Copyright Issues for Former Band Members

What happens if a musician co-wrote a song or multiple songs with his band after which point the group relationship is terminated and one or more of the musicians part ways? Well, this issue should ideally be resolved in a written document each serious band should begin its career with, simply called a Band Agreement. This document spells out the respective interests in all copyrights, the division of financial rewards, and numerous other issues, such as the band’s outside representatives, the band members’ responsibilities (professional equipment, showing up on time, etc.), touring matters, practice matters, and dispute resolution issues. Such an agreement is fundamental to the smooth functioning of a cohesive musical unit that purports to make a career out of writing and performing music. A band without such an agreement, is and likely will remain an amateur performer, and is likely to experience a rocky career.

If no Band Agreement exists, the default copyright laws state that the creators own the composition in equal shares, but this applies only to copyrightable portions. Drum beats are not copyrightable; nor are chord progressions. Therefore, whoever writes the original music and lyrics of the composition will share in the copyright. If the bass player wrote the main melody or main hook of the song, that is copyrightable, and if the guitarist and vocalist crafted the rest of the song, then three individuals will share the copyright ownership equally, and the federal copyright registration will name three owners. If the bassist is thereafter kicked out of the band, or perhaps simply parts ways for greener pastures, the band will do well to obtain a copyright assignment(s) from that party, who will probably and properly demand some form of payment, either flat or percentage, and perpetual credit as songwriter, though everything is negotiable. The amount of the payment depends on the band’s star power and potential income that may be generated from the composition(s) in question. Always consult an attorney when selling your intellectual property.

If the band member leaves without signing a copyright assignment and the band decides to record the song anyway, you should be aware that the copyright has already vested in the songwriters, therefore it is irrelevant if the departed member plays on the master recording or not. Or say the group already recorded the tune using the former band member and simply decides to market it by distributing copies on the road or online. Well, the answer is simple: the songwriter royalties due the departed member are 1/3 in the above example; therefore, that person has a right to, and may sue for, that amount as generated by the mechanical reproductions of his composition(s). The royalties are due on printing of the cds, none of them actually have to be sold.  Remember that if the former band member did not perform on the master then he has no ownership interest in it, but only the copyright rights in the composition(s) he co-wrote. Current statutory mechanicals are 9.1c per song for compositions under five minutes, and if the band owns the master recording then that is the amount due to the former band member, per song he has an interest in, and the group keeps and splits the rest. If the master is owned by a label, then all the copyright holders will get equal shares of the mechanicals, while the drummer may get nothing.

If the band is also functioning as its own publishing company, or assigns part of its publishing copyright to a publisher, then the departed group member is also due his share of publishing royalties. For example, if the above band assigns 25% of its publishing rights to a publisher, after the band receives 75% of the publishing royalties, they owe the departed member 25%, and are liable for this amount regardless if the person is a part of the group or not. The publisher attempts to obtain the band revenue other than through cd/internet sales, which are from the master recordings, and such royalties are called mechanical royalties which are typically collected and distributed to musicians by the Harry Fox Agency. So, publishing royalties due the departed band mate are in addition to the mechanical royalties the group obtains.

Starting a Music Publishing Company

Technically, once a musical composition is created and completed, the composer becomes the publisher and the writer. The artist may choose to split this unified ownership bundle into two by selling the publishing part of the copyright to an established publishing company which will then attempt to exploit the composition by collecting royalties in exchange for licensing the music for recording. The split will vary but may be as high as 50/50 between the composer and publisher of all moneys received by the publisher. And when a separate publisher is retained that publisher will engage the services of two types of organizations to collect performance royalties (BMI, ASCAP, SESAC) and issue mechanical licenses and collect those royalties (Harry Fox). Publishers also use their own contacts in the industry to sell synch licenses, and sell the rights to rerecord their clients’ compositions to other musicians.

