WIPO Tallies Song Credits Worldwide

Originally published in the Oct-11 issue of The Music Business Journal – Berklee College of Music

Considering the vast array of music services that were launched this year, including Amazon Cloud Drive, Spotify, and Google Music, it seems a new order for the consumption of music is taking shape. Indeed, legislation is being reformulated to facilitate new forms of music consumption, with consumers substituting piracy practices and moving to legal services. However, the existing music rights management architecture is being challenged. The difficulty is to know exactly who all the copyright owners of a song really are–and where they can be located. Transactions for the appropriate licenses cannot happen without this knowledge.
For each song recorded there are two copyrights involved: one for the composition itself (©) and one for the sound recording (℗). The first one is owned and controlled by different songwriters and publishers, while the other is usually owned by record labels and performing artists. When each of those rights are owned by a significant large group of people, someone needs to locate all of them in order to obtain licenses that need to be negotiated on a case-by-case basis. Additionally, many popular artists are now emerging outside traditional corporate structures, and not having them in the current databases of copyright ownership impedes the legal consumption of music. Two recent examples are Choruss and SoundExchange. Choruss, an experiment meant to allow college students across the country to download an unlimited amount of music in exchange for a small fee built into the their tuition, was not able to gain traction because of the difficulty in finding out exactly who it had to compensate. SoundExchange, a Performance Rights Organization created to collect royalties from digital music services, has had millions of dollars stuck in its accounts for some time now because it simply cannot find the appropriate right owner.
Jim Griffin, founder of Choruss, is a former label executive that now is channeling his efforts to tackle this situation. As he recently pointed to Billboard, “[the] big problem we ended up facing…is that we couldn’t find at least half the rights holders.” He advised that an extensive global registry of copyright owners be created to facilitate the licensing process across borders.
Such an ambitious plan started to be brainstormed at the end of 2010 and took form as the International Music Registry (IMR), currently functioning under the auspices of World Intellectual Property Organization (WIPO), an agency of the UN. In order to be viable, the organization needed representation of all the stakeholders involved in the process of licensing. Indeed, its first Consultative Committee included Jim Griffin and brought together a wide variety of players in the music industry. In its initial planning stage, the IMR will be an internationally transparent global registry of all rights and right holders sharing all the necessary information needed to ease the process of multi-territorial licenses. “This”, it said “will preserve the public good [character of music] both [for] culture and commerce.”
The system is designed to be an inclusive platform, creating a single point of access for multiple databases already in existence around the globe, tying the information together and diminishing overlapping efforts and conflicting information. In fact, critics of IMR argue that there are a number of similar initiatives trying to achieve the same goal, such as the Global Repertoire Database being developed in Europe.
However, WIPO has advantages over other entities in creating and maintaining a successful global registry. Being an agency of the United Nations ensure worldwide involvement in the project. Furthermore, the agency already developed and runs established global registries in other intellectual property fields such as patents and trademarks. WIPO generates most of their income through the operation of these systems, but also counts on contributions from member states. Due to its public character, the agency is free of antitrust regulations and can focus on developing such a system without being concerned on an immediate return on investment – which would usually hinder the major music companies.
The IMR wishes for a comprehensive geographical representation in order to facilitate a truly global dialogue. The idea is to not only focus on the most powerful countries, but to enforce the inclusion of the BRICS (Brazil, Russia, Indonesia, China, South Africa) and other fast developing regions. Brazil for instance was one of the few music markets that showed growth last year, despite the fact that it lacks download stores such as iTunes and streaming services. The structure and organization that IMR will provide will be essential to the development of new services in these countries, shifting the audience to legal services and therefore reenergizing the music market globally. (Still, how fees will be collected, be it by individual entry or by subscription, is yet unclear.)
Overall, the development of this comprehensive database is a long process that depends significantly on compromise. Skeptics will be afraid of losing control over their information, fearing that data that was private may go public. A good balance has to be found between what data will remain confidential, and thus not hurt licensors and licensees, and what data can be made readily available to promote what really is an ailing music trade. It is not an entirely new problem for the business. Record industry organizations, like the RIAA in the US, have long tallied rival company recorded music sales promising confidentiality to the individual labels. Back in the day, trust was good for business. The hope is that the same will happen with the International Music Registry.
By Luiz Augusto Buff

The G8 and Copyright

Originally published in the Aug-11 issue of The Music Business Journal – Berklee College of Music

On May 27-28, the heads of state of the eight most industrialized nations got together in Deauville, France to discuss world issues at the G8 Summit. Two days earlier, in Paris, French President Nicolas Sarkozy sponsored a special gathering of G8 member countries to discuss broad questions related to the Internet and the digital universe, including copyright law. Thus, key players from France, the United States, the United Kingdom, Russia, Germany, Japan, Italy, and Canada came together to exchange views over the Internet’s impact on society and the economy. The topic was included as an agenda item in the full G8 Summit.

France, the host country that pioneered the “three-strikes” (and you-are-out of Internet) legislation, has a conservative position in copyright law. Hence, the following final declaration issued by the heads of state:

“With regard to the protection of intellectual property, in particular copyright, trademarks, trade secrets and patents, we recognize the need to have national laws and frameworks for improved enforcement. We are thus renewing our commitment to ensuring effective action against violations of intellectual property rights in the digital arena, including action that addresses present and future infringements. We recognize that the effective implementation of intellectual property rules requires suitable international cooperation of relevant stakeholders, including the private sector. We are committed to identifying ways of facilitating greater access and openness to knowledge, education and culture, by encouraging continued innovation in legal on line trade in goods and content, that are respectful of intellectual property rights.” (Section II, Paragraph 15 of G8 Declaration–Renewed Commitment for Freedom and Democracy).

Criticism against this communiqué followed swiftly by one of its signees, Russian president Dmitry Medvedev.   Medvedev, who has made  strong use of web resources and is widely followed on Twitter, speculated that the other heads of state had formed a conventional opinion due to a  poor understanding of the Internet.  Copyright laws were written “50 or almost 100 years ago” and Medvedev advocated reform instead of punishment, fostering fair use exemptions, allowing format shifting, and easing the licensing process in order to facilitate the development of new legitimate business practices and legal activities for the average music consumer. Cynics would say that the ravages of piracy hardly affect Russia’s music industry, so a progressive stance on copyright is not a hard fit for that country.

Still, e-G8, which brought together international business leaders, media experts, and technologists, seemed to conclude that more copyright protection and Internet regulation, as supported by President Sarkozy in his opening remarks, were necessary.

However, a group of organizations concerned with human rights, liberties, and a more open civil society released a statement at the G8, pointing to a very different set of priorities, i.e. “expanding internet access for all, combating digital censorship and surveillance, limiting online intermediary liability, and upholding principles of net neutrality.”

In particular, Lawrence Lessig, the Harvard professor and Creative Commons founder, maintained at a press conference that the builders of the Internet first thought about societal, not business, needs.  Missing too at the gathering, he said, were the business innovators of tomorrow.

In fact, tensions over the Sarkozy consensus were not hard to find. At the panel  “Intellectual Property and the Culture Economy in the Digital Age”, Electronic Frontier Foundation (EFF) Co-Founder John Perry Barlow was added as the dissenting voice at the last minute. Panelists included Frederic Mitterand, the French culture minister, as well as representatives of traditional media companies such as 20th Century Fox, and Universal Music France.

