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.

Warranties and Indemnification Language in Entertainment and Intellectual Property Agreements

To build on my previous post, I thought I would write about warranties and indemnity language in entertainment and intellectual property agreements. Many of my clients do not understand the significance of the warranty and indemnity language that is inevitably placed in recording artist contracts, exclusive songwriter agreements, and the myriad of other intellectual property and entertainment agreements. Many more don't know that indemnity clauses creates a duty to pay any losses or damages of the other party based on the warranty language.

I always advise my clients and teach my students that such language is an effective means of risk management. Smart people and well run business entities enter contractual relationships with slight trepidation. They conduct risk assessments and balance those risks against the possible rewards of the relationship. As we have all heard before, such a balancing of risk and reward requires us to ask ourselves: does the reward outweigh the risk? This question, however, is too vague to be of any real use. As any attorney has experienced, the masterful debater can always convince themselves of the answer they emotionally want to reach.

The better question to ask oneself is: Am I able and willing to absorb the loss? You must look to both your emotional position and your resources. That is why your investment adviser makes you plan your retirement strategy by deciding your (emotional) willingness and (financial) ability to tolerate market fluctuations.

So what does this have to do with warranty and indemnification language? Warranty and indemnification language directly impacts each contracting parties’ answer to the question “am I able and willing to absorb the loss” of this transaction.

Let’s look at this from a record label’s point of view. If a record label is going to invest in a band, provide them with A&R services, pay them an advance, spend money producing and shipping their albums, they want to limit the level of risk in all the areas they have control. Since they can’t control with any degree of certainty what the consumers will purchase, they will focus on all the variables of risk they can control. Warranty language allows the record label to allocate the risk to the band for such things as copyright and trademark infringements.

From the Band’s perspective this can be uncharted water. Let’s say that you are a member (say the drummer) in the band. Your band is about to sign a recording artist contract with a major record label. You want to record some of the songs your lead singer brought with him from his previous band. The label is insisting that you provide them with a license to these songs and warrant that such songs are free and clear of any copyright claims. The label also wants language in the contract that if they get sued for infringement on these songs, the band will be required to pay the label’s attorney fees and pay any judgment.

If your lead singer co-wrote the songs with another person and then granted the copyright to those songs to a music publisher in an exclusive songwriter agreement, you and your band mates had no right to give the label a license to property to which none of you, not even your lead singer, properly owns. You could be on the hook for any possible copyright infringement claims brought by the music publisher against the label. Indeed, you could be liable even if you did not have knowledge of who owned the copyright to the songs.

Can you see now how your answer to the question “am I able and willing to absorb the loss” of entering into a contract is impacted by the warranty and indemnity language?

The trepidation I spoke of before should lead you to ask questions of your lead singer before agreeing to any such contractual language. I would also ask to see the copyright registration or look it up myself on the U.S. Copyright Office’s website. If you don’t do your research, you are answering the question “am I able and willing to absorb the loss” of this transaction without the necessary information. Without the proper information, you might as well not even ask yourself the question in the first place.