A composer may create his own publishing company to engage these companies/services on behalf of the composer and keep far more of the royalties. However, an artist should not consider doing this unless he is certain that he can do a better job at exploiting the compositions than an established publishing company. The artist should have some contacts in the industry if he plans on forming his own publishing company. The steps to take in creating a publishing company are quite simple:

1. You will need to have actual music fully recorded and ready to be released.
2. Join one of the performance rights organizations. (BMI, ASCAP, SESAC)
3. Conduct a name check with that company. They will do a search and deny your proposed company name if it is too similar to an existing publisher. Sending the wrong party royalties is very bad for business. The name should be something very unique.
4. Obtain a DBA certificate from your county and open a checking account in the name of the company name that was approved by the performance organization.
5. Transfer the copyright ownership from you personally to the newly formed company. You will need an “Assignment of Copyright” contract between you and your company, and you may wish to re-record the copyright under the new company with the Copyright Office. Please see Circular 12 here: http://www.copyright.gov/circs/circ12.pdf
6. Fill out both writer’s and publishers clearance forms for the performing rights organization you are a member of. If you plan on representing other artists, you will need to register with all three performance rights societies.

The UFC Sues NY State

The UFC has a right to be irked when the product it traffics, namely MMA competition, is banned or not expressly permitted/regulated in a particular state. A great proportion of its income is directly or indirectly derived from live events which it airs on Pay Per View, may later sell television rights to, and which create legends of the sport. If the UFC only has a limited number of places where it can stage live events, depriving much of the country of the live experience, this may end up costing the organization billions in the long run. Clearly going into areas which will bring in new audiences thereby spawning new fans by the strength of the performances turned in by the fighters, is the best marketing a sport can get. Being present at the event, experiencing the excitement of two warriors locked in a cage, and the unpredictability of the combat, are all factors that help explain the almost 20-year ascent of MMA into sports big leagues. New York has not moved forward with passing regulations which permit MMA in that state, while the UFC sees a potential Klondike in that pugilistic state, hence the UFC has sued for a declaration.

UFC is seeking a declaration from the court that Mixed Martial Arts competitions are a right protected by the First Amendment, and must be allowed to be presented in a live exhibition (by the UFC or any other promoter). The crux of the argument made by UFC lawyers is essentially that MMA competition is analogous to various forms of expressive art, much like ballet, theater, or the other combative sporting contests such as Tae Kwon Do or Karate, all permitted in NY with some gray areas. Since, Mixed Martial Arts competition is a form of expression, and based in art, not permitting it within the state usurps the plaintiffs’ First Amendment rights to free speech and self-expression. There are other claims based in the 14th Amendment and interstate commerce, which may hold merit, but the 1st Amendment claim is the most original.

As essentially sound as that argument may be, and as strong an analogy to performing arts may be made with MMA, the initial hurdle for this suit to proceed are the justiciability doctrines; or whether or not a court is even permitted to hear this case, and whether the plaintiffs are the proper parties to pursue this claim. The burden is on the plaintiffs to show “standing”, which means that they have to show some injury, which may be pecuniary in nature, as in lost income from not being allowed to stage live events. They also have to show causation, which may be traced to the inaction of the state legislature. And finally, they have to show redressability, meaning the court hearing this case can actually resolve this conflict.

I foresee some potential problems in a court accepting this case for hearing, essentially because the court may view this dispute as a “political question”, which means that the state constitution has entrusted a different branch of government with resolving this issue, and the court cannot overstep its authority and presume to act as that other branch and resolve the matter. The court may be overstepping its powers by acting or it may not be able to craft the appropriate remedy even if it did choose to act; i.e., order the legislature to pass a law. It seems to me that since the legislature has chosen not to act to pass legislation regulating/allowing MMA in NY State, the court may view itself as being somewhat  presumptuous in ordering the legislature to act by deciding that all of a sudden the legislature has been discriminating against a particular group of athletes, and violating the US Constitution. This injury may simply not be redressable by a court of New York. Additionally, acting in this case may open the doors to a flood of similar free-expression lawsuits by other sports and athletes who may want to claim legal protections under various Amendments; an untenable situation for the courts.

Mootness is another reason the court may decide to refuse to decide the question posed as to the constitutionality of the MMA ban. It appears that much of the legislature is supportive of the regulation of MMA, and a bill may be on the way, or perhaps has already been proposed by a member of one of the houses. If this is the case, a court is not likely to make the requested declaration, because if it did, its decision would mean little besides wasted time if the legislature immediately passed a bill regulating MMA, irrespective of the court’s verdict.

