Can't Buy Me Love, but You Can Buy My Copyrights (as Long as You Give Them Back): Finding Balance in the Era of Terminating Transfers

• Publication year: 2022

53 Creighton L. Rev. 575. CAN'T BUY ME LOVE, BUT YOU CAN BUY MY COPYRIGHTS (AS LONG AS YOU GIVE THEM BACK): FINDING BALANCE IN THE ERA OF TERMINATING TRANSFERS

CAN'T BUY ME LOVE, BUT YOU CAN BUYMY COPYRIGHTS (AS LONG AS YOUGIVE THEM BACK): FINDINGBALANCE IN THE ERA OFTERMINATING TRANSFERS

MEGAN KEELAN ^[D1]

I. INTRODUCTION

Every musician has to start somewhere, and usually that starting point is accompanied by a bad deal, even if you're The Beatles. The first music publishing agreement that the band executed in 1963 has been regarded by the members themselves as a "slave contract." ^[1] The effects of that deal with Northern Songs were felt by all four members of the band, not just John Lennon and Paul McCartney who together wrote the majority of The Beatles' works. ^[2] Ringo Starr and George Harrison were given such a small piece of the publishing income and copyrights that Harrison famously wrote the song "Only Northern Songs," which includes the line "it doesn't really matter what chords I play. . . as it's only a Northern Song," referring to that infamous publishing deal. ^[3]

The Beatles' deal with Northern Songs gave both Lennon and McCartney a "15 percent stake" in the company, however, that share was sold four years later to ATV, which would eventually merge with Sony to become Sony/ATV. ^[4] By the time The Beatles parted ways as a band, John Lennon and Paul McCartney had sold all of the copyrights in their works, while only retaining their respective songwriter's share-a passive income stream without control in the actual copyrights. ^[5] Today, writers of Lennon and McCartney's stature, along with those who have had a miniscule amount of success in comparison, will own both the songwriter's share and retain an ownership share in the copyrights. ^[6]

While The Beatles may be an extreme example considering their success, the effects of long-lasting bad deals can be felt by artists and songwriters of all levels. ^[7] The problem with new artists is that there is no good way to predict what might sell in the future, which means artists who do end up with successful careers are stuck with the remnants of the first deals that they made, no matter how unfavorable the terms. ^[8] This is why the Copyright Act of 1976 ^[9] created a termination right that allows authors to recapture the rights they had previously granted to others and allow them an opportunity to control the copyright again or renegotiate in order to secure a more favorable deal. ^[10] One of the purposes of the Copyright Act of 1976 was to create an easy path for authors to recapture those rights; however, because of the technical nature of the termination formalities, companies that have purchased or been granted the rights have the ability to essentially hold the rights hostage and not transfer them if there are errors, other than harmless ones, in the termination notice. ^[11]

While these statutory provisions were written with good intentions, the execution, creates a situation where "those who actually work through the complicated procedures and attempt to exercise their termination right may find their attempt invalidated because they have failed to property comply with some aspect of the termination formalities." ^[12] Furthermore, there is nothing in the provisions or promulgated rules that requires a party receiving notice to indicate whether the termination notices were received or met the requirements, leaving creators in a state of limbo wondering if the notice was effective. ^[13]

This problem was what led Paul McCartney to sue Sony seeking a declaratory judgement to state that the notice sent was effective and that works included in the termination notices he sent will actually revert back to him. ^[14] In the end, the result is that "[t]hose intricate provisions oftentimes create unexpected pitfalls that thwart or blunt the effort of the terminating party to reclaim the full measure of the copyright in a work of authorship." ^[15]

This Note details how the balanced copyright system that Congress intended to exist after enacting the Copyright Act of 1976 can be achieved through: a clarification of the harmless error rule, a system of accountability that requires a party receiving notice to acknowledge the receipt of such and to acknowledge any errors so that the terminating party may fix the errors, as well as instituting liability when an artist detrimentally relies on a term of an agreement which transfers the rights in the copyright irrevocably or in perpetuity and the author misses the termination window.

In Part A, I will first explore the background of the music industry and the necessary role of transferring copyrights within the music industry as well as the various parties involved with a copyright transfer. ^[16] Furthermore, Part A will explore the statutory background of the termination provisions in the Copyright Act of 1976 (the "Copyright Act") as well as the promulgated rules which put those provisions into effect. ^[17]

Part B takes a look that the harmless error rule created by the promulgated regulations regarding termination notices and how the rule has been interpreted by the courts as well as the Copyright Office. ^[18] Part C discusses the hurdles that an author must confront that stem from the power imbalance tipped in the favor of grantees. ^[19] That power imbalance is highlighted by the archaic language of standard grant-of-right clauses in music publishing agreements, the historical imbalance of power between the parties, and the lack of obligation on behalf of grantees to acknowledge that the notice of termination is effective.

Part D proposes amendments or additions to the regulations accompanying the Copyright Act that are designed to effectuate the termination of transfer provisions. ^[20] These additions to the current regulations include: (1) an addition to the harmless error rule that would clarify an additional exemplar of what a harmless error may be-any information placed into a notice due to a good faith reliance on prior registration at the copyright office that turns out to be incorrect shall be considered a harmless error, (2) an addition to the Copyright Act that would require parties receiving notice to acknowledge receipt of the termination notice as well as any inaccuracies in the notice in order to allow a grace period for the terminating party to correct such errors, and (3) an addition to the regulations that creates a mandatory disclosure to be included in all agreements that include a transfer that may be terminated under the Copyright Act alerting the author of his ability to terminate the transfer in accordance with the statute.

Finally, Part E first explores how the additional provision to the harmless error rule proposed in Part D will add a layer of protection for authors who are seeking to terminate their previous transfers so that they may feel assured that information they have relied on from a credible source, even if it turns out to be factually inaccurate, will not thwart their ability to terminate and recapture their rights. ^[21] Furthermore, Part E will delve into how the interplay between acknowledgement by a party receiving a termination notice that it has received the notice and whether or not there are fatal errors in the notice, a grace period to fix said fatal flaws, and recognition of a mandatory disclosure that alerts the author of the right to terminate will create a more balanced system of copyright transfers that was sought by Congress in creating the termination provisions. ^[22]

II. BACKGROUND

A. Statutory and Regulatory Background and Purposes

1. Brief Overview of the Music Industry

The music industry is centered on relationships that are created by different variations of copyright transfers-whether that is a full grant of exclusive rights or a non-exclusive license to use a work for various uses. ^[23] A full grant of exclusive rights, as set forth in section 106 of the Copyright Act of 1976, is a transfer where the author gives the grantee the ability to exclusively exercise the "bundle of rights." ^[24] The "bundle of rights" included in a copyright are delineated in section 106 of the Copyright Act: the reproduction right, the right to create derivative works, the distribution right, the public performance right, the display right, and the right of public performance by means of digital audio transmission. ^[25] On the other hand, a non-exclusive license allows a grantee to exercise a specific right or rights under section 106 without limiting the grantor's ability to allow other grantees the same right. ^[26]

When considering a song that has just played on terrestrial radio (as opposed to satellite radio which has additional rights), there are typically two exclusive transfers of the full bundle of rights and approximately three non-exclusive licenses for individual rights involved in the broadcast of that song. ^[27]

First, the songwriter who has written the song, and is considered the author for copyright purposes, has likely transferred the full bundle of rights to a music publisher. ^[28] A music publisher finds artists to record the songs written by the songwriter and other users of the composition, issues licenses to users of the song, collects the royalty payments for the songwriter, disperses the royalties back to the writer, and handles all the registrations of copyright for the writer. ^[29]...