Mitterand’s argument was classic: “if you protect copyright you protect artistic creation; if you don’t do that, you get a drying up of artistic creation, ending up with the disappearance of artistic creation.” And so was Barlow’s retort about “incentivizing creativity for people who create things, not [collect money] for large institutions who prey on them and have for years.” The head of Universal Music France then drew attention on the money spent nurturing talent, but  Perry Barlow contended that “it’s not IP enforcement that gets you guys properly paid”; for him,  compensation came from the development of a product of quality that people would really want to buy—in the same way that a movie’s success  showed a consumer’s willingness to spend money on product that was perceived as having value.

Undoubtedly, it is important to secure a “civilized” Internet–a favorite phrase of President Sarkozy. Perhaps the right direction is not to try to impose regulations that are at odds with the forward thrust of technology. The Rethink Music conference, held in Boston a month earlier, contemplated alternative schemes to compensate copyright owners in the digital economy that should have been further discussed by those responsible for setting global policies. The creation of an International Music Registry – a global database of copyright owners that would ease tremendously the licensing process worldwide – was also presented at Rethink, but not discussed in the e-G8 Forum. Thankfully, this subject was once again brought to life at the World Copyright Summit in Belgium last month. It seems that this idea will be likely be implemented, because of the efforts of Jim Griffin, a well known digital strategy consultant in the US, and the UN’s World Intellectual Property Organization.

By Luiz Augusto Buff

An Essay on Termination of Transfers and Licenses

Originally written for the final project of the class MB-335-002 – International Industry Operations: Music Publishing, Professor Ed BlomquistBerklee College of Music

Introduction

The intention of the copyright protection is to give incentive and ability to create for all potential creators. One of the incentives for creation in the actual copyright framework is the economic exploitation derived from granting of transfers and licenses of the exclusive rights of authors, to other parties, in exchange for monetary compensation. The discussions of copyright in the musical field are focused on two different kinds of work – the copyright of the musical composition per se, and the copyright of the phonorecord (sound recording). Generally speaking, songwriters assign rights of a musical composition to publishers, while artists transfer their rights over their sound recordings to the record labels. Considering that a significant part of those transfers and licenses are made prior to the publication of works, when is difficult to predict its success, authors are usually tied to the unbalanced offer of transferees and licensees, and end up collecting a small benefit from their works.

The 1976 Copyright Act established equity right for authors to terminate transfers and licenses after a certain period of time. The intent of the legislator, at that time, was to give creator what is known as “a second bite at the apple,” that is, an opportunity to recapture and renegotiate their exclusive rights at a time in which the potential of the work is better known, therefore balancing the relative bargaining power of the parts involved. This study will present a review of these statutory provisions, explaining its origin, complexities, and formalities.

Origin

Copyright had different terms since its first regulation under the 1710 English Statue of Anne. In this first legislation a copyright was secured for fourteen years, with a right of renewal, if the author was living, for another term of fourteen years. The colonial statutes prior to the American Constitution secured different terms of fourteen or twenty-one years for copyright protection. In the U.S. Act of 1790 the same duration of copyright as in the English statute was adopted. This term was extended in 1831, for twenty-eight years, with a right of renewal for fourteen years, in a total of forty-two years[1]. Contrary to the 1886 Berne Convention for the Protection of Literary and Artistic Works, an international agreement that states that a copyright shall be secured to the life of author plus at least fifty years, The U.S. Copyright Act of 1909 preserved the first term of twenty-eight years with the option of a second term for more twenty-eight years totaling fifty-six years of copyright protection.

The objective of the two separate copyright terms were meant in essence to allow authors to recapture their rights for the second term, renegotiating it. Only the author or heirs could exercise the option of renewal, or otherwise the work would fall into public domain. However, the common practice between writers and publishers was to transfer the renewal term before it had vested, granting for publishers a full term copyright. In fact, in 1943, the Supreme Court decided in the Fred Fisher Music Company v. M. Witmark & Sons that “an author’s right to obtain a renewal and extension of his copyright is assignable by him by an agreement made before the expiration of the original copyright term.”[2] The dissenting opinion in the case addressed the Congress intention to reserve the renewal privilege for the personal benefit of authors and their families. Hence, this decision interpreted the recapture right as alienable, and the attempt to balance the relative bargaining power between writers and publishers was prejudiced. A family would only recapture the rights if the author died before the second term, annulling the renewal; otherwise the publisher would have the copyright for its entire duration.

A long process of revision of the copyright law started in 1955. Ten years after, a bill was drafted by the U.S. Copyright Office, and introduced in the senate in 1968. In 1972 sound recordings were recognized as copyrightable works and in 1976 a new Copyright Law was enacted. Because it presented drastic changes, the 1976 Copyright Act only became effective in January 1st, 1978. Alongside with the recognition of the fair use defense and the creation of a single federal system of protection for all original works of authorship whether they are published or unpublished, probably the most important change was the adoption of a single term for copyright protection.

The current term for copyright was established in the 1976 Copyright Act and then extended in 1998 by the Sonny Bono Copyright Term Extension Act. The general rule is that copyright endures for the life of author plus seventy years, if created on or after 1978; or for a maximum of ninety-five years from the date it was originally secured if created prior to 1978. Substituting the recapture right provided by the renewal term, Congress enacted the rights of termination of transfers and licenses, giving authors and heirs an opportunity to better exploit their original works.

Termination Rights

Termination rights are found in two sections of the 1976 Copyright Act. For works in which grants were executed on or after 1978 the specifications of the Section 203 of the 1976 Copyright Act should be applied. In the case of works created prior to 1978 and for which the grant was also executed before that date, the provisions of Section 304 (c) and (d) are applied.

The right to terminate is secured only to works that are not considered works made for hire. That happens because, according to the definition of work made for hire in the Section 101 of the Copyright Act, not the original creator, but the employer or commissioner is deemed the author of the work from the moment of its creation. Also, grants of transfers or licenses made by will are not subject of termination. In the case of a transfer by will, there is no termination interest transmitted by the author to the widow or widower, children, grandchildren or an executor, administrator, personal representative, or trustee. All rights are transmitted freely to the grantee.

Termination rights are not automatic. In order for termination become effective under both Sections, the majority of the authors, or statutory heirs must serve a notice upon the grantees, expressing the effective date of termination. There is a specific five-year period for each Section (203 and 304), in which the effective date of termination shall fall, that will be further explained in detail. In the absence of action, termination rights disappear after the closing of the five-year window, leaving rights in the work permanently in the hands of the grantee until statutory expiration of the copyright term, or the term of the grant.

After the effective date of termination, considering that all formalities were met, all rights derived from the U.S. Copyright Act revert to the author, authors and other persons owning termination interests. In order to terminate a transfer or license, the majority of the interested is needed, but the reversion is applied to all, including those owners who did not joining signing the notice of termination. However, termination do not affect any rights that may be derived from the work, such as trademark, or any other Federal, State or foreign rights. Furthermore, international licenses and transfers are not affected by termination, even if the grantee is the same for whom the rights were assigned in the United States.

Section 203

Grants of transfers or licenses of works executed on or after 1978 are subject of termination under the rules of the Section 203 of the 1976 Copyright Act. However, in favor of publisher, only grants that were executed by authors can be terminated.

