EXTENDING the TERM: Should the UK Recording Industry Have New Obligations As Well As New Rights If the Copyright Term for Sound Recordings Is Extended?

EXTENDING THE TERM: Should the UK recording industry have new obligations as well as new rights if the copyright term for sound recordings is extended?

Ben Challis, LLB MA MA(law) FRSA Barrister-at-law

In this article Ben looks at the current moves by the UK’s recording industry to push for a Europe wide extension in the term of copyright for sound recordings - from fifty years to ninety five years. But Ben asks if this is the time for a complete overhaul in the way copyrights are owned and suggests that any change in term should only be made with additional provisions to protect both the customers and the creators of recorded music.

Front page news in the UK trade magazine Music Week on the 4 th March 2006 was the headline ‘Timefor Action’ launching a major campaign under the „Extend The Term!‟ banner, calling on the UK Government to take action over extending the term of copyright for sound recordings. Currently the term of copyright protection for original literary, dramatic, musical and artistic works along with Films is seventy (70) years from the death of the author or last surviving author pursuant to the provisions of the Copyright Designs and Patents Act 1988s12 and s13B. However S13A of the same Act provides that the copyright in sound recordings in the UK lasts for only fifty (50) years from the end of the calendar year in which the recording is made or released. And this is what is agitating the British Phonographic Industry as its members being to see some very valuable copyrights (such as early sound recordings from Elvis Presley and Cliff Richard) enter the public domain