Copyright Update: Digital Music Streaming Issues


This paper was written and presented by Tamera H. Bennett at the 28th Annual Technology Law seminar hosted by UTLaw CLE. It has been edited into multiple blog posts. Enjoy part 1 below, Part 2 here, Part 3 at this link and Part 4.

I.          Streaming Pennies Are Hard to Divide

While most songwriters and artists thrive on the creative process of crafting their next song or production, the creative process by itself often does not put money in the bank.  The songs and sound recordings need to be commercially exploited with the hope and goal of securing licensing fees.

Whether you’re a label, artist, music publisher or songwriter, you either know or are quickly realizing the music business is a business of pennies. Those pennies are often so sliced and diced the music business has become a business of percentages of pennies.  Copyright owners often spend as much time tracking down payment for licensed uses as they do tracking down unlicensed content on the web. 

In 2014, for the first time revenues from digital channels equaled revenues of physical format sales with both accounting for forty-six percent of global revenues.

The new media – or digital space is huge and growing. In 2014, the music industry’s global digital revenues increased by 6.9 per cent to US$6.85 billion. IFPI DIGITAL MUSIC REPORT 2015 at 6. For the first time, revenues from digital channels equaled revenues of physical format sales with both accounting for forty-six percent of global revenues.

Thirty-two percent of digital revenues are from subscription and ad-supported streaming services, up from 27 per cent in 2013. Digital downloads still account for the majority of digital income coming in at 52 percent of global digital revenue. An estimated 41 million people paid for music subscription services in 2014, five times the level of eight million people in 2010. Once the royalties for digital downloads and streams are collected, they have to be distributed to the copyright owners.

When discussing the music business and who owns what rights, it's important to note that there are two copyrights involved in each musical recording. 17 U.S.C. § 102. The copyright that attaches to the song covers the words, music, and the arrangement. Sound recordings are defined as “works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work.” 17 U.S.C. § 101. The song copyright is owned by the song writer or a music publisher who was assigned the copyright. The copyright in a particular version of a recording is owned by the artist or record label. 

As an example of the difference between owning the song copyright and the master/sound recording copyright, recall that Dolly Parton is the songwriter of the hit “I Will Always Love You.” Neither Dolly Parton nor the music publishing company that owns the song copyright for “I Will Always Love You,” have any ownership in the sound recording copyright for the version of the song recorded by Whitney Houston for the movie “The Bodyguard.” Nor does the record label or Whitney Houston’s estate have any ownership in the song copyright. 

While music publishers and record labels are fighting their own issues on getting paid (and sometimes against each other), this article focuses on new media recent legal issues facing sound recording copyright owners.

Stay tuned for additional posts in this series.

Divorced in Motown: Who Gets the Rights?

Image Mathias Miranda CC2.0

Image Mathias Miranda CC2.0

Updated 12/31/2014 - Smokey Robinson and his former wife settle the lawsuit out of court. The parties told the judge, "Due to the complexity of the settlement issues involved in reducing the parties’ agreement to a long form, which issues include having to address different income streams, and possible future uses and disposition of the copyrights and income streams, the parties require additional time to finalize their settlement agreement. The agreement also requires input from family law and music transactional counsel, in addition to litigation counsel."

originally published in TEXAS LAWYER*

Family lawyers worry about a divorce client or the ex-spouse undoing a settlement agreement after the divorce and diverting money or property. Worry is well founded if a client or his/her soon-to-be-former spouse writes songs, books, scripts or otherwise creates things protected by copyright.

Here’s a question: How does a divorced spouse claim a property right that might vest 30 years after the divorce? On March 7, famed songwriter Smokey Robinson filed a declaratory judgment in the U.S. District Court for the Central District of California. He asked the court to find that he had the sole right to reclaim certain copyright assets and that those rights, once reclaimed, vest solely in him. He and Claudette Robinson divorced 25 years ago. She now claims she is entitled to certain revenues from what Smokey Robinson alleges is a new and unvested property right that did not exist during their marriage.

Federal copyright law and state community property law don’t often collide, but when they do, it makes for an interesting case. As set forth in 17 USC §101, a copyright is an original work fixed into a tangible medium of expression. The right vests in the author of the work at the moment of creation.