The period in which the effective date of termination shall fall is a five-year window that starts at the end of thirty-five years from the date in which the grant was executed. However, if the grant covered the right of publication of the work, the 5-year period begins after thirty-five years of the publication, or forty years after the execution of the grant, whichever ends earlier. Any date that falls within the five-year period can be picked to be the effective date of termination.

The majority of the persons that have termination interests must serve a notice of termination to the grantee not less than two and no more than ten years before the effective date of termination.

Considering the general rule of thirty-five years after the execution of the grant, the following table presents examples of when the effective date of termination could fall, and the possible dates in which interested must serve a notice, given hypothetical dates in which grants were executed.

Section 203

Grant Executed in

5-Year Period for

Effective Date of Termination

Serve Notice

First Possible Date

Last Possible Date

Jan 1, 1978

Jan 1, 2013

Jan 1, 2018

Jan 1, 2003

Jan 1, 2016

Jan 1, 1979

Jan 1, 2014

Jan 1, 2019

Jan 1, 2004

Jan 1, 2017

Jan 1, 1980

Jan 1, 2015

Jan 1, 2020

Jan 1, 2005

Jan 1, 2018

Jan 1, 1981

Jan 1, 2016

Jan 1, 2021

Jan 1, 2006

Jan 1, 2019

Jan 1, 1982

Jan 1, 2017

Jan 1, 2022

Jan 1, 2007

Jan 1, 2020

Jan 1, 1983

Jan 1, 2018

Jan 1, 2023

Jan 1, 2008

Jan 1, 2021

Jan 1, 1984

Jan 1, 2019

Jan 1, 2024

Jan 1, 2009

Jan 1, 2022

Jan 1, 1985

Jan 1, 2020

Jan 1, 2025

Jan 1, 2010

Jan 1, 2023

Jan 1, 1986

Jan 1, 2021

Jan 1, 2026

Jan 1, 2011

Jan 1, 2024

Jan 1, 2011

Jan 1, 2046

Jan 1, 2051

Jan 1, 2036

Jan 1, 2049

As observed, terminations under the Section 203 will only start to be effective in 2013. However, notices for works created in 1986 can already be sent to grantees. The provisions under Section 203 are the general rules of termination for grants of new works now and further created.

Section 304 (c)

Grants of preexistent works that were made prior to 1978 are subject of termination under the section 304 (c) of the 1976 Copyright Act. The structure and formalities for this Section are very similar to the Section 203, with the exception that not only grants made by authors, but also grants made by their successors are subject of termination. However, for grants executed by persons other than the author, only these persons have the right to terminate. If the author executed the grant, the termination interest is owned by their statutory successors.

As opposed to Section 203, in which the time frame is set by the date of the grant, on Section 304 the termination window is set by the date in which copyright was originally secured. For grants under this provision the five-year period for the effective date of termination begins fifty-six years from the date copyright was originally secured, or beginning on January 1, 1978, whichever is later. Here, the notice must be served following the same rule as Section 203, in not less than two and no more than ten years before the effective date of termination.

Section 304 (c)

Grant Executed in

5-Year Period for

Effective Date of Termination

Serve Notice

First Possible Date

Last Possible Date

Jan 1, 1955

Jan 1, 2011

Jan 1, 2016

Jan 1, 2001

Jan 1, 2014

Jan 1, 1956

Jan 1, 2012

Jan 1, 2017

Jan 1, 2002

Jan 1, 2015

Jan 1, 1957

Jan 1, 2013

Jan 1, 2018

Jan 1, 2003

Jan 1, 2016

Jan 1, 1958

Jan 1, 2014

Jan 1, 2019

Jan 1, 2004

Jan 1, 2017

Jan 1, 1959

Jan 1, 2015

Jan 1, 2020

Jan 1, 2005

Jan 1, 2018

Jan 1, 1960

Jan 1, 2016

Jan 1, 2021

Jan 1, 2006

Jan 1, 2019

Jan 1, 1961

Jan 1, 2017

Jan 1, 2022

Jan 1, 2007

Jan 1, 2020

Jan 1, 1962

Jan 1, 2018

Jan 1, 2023

Jan 1, 2008

Jan 1, 2021

Jan 1, 1963

Jan 1, 2019

Jan 1, 2024

Jan 1, 2009

Jan 1, 2022

Jan 1, 1964

Jan 1, 2020

Jan 1, 2025

Jan 1, 2010

Jan 1, 2023

Jan 1, 1965

Jan 1, 2021

Jan 1, 2026

Jan 1, 2011

Jan 1, 2024

Jan 1, 1966

Jan 1, 2022

Jan 1, 2027

Jan 1, 2012

Jan 1, 2025

Jan 1, 1967

Jan 1, 2023

Jan 1, 2028

Jan 1, 2013

Jan 1, 2026

Jan 1, 1968

Jan 1, 2024

Jan 1, 2029

Jan 1, 2014

Jan 1, 2027

Jan 1, 1969

Jan 1, 2025

Jan 1, 2030

Jan 1, 2015

Jan 1, 2028

Jan 1, 1970

Jan 1, 2026

Jan 1, 2031

Jan 1, 2016

Jan 1, 2029

Jan 1, 1971

Jan 1, 2027

Jan 1, 2032

Jan 1, 2017

Jan 1, 2030

Jan 1, 1972

Jan 1, 2028

Jan 1, 2033

Jan 1, 2018

Jan 1, 2031

Jan 1, 1973

Jan 1, 2029

Jan 1, 2034

Jan 1, 2019

Jan 1, 2032

Jan 1, 1974

Jan 1, 2030

Jan 1, 2035

Jan 1, 2020

Jan 1, 2033

Jan 1, 1975

Jan 1, 2031

Jan 1, 2036

Jan 1, 2021

Jan 1, 2034

Jan 1, 1976

Jan 1, 2032

Jan 1, 2037

Jan 1, 2022

Jan 1, 2035

Jan 1, 1977

Jan 1, 2033

Jan 1, 2038

Jan 1, 2023

Jan 1, 2036

Dec 31, 1977

Dec 31, 2033

Dec 31, 2038

Dec 31, 2023

Dec 31, 2036

The table above illustrates the applicability of the Section 304 (c) for hypothetical works for which grants were executed before 1978. According to the date that the copyright was originally secured, the 5-year window and the possible dates to serve a notice are identified. The table includes the last possible date for which Section 304 (c) can be applied (works that the copyright was secured in December 31, 1977).

Section 304 (d)

The Sonny Bono Copyright Term Extension Act included one more chance for authors and their successors to exercise termination rights for preexisting works for which grants were executed before 1978. If at the effective date of the Sonny Bono Act (October 27, 1998) the termination of 304 (c) has expired without being exercised this special termination allows authors or heirs to recapture their works for the last twenty years of copyright term. It means that the effective date of termination shall fall in a five-year period starting after the completion of seventy-five years from the date copyright was originally secured. The structure of notice is the same as on Section 304 (c).

The Following table presents hypothetical dates in which copyrights were originally secured, for works that could be subject for termination under Section 304 (d), given that (1) Grants for those works were made before 1978; (2) Termination rights under Section 304 (c) have not been exercised.