Finally, my personal speculation is that there are powerful organized sports associations such as NFL, NBA, NHL etc., putting sufficient lobbying pressure on legislators to hold the UFC sought legislation stuck somewhere in limbo and off the legislatures’ floor for a vote simply because the competition from UFC for the sports dollar would cut in deeply into any other sporting organizations’ pockets. This is not a difficult prospect to imagine; all large companies spend huge sums lobbying legislators to keep legislation which would cut into their bottom line away from passage. The regulation of MMA in NY State is only a matter of time, and I suspect the established sports leagues are only buying a few precious months. NY is a huge market, and the UFC may have brought a publicity suit, but in my opinion it was a smart move, and will put the pressure on the legislature publicly to put up or shut up. The UFC is sending a message to every state: MMA is here to stay, and the “brutality” and “violence” arguments against it no longer have merit due to its availability on television, and other violent media content pervasive in our culture.

Chevron Sues Filmmaker

A three-judge panel of the United States Court of Appeals for the Second Circuit in Manhattan issued an order on July 15th in the case of documentary filmmaker Joe Berlinger (Brother’s Keeper 1992) after hearing arguments from attorneys for both the filmmaker and for Chevron. Berlinger had been ordered by the lower trial court to turn over 600 hours from his documentary Crude to Chevron. The documentary chronicles the legal struggle by 30,000 Ecuadorian rainforest residents over Chevron’s illegal dumping of more than 18 billion gallons of toxic water into the Amazon. At least 345 million gallons was crude oil, and Chevron admitted to the dumping in order to save $1-3 per barrel of oil. The suit concerned whether or not a journalist could be compelled to turn over such materials.

The Court of Appeals order was a partial win for each side. The panel concluded that Mr. Berlinger must turn over to Chevron all footage that does not appear in publicly released versions of the movie that depict the lawyers for the Ecuadorean plaintiffs, experts or current or former government officials. However, the many hours of footage that Berlinger gathered alone with the plaintiffs and their families, friends, and neighbor does not need to be disclosed and the court restricted Chevron use of the footage to the legal dispute.

In August Berlinger claimed that Chevron violated the court’s order by making “false and misleading” statements about his outtakes. Several days ago a federal judge in Manhattan ruled Berlinger must submit to depositions in the case and writing that the oil company’s original request to see the filmmaker’s raw documentary footage was not a fishing expedition.

Film Studio Accounting Issues

Filmmakers and profit participants often lament about distributors engaging in creative bookkeeping. This is one area where filmmakers concede that studios are sufficiently imaginative in their thinking. A frequent complaint is that the studios continually devise new and ingenious ways to interpret a contract so that all the money stays in their pockets. The general consensus among filmmakers is that net profits are illusory. Rarely does a share of net profits generate hard cash.

No doubt, there are numerous instances where producers or distributors have cooked the books to avoid paying back-end compensation to those entitled to it. Expenses incurred on one movie might be charged to another. Phony invoices can be used to document expenses that were never incurred. Some ruses are subtler, and not readily apparent to the uninitiated.

The major studios determine profits for participants using their own special accounting rules as set forth in their net profit defi¬nitions. The accounting profession has generally agreed-upon rules called Generally Accepted Accounting Principles (GAAP). There are special guidelines for the motion picture industry called Financial Accounting Standards Bulletin 53 (FASB 53). These rules provide, among other things, for the accrual method of account¬ing. Under this method, revenues are recognized when earned, and expenses are recognized when incurred. But distributors do not necessarily follow these rules. They may use GAAP and FASB 53 when accounting to their shareholders, or reporting to their bankers, but they often resort to their own Alice in Wonderland-type rules when they calculate net profits for participants. They may recognize revenue only when it is actually received, while taking expenses when incurred. So if the distributor licenses a film to NBC, the distributor may not count the license fee as revenue until they actually receive it. Even when they receive a non-refundable advance, they might not count it as income until the time of the broadcast. Meanwhile, they count expenses as soon as they are incurred, even if they have not paid them. This mismatching of revenues and expenses allows the distributor to delay payment to participants. It also allows distributors to charge producers interest for a longer time on the outstanding “loan” extended to the producer to make the film.

Under long-established precedent, courts refuse to invalidate contracts simply because they are unfair. Law students are taught the principle that even a peppercorn—something worth less than a penny—can be valid consideration. This means that if you are foolish enough to sign a contract to sell your $200 bike for a dime, do not expect a court to bail you out of a bad deal. Absent fraud, duress, or some other acceptable ground to invalidate a contract, courts do not second-guess the wisdom of what the parties agreed to.

The major studios have rewritten their contracts, replacing the phrase “net profits” with such terms as “net proceeds.” They want to avoid any implication that the back-end compensation promised participants has anything to do with the concept of profitability.

