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Why Did Musicians Seeking to Reclaim Copyright Decide to Settle?

by | May 20, 2024 | Copyrights, Intellectual Property

When an artist grants the transfer or license of copyrighted material to another party, is that assumed to be in perpetuity or can they reclaim copyright at some point? Is it solely on the creator to set time limits for these agreements? 

Fortunately for creators, the Copyright Act of 1976 does offer a window in which they can legally terminate transfers or licenses granted in the past. This gives artists an opportunity to work themselves out of a bad deal – or, at the very least, reclaim the copyright and the accompanying royalties of works that originated in their name.

Recently, a cluster of musical artists settled lawsuits against UMG Recordings regarding reclamation of copyright. Although the settlement outside of court means that their specific reasons for settling remain private, we can look at the case terms to understand why they might have chosen this route rather than extending litigation. 

The Initial Lawsuit

The plaintiffs include a diverse group of artists who signed contracts in the 1970s and ‘80s with UMG Recordings, Inc. and their subsidiary Capitol Records, LLC. You may recognize some of their names: Bruce Springsteen, John Waite of The Babys, singer-songwriter Syd Straw, The Dickies, Dream Syndicate, and Joe Ely, sometimes-guitarist of The Clash. These artists signed contracts in the ‘70s and ‘80s with record labels that eventually came to be owned by UMG Recordings and Capitol Records.

Represented by counsel, the artists listed above filed multiple lawsuits in Manhattan federal court in 2019. A similar cluster of lawsuits arose against Sony Music Entertainment, Inc. around the same time.

The artists claimed that UMG had been ignoring their termination notices – in other words, the artists were trying to reclaim copyright ownership by terminating licensing or transfer agreement contracts with UMG. They believed that the contract terms were unfavorable, and many wanted the chance to receive royalties again. They asked for an injunction on what they see as UMG’s current infringement, as well as actual and statutory damages.

What gives them the right to do this if they signed those contracts?

By the Power of Section 203

Section 203 of the Copyright Act of 1976 allows for artists to legally end the agreements with the recording companies under certain circumstances. Put simply, the spirit of Section 203 is to give creators a chance to renegotiate or be free of bad deals.

However, this is not the same as the termination of copyright in general, which happens automatically when a copyrighted work enters the public domain after a certain amount of time. Instead, after 35 years have passed from a particular agreement date, the artist has the option to ask for termination. They need to make their intention clear by sending a termination notice to the current owner of the license.

The lawsuit in question revolves around UMG’s response to these termination notices. The artists claim that UMG has been routinely ignoring them, de facto blocking any attempts to reclaim copyright for notices that would have been effective from 2013 to 2031.

Class Action Rejected

Initially, the artists wanted to band together to create a class action lawsuit against UMG. This would have broadened the scope of plaintiffs to include more artists who had filed termination notices with UMG, which could have potentially helped build a larger case against the recording corporation. 

However, U.S. District Judge Lewis Kaplan ruled that each lawsuit was too unique to lump them all together. It would prove too difficult to address the cases unilaterally and fairly in a class-action suit.

The Work-For-Hire Snag

At the outset of Section 203, it states “In the case of any work other than a work made for hire…” before continuing to explain conditions under which creators can terminate copyright license or transfer agreements. UMG argued that the artists’ termination notices were invalid because the contracts for the recordings were made-for-hire agreements.

Did UMG have a point?

Settling Out of Court

This is where the case becomes a bit of a black box. In March 2024, Waite and other musicians entered into a confidential settlement agreement with UMG. They agreed to request a voluntary dismissal of the case with prejudice, giving the decision closure without the possibility of appeal. 

Why would UMG agree to this when the “work-for-hire” condition seems pretty cut and dried? The sticking point may come down to the nature of work-for-hire agreements.  Usually work for hire agreements are only applicable to independent contractors working with companies. The musical artists in this case may have argued that they were employees of the record labels, not really independent contractors. 

After all, a contractor can typically work with multiple companies in the same industry, but many artists signed to record labels are locked into contracts that prohibit them from producing music for other labels. In that case, are they really independent – or contractors? While this relationship may fall into a unique category of employment, it certainly creates enough ambiguity to fuel legal arguments. 

In the end, both parties may have decided that it would simply cost far less to settle rather than see this debate to the end. And while the artists may not have regained copyright ownership and the accompanying royalties, it is possible that they received enough monetary compensation to make the settlement worth it. Without further public comment from UMG or the creators, we can only speculate.


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