Section 304 (d)

Copyright Secured in

5-Year Period for

Effective Date of Termination

Serve Notice

First Possible Date

Last Possible Date

Jan 1, 2032

Jan 1, 2007

Jan 1, 2012

Jan 1, 1997

Jan 1, 2010

Jan 1, 2033

Jan 1, 2008

Jan 1, 2013

Jan 1, 1998

Jan 1, 2011

Jan 1, 2034

Jan 1, 2009

Jan 1, 2014

Jan 1, 1999

Jan 1, 2012

Jan 1, 2035

Jan 1, 2010

Jan 1, 2015

Jan 1, 2000

Jan 1, 2013

Jan 1, 2036

Jan 1, 2011

Jan 1, 2016

Jan 1, 2001

Jan 1, 2014

Jan 1, 2037

Jan 1, 2012

Jan 1, 2017

Jan 1, 2002

Jan 1, 2015

Oct 26, 1937

Oct 26, 2012

Oct 26, 2017

Oct 26, 2002

Oct 26, 2015

Considering that termination rights under must have been expired at the effective date of the Sonny Bono Act, the last possible date in which a work could be originally secured in order to this termination be applied is October, 26 1937.

Notice of Termination

The notice of termination requires special formalities to be effective, and therefore produce the desired reversionary effects. The requirements for notices of termination are found both in the 1976 Copyright Act and in the Code of Federal Regulations, under the Section 201.10 of the Title 37: Patents, Trademarks and Copyrights.

The notice must be served upon the grantee or grantee’s successor in title no less than two and no more than ten years before the effective date of the termination. The notice can be served personally or by first-class mail sent to an address, which, after reasonable investigation (Copyright Office, PRO’s), is found to be the last know address of the grantee or successor in title. If served by first-class mail, the date of the service is considered the date in which the notice was deposited with the U.S. Postal Service.

After being served, a copy of the notice shall be recorded in the Copyright Office, indicating the date and manner of service, and requires a payment of a fee for document recordation. There is no specific form provided by the Copyright Office for notices of termination, just an exact copy of the served notice is needed. If the Copyright Office identifies that the notice of termination was untimely served, or has any other formal failure, the document is not indexed as notice of termination, but as a “document pertaining to copyright,” and a court decision would determine the effectiveness of the notice.

To be formally adequate the notice must contain a specification of the section applied to termination [203, 304 (c), 304 (d)], the name of all grantees and/or successor in title whose rights are being terminated, accompanied by address for each one, to where the notice is being sent. The title of the work, its authors, date and name of persons who executed the grant must also be indicated, if possible, accompanied by the original copyright registration number. Also it is important to clearly identify the effective date of termination, which must fall within the 5-year period, elected by the signers of the notice of termination.

The majority of persons that have termination interests, or their duly authorized agents, must sign the notice. Each of these persons must be clearly listed, indicating their relationship to the author, indicating that they represent more than one-half of the termination interest. A brief statement explaining a potential lack of any of this information and affirming that, to their best knowledge, the notice is signed by all persons whose signatures necessary to terminate the grant. In the case of termination under Section 304 (c) or (d), for a grant executed by a person or persons other than the author, the notice must be signed by all of the surviving persons, or their duly authorized agents.

Gap Grants

Under exclusive songwriting agreements, writers agree to assign all rights of songs they write in a specific period of time to their publishers, usually in exchange of an advance. This common practice in the publishing world generates important issues regarding termination of transfers. Since terminations are based on the execution of a grant, a discussion if the grant was executed on the date in which the agreement was signed or when the work was created becomes extremely important to define when this grant can be terminated.

Furthermore, there are certain works for which grants were signed prospectively by authors before 1978, but the works only came into existence after January 1st, 1978. That was the case for the country composer Charlie Daniels, whose 1979 song “The Devil Went Down to Georgia” was written under a 1976 agreement. The issue was whether or not the grant could be terminated, as the provisions of Section 203 are applicable only for grants executed after 1978, and Section 304 is not applicable because it requires a subsisting copyright in 1978.

These so called “gap grants” were the subject of recent analysis by the Copyright Office. After receiving comments from different stakeholders, the study concluded that a grant can only be considered executed when a work come into existence. The Copyright Office will accept for recordation under section 203 a notice of termination of a grant agreed to before January 1, 1978, as long as the work subject of the grant was created after 1978. Although the Copyright Office will register such notices of termination this is a matter that will ultimately be resolved on courts.

Sound Recordings

As sound recordings only became recognizable as copyrightable works in 1972, no grant has reached the five-year period of termination. In fact, the first sound recordings that may be subject of termination are the ones created in 1978, for which the window for termination will open in 2013, according to Section 203. Sound recordings from 1972 to 1977 are subject of termination under Section 304 and will only be possibly terminated in 2028, at the earliest.

However, application of termination provisions for sound recording rights is an issue that will provide a fertile ground for litigation in the following years. Typical agreements between artists and record labels considered the sound recordings created as works made for hire. Under this doctrine the record label is considered the original author of the work and not the artist, and therefore there are no rights of termination, as works made for hire are excluded from the termination provision.

Artists argument that sound recordings cannot be considered works made for hire, as they are not typical employers of record labels nor sound recordings fall in one of the nine types of works listed on the statutory definition of work for hire. In 1999 Congress amended the definition of works made for hire and included sound recordings as a category eligible for that status, but the amendment was repealed with retroactive effect less than a year later. Record labels would argument that a sound recording can be considered work for hire, as it may fall in the category of compilation, collective work, or even in some cases audiovisual works.

Even if sound recordings were not considered as works made for hire, still there is a burdensome problem to resolve. As sound recordings typically involve many different people, each of them artists, musicians, producers and engineers, contributing in part to the creative process, the discussion of who may be considered the author, and therefore, able to exercise termination rights would still need to be discussed.

Derivative Works

Limiting the extension of the termination provision, the original grantee remains with the right to utilize any derivative work prepared under authority of the grant. This is due “both to encourage investment by derivative work proprietors and to assure the public retain access to the derivative work.”[3] However, after the effective date of termination, the original grantee cannot prepare any new derivative works based on that work.

Known as the derivative work exception, this ruling was object of discussion in several court cases. The Supreme Court, on Mills Music v. Snyder[4], decided that sound recordings were derivative works, and the rights over them would remain with Mills Music – the terminated publisher. New sound recordings however, would be entitled to Mr. Snyder’s heirs. On Woods v. Bourne Co.[5] the terminated publisher alleged that every copy of printed music was based on the original lead sheet, and that would be a derivative work, but the court affirmed that lead sheets were not derivative works, thus the new versions of printed music belonged to the new publisher, for whom the works were assigned after termination.

Agreement to the contrary

In order to avoid what occurred in the previous legislation, in which the recapture right was considered alienable by an interpretation of the Supreme Court, and therefore practically ineffective, Congress stipulated, “Termination of the grant may be effected notwithstanding any agreement to the contrary…” That means that termination rights are inalienable and cannot be waived by authors or heirs in any previous agreements.

“Agreements of the contrary” were the subject of recent court decisions addressing the Section 304 termination provision. In the cases of Milne v. Stephen Slesinger, Inc. (9th Cir. 2005, Winnie the Pooh Character) and Penguin Group (USA) Inc. v. Steinbeck (2nd Cir. 2008, works of John Steinbeck), the courts decided that the renegotiation of the agreement during the termination window revoked the original grants and were not deemed to be “agreements to the contrary,” denying therefore, the possibility of termination.