As a result of many highly publicized creative-accounting disputes, anyone who has clout insists on receiving either large up-front payments or a share of gross revenue. Distributors have consequently lost the ability to share risk with talent. Budgets have escalated to accommodate large up-front fees, with major stars now demanding $20 million per picture. Moreover, stars and directors have little incentive to minimize production expenses, since it doesn’t affect their earnings.

Not all complaints about creative accounting concern accounting errors. Many grievances reflect the inequality of the deal itself. The studio uses its leverage and superior bargaining position to pressure talent to agree to a bad deal. The distributor then accounts in accordance with the terms of the contract and can avoid paying out any revenue to participants because of how net profits are defined. The contract may be unfair, but the studio has lived up to its terms. It is only after the picture becomes a hit that the actor bothers to read the fine print of his employment agreement. This is not creative accounting. This is an example of a studio negotiating favorable terms for itself.

Keep in mind that there is no law requiring distributors to share their profits with anyone. Indeed, in most industries, workers do not share in their employer’s profits. Moreover, when a major studio releases a flop, losses are not shared; they are borne by the studio alone.

Contractual Twitter Bans Making Way Into Employment Agreements

There’s a growing number of studio deals with new language aimed specifically at curbing usage of social-media outlets by actors, execs and other creatives. The goal: plugging leaks of disparaging or confidential information about productions via the likes of Twitter, Facebook and YouTube.

From professional sports leagues like the NFL to news media outlets like the Washington Post, industries are openly struggling with how to make sure social media doesn’t expose the inner workings of their operations.

While Hollywood recognizes the marketing value of social media, the backlash from business affairs execs is a testament to the leaks and potentially damaging misinformation these emerging technologies make possible — as well as the control studios like to maintain over their messaging to consumers.

Keeping stars from blabbing what they shouldn’t remains just as much a problem today as it was in the ‘30s. But until relatively recently, getting an ill-advised word out to the wider public required a TV camera or a gossip columnist; social media eliminates the middleman and enables an actor to broadcast to millions in an instant.

Most film and TV studios say their talent deals do not put any shackles on social media usage that doesn’t reveal confidential information. To the contrary, most studios, particularly in television, openly encourage the practice as a means of getting the buzz on current productions going.

The Twitter backlash is reminiscent of the schizophrenic response YouTube generated from media companies a few years ago, where legal departments were wagging their finger at the site for distributing the very same videos the marketing departments were submitting.

Some believe the new Twitter-targeted contract language isn’t necessary as existing standard confidentiality clauses are written so broadly that they were assumed to cover social media. But specifying Twitter and its ilk could come in handy when violations occur because studios can fire off breach of contract notices that zero in on the offending mode of communication.

Crowd Release for Public Filming

When producers shoot a scene at a place open to the public people in the background might be captured on camera. It is often not practicable to get every member of the crowd to sign a release. Consequently, producers may post a sign at the entrances to the event alerting participants that they may be captured on screen and stating that by entering the venue they are consenting to be recorded. Alternatively, a release might be presented to persons when they purchase a ticket to an event and printed on the ticket as well.

Persons do not have an absolute legal right to prevent publication of any photo taken of them without their permission. If every person had such a right, no photo could be published of a street scene or a parade. Liability usually exists only if publication of a photo would be offensive to people of ordinary sensibilities, or is defamatory or invades their right of privacy. However, the use of a person’s image or likeness without their permission to sell a product would likely infringe their right of publicity and give rise to liability.

If you are using a posted crowd release, it is good practice to take a photo of all the entrances with the sign clearly posted in public view. The notice should  be large enough that those passing by will clearly see it.

Sundance Institute Announces Online Distribution

The non-profit Sundance Institute, announced an expansion of the Institute’s Artist Services program, which enables Sundance Institute artists to reach audiences, raise funding and receive support through an educational and resources site. Filmmakers can now make their films available online to consumer markets via iTunes, Amazon, Hulu, Netflix, SundanceNOW, and YouTube while still retaining ownership of their work and making independent decisions about strategies for each outlet.

Each partner will identify and promote these film projects to their audiences, while in turn, the Institute will endorse their availability through its own marketing and promotional efforts and through the vast social community developed by the Institute. New Video, the Institute’s exclusive aggregation partner for distribution across these portals, will offer all eligible Sundance Film Festival and Lab titles a unique gateway to digital distribution that emphasizes filmmaker ownership and control.

