Click Lit

This weekend I was listening to "Weekend Edition Saturday" on National Public Radio (NPR). Scott Simon was interviewing Slate Magazine's Dahlia Lithwick (click here for the full transcript). Ms. Lithwick, a lawyer by trade, is taking time off of her day job covering the U.S. Supreme Court at Slate to co-author a fiction novel in the "mommy lit" genre.

Besides the fact that I have long admired Ms. Lithwick's writing and reporting, there is nothing particularly noteworthy about an attorney writing a fiction novel, even an attorney of Ms. Lithwick's considerable writing prowess. What makes this work of authorship newsworthy is that Ms. Lithwick's collaborators--her numerous "friends" on the social networking site Facebook. According to her interview, she sends out Facebook posts asking for help and her Facebook friends to chime in and collaborate on the story. Their input ranges from naming central characters to plot development. She also posts each chapter for review and comment.

This is such an interesting new way to write a novel. It is like having a focus group help you write every chapter, every plot twist, every detail. As intrigued as I was by this new model of writing, I was drawn in more by the potential conundrum of who might own the copyright to the work.

According to the U.S. Copyright Act, 17 U.S.C.A. Sec. 101, a joint work is “a work prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole.” When analyzing joint authorship, we typically apply the two-pronged joint authorship test where we look to (1) contribution and (2) intent.

Under the contribution prong of the joint authorship test each author claiming to be a co-author must have contributed sufficient independent original expression that could stand on its own as copyrightable subject matter. Therefore, those who helped name the protagonist's husband would not be considered a joint author.

The next prong of the joint authorship test is mutual intent: a joint author must intend that his or her contribution be a part of a joint work (i.e., they must be a willing collaborator with other joint authors). Because of the collaborative nature of asking for input, posting chapters for review and input, and editing based on these contributions it would seem that the application of this prong of the test favors joint authorship for those Facebook "friends" who are contributing some significant content that on its own would garner copyright protection.

Lastly, because the Facebook terms of use require each user to issue a license to all intellectual property posted, can Facebook publish this work?

This is a very interesting experiment indeed.

The Performance Rights Act

For those of you following the Performance Rights Act, I was recently a guest on Paul Butler's radio show Prime Time America. Joining me was Bob Powers, Vice President of Government Relations in the Capital Hill Office of the National Religious Broadcasters.

Give it a listen by clicking on the link above and pressing the play icon. Tell me your thoughts on this topic by leaving a comment here.

Brooks & Done

In case you have not heard, Brooks & Dunn announced on their official website that they are splitting up. As a fan of this amazing duo, I was greatly saddened by the news. As a former music attorney and current legal scholar, I was intrigued.

If you believe their website, and I have no reason not to, this is a very amicable split. Yet, often when a group or duo splits up it resembles a nasty divorce more than the break up of a band. For those of you that remember the legal battles between duet partners and close friends Dolly Parton and Porter Wagoner or bitter ex-band mates Al Jardine and Mike Love of the Beach Boys, you know how ugly and expensive these things can get.

For many music fans, this begs the question of why do so many former band mates have so much trouble with each other after a split? As I see it, there are two main causes. The first cause is personal. As is often the case with the end of any relationship, there can be a lot of personal baggage that has been festering under the surface of the relationship for years. Once the relationship ends, those issues surface with a vengeance. Aside from trying to be a better person, there is very little preventative steps anyone can take to address this cause.

The second cause is legal and much more preventable. From a legal perspective, the festering personal issues that surface at the end of a relationship are best dealt with before they ever arise. Any musician who is thinking about entering into a band will be well served to take the proper steps in the front end, when everybody is getting along, to decided what happens to the band's assets and liabilities upon a breakup, how decisions will be made prior to and after the break up, and what to do if a member wants to leave or a new member joins the band. These decisions should be documented in a written operating agreement that is agreed upon (i.e., signed) by all the members of the band.

By addressing these issues up front, the hurt feelings that may surface upon the split are just that--hurt feelings. They may bother you, but they don't cost you anything financially. If the band members fail to address these issues up front, the hurt feelings act as an insurmountable hurdle to any fair resolution of such issues. The parties then waste a lot of time and money in protracted and expensive litigation just to have a judge or jury settle these issues for them.

Again think of a divorce. If the husband and wife have a prenuptial agreement, the divorce is usually a rather simple matter. Everyone knows going into the marriage what is going to happen if the marriage ends. For the obvious reasons, it is much easier to convince your band mates to enter into an operating agreement than it is to convince your future wife to enter into a prenuptial agreement.

