Recording artists and labels are gearing up for a major legal battle in the near future as creators attempt to take back their works.

U.S. copyright law allows authors to terminate their transfers executed on or after January 1, 1978 after thirty-five years.  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 execution of the grant; or, if the grant covers the right of publication of the work, the period begins at the end of thirty-five years from the date of publication of the work under the grant or at the end of forty years from the date of execution of the grant, whichever term ends earlier.  17 U.S.C. § 203(a)(3).  Different termination rights apply to transfers and licenses executed before January 1, 1978. 17 U.S.C. § 304(c).

The year 2013 will mark the first time that authors can terminate transfers under Section 203.

The idea behind transfer termination is to protect authors because of an unequal bargaining position resulting in part from the impossibility of determining a work’s prior value until it has been exploited.  It protects authors by providing another opportunity to profit from their works, notwithstanding an earlier grant to the contrary.

What is the Problem?

Copyright transfer termination does not apply to “works made for hire.”  A “work made for hire” consists of either: (1) a work prepared by an employee within the scope of his or her employment; or (2) certain works specially ordered or commissioned.

The categories of specially ordered or commissioned works are: 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.  17 U.S.C. §101.  Missing from the categories of specially ordered or commissioned works are sound recordings.  In 1999, “sound recordings” were added as a category eligible for protection as specially commissioned works for hire.  Less than a year later, Congress deleted sound recordings.  In “determining whether any work is eligible to be considered a work made for hire,” neither the 1999 amendment “nor the deletion of the words added by that amendment . . . shall be considered or otherwise given any legal significance.”  17 U.S.C. §101.

Whether a given work is a work made for hire is a fact specific inquiry.  It is the ambiguities in these definitions that likely will be the cause of increased litigation as 2013 approaches.

This is particularly the case in the recorded-music business, in which sales of recordings from 1978 and after are still a significant source of revenue for major record labels.  Record labels argue that these recordings are works for hire, because artists are employees for hire.  Recording artists, on the other hand, believe they are quintessentially independent contractors.  If the recording artists prevail, then recording artists can take back their recordings or use their leverage to negotiate artist-friendly agreements.  This could have a devastating impact on record labels that are already suffering a sharp decline since the beginning of the millennium.

Add to this complicated mix the fact that transfer termination does not apply only to featured artists. Equally entitled to terminate would be backup musicians, sound engineers, producers, and others.

This fight has been the impetus of private negotiations between content creators and content owners.  Lawmakers have called for a revision of United States copyright law to remove ambiguities in the current statute about termination of transfer.

Broader Implications and Conclusion

Are you a recording artist?  If so, then you may be facing a transfer termination issue either now or in the future.

Here are some ways that you can prepare for the coming termination time bomb:

1.    Determine whether your recordings are subject to transfer termination.  Are they works made for hire?  Were they prepared by an employee within the scope of his or her employment?  Were they works specially ordered or commissioned?
2.    The author (or the author’s heirs) must effect termination during a certain statutorily prescribed time and must serve advance notice in writing between 2 and 10 years before termination.  Determine when the deadline is for the relevant parties to terminate the transfer.
3.    If your recordings are subject to transfer termination, determine where you would be if you terminate the transfer.  What rights will your record label be losing if termination is effected?  How will this loss affect your record label’s bottom line?

You should be aware that the rights you transfer in copyrighted works may under certain circumstances be subject to termination in the future and should plan accordingly.