However, in the Classic Media, Inc. v. Mewborn, (9th Cir. 2008, Lassie Works) the court preserved the termination rights considering a post-1978 assignment as an “agreement to the contrary” and therefore “attending the congressional intent to give the benefit of the additional renewal term to the author and his heirs”.

Negotiation Period

After the service of a notice, and before the effective date of termination, the group that signed the notice can only negotiate those rights with the grantee or successor in title for whom the notice was served. In effect, this period is a period of renegotiation, in which the grantee has the preference to make a deal with those persons who sent the notice, and maintaining their right to exploit the works, until the rest of the grant term, or new term. An agreement in this period would not be considered an agreement to the contrary and would cancel future rights of termination, for those who served the notice.

If the terminated grantee is not interested in renegotiate rights over the terminated work, all original authors and/or successors, and not only those who served the notice, receive their rights back after the effective date of termination. Only after that date a new grant, with other party may be made, and it has to be signed by those who served the notice, or their successors.

Conclusion

As we approach 2013, discussions about the termination provisions are becoming more relevant. The Future of Music Coalition recently affirmed “as more copyrights become eligible to revert back to creators, we may find that the artists themselves exploit their works in novel ways that could be beneficial to the overall health of the music marketplace.” The efficacy of termination provisions depends on intricate formalities that are very difficult to meet in practical reality. However, as many creators of extremely valuable works and their heirs are stuck on unbalanced agreements, definitely terminations rights will play an active part in the copyright litigation scenario over the next years.


[1] Elder, Samuel J. “Duration of Copyright.” The Yale Law Journal 14.8 (1905): 417-23. The Yale Law Journal Company, Inc. Web. 10 Apr. 2011. <http://www.jstor.org/stable/781474&gt;.

[3] Lohmann, Virginia E. “The Errant Evolution of Termination of Transfer Rights and the Derivative Works Exception”, 48 Ohio St. L.J. 897, 912 (1987)

[4] 105 SCT 638 [1985]

[5] 603 F.2d 978 (2nd Circ. 1995)

A Primer on Termination Rights

Originally published in the Apr-11 issue of The Music Business Journal – Berklee College of Music

By default a person that makes an original work and fixes it in a tangible form owns its copyright and consequently the exclusive right that will permit the extraction of commercial benefits from the creation. The economic exploitation of copyrights is commonly made through the granting of transfers and licenses to other parties in exchange for compensation.

Generally speaking, songwriters assign rights of a musical composition to publishers, while artists transfer their rights over their sound recordings to the record labels. Many of these licenses and transfers are usually granted before the publication of the work, when it is not possible to predict its success. For this reason, authors are usually in a worse bargaining position than the transferees or licensees–and end up collecting less than they could.

The Issue

In order to protect authors, the 1976 Copyright Act established termination or “recapture” rights that give authors a second chance depending on when the grant was executed. The statutory termination of transfers and licenses allows the renegotiation of these grants, either by renewing the contract with the original grantee or by recapturing that right in order to enter into a new agreement with a third party.

Termination is considered for any works other than works made for hire, and only for U.S rights that are copyright related. It excludes the possibility of recapturing foreign rights, trademarks, or any other federal or state rights. The terminated grantee has the right to exploit derivative works that were prepared under their grant, but not others.

The Letter of the Law

The provisions of the termination rights can be found in the 1976 Copyright Act in two different contexts, depending on when the grant was executed. The first, under Section 203, provides that grant of transfer or licenses that were executed by the author in or after 1978 may be terminated. Generally, the author, as well as his heirs or a duly authorized agent, has a period of five years, beginning after thirty-five years of the mentioned grant, to effect the termination. Works that were created prior to that date, but for which the grants were executed on or after January 1st, 1978, are also included.

For works created prior to 1978 and for which the grant was also executed before that date, the provisions of Section 304 (c) and (d) are applied. The general rule is that the termination may be effective during a five year period starting fifty-six years after the copyright was first secured, regardless of the date of the grant. In these cases, for the grant to be subject to termination, it is not required that it be executed only by the author, as in Section 203, but also by his heirs or executors.

Inventorying the Transfers

However, the transfer of rights back to authors is not automatic. In order for the termination to become effective under both Sections, the majority of the authors, heirs or duly authorized representatives must serve a notice upon the grantees, expressing the effective date of termination. In order to be valid, a copy of this notice must be registered in the Copyright Office prior to the effective date of the termination. The service of the notice should occur no later than two years and no earlier than ten years of the desired date of termination.

In the absence of action, the termination right disappears after the closing of the five-year window, leaving rights in the work permanently in the hands of the grantee until statutory expiration of the copyright term. For instance, for a grant executed on January 1st, 1978 the termination window will begin thirty-five years after the grant – from 2013 to 2018. If the author decided that they would want to terminate the transfers at the earliest possible date a notice should have been sent at any time between 2003 and January 1st, 2011.

With regards to the application of the Section 304, a point to be highlighted is that as sound recordings were not contemplated by the Copyright Law until 1972, the first terminations of transfers for sound recordings made before 1978 will only be effective in 2028, fifty-six years after 1972. The first notices for such terminations will start to be served in 2018.

There are certain works for which grants were signed prospectively by authors before 1978, but the works only came into existence after January 1st, 1978. These so called “gap grants” were the subject of recent analysis by the Copyright Office. At issue was whether or not the “gap grants” could be terminated, as the provisions of Section 203 are applicable only for grants executed after 1978 (Section 304 is not applicable because it requires a subsisting copyright in 1978 to become valid). After receiving comments from different stakeholders, the study clarifies that the Copyright Office will accept notices of termination for these works (it considers that the execution of the grants only becomes effective on the date when works come into existence). However, whether such notices of termination fall within the scope of section 203 will ultimately be a matter to be resolved by the courts.

Rewriting Existing Contracts

Many agreements between writers and publishers anticipate that any termination right should be renounced, with the publisher owning the copyright for its entire term. However, the Law states that the “termination of the grant may be effected notwithstanding any agreement to the contrary.” The intention of the legislation was to secure for the author the rights of termination independently of any language that might be set out in an agreement, i.e. forcing them to give up their future rights without renegotiation.

“Agreements of the contrary” were the subject of recent court decisions addressing the Section 304 termination provision. In the cases of Milne v. Stephen Slesinger, Inc. (9th Cir. 2005, Winnie the Pooh Character) and Penguin Group (USA) Inc. v. Steinbeck (2nd Cir. 2008, works of John Steinbeck), the courts decided that the renegotiation of the agreement during the termination window revoked the original grants and were not deemed to be “agreements to the contrary”. They denied, therefore, the possibility of termination. However, in the Classic Media, Inc. v. Mewborn, (9th Cir. 2008, Lassie Works) the court preserved the termination rights considering a post-1978 assignment as an “agreement to the contrary” and therefore “attending the congressional intent to give the benefit of the additional renewal term to the author and his heirs”. There is yet no case law related to Section 203, as its provisions will only become effective on 2013.

Works for Hire

Works made for hire are the significant exception for termination provisions and will provide a fertile ground for litigation in the following years. The exemption exists because in such cases there is no transfer of copyright and the employer or commissioner shall be considered the author of the work from the moment of its creation.

