Over the past six years, the record industry has successfully sued thousands of people in the United States for illegally downloading copyrighted songs. Just this summer, the only two file-sharing cases to go to trial ended in big wins for the industry.
Soon, though, the major labels are going to have a different copyright battle on their hands — one that will pit them not against those who want to listen to recordings, but those who created them in the first place. Call it the fight over “Funkytown.”
The looming problem is the so-called termination rights Congress gave to creators of copyrighted material when it amended the U.S. copyright law in 1976. The rights — which allow a copyright grant to be terminated after 35 years — have bedeviled the film and publishing industries lately in cases involving the Superman franchise, John Steinbeck novels and Captain America comic books. Legal observers say those conflicts will pale next to the ones facing the music industry come 2013. That’s the first year holders of sound-recording copyrights can take advantage of this provision, which, in turn, makes recordings from 1978 potentially the first to be up for grabs.
“We’re going to see huge fights over this issue,” says Moses & Singer partner Ross Charap, who represents songwriters, record labels and the licensing arm of the National Music Publishers Association. “Litigation is going to get bloody, and record labels are legitimately very nervous over copyright termination.”
One man who may make them nervous is Lee Phillips, a Manatt, Phelps & Phillips name partner whose clients include The Eagles, Journey and Barbra Streisand. Phillips says he and his firm colleagues have begun gathering information about old record contracts and copyright registrations. By the end of the year, he vows, “we’ll be sending out termination notices.”
That venerable acts like those in Phillips’s stable could cause such a headache for the record industry may seem surprising, but it’s actually quite logical. After all, album sales are reeling. Market research company NPD Group reports that close to half of all U.S. teens did not buy a single CD last year, while consumers ages 36-50 drove what sales there were. Since the latter group tends to prefer time-tested artists, the major labels have shied away from signing and promoting new acts in favor of relying on already established performers. The prospect that these artists would, as a group, launch a wave of terminations — and regain control over their lucrative catalogs — is viewed by many within the industry as a legal “third rail.”
No one affiliated with any of the four major record labels — EMI Group Limited, Sony Music Entertainment, Universal Music Group and Warner Music Group — would agree to be interviewed on the topic, but numerous sources say they are prepared to take the issue to court. One potential strategy being considered: to claim that sound recordings aren’t subject to termination because they were created as “works for hire,” making the record companies the legal authors.
Phillips and other lawyers concede that standard recording contracts often classify what’s created by an artist for a label as a “work for hire.” But, these lawyers say, the same copyright act that created termination rights explicitly defines what qualifies, for copyright purposes, as a work for hire. And sound recordings, these lawyers say, aren’t mentioned.
Ten years ago, the Recording Industry Association of America moved to fix that, lobbying for a last-minute provision to the Satellite Home Viewer Improvement Act that amended the work-for-hire rule. After President Bill Clinton signed the law, artists such as Sheryl Crow and Eagles frontman Don Henley reacted angrily. The provision was later repealed, leaving the door open to more squabbling over whether sound recordings are works for hire.
Mitch Glazer, the RIAA’s chief lobbyist, says they are, because they are “compilations” as defined by the Copyright Act. Asked whether the RIAA’s lobbying for an amended work-for-hire definition in 1999 suggests a concern that this argument won’t fly in court, Glazer says, “My guess is that lawyers at record companies were looking to the future and didn’t want to argue on ‘compilation.’ They wanted to be as explicit as possible so even if there’s a sense they are covered, why leave argument for otherwise?” Beyond that, Glazer says he expects notices to begin arriving, and for litigation to follow: “My guess is that some sort of negotiation will open up. I don’t think it serves anyone’s interest to lose in court.”
Because copyright law requires those seeking to terminate to notify grantees no more than ten years but at least two years in advance, the clock is ticking. As of now, songwriters and performers — as well as producers, engineers and anyone else who helped create a song — can send a notice for songs created between 1978 and 1984. That’s where “Funkytown” comes in. Steve Greenberg, who wrote, performed and produced the 1980 disco hit under the name Lipps, Inc., recently sent a termination notice to Universal Music Group, the parent company of Greenberg’s original label.
Greenberg’s move is likely to be just the first volley in this music war. “This will heat up quickly,” says Lee Phillips. And which of his clients will join the fray? “Maybe Barbra Streisand,” he says. “We’ll be looking into it. Or The Eagles. They are litigious and could be into this sort of thing.”