“Overlawyered” or Just Over Simplistic

There seems to be a trend with some commentators who, in their desire to push-back against copyright law, are distorting the truth in an attempt to influence the debate. These people are not necessarily wrong in the trepidation regarding copyright law--their arguments, however, are not well reasoned and lack a fair assessment of the legal system, federal litigation, or the Copyright statute. It is their tactics not their message for which I take umbrage.

One such example can be found on Walter Olson's blog Overlawyered. In a June 5, 2009 post, Mr. Olson quotes Kathleen Fasanella, a 27 year veteran of the apparel industry, as saying that the copyright legislation titled the Design Piracy Prohibition Act "will be enough to sink many small apparel and fabric firms that can’t afford lawyers to fight big firms' infringement claims." It is this type of quote that currently seem to be driving the debate on the scope of copyright law.

While I admit to enjoying Mr. Olson's blog from time to time, his post was irresponsible. His arguments against copyright protection are classic examples of the logical fallacy of the scare tactic--where a person reduces complicated issues to overly-simplistic undesirable outcomes and exaggerates possible dangers beyond their likelihood. To simply make such comments that individuals and small businesses of limited means are unable to protect themselves from overly litigious corporations is unsubstantiated and does not take into account economic realities of business or the legal procedures available to litigants.

For instance, if an individual or small business is sued for copyright infringement and they have not infringed, they have several protections available to them in the Federal Courts including summary judgment and Rule 11 sanctions for the filing of frivolous law suits. These procedural safeguards are useful in efficiently defending baseless lawsuits and can even result in the Defendant receiving an award of attorney fees and the other costs of their defense.

If the small business or individual did infringe (they should not expect to be allowed to violate a copyright with no consequences should they?) they can still limit their liability through a quick and reasonable Rule 68 Offer of Judgment. The Rule 68 Offer of Judgment has the attractive benefit of either settling the case quickly and in a reasonable fashion before much in the way of litigation expenses are incurred or shifting the burden of the costs of the litigation to the plaintiff for being unreasonable.

Furthermore, in the current business environment how many large corporations are looking to task resources (both time and money) litigating against small businesses and individuals unless they have a serious claim that pasts muster under the most strict cost/benefit analysis?

Copyright law is always trying to strike a fine balance between protecting authors rights in their works--thereby giving them an economic incentive to create--and protecting the public's' access to these works. While I agree we must stay vigilant to keep copyright law in a state of equilibrium between these often competing public policies, we must not fall victim to such unsubstantiated arguments like the ones described in the post cited above. Great harm is often the result of building public policy on a foundation of fear instead of reason.

The King of Pop, Inc.

Time author Adam Smith recently reported on the debt of the late King of Pop, Michael Jackson. This short, yet reveling, story can be found on Yahoo by clicking here. It is sad when a person of Michael Jackson's vast talent passes on with such staggering debt--reported to be between 300 million and close to 600 million dollars. While much of the reporting on Michael Jackson's debt at the time of his passing is speculation, we do know that he lost his Neverland Ranch to foreclosure as a result of defaulting on substantial loans and that the debt was huge.

Yet, much of the reporting only tells half of the financial story. Michael Jackson enjoyed two valuable commodities during his life that survived his death--(1) intellectual property in the form of music and song catalogs and (2) his name and likeness (i.e., publicity rights). The ability to monetize these assets is legally and financially more significant than the hefty debt his lifestyle created. His estate's earning power will play out in the next few months and years. The income-generating property of Michael Jackson's estate could rival or even surpass that of the other Music King, the King of Rock Elvis Presley.

A playlist for the ages

For those of you who are curious after reading my last post, here are the 24 songs for which Ms. Thomas-Rasset was ordered to pay 1.92 million dollars. This is, without a doubt, the most expensive play list ever created. Yet, you can purchase all of these songs from iTunes for around $23.76. In other words, the judgment was a little more than 80,000 times the actual damages (the lost revenue of the record labels).