Record labels would like to consider sound recordings as works made for hire. Artists, however, argue that this cannot be applied to sound recordings, as they do not fall in one of the nine types of works listed on the definition of a work for hire (Section 101 of the Copyright Law). As sound recordings are typically a joint work of different artists, producers and engineers, the discussion of who can be considered the author will increase. In effect, the period between the service of a notice and the effective date of the termination resembles a period of renegotiation for record labels and artists–at least for those who have maintained commercial value throughout the years.

At Stake

As we approach 2013, discussions about the termination provisions are becoming more relevant. The Future of Music Coalition recently affirmed “as more copyrights become eligible to revert back to creators, we may find that the artists themselves exploit their works in novel ways that could be beneficial to the overall health of the music marketplace.” At the very least, the upcoming termination of transfer provisions will provide a valuable window for authors to exploit.

By Luiz Augusto Buff

The Music Industry in 2011

Originally published in the Feb-11 issue of The Music Business Journal – Berklee College of Music

More than ten years have passed since the debut of Napster shook the record industry. The file-sharing software gave music listeners access to an immense diversity of music for free, causing a shift in industry power from record labels to consumers. The popularity of MP3 files increased even more with the success of the iPod. Even before Napster, recorded music sales were dropping year after year, due to discounts that labels were given to wholesale prices globally. Those numbers dropped even further when the demand shifted to the free content available on the Net. After the panic, artists and the music industry started to understand the opportunities that the Internet was offering, and started to migrate to new models of marketing and distribution through the online world. Still, adaptations are a necessity in the legal system to guarantee the functioning of the creative process. The fight against piracy continues but hopefully a new business model that takes advantage of the “feels like free” system will drive people to a legal form of consumption that not only will attend the demand for lower prices, but will help elevate the value of music back to a sustainable level.

Apple
In 2003, with the intention to provide legal content for their successful iPod, Apple developed the iTunes Store. The iPod had become the worldwide standard media player but the lack of legal content was the main issue that the company had to face. After forming agreements with all the major record labels, the digital retailer store was a booming success and is now responsible for more than 70% of the digital sales and the biggest retailer store in the overall music market, accounting for 25% of the market share, accordingly to IFPI (International Federation of the Phonographic Industry).

Before the online-based sales of music products, in order to get access to one specific song the listener had to buy an entire album. That meant that to buy one song, one had to pay for the ten (or more) other songs that came with it. One of the major changes that happened with the iTunes Store was the commercialization of single tracks- making it cheaper for listeners to buy their favorite songs. The number of units sold increased significantly but the sales performance of the recorded music products dropped radically.

When the iTunes Store first opened, prices were fixed at $0.99 for a single-track and $9.99 for an album. Being the most prominent store in the online environment, major record labels started pressuring them to reconsider this pricing structure; maybe not every song was worth the same to costumers. The concept behind the argument is the price elasticity of demand. To maximize revenues the labels defended that hit songs could be sold at higher prices without loosing significant demand and deep catalog songs had to be sold at lower prices, driving interest for more people to buy them. In 2009 Apple accepted the claim and introduced a three-tier system, with variable prices of songs at $0.69, $0.99 and $1.29. The labels could raise revenues, and the system could help redirect interest to album sales, as they became cheaper. Higher quality files, bundled with bonus features such as animated lyrics, artist photos and liner notes were part of other new ideas to help boost album sales. The iTunes LP was a line of albums that offered these premium contents to fewer people at higher prices, in effect aggregating the old visual experience of the physical album into a download.

Apple’s agreement with major labels stated that 33% of the income is kept by the iTunes Store, similar to traditional values of physical distribution. The remaining 67% goes to the labels that split it with artists as traditional CD sales. When all is said and done, the artist usually ends up with around 10% of the price of a download. Labels get away with this by wording contract agreements to consider such downloads as sales of song copies and applied traditional accounting schemes. Now there is a current of thought that argues that iTunes Store downloads are licenses and not distribution of products. In fact, recent court decisions are adopting the argument of licenses, applying a 50/50 split between labels and artists, which is devastating for the former but great for the latter.

Free Music and the Record Labels
Even with digital channels being responsible for more than one quarter of the overall music sales in the world, the fight against piracy and illegal file sharing is still running. Accordingly to BMR – the UK’s umbrella organization representing the industry of the British music industry, just 37% of listeners download music legally. The majority is still taking advantage of illegal file sharing, and the difference for the digital market of less developed countries could be even bigger. As expected, in their study, BMR also identified that the main reason for downloading music illegally is that it is free and it saves money.

Digital retail stores are competing with free content spread on the web. To prevail in this new scenario, legal business models have to take advantages of gratis opportunities and not just look at its downside. For some futurists, it is important to give away control of their works in exchange for attention, thus affording them an expanded consumer audience. Just like word-of-mouth, file sharing could be viewed as a marketing tool for people to discover new music; if they like what they hear, they will seek more and different product by that artist.

With very few marginal costs in online distribution, it is easy to give away songs for free in an effort to reach a small segment that is willing to pay for premium content. This is the idea that inspired business models like Topspin. The company provides a structure with powerful marketing and selling tools with which the artists can develop a profitable relationship directly with the fans after giving away a couple of songs for free.

With the decreasing power of record labels, artists will start to organize themselves as small businesses, benefitting from the social media networking tools that allow a direct and two-way relationship between artists and fans. Inspired by that direct relationship, companies like Artist Share are now offering artists the opportunity to raise money for projects through fan funding. The idea is to build a sustainable environment that remunerates artists in their creative process. With this model, fans can contribute with all sorts of monetary values in exchange for access to the artist’s creative process—at audio sessions for album credits, in the production of videos, sheet music, and other. It is a sustainable system that affirms that the true value of music lies on the artist’s creativity.

In past years, artists got similar type of investment through record label advances. The old model was based in a recoupment system that often made it very difficult for artists to start generating revenues from the sale of their products. In the fan-funding model, 85% of all generated income goes directly to the artist. Maria Schneider – one of the most important contemporary jazz composers – won a Grammy for best large jazz ensemble album with a fan funding based project via the Artist Share website.

Monetizing the Cloud
Probably the most important growth trend of the music industry is streaming. The model is based on acquiring access to a large database of songs that can be played directly into users devices without file transferring. Free subscriptions are sustained by advertisements, while paid subscriptions allow users access to improved content such as higher quality audio files, expanded database, mobile capacity and offline usage, all commercial free.
Non-interactive streaming offers pre-made playlists that are configured to try match listener’s interests and tastes. It is a passive service that is authorized by blanket licenses for the use of the compositions from performance rights organizations (ASCAP, BMI, etc.) and a compulsory license for the use of sound recording issued by Sound Exchange. To keep the service legal, there are certain restrictions that companies like Pandora have to follow in order to avoid interactive streaming.

Allowing users to manage the database, choose songs and create playlists to share with friends requires a totally different form of licensing. In addition to the blanket licenses issued by PRO’s for the use of compositions, interactive streaming requires mechanical licenses and a license for the digital performance of the sound recording negotiated with each appropriate rights owner. These requirements make interactive streaming much more expensive to the service providers and it can be impractical to license all the content. In Europe, the Spotify model has been experiencing high levels of success. The company made an agreement with a Swedish Internet Service Provider that allowed the user to pay the premium subscription on their broadband bill. Recently they declared that two thirds of their income was used to pay licensing agreements and other rights to keep the service legal. Currently, Spotify is trying to arrange license agreements in order to make the service available in the US. With the company planning global expansion, they are aiming to turn illegal file-shares into users of their services.

