead, the changes reflect 'multiple kinds of creative authorship, such as adjustments of equalization, sound editing and channel assignment...'" ABS also tried to argue that sound recordings authored before 1972 cannot serve as a "pre-existing work" for a later derivative work, but the judge found that argument to be unpersuasive. For now therefore, based on this decision, the remastered versions are independently copyrightable.

The holding in this case determined that for some of the recordings in dispute, such as Green's "Let's Stay Together" and Jackie Wilson's "I'm Coming on Back to You": there is no disagreement that the version publicly performed is different from the pre-1972 versions; that for other songs there is no genuine dispute that CBS is performing the post-1972 versions; and that for the remaining songs ABS failed to offer up sufficient evidence that CBS is performing pre-1972 versions. It all adds up to huge victory for CBS, as well as road map for how radio can publicly perform older sound recordings without liability... and it is a horrific, although hopefully temporary, decision for the recording artist community.

Hopefully, this decision will be overturned on appeal so as not to wreak havoc on issues of copyright term, termination rights and its singular determination that sound engineers do copyrightable work when they remaster sound recordings.

June 30, 2016

Flo & Eddie, Inc. v. Sirius XM Radio, Inc. Decision

The 11th Circuit's decision in Flo & Eddie, Inc. v. Sirius XM Radio, Inc. certified two questions to the Florida Supreme Court. In addition to whether the state law recognizes a right of public performance for sound recordings, the Court also inquired whether under the Court's 1943 decision in Glazer v. Hoffman there was a divestive publication by virtue of the extensive public performance of the sound recordings.

11thcirflo&Ediedecision.pdf

September 14, 2016

Flo & Eddie, Inc. v. Sirius XM Radio, Inc., et al. Partial Summary Judgememt

Judge Gutierrez's decision granting Sirius XM partial summary judgment dismissing the request for punitive damages and the unfair competition claim in the Turtles' pre-1972 recording suit in California is available here:

TurtlesCaliforniapartialsummaryjudgment.pdf

September 27, 2016

Post Kirtsaeng, Withdrawal of Attorneys' Fees

After Kirtsaeng, a federal judge in Los Angeles withdrew an earlier award of $720,000 in attorneys' fees to Madonna for winning summary judgment in a music case. vmgv.madonna.pdf

November 16, 2016

Flo & Eddie v. Sirius XM Settlement

By Helene Freeman

Flo & Eddie have settled its case against Sirius XM in the Central District of California. According to reports, the settlement preserves the rights of the parties to continue to pursue appeals and therefore the cases in NY and Florida do not appear to be affected. The proposed settlement will be submitted to the court for preliminary approval in December.

Whether California law provides for a performance right for pre-1972 sound recordings is on appeal in litigation against Pandora in state court, so there yet may be a decision on that issue notwithstanding the settlement of Flo & Eddie.

March 18, 2017

Flo & Eddie, Inc. v. Pandora Media, Inc.,

On March 15th, the Ninth Circuit issued an order certifying the pre 1972 sound recording public performance right question to the California Supreme Court in Flo & Eddie, Inc. v. Pandora Media, Inc. (9th Cir. No. 15-55287)

The Certification Order: Flo & Eddie Certification Order.pdf

March 30, 2017

"Warm Kitty"

In Ellen Newlin Chase and Margaret Chase Perry v. Warner Bros. Entertainment, Inc., et al, Judge Buchwald of the Southern District dismissed the copyright action brought by daughters of a poet for failure to state a claim against "The Big Bang Theory" for the song "Warm Kitty".

MTDorder.pdf

September 11, 2017

"We Shall Overcome" in the Public Domain

By Barry Werbin

In a significant decision issued on Friday (We Shall Overcome opinion.pdf), Judge Denise Cote granted summary judgment in favor of the class action plaintiff organizations against the owners of the publishing rights to Pete Seeger's iconic civil rights song "We Shall Overcome," finding that the original 1948 copyrighted version of the sheet music (with lyrics), which was owned by Seeger's company, People's Songs, Inc. ("PSI") and had fallen into the public domain in 1976, was not sufficiently different from the core portions of later versions recorded in 1960 and 1963, in which derivative copyrights were claimed by the defendant music publishers. Judge Cote agreed with the plaintiffs "that the lyrics and melody in the first verse and its identical fifth verse ("Verse 1/5") of the Song are not sufficiently original to qualify for copyright registration as a derivative work." The opinion goes through a detailed, lengthy history of the song's genesis.