1. Cryin by Aerosmith
2. Somebody by Bryan Adams
   
3. Pour Some Sugar on Me by Def Leppard
4. Bills, Bills, Bills by Destiny’s Child
5. Here We Are by Gloria Estefan
   
6. Coming Out of the Dark by Gloria Estefan
   
7. Rhythm Is Gonna Get You by Gloria Estefan
8. Iris by the Goo Goo Dolls
9. Basket Case by Green Day
10. Welcome to the Jungle by Guns N' Roses
11. November Rain by Guns N' Roses
12. Let's Wait Awhile by Janet Jackson
13. Faithfully by Journey
    
14. Don't Stop Believing by Journey
15. One Step Closer by Linkin Park
16. Bathwater by No Doubt
    
17. Hella Good by No Doubt
18. Different People by No Doubt
19. One Honest Heart by Reba McEntire
20. Now and Forever by Richard Marx
21. Possession by Sarah McLachlan
22. Building a Mystery by Sarah McLachlan
23. Run Baby Run by Sheryl Crow
24. Save the Best for Last by Vanessa Williams

$1.92 Million ... Wow

O.K. Let me first say I'm sorry for the lack of postings for the last few months. I have had a lot on my plate this past 6 weeks, for which I will spare you all the details. But I promise I am going to make up for the missing posts over the remainder of the summer.

For those of you who have been following the Jammie Thomas-Rasset saga, a jury has yet again found her guilty of willful copyright infringement--this time, however, they have awarded the labels who sued her $1.92 million. (For those of you unfamiliar with this case please Click here and here.) In her prior trial, which was overturned by the trial judge for an erroneous jury instruction, Ms. Thomas-Rasset was ordered to pay $222,000 in statutory damages. This recent result greatly increases the stakes of this very dramatic test case.

There are so many interesting facets of this case, it is hard for me to pick one to blog upon. One of the recent plot twists that caught my attention was the post-judgment statements of the Recording Industry representatives. The Associated Press has reported that the RIAA has made statements that settlement is still a possibility (see the second link above).

While I believe that such a settlement would be in all the parties' best interests, it will not be in the best interests of the law. Why might a settlement between two private litigants not be in the best interest of the law? Because such settlement agreements almost always contain a clause requiring the defendant (Ms. Thomas-Rasset in this case) to waive any right to appeal the verdict and in return she will have to pay a small amount (around the $3,000 to $5,000 others have paid to settle their file-sharing cases) to the Plaintiffs. Such a settlement will keep the constitutional issues of whether such extremely large statutory-damage awards, ones that are disproportionately large compared with the actual damage done by the file sharing, are unconstitutional.

Many of us in the legal community have been eagerly awaiting a copyright case of sufficiently high statutory damages to trigger an appellate battle that could get the attention of the U.S. Supreme Court. There is little in the way of case law to offer guidance to the intellectual property bar or the trial judges. This could indeed be the case that settles this important constitutional issue--but only if Ms. Thomas-Rasset is willing to continue the fight. Part of me hopes she will and part of me hopes she will come to her senses.

Pitfalls in Single Song Agreements

To continue my series of songwriter contract posts, I thought it would be helpful to discuss some of the pitfalls a songwriter might encounter when entering into a single song agreement.

As I stated last week, a single song agreement is the sale of a song or songs (in spite of the name, single song agreements can be for more than a single song) that are already written. Therefore, a single song agreement should contain a list of the title or titles of the song or songs that are governed by the agreement; this is the no-brainer part of these agreements and usually does not pose a problem. The corollary pitfall, however, is often not as easy to spot in a multi-page legal contract.

This corollary pitfall is usually found in a words like option, term, and exclusive. If a single song agreement is the transfer of songs that have already been composed, there should not be any options for yet-to-be-composed songs or songs that are not specifically enumerated in the agreement or addendum. It, therefore, seems to clearly follow that there should not be a term (the word "term" in the world of legal contracts refers to the length of time a contract lasts) or options for additional songs. Lastly, there should never be any language in the agreement that would make the songwriter's services provided exclusively to the publisher.

Songwriter Contracts

Today I had the pleasure to meet with a few Nashville Songwriters at the Country Music Hall of Fame. I was there to offer my services in a pro bono clinic as part of the For All campaign of the Tennessee Bar Association (TBA). This clinic was co-sponsored by the TBA's Entertainment and Sports Law Committee and the Arts & Business Council of Greater Nashville's Volunteer Lawyers and Professionals for the Arts (formerly the Tennessee Volunteer Lawyers for the Arts).

One of the questions I received regarded the distinctions between the types of songwriter contracts. That got me thinking that I should post a quick outline regarding the the different types of songwriter contracts. This just scraches the surface. But I plan on building on this post in the weeks to come.

