Termination of Sound Recording Copyrights & the Potential Unconscionability of Work for Hire Clauses

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I. INTRODUCTION

The classic story of a young artist entering into an unfair record deal and receiving pennies on the dollar for his work after years of recording and touring resonates throughout the music community. Although these stories are potentially exaggerated, there are certainly disparities in the compensation granted compared to the value of an artist's work. Even successful, established artists often wish to regain control of their copyrights. What if there was an opportunity for an artist to escape these arrangements?

The 1976 Copyright Act includes a provision that allows artists to recapture their copyrights thirty-five years after assigning their work to a third party, such as a publisher or record label. Congress recognized the disparity in bargaining power between authors and assignees and provided a "practical compromise" that would recognize the interests of both sides.2 In addition, the termination right acknowledges the impossibility of determining the value of a work until it has been exploited by the assignee.3 Ideally, artists would have the opportunity to sign new deals after the value of their work is recognized.

Significantly, works for hire are not subject to the right of termination.4 As an obvious result, record companies prefer to own a copyright as a work for hire, rather than as an assignment.5 If a sound recording is considered a work for hire, then the record company retains full copyrights for the entire duration of the copyright - up to ninety-five years.6 If sound recordings are considered a work for hire, artists completely lose the right to recapture the copyrights in their master recordings.7 Often, young or inexperienced artists are forced into a contract that does not fully compensate them for the value of their work.

Termination rights for works transferred on or after January I, 1978, will begin in 2013.8 However, notice of termination may be served between two and ten years before the thirty-five year mark.9 Therefore, notices of termination for pre- 1978 works could have been served as early as 2003. 10 There is little clarity as to whether recording agreements will be construed as creating works for hire. It will likely take a high court decision or legislative action to determine if sound recordings are works for hire and therefore ineligible for copyright termination.

This paper will examine the work for hire doctrine and the potential impact of the termination of sound recordings. Part II provides an overview of the pertinent history of copyright law in the United States. Part III describes Sections 203 and 304(c) of the Copyright Act and the problems that these termination rights bring forth. Part IV outlines the factors of the work for hire doctrine as applied to artist contracts. Part V describes legislative changes to the right of termination. Finally, Part VI considers defenses available to artists if the work for hire doctrine is found to apply to recording contracts.

II. Copyright History

A. The Copyright Act ofl 790

The Constitution empowers Congress to promote the "useful Arts, by securing for limited Times to Authors ... the exclusive Right to their respective Writings . . . ."

The first federal Copyright Act was passed in 1790.12 This act was based upon the system of formalities and restrictions of the English Statute of Anne.1 The Statute of Anne was enacted in 1710 and was a considerable shift in law because it recognized the rights of authors, rather than just the rights of printers and booksellers.14 The statute provided the author with the exclusive right to print his works for fourteen years and included an additional renewal term of fourteen years for a living author.15 These structural provisions combined with the recognition of a creator's rights formed the basis for future copyright legislation.16

B. The Copyright Act ofl 909

The Copyright Act of 1909 extended the duration of copyright from fourteen years to twenty-eight years from the date of publication. …