The song likely originated from an old spiritual that Zilphia Horton learned from striking tobacco workers in South Carolina in the early 1940s. Seeger learned a version of the song from Horton. In 1960, defendant Ludlow Music, Inc. registered a copyright in the sheet music for a claimed derivative version of the song, listing Horton as a co-author with two others (but not Seeger). In 1963, Ludlow obtained a second registration that identified Seeger, along with Horton and the others, as the authors of "New words and music adaption."

The court found only minor differences between the 1948 public domain PSI sheet music version and the later versions registered in 1960 and 1963. Specifically, the words "I will overcome" were changed to "I shall overcome" and the phrase "down in my heart" was changed to "deep in my heart." Two small music changes were also noted, described by Judge Cote as follows:

In both versions of the Song the differences occur during the melodic descent from note "A" to "E" during the singing of the word "overcome." Specifically, the descent from "A" to "E" begins one beat later in the Copyrighted Song, and an eighth note "F" is added between notes "G" and "E" in the second measure. This also changes the rhythm of the second measure. The second difference appears in the seventh measure. In both versions, the melodic descent is from note "D" to "G" during the singing of the word "someday," which is sung over measures six to eight. The Copyrighted Song adds a flourish or trill during this descent, while the word "day" is being sung. The trill consists of three eighth notes "A - B - A."

The court initially rejected any presumption of validity of the 1960 and 1963 copyright registrations because of erroneous information submitted to the Copyright Office about the derivative nature and authorship of those works.

On the core issue of similarity with the 1948 PSI public domain version and the enforceability of the 1960 and 1963 versions as independent derivative works, Judge Cote held "that the melody and lyrics of Verse 1/5 of the Song are not sufficiently original to qualify as a derivative work entitled to a copyright. As a matter of law, the alterations from the PSI Version are too trivial. A person listening to Verse 1/5 of the Song would be hearing the same old song reflected in the published PSI Version with only minor, trivial changes of the kind that any skilled musician would feel free to make. As §101 of the Copyright Act teaches, a judgment about modification to an original work must be based on a consideration of the derivative work 'as a whole.'"

March 6, 2018

Founder of Tower Records Dies at 92 While Drinking Whiskey and Watching the Oscars

By Barry Skidelsky

For those of you who remember (or at least may have heard about) the days when music was distributed on physical media, such as vinyl records and compact discs, perhaps you also know of Russ Solomon. Russ was inter alia a visionary entrepreneur who founded Tower Records in Sacramento, which he built up to become a global empire that truly revolutionized music retailing. Russ died last Sunday night at home from an apparent heart attack while (and reportedly unrelated to) drinking whiskey and watching the Oscars on television.

For more info, see: http://www.sacbee.com/latest-news/article203542104.html

March 21, 2018

Ninth Circuit Affirms, 2-1, "Blurred Lines" Infringement Judgment

By Cynthia Arato

​There is a strong dissent stating that "Blurred Lines" and "Got To Give It Up" were not objectively similar as a matter of law under the extrinsic test because they differed in melody, harmony, and rhythm, and the majority's refusal to compare the two works improperly allowed the defendants to copyright a musical style.

The decision is available at blurred lines.pdf

April 12, 2018

ABKCO Music Inc. et al. v. William Sagan et al.

By Barry Werbin

In a closely watched case, Judge Ramos ruled on April 9th that the concert archive's streaming of archival concert footage and music constituted copyright infringement, and that Section 115 of the Copyright Act did not include audiovisual recordings within its compulsory mechanical license provisions (the latter requiring synchronization licenses). The court also found that Wolfgang's Vault, operated by Bill Graham Archives LLC, which owned legal title to the recordings, did not produce evidence that it held valid licenses or other rights from the artists themselves to stream the live concert performances. Summary judgment of infringement was therefore granted for the plaintiffs.

The action was filed in 2015 by a group of music publishers, alleging that approximately 200 concert recordings, of which about 146 were audiovisual works, were not licensed for streaming, consisting collectively of "more than 1,175 recordings of Plaintiffs'." Injunctive relief, however, was not granted, because money damages were found to be adequate and, as Judge Ramos concluded: "Licensing issues notwithstanding, the Court finds that the public's interest in having access to these recordings counsels against the imposition of a permanent injunction."