Federal copyright law and state community property law don’t often collide, but when they do, it makes for an interesting case.
— Tamera H. Bennett

Although California law governs the Robinson case, the analysis is similar under Texas law. In Alsenz v. Alsenz, decided in 2003 by Houston’s First Court of Appeals, Texas fell in line with other community property states. The First Court held that a copyright created during the marriage is community property, and any royalties earned during the marriage are also community property.

In a U.S. Court of Appeals for the Fifth Circuit ruling in Rodrigue v. Rodrigue (1999), which originated in Louisiana, the Fifth Circuit held that federal copyright law does not preempt state family law. Texas adopted this stance in regard to patent law in Alsenz and Sheshtawy v. Sheshtawy (2004). It is a natural extension of Alsenz for Texas courts to find copyright law does not preempt Texas state family law.

Smokey Robinson assigned the copyright in the songs that he wrote during the marriage to his music publisher. That assignment entitled the songwriter to certain royalties from revenue earned by the music publisher from the songs.

Extending the reasoning in Rodrigue to the facts as alleged in Robinson, the royalties earned during the marriage should be community property. Claudette Robinson’s counterclaim filed on May 2 alleges that, upon divorce, there were 453 song copyrights that Smokey Robinson could solely control, but he had a fiduciary duty to her in regard to those songs. And, she was entitled to 50 percent of the royalties from these songs post-divorce.

Upon divorce, a non-creating spouse may negotiate a settlement that entitles him/her to a future royalty revenue stream from the copyright work. The non-creating spouse assumes this revenue stream will last for the life of the copyright.

For songs written by Smokey Robinson and published prior to Jan. 1, 1978, the copyright expires 95 years from publication. For the songs he wrote and published after Jan. 1, 1978, the copyright expires 70 years after his death.

The legislative history to the U.S. Copyright Act states that authors had signed bad deals, leading to loss of revenue streams from their copyrights. To counteract this situation, lawmakers revised the act to allow authors to reclaim assigned copyrights and have a second bite at the apple to enter into better deals.

According to 17 U.S.C §§ 304 and 203, Smokey Robinson, as the author, has the sole right during his life to terminate copyright assignments to the music publishers and reclaim ownership of the copyright in the United States for the 453 songs.

The Copyright Act sets forth detailed requirements on when and how to file such notices to terminate the copyright assignments. According to filings recorded with the U.S. Copyright Office, Smokey Robinson has so far filed notices to terminate the copyright assignments for 16 of the 453 songs and the rights in the 16 songs vested in the songwriter. Eventually, he’ll be able to assign the remaining U.S. copyright term for each song in which the rights vests.

While any of Smokey Robinson’s assignment of rights doesn’t completely cut off the royalties to Claudette Robinson, it could have a substantial impact. She wouldn’t be entitled to royalties from any new revenue streams, as those new revenue streams tie to the new right that vested in Smokey Robinson. Claudette Robinson still would receive her portion of income from prior licenses issued, as well as foreign royalties as those rights are not impacted.

It is unclear how Claudette Robinson will succeed in arguing that the U.S. Copyright Act allows any portion of this new right to vest in her, the divorced spouse. Smokey Robinson must take an affirmative action to terminate the copyright grants. If the songwriter dies before it’s time to take this affirmative action, only then may his then surviving spouse and surviving children (and possibly grandchildren) file the notices of termination.

Also, 17 U.S.C. §203 (b)(4) specifically states that “a further grant, or agreement to make a further grant, of any right covered by a terminated grant is valid only if it is made after the effective date of the termination.” Even if Smokey Robinson had made a grant of any potential reclaimed copyright term to Claudette Robinson as part of their divorce, the grant would have been invalid and unenforceable.

If the divorce settlement agreement, as alleged by Claudette Robinson, requires her former husband to act as a fiduciary to her, must he do everything he can to protect the 50 percent royalty to which she is entitled? Perhaps contract law, not copyright law, secures her a portion of royalties from this new vested right.

Just maybe, the deal has not been undone at all.

Tamera H. Bennett is a trademark, copyright and entertainment attorney and mediator practicing law in Texas and Tennessee as president at Bennett Law Office, PC in Lewisville.

*Reprinted with permission from the July 7, 2014 print edition of Texas Lawyer. © 2014 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.  Read more