In addition, the Institute has also entered into a deal with Topspin Media to provide its artists with direct marketing tools and fulfillment services. Topspin is a direct marketing and retail software platform for musicians, filmmakers and authors that provides tools for independent artists to increase awareness of their work and build relationships with fans.

Obama Refuses to Support Piracy Bill That ‘Undermines’ Online Freedom

A message posted on a White House blog on Saturday says that the Obama administration acknowledges the threat that foreign websites pose but it “will not support legislation that reduces freedom of expression, increases cybersecurity risk, or undermines the dynamic, innovative global Internet.”

The message comes as the debate over the Stop Online Piracy Act (SOPA) and other antipiracy bills heat up. The content industry, supported by Hollywood studios and the MPAA, is pushing for legislation that grants broad powers to shut down foreign websites and intermediaries that provide support to rogue, file-sharing sites that facilitate piracy. Opponents believe the legislation goes way too far, allowing the government to censor free speech online.

The White House’s message Saturday comes in response to online petitions cirticizing the proposed law. The White House blog post, penned by chief intellectual property enforcement coordinator Victoria Espinel, chief technical officer Aneesh Chopra, and Howard Schmidt, special assistant to the president and cybersecurity coordinator for national security staff, warned that antipiracy legislation should be “transparent and designed to prevent overly broad private rights of action that could encourage unjustified litigation.”

That language suggests the Obama administration will not support the bills in their current form. If so, the move is a key blow to the entertainment industry and MPAA chief Chris Dodd in their effort to pass comprehensive antipiracy reform.

Still, the blog post encouraged bipartisan legal compromise that leads to increased protections. “The Administration calls on all sides to work together to pass sound legislation this year that provides prosecutors and rights holders new legal tools to combat online piracy originating beyond U.S. borders while staying true to the principles outlined above in this response.”

A Congressional committee was scheduled to take up SOPA on Wednesday but on Friday that hearing was postponed. House majority leader Eric Cantor said on Friday that the legislation wouldn’t be brought to the floor for a vote until there is a consensus on what that legislation should look like, making the Obama administration’s position even more ominous for the bill’s future.

The MPAA has issued a lengthy statement in response to the Obama administration. Here’s the most relevant part:

“While we agree with the White House that protection against online piracy is vital, that protection must be meaningful to protect the people who have been and will continue to be victimized if legislation is not enacted. Meaningful legislation must include measured and reasonable remedies that include ad brokers, payment processors and search engines. They must be part of a solution that stops theft and protects American consumers.”

Ben Stein Claims His Politics Cost Him a Job.

Stein, the prolific actor, author, spokesperson, pundit and one-time star of Comedy Central’s game show Win Ben Stein’s Money, has sued a Japanese company and its New York ad agency for $300,000 for allegedly backing out of a deal to hire him to act in commercials when they found out about his beliefs on global warming.

Stein filed suit in Los Angeles Superior Court on Wednesday against Kyocera Mita America, Inc., Seiter & Miller Advertising and their principals.

Stein, a well-known conservative commentator who became famous as the economics professor in Ferris Beuller’s Day Off, has appeared in popular commercials for Clear Eyes eye drops and Comcast. He claims that in 2011, Kyocera and Seiter & Miller approached his agent at Innovative Artists about him appearing in commercials for a line of computer printers. A deal was allegedly worked out to pay him $300,000 for the commercials and to appear at a company event. “The only points still under discussion–but not in dispute–were what kind of tea and other snacks Ben Stein would have on the set,” the complaint states. “There were no outstanding deal points.”

But Stein alleges that in Feb. 2011 his agent was called by a Seiter employee and told that “questions had been raised by defendant Kyocera about whether Ben Stein’s views on global warming and on the environment were sufficiently conventional and politically correct for Kyocera,” according to the complaint.

Stein alleges he informed the ad agency and Kyocera that he was deeply concerned about the environment but he was not certain that global warming is a man-made phenomenon. “He also told [his agent] to inform defendants that as a matter of religious belief, he believed that God, and not man, controlled the weather,” the complaint states.

Days later, Kyocera allegedly withdrew its offer and hired an economics professor at the University of Maryland to appear in the commercials and, “in an astonishingly brazen misappropriation of Ben Stein’s persona, dressed him up as Stein often appeared in commercials (bow tie, glasses, sports jacket).”

So Stein is suing, claiming breach of contract, and wrongful discharge in violation of public policy, among other causes of action.