A copy of the lengthy opinion is attached (with confidential facts blackened out). ABKCO Music Inc. et al. v. William Sagan et al., No. 1:15-cv-04025 (S.D.N.Y. April 9, 2018).ABKCO Music Inc. et al. v. William Sagan.pdf

July 30, 2018

'Blurred Lines' Verdict Affirmed: Has the Sky Fallen?

By Robert J. Bernstein and Robert W. Clarida

Now that a divided panel of the U.S. Court of Appeals for the Ninth Circuit has issued an amended opinion affirming the denial of a new trial motion and an order denying rehearing en banc in Williams v. Gaye (Williams), 2018 WL 3382875, No. 15-56880, Order and Amended Opinion (9th Cir. July 11, 2018) (the Amended Opinion), it is timely to consider whether the final affirmance of the jury verdict is likely to wreak havoc on musical creativity as some, including the dissent, have argued. The short answer is no. Our reasoning is set forth below.

The Debate

From the time that lawyers for Pharrell Williams and Robin Thicke (Williams-Thicke) commenced a declaratory judgment action in response to a claim letter from attorneys for the heirs of Marvin Gaye (The Gayes) alleging that Gayes' 1977 hit "Got to Give It Up" (Got To) was infringed by the Williams-Thicke's 2013 best-selling single "Blurred Lines", a public debate has unfolded parallel to developments in court. Most recently, this debate has found purchase in the impassioned dissent from the Amended Opinion by Judge Jacqueline H. Nguyen, wherein she concludes by warning The Gayes, and, by extension, all songwriters, to be careful for what they wish: "The Gayes, no doubt, are pleased by this outcome. They shouldn't be. They own copyrights in many musical works, each of which (including "Got to Give It Up") now potentially infringes the copyright of any famous song that preceded it."

Judge Nguyen's observation echoes the closing argument of Howard E. King, trial counsel for Williams-Thicke, that "Blurred Lines" only emulates the genre of music represented by "Got To," but not any original expression protected by its copyright, and therefore that a finding of infringement would stifle creativity by granting a prohibited monopoly on a musical style: "I believe Pharrell Williams and Robin Thicke are proud to stand on the shoulders of Margin Gaye, Stevie Wonder, Lionel Richie, dozens of other performers, and honor their legacies and honor their works by creating their own works in the same style and genre."

The jury, however, chose to accept the argument of The Gayes' trial counsel, Richard S. Busch, and the expert testimony of their musicologist, Judith Finell, that the similarities between the two works included copyrightable elements, rather than merely a shared style. In contrast to King's parade of horribles predicting the end of musical creativity, Busch focused on two salient evidentiary points--the specific similarities between the two songs and the unprompted reaction of an executive of one of the record company defendants upon hearing "Blurred Lines":

This is a copyright infringement case where Mr. Thicke and Mr. Williams created a song from Got to Give It Up and in so doing, ... copied eight different elements from "Got to Give It Up." This is not about the copying of an era. This is not about the copying of a genre. This is not about the copyright of a style. Harry Weinger is a senior executive at UMG and [he said that] "Blurred Lines" was "utterly based on "Got to Give It Up." He didn't say it was a genre. He didn't say it was a style ... He flat out said it was a copy. He works for them ... Their own people internally said it was a copy. I guess at the end of the day--I guess at the end of the day it boils down to who do you believe? That's what it boils down to.

The 'Amended Opinion'

In the majority Amended Opinion, written by Judge Milan D. Smith, Jr. and joined by the Judge Mary H. Murgula, the Ninth Circuit placed great weight on both procedural and credibility issues. Procedurally, because the case was on review of the denial of a motion for a new trial, the court applied the highest standard of deferential review:

We are bound by the limited nature of our appellate function in reviewing the district court's denial of a motion for a new trial ... based on its ruling that the verdict is not against the weight of the evidence, ... When that is the case, we reverse only when there is an absolute absence of evidence to support the jury's verdict ... It is not the courts' place to substitute our evaluations for those of the jurors ... Of note, we are reluctant to reverse jury verdicts in music cases on appeal, given the difficulty of proving access and substantial similarity.

Applying this stringent standard, it was not surprising that the Court of Appeals affirmed the denial of a new trial.

