January 1, 2013 was a date long-feared by the recording industry. It marked the 35-year anniversary of the effective date of the Copyright Act of 1976, which grants authors of works an absolute right to terminate a transfer of copyright thirty-five years after the date of transfer. For the record labels, the barbarians were supposedly at the gates, as countless artists who had made records in 1978 were certain to attempt to terminate their transfers and retake control of those copyrights immediately. For the lawyers, the ensuing battle would provide fertile ground for litigation because a largely unanswered legal question loomed at the center of the fight: could sound recordings instead be considered works made for hire not subject to termination? Litigation seemed inevitable; but despite these doomsday fears, nothing really happened, and that legal question has remained unanswered. Why?
First, a little background on that major legal issue. Copyright ownership vests initially in the author of a work, who may then transfer or assign all or part of the copyright to other parties. But the authorship of a work made for hire never resides in its creator; instead, the author is deemed to be the party that employed or commissioned the creator to produce the work. Work-made-for-hire status thus determines who may exercise the exclusive rights of authorship under the Copyright Act.
17 U.S.C. § 101 provides for two ways in which a work may be created as a work made for hire. Under the first, a work is "made for hire" if it is created by an employee acting within the scope of his or her employment. Alternatively, work-made-for-hire status may attach to works that are "specially ordered or commissioned" under a written work-made-for-hire agreement, but only if the works fall into one of nine exclusive categories of copyrightable works specified: 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. The Supreme Court has read this section quite literally, dividing all works made for hire into two groups: those made by employees, which qualify as works for hire, and those made by independent contractors, which qualify as works for hire only if they fall in one of these nine categories. Sound recordings are notably exempt from that list.
So who is deemed to be the author of a sound recording? If the author is the recording artist, producer, or musicians – or some combination of them – then the contract with the record label is effectively an assignment or transfer of the author's copyright that may be terminated by the author after thirty-five years. On the other hand, if the sound recording is created as a work made for hire, then its author is the contracting record company and termination rights do not apply.
There are decent arguments on both sides of this debate, but that discussion is beyond the scope of this blog. What's addressed here is why, given the strength of those opposing arguments, a case on point hasn't yet been brought to fruition in litigation. I submit that it is unlikely that a terminating artist will see his or her day in court (or at least a court of any precedential consequence) against a defendant sound recording owner for at least three reasons.
First, most cases are likely to settle quickly. The termination procedure is contemplated to allow the author to renegotiate the terms of the assignment, not necessarily to take the copyright away from the grantee in every case. Although the latter scenario is always a possibility, a record company or sound recording owner faced with a termination notice would probably opt to renegotiate the terms of copyright ownership and settle with the artist quietly, if for no other reason than to preserve the unanswered-question status quo.
Second, an artist-plaintiff financially capable of bringing and maintaining a suit is also more likely to be a high-profile artist with a valuable catalogue of sound recordings. That is, an artist currently able to bear the cost of bringing the suit and litigating it all the way through the appellate process is not likely to be an obscure one, so the defendant would then have the added incentive and strong business interest in reacquiring those presumably profitable copyrights, apart from its interest in avoiding the precedent of an unfavorable decision. Also, the defendant owner of more valuable copyrights would, of course, be willing to pay a higher settlement in order to maintain control of them, further curbing the capable plaintiff's appetite for litigation. Conversely, an obscure artist-plaintiff's catalogue of sound recordings would presumably be less valuable, thus lowering the settlement value of the claim; and, in most cases, the artist's obscurity might translate into a smaller litigation war chest. All these circumstances together make a party's choice clear: settle.
Finally, even though the above factors make settlement a much more likely outcome than a binding opinion on the merits, the right case may not yet have presented itself for ripeness reasons. That is, while certain sound recordings may have been recorded in 1978, the artist's actual recording contract governing those recordings likely predates the January 1, 1978 effective date of the 1976 Act. In other words, the recording artist who both signed a record deal after January 1, 1978 and subsequently created sound recordings under that deal may not yet have a ripe claim arising out of a denial of termination. After all, in those days, artist development often took years, and the recording process itself generally took much longer than it does today: think razor-blade editing of analogue tape, actual playing of instruments, and the absence of auto-tuning for vocals.
So while it's unlikely, we could still see litigation aimed at answering the question of whether the work-made-for-hire doctrine applies to sound recordings. It just may take some time, and an artist-plaintiff guided more by principled gumption than by reasoned economics.
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