Phones, Concerts, and Rights’ Collections
Expanding the opportunities for the music industry even further, mobile phones are becoming the easiest interface between users and the online world. These small portable devices are consistently getting cheaper and reaching all different social classes. Ringtones and ringbacks are helping artists to develop their marketing strategies as well as making revenue. A recent study made by Myxer -a broadband service provider- pointed out that almost three quarters of mobile phone users listen to music on their phone, via MP3, streaming or through the use of apps.

Despite this, Nokia recently shut down its unlimited download service, Ovi Music Unlimited (formerly “Comes With Music”) in more than thirty countries, leaving it available only in China, India, Brazil and South Africa. However, they are still exploring the Ovi brand, with applications and music stores as well as other services. Nokia also just announced a strategic alliance with Microsoft, in order to develop a new mobile ecosystem. Vodafone, the largest mobile phone telecommunications company of the world also has a music service called 360 Music, offering unlimited downloads for subscribers.

There’s no denying that the changes brought with the digital era have had a negative effect on record sales, but fortunately, the live music sector is still in constant growth. Concert ticket sales almost tripled in value in the last ten years and that only accounts for the public sector. Private sector events like weddings and corporate banquets make up a much more substantial industry and have been experiencing similar rates of growth. Consolidating both of these values would make the real figure for live music much bigger than it is being reported. Live music in the past was used as a marketing tool to sell recorded music, now it is becoming a vital source of income for artists. The live experience is enhanced with sophisticated venues and breath-taking productions that are driving price increases of tickets and also encouraging people spend more money in merchandising.

Digital advances are providing a better structure for the publishing sector of the music business as well. Sophisticated mechanisms of tracking song performances bring more evenly distributed royalties as well as increased revenue from collection. Issuing mechanical licenses is getting easier with new services RightsFlow, which handles all procedures involved with license acquisition online. Before the development of these tools, the process to obtain a license was very difficult and many times, independent artists didn’t get licenses because they didn’t know how.

Moving Forward

It is evident that the digital era has brought new forms of business to the music industry. New models will most likely survive best on the mantra that music is everywhere and that it should be free (or at least feel like it). The industry may be in somewhat of a slump, but value at the consumer level is increasing quicker than ever- in essence rebuilding a foundation for the business for the sake of sustainability and longevity. Never before have people had the unlimited access to music that they do now. Direct relationships with artists and fans will create a more democratic environment, as more artists will have opportunity to reach their listeners.

By Luiz Augusto Buff

Sources
Alhadeff, Peter. “US Music Industry Statistics: A Reappraisal.” MEIEA Journal, 2008.
Alhadeff, Peter. “The Value of Music and the Trappings of the Market place, 1990-2005.” MEIEA Journal, 2006.
Bargfrede, Allen/Mak, Cecily. “Music Law in the Digital Age”. Berklee Press, 2009.
Beall, Eric. “Making Music Make Money”. Berklee Press, 2004.
Hosein, Trish. “Mechanical Dues and Rightsflow”. The Music Business Journal, 2010.
Kusek, David/Leonhard, Gerd. “The Future of Music – Manifesto for the Digital Music Revolution”. Berklee Press, 2004.
Leonard, Gerd. “Music 2.0”. Gerd Leonhard, 2008.
Madden, Mary. “The State of Music Online: Ten Years After Napster”. Pew Internet, 2009.
Owsinski, Bob. “Music 3.0 – A Survival Guide for Making Music in the Internet Age”. Hal Leonard Books, 2009.
Music and Copyright, Issue 415. Informa UK Ltd.
IFPI Digital Music Report 2010.
“What’s Working in Music – Having a Ball”. The Economist, 2010

Mash-Ups & Fair Use: Girl Talk

Originally published in dez-10 – The Music Business Journal – Berklee College of Music

With the development of digital music in the mid-1990s, the act of sampling became very popular and is now a fundamental element for musical styles like Rap and Hip-hop. The use of samples to construct new songs is considered a derivative work and usually a license is required. Copyright owners have already successfully sued Hip-hop artists that tried to use samples without these licenses.

Another sample-based derivative work is the Mash-Up; a type of composition that blends two or more pre-recorded sounds creating an entirely new musical composition. While Mash-Ups are also considered a derivative work, artists like Gregg Gillis – known as DJ Girl Talk – are trying to push the boundaries of the strictures of the law by trying to include these musical collages under the fair use concept.

Girl Talk’s latest album, All Day, was released as a free download on November 15th and has more than 350 samples of different sound recordings in approximately seventy minutes of runtime. Obtaining all of the necessary licenses for each sound recording used would have been very costly and extremely time consuming.  Gillis, having planned to release the album for free, decided to move forward without licensing a single track – not even the three-minute use of Black Sabbath’s War Pigs– claiming that his creations fit the guidelines of fair use.  However, to determine congruency with the fair use doctrine, it is necessary to understand the origins and basis of the fair use concept.

Fair Use Revisited

Following a tendency that had been developed through case law, the 1976 Copyright Act recognized the fair use doctrine as a defense against copyright infringement. The goal of that concept was to permit certain uses of copyrighted works that encouraged the advancement of learning and knowledge and to provide wide access to creative works for the public. It is important to understand that fair use is not an affirmative right, but merely a defense against a copyright infringement. There is a false common belief that it is considered “fair use” to use an unlicensed, copyrighted work as long as one gives credit to the author or copyright owner (the assumption that a use is fair can be risky, and technically speaking, it is considered fair only when a court decides so).
The Copyright act listed certain types of use that are likely to be considered as fair, such as criticism, comment, news reporting, teaching, scholarship and research. This list is just illustrative and there are other types of uses that can be considered fair as well. Also, Section 107 of the Copyright Act lists four main factors to be considered by a court to determine whether or not a particular use is fair:

  1. The purpose and character of the use, including whether such use is of commercial nature or is for nonprofit educational purposes;
  2. The nature of the copyrighted work;
  3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole;
  4. The effect of the use upon the potential market for, or value of, the copyrighted work.”

Girl Talk

The first factor focuses on the observation of how the work is being used. If the use is related to information and/or education, it is more likely to be considered as fair since there are public benefits in these purposes. In general, the nonprofit character will weigh towards fair use, but the commercial use by itself does not discard the fairness of the use, since most uses are commercial to some extent. The court’s main concern is finding out if the user stands to profit from exploitation of the copyrighted material without paying the customary price for the licenses–and Girl Talk’s does profit from the act.
The transformative quality of the use is also analyzed here as a means to distinguish infringement and fair use. A use that is transformative, rather than imitative, has more of a chance to be qualified as fair, for it inserts the piece in a different context and purpose.  Girl Talk’s sample works are transformative, in that he transforms different pieces of existing sounds recordings into a new work of his own.  However, his purposes are strictly commercial and do not involve educational value or critical commentary.  In addition, the good faith of the defendant is extremely relevant in court analysis of the first factor. As the album was distributed on a website called Illegalart.net, the presumption of good faith can be quite a stretch.