In addition to its review of the district court's denial of the motion for a new trial, the Ninth Circuit considered two separate arguments for reversal asserted by the Thicke-Williams parties: That the jury instructions regarding "subconscious copying" and "substantial similarity" were erroneous and that the district court improperly admitted certain testimony of The Gaye parties' experts. On the jury instructions, the court concluded that they accurately reflected Ninth Circuit law, and that, when considered along with the jury instructions as a whole, they provided correct legal guidance for the jury. On the experts' testimony, the court held that there was no error in its admission, because there was a sufficient basis for their musicologist's testimony comparing musical elements implied in the lead sheet for "Got To" with elements of "Blurred Lines", and that the testimony of their second expert, Dr. Monson, using "mash-ups" to demonstrate structural, harmonic and melodic commonalities between the songs, was similar to expert testimony permitted in prior Ninth Circuit cases.

The court also noted that both Judith Finell and Dr. Monson were subject to extensive cross-examination, and the jury also had an opportunity to consider the equally detailed expert testimony of Sandy Wilbur, the musicologist for Williams-Thicke, who disagreed in virtually every respect with The Gaye parties' musicologist. The jury's resolution of the resulting credibility issues was not deemed appropriate for reconsideration on appeal.

In contrast, the dissent characterized much of the expert testimony as comprising improper legal opinion rather than legitimate factual debate. In the Ninth Circuit, an extrinsic (or objective) test is applied to determine copying, and on this prong of the infringement analysis expert testimony and comparison is permitted. However, expert testimony is not permitted on the second prong of the Ninth Circuit determination of infringement--the "intrinsic" (or subjective) test. The dissent would have treated the contrasting experts' testimony as calling for a judicial determination under the extrinsic test, as a matter of law, concerning whether the proffered similarities comprise protected (copyrightable) expression, rather than as a factual dispute suitable for a credibility determination by the jury. The dissent would have remanded with instructions for the district court to enter a judgment of non-infringement as a matter of law based on her view that the similarities were in the nature of nonprotectable elements of a genre.

Sui Generis Factors

There are a number of factors that led to the jury verdict that were not discussed in the Amended Opinion, but nevertheless were significant in the result below. These factors concern an issue that is most basic to every trial--credibility. As noted above, trial counsel for The Gaye parties focused on credibility in his closing argument, and we quoted above his reference to the record executive who spontaneously, in a pre-litigation statement, observed the great similarity between "Blurred Lines" and "Got To". Of perhaps even greater impact were pre-litigation statements made by Williams and Thicke revealing how inspired they were by "Got To" and how they tried to create the same feeling with "Blurred Lines."

Of course, these statements could arguably be merely indicative of an attempt by Williams and Thicke to create a song in the same genre, but using terms such as "the same feeling", the "same groove", and "inspired by" could also be interpreted by the jury as falling within one of the Ninth Circuit's legal definition of "substantial similarity" under the intrinsic test: "[The intrinsic test asks whether the ordinary reasonable person would find the total concept and feel of the works to be substantially similar." Although the jury instructions stated that "substantial similarity requires similarity of protected expression", once the issue is put to members of the jury, it is anybody's guess whether, in considering the works' "total concept and feel", they could effectively denude the works' nonprotectable elements, or, for that matter, whether even trained lawyers and judges could do so.

For these reasons, and particularly in this case, pre-litigation admissions of overall similarity of feel, inspiration, and intention by the accused authors, even if later watered down or re-contextualized at trial, may have led the jury to find infringement, notwithstanding the infringers' proclaimed purest of intentions to replicate only a style, or to create a new work within a genre. When combined with other pre-litigation statements, such as the record executive's, and the impression conveyed by an online interviewer that Williams had "sampled" "Got To" in "Blurred Lines", it would appear that an unusual confluence of factors negatively impacting Williams-Thicke's credibility is unlikely to find a comparable fact pattern in future infringement litigation. Thus, this jury verdict, as affirmed in the Amended Opinion, is more sui generis than indicative of a possible trend toward improper protection of a genre. We would therefore venture to say that the sky is still the sky, and that the forecasts for a resulting constriction in the output of American songwriters will not stand the test of time.

Robert J. Bernstein practices law in The Law Office of Robert J. Bernstein. Robert W. Clarida is a partner at Reitler, Kailas & Rosenblatt and author of the treatise Copyright Law Deskbook (BNA).

About Music and Recording Industry

This page contains an archive of all entries posted to The Entertainment, Arts and Sports Law Blog in the Music and Recording Industry category. They are listed from oldest to newest.

Motion Pictures is the previous category.

Privacy and Media is the next category.

Many more can be found on the main index page or by looking through the archives.