When a person speaks of a “songwriter agreement” or “songwriter contract” they are referring to a contract entered into between a songwriter and a music publisher. Music publishers, as many of you know, act on behalf of songwriters to get their written songs “cut” (i.e., recorded on an album). This is known as “plugging.” Publishers also take care of all the administrative work related to plugging. This can include registering songs with the U.S. Copyright Office, issuing licenses, and accounting for royalties.

There are several types of songwriter agreements. Generally they are
1. Single Song Agreements
2. Exclusive Songwriting Agreements
3. Co-Publishing Agreements and
4. Administration Agreements

Single Song Agreements
Under a Single-Song Agreement, the songwriter transfers copyright ownership of specifically identified song(s) to the publisher. These are “non-exclusive” agreements because there is no term. In other words, these agreements are simply a one-time “sale” where the copyright is transferred from the Songwriter to the Publisher. The songs must already be in existence and are specifically identified in the contract.

Exclusive Songwriter Agreements
The main difference between exclusive songwriter agreements and single song agreements is that in an exclusive songwriter agreement the songwriter is transferring to the publisher copyright ownership of all songs written during the duration of the contract. Further distinguishing these types of agreements from single song agreements is that under an exclusive songwriter agreement the songwriter usually receives an advance that is recoupable from future royalties.

Co-Publishing Agreements
Under a co-publishing agreement, two or more parties (usually the songwriter and their publisher) share ownership of songs. In the typical co-publishing agreement, the songwriter transfers partial copyright ownership to the publisher and retain part ownership either in themselves or in their own publishing company. The songwriter’s independent publisher will have administration duties under this type of contract. The provisions of co-publishing agreements are usually very similar to those of exclusive songwriting agreements.
The main difference is that the songwriter will receive both the songwriter’s share of royalties (usually 50% of net royalties) and a cut of the publisher’s share the royalties (usually 25% of the net royalties).

Administration Agreements
Administration agreements are service contracts between the songwriter (or writer’s publishing company) and a publisher or administrator. These type of agreements are usually, although not always, reserved for established songwriters. In an administrative agreement a songwriter will pay up to 25% of net royalties for the administrative services of a music publisher. The important distinction between this type of agreement and the other types above is that the songwriter does not transfer any copyright ownership to the publisher.

On and off over the next few months I will be highlighting issues and pitfalls regarding these songwriter contracts. For those of you who are unfamiliar with songwriters and music publishers I suggest you check out the Nashville Songwriters Association International.

Are Digital Downloads Worth More Than CD's?

The music industry watched with rapt attention the recent legal skirmish between musicians and their record labels over the payment of royalties. At issue in the Eminem royalty battle was the definition of digital distributions of music and what royalties should record labels pay to their musicians when consumers download digital recordings or ringtones. According to the pleadings filed in the case, the contract for the rap artist Eminem set royalty rates payable by Universal Music Group and several other labels for “records sold” at twelve to twenty percent of net proceeds and set royalty rates for “masters licensed” at a royalty rate of fifty percent of net proceeds.

The plaintiffs claimed that Universal Music Group failed to pay the full fifty percent of net proceeds from the digital downloads and ringtones of the Eminem catalogue of recordings. According to the plaintiff’s auditor, Universal owed them at least $650,000.00 in back royalties as a result of this breach of the contract. The jury disagreed and found in favor of Universal Music Group. Many in the industry have, therefore, declared the issue settled and began moving forward with the belief that a digital download is a record sale for the purposes of calculating royalties.

In spite of all of the attention the Eminem case has garnered, it is a relatively insignificant case. It has no precedential value for other courts, does not solve the definitional problem of whether a download or ringtone is a sale or license of music, and has done little in the way of adding contractual clarity or consistency to this issue.

New York entertainment attorney Brian Caplan, of Caplan and Ross, LLP, knows firsthand about the issues involved in defining a download or ringtone for the calculation of a musician’s royalty. Mr. Caplan is pursuing the same royalty claims found in the Eminem case in the class action lawsuit he filed on April 27, 2006 against Sony Music Entertainment. In Allman v. Sony BMG Music Entertainment Mr. Caplan is asking for damages in excess of $25,000,000.00 for clients such as the Allman Brothers and Cheap Trick among others.