When analyzing the nature of the copyrighted work, the court must determine if the work was published or unpublished, or if it is a factual or creative work. As musical works are creative in essence, this factor usually weighs against fair use- even more so when it is an unpublished work, in which case, the original author has the right of first use before a derivative creator. Gregg Gillis’ samples come from published original works- a fact that does not harm the first use principle.  The third factor refers to the portion of the copyrighted material used. There is no absolute rule to determine how much of a work can be used to be considered fair. Not only is the size and proportion of the work relevant, but also the qualitative dimension of the portion used. The greater the amount used, the less likely a use will be considered fair.  Yet in some cases, the use of even a very small part- if considered signature to a song- may characterize the use as an infringement.

Probably the most important of the four factors is the final, stating that it is important to analyze the value and the potential market of a copyrighted work. Any use of a copyrighted work –fair or unfair- it will automatically affect the copyright owner to some extent, as since they are not receiving any licensing incomes. This is tolerated due to the public benefits afforded from the fair use of the work. However, if the new work competes with, or reduces the potential commercial market for the original copyrighted material, then the use will most likely be deemed unfair. Again, a commercial use has a presumed adverse impact on the market for the original copyrighted work and reduces the credibility of fairness. Girl Talk’s main argument relies on the last two factors:  He alleges that his work is based on various small portions of original works, and the substantiality of it will not substitute or harm the copyright holder’s original or potential markets.

Conclusion

Girl Talk is aware of the risks that he is taking by not licensing the samples that he uses. There is no way to prevent a lawsuit of copyright infringement by claiming fair use and only a court has the power to determine his particular uses as fair or infringed. The expenses needed to prove fair use in court can be very high, sometimes surpassing the amount needed to obtain the legitimate licenses in the first place. Although Girl Talk has not yet faced a lawsuit for copyright infringement, the major distributors of digital music decided to not offer his albums on their websites. Major labels and publishers are most likely holding their moves against the artist because they are afraid of the negative attention and the potential setting of precedent in favor of the fair use.

By Luiz Augusto Buff

Copyright Law Compromises The Preservation of Recorded Sound

Originally published in the nov-10 issue of The Music Business Journal – Berklee College of Music 

With the advent of sound recording at the end of the nineteenth century, many different kinds of sounds – from musical performances and important government speeches to animal sounds and baby laughs – were captured and registered for future listening. In order to commercialize those recordings, early entrepreneurs established an industry around these recordings that grew vertiginously, becoming a fundamental part of our contemporary cultural history. For years, it had been a solid, profitable structure. Lately, however, it is undergoing drastic transformations. The transition to a digital age is causing a huge impact on the way sound recordings – especially music – are commercialized, consumed and distributed. The creation and consumption of recordings are now occurring at a much faster rate than the efforts involved in preserving this cultural heritage for posterity. 

In that regard, the US Congress assigned the responsibility to “maintain and preserve sound recordings that are culturally, historically, or aesthetically significant” to the National Recording Preservation Board of the Library of Congress (NRPB). This was done through the National Recording Preservation Act of 2000 (Public Law 106-474), that also required them to “… undertake studies and investigations of sound recording preservation activities as needed, including the efficacy of new technologies, and recommend solutions to improve these practices.” As a result, NRPB published ”The State of Recorded Sound Preservation in the United States: A National Legacy at Risk in the Digital Age.” – a comprehensive study that delineates the web of issues that endanger the sound recording history. 

There are several organizations, both in private and public spheres, which are committed to preserve the audio legacy for future generations. More and more they are benefitting from the digital technology to store files and manage their collections. Digital storage helps overcome problems such as physical space – since long halls with countless shelves are being substituted for hard-drives – and provides enhanced search engines. On the other hand, the protection and maintenance of digital audio recordings is not at all simple. Problems like server crashes and incompatibility of file for- mats due to the successive releases of new software are an everyday struggle. There are many more positive and negative issues to consider, but it is clear that digital storing must be the preferred format to achieve the objectives of recorded sound preservation. Hence, the archives require the development of totally new preservation techniques. 

To overcome this transitional phase, NRPB envisions that a collective effort must be made. Different archives and collectors should work together to avoid un- necessary costs caused by redundant efforts of reformatting, cataloguing, and archiving. That would help develop a new system in which both old and new works are available and preserved for posterity in a single digital format. According to the report, this would only be possible with a change in copyright law, allowing the creation of a file-sharing network of credentialed institutions. They would acquire licenses to share digital files of preserved commercial recordings for archival purposes. The whole idea of preserving audio content is very positive and important to our cultural heritage; however, it is crucial that any changes made in the existing system do not harm the copyright owners in any way. 

The study further emphasizes that digital development does not ensure preservation for present and future creations. As time progresses, newborn digital recordings are in similar danger of being lost, like old 78-rpm recordings. The dissemination of sound recordings is happening exclusively in digital format, via downloading and streaming. Inexpensive tools for production and recording, matched with efficient marketing tools, allow new artists to offer their productions directly to their costumers. Therefore, the institutions responsible for sound recording preservation will have to face challenges like the diversity of file formats, possible virus- contaminated files, digital rights management and legal issues related to the capture and maintenance of these files. 

Another arduous task will be the discovery and selection of the recordings to be preserved, due to the immense quantity of potentially important material, extensively spread on the Internet. Meanwhile, much information is being lost. For instance, a podcast that could have great content for scholars may not be available the following month. It could be due to the closure of the web site, or an inability or refusal to pay royalties. As a possible solution, the Library of Congress considered capturing the entire audio material produced online. Although the modern industry has all of the technology required to complete such a task, under the cur- rent law and license agreements, it is illegal to copy this born-digital content to public access servers and to provide access to it in an institutional setting. Dark archives – where data has restricted access until the content falls into public domain – are suggested in- stead, but funding for an archive that has such limited use may be very difficult. 

It could be said, as a student did at an NRPB public hearing in 2006, that “the preservation of music is meaningless if this music is not accessible”. Indeed, from a business perspective, access is fundamental to the viability of investment in the area. The costs of preservation are tied to the possibility of exploring and exploiting the audio material. An increase in funding for sound recording preservation will only occur with enhanced models of licensing agreements that grant access to a vast variety of works, including unpublished and out-of-print recordings. Sony Music Entertainment took one step in this direction. They licensed their repertoire of recordings from the acoustical era (before the advent of microphones and electrical recording) to the Library of Congress Jukebox, a tool that soon will be streaming approximately 10,000 recordings to the public. 

NRPB gave special attention for old materials in their study. They observed that the works made before 1972 are protected by a confusing set of different state, civil, criminal and common laws. It was only that date that federal laws started to look after the copyright of sound recordings. The actual law keeps these works under state regulation until 2067. According to NRPB’s analysis, this provision should be repealed and all recordings produced should be placed under a single, understandable and more coherent national law. As for the material that no owner could be located – orphan works – the proposal is to legalize their usage by means of preservation. The report also suggests a compulsory license for abandoned or out-of- print recordings, so third parties can reissue those works with an appropriate compensation to the rights owners. 

It is clear that the interests of copy- right owners and of those responsible for pre- serving the nation’s recorded sound heritage are in conflict. The recorded sound preservation is critically affected by restrictions and limitations fixed in the US copyright law. It is important to find a perfect balance so that copyright owners can be compensated and organizations can achieve their fair goals of preservation. The complete study from the Library of Congress is available for purchase and as a free download at http://www.clir.org/pubs/abstract/pub146abst.html

by Luiz Augusto Buff
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