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Courts decline to dismiss the potentially explosive termination right lawsuits against Universal and Sony

By | Published on Wednesday 1 April 2020


The courts in New York yesterday declined to dismiss the potentially explosive lawsuits being pursued against Universal Music and Sony Music in relation to the termination right under US copyright law. The majors argue that the termination right does not apply to traditional record deals, although their motions to dismiss focused more on technicalities around the termination notices previously submitted by the plaintiffs.

The American termination right says that ‘authors’ who assign their copyrights to another entity have a one-time opportunity to terminate that assignment and reclaim their rights after 35 years. This particular termination right comes from a piece of 1970s copyright law Stateside, so only really kicked in earlier this decade.

On the songs side of the business, American songwriters reclaiming their US rights in this way has become routine. There are formalities a songwriter must go through to reclaim those rights – and many may use the opportunity to re-sign with the same publisher on better terms and with a new advance – but in the main termination notices are accepted.

However, on the recordings side many corporate rights owners have resisted efforts by artists to reclaim assigned rights. This is principally on the basis that record contracts are so called work-for-hire agreements, making the label not the artist the default owner of the resulting copyright. Therefore, there was no assignment of rights from artist to label 35 years ago and as a result the right to terminate that assignment does not apply.

Needless to say, most artists disagree with that argument, in turn arguing that record deals aren’t really work-for-hire agreements at all. Which has resulted in years of dispute that led to lawsuits being filed against both Universal and Sony in February 2019.

Those lawsuits – each involving multiple artists – seek court clarification that termination rights do apply to record contracts. And therefore labels which have previously knocked back termination notices and continued to exploit recordings referenced in said paperwork should be held liable for copyright infringement.

Both majors sought to have the cases dismissed by raising issues with the termination notices previously submitted by each plaintiff, in some cases claiming insufficient information was provided and in others that deadlines had been missed.

Universal also reckoned that artists who had signed their record deals via companies – rather than in a personal capacity – couldn’t utilise the termination right. And – in relation to one artist – it argued that the original record deal had been done before 1978 when the termination right that is being enforced here first came into being.

The judge actually sided with Universal on those latter points, more or less, dismissing some aspects of its lawsuit as a result (though in relation to the pre-1978 deal, only for recordings also released pre-1978). However, the other technicalities raised by both Universal and Sony were rejected, allowing both lawsuits to proceed.

As noted, the motions to dismiss – and therefore the judgements on those motions – did not focus too much on the core dispute in these cases. Which is to say, whether or not artists can exercise the termination right at all, or whether – because record contracts are work-for-hire agreements – the termination right does not apply.

Although, in the Universal case, plaintiffs had sought declaratory relief in their favour on that point, ie for the court to rule that their interpretation of the termination right – and that it does apply to their record contracts – was correct. For its part Universal wanted that element of the lawsuit dismissed too, which the judge also agreed to yesterday.

However, he only declined to provide declaratory relief at this time, he didn’t rule on the issue at hand. After all, he noted, in its motion to dismiss, Universal had only referenced the ‘work-for-hire’ elements of the artists’ record contracts as part of its efforts to have the termination notices ruled void because of the statute of limitations. He added: “The court, therefore, need not resolve, for purposes of this motion, whether the agreements conferred ‘for hire’ status on the works”.

But, of course, that is the big issue that will need to be resolved down the line, the entire dispute over the termination rights of artists pretty much hanging on that point. If the court does ultimately decide that record contracts are not, in fact, work-for-hire agreements (even if they claim to be within the contract itself), then the termination right will likely apply.

That could result in a flood of artists seeking to reclaim the American rights in their old recordings at a time when catalogue is becoming ever more lucrative for the labels.