In appraising his chances of success in light of the Eminem defeat, Mr. Caplan focused on two important points. “In the Eminem case, there was an amendment in 2004 to the recording artist contract that defined downloads as sales of albums.” According to Mr. Caplan no such language exists in any of the contracts at issue in his case. “You simply need to look at the agreements record labels have with companies like Apple. The consumer signs a contract with iTunes saying ‘I am a licensee and I acknowledge that iTunes does not own the master,’ and iTunes has stated that it is a licensee of major record labels granting to you, the consumer, a sublicense. If this is the case, then the musicians whose contracts do not specifically define a download as a sale, like in the Eminem case, are entitled to 50% of the net proceeds from downloads pursuant to their contracts.”

Mr. Caplan points to the February 6, 2007 press release from Steve Jobs, CEO of Apple Computers, Inc. In that press release Mr. Jobs stated that “[s]ince Apple does not own or control any music itself, it must license the rights to distribute music from others, primarily the “big four” music companies: Universal, Sony BMG, Warner and EMI.” In reviewing the agreement between Universal Music Group and Apple Computer, Inc. the trial court in the Eminem case stated that the facts suggest “that the agreement was a license.”

Mr. Caplan also points to the fact that “the jury verdict in the Eminem case, or any jury verdict for that matter, is not binding on other juries or other courts.” Precedents are “set by higher courts, not by juries” Mr. Caplan reminds us.

While the skirmish over Eminem’s royalties was not a defining moment in the music business, it was the opening salvo of what looks to be a protracted campaign on the part of musicians to collect more significant digital royalties from their financially strapped labels.

Due to the substantial amount of money at stake in this case, it will very likely go to trial and then be appealed. The resulting appellate ruling would create a legally binding precedent defining the parameters of the digital distribution model for a majority of recording artists for years to come. An appellate ruling of that magnitude would tip the balance of power in the recording industry in favor of the successful side of this dispute. If the musicians were to succeed, combined with the financial vulnerability of the record labels, this case could change the face of the recording industry to a more artist driven business model for years to come.

Turn over the bootleg CD and nobody gets hurt

The Tennessee State Legislator is currently considering a bill that would require police intervention for copyright owners or their authorized representatives to request purveyors of counterfeit copies of their works to voluntarily surrender the illegal copies. Such counterfeited works, which are better known in the music industry as either pirated or bootleg copies, are often sold at flea markets or in local independent record stores.

If the Bill aims to strike a balance between protecting the rights of copyright owners and the rights of legitimate vendors--all of which are laudable public policy goals--it is seriously off the mark. It is already a crime in Tennessee to illegally take someone's property. That is not what rights holders do when they approach a vendor selling a bootleg. The bootleg is not the vendor's property in the first place. The criminal code already protects legitimate vendors. This Bill simply removes the self-help solution available to rights owners. Which would be fine, if the State of Tennessee was willing to fund a statewide taskforce to police such piracy.

For background, there was an excellent article in the Nashville based Tennessean newspaper today that highlights the competing interests involved. (That article can be found by clicking here.) Also the Recording Industry Association of America (RIAA) has an excellent website highlighting the economic and social impact caused by physical piracy.

The interesting issue here is that copyright holders, like those represented by the RIAA and similar organizations, have a legitimate interest in both protecting their copyrights and assisting legitimate vendors who often must compete with pirates who have an unfair competitive advantage. The involvement and education of local law enforcement in this effort should be encouraged by our laws. Also, a funded law enforcement taskforce would legitimize efforts of rights holders who do attempt to confiscate counterfeit copies of their works. Such official procedures could make the process more effective. Having a local uniformed police officer busting a bootlegger at the flea market would have a clear deterrent affect.

The law fails, however, to provide local law enforcement with the resources necessary to meet a mandate such as that found in the Tennessee Bill and does not add any protection to legitimate vendors. It simply protects pirates. If your local police force does not have the proper resources, this Bill will simply tip the balance in favor of the pirates. That possible unintended consequence should be seriously considered before such a bill is made law.

Music Access

I just finished reading the Digital Music Report 2009 authored by the International Federation of the Phonographic Industry (IFPI). The IFPI is the organization that represents the interests of the recording industry worldwide and has 1400 members including the Recording Industry Association of America.

The report goes into great detail describing the shifting business model from a sales and distribution based model to one that monetizes access to music. According to Nielsen SoundScan single track downloads in the U.S. crossed the one billion mark in 2008. That represents a 27 % increase in one year.

Considering the recent defeat of former Eminem producers F.B.T. Productions, this new business model could be the savior of the record labels. But is it unfair to the musicians? Let me know what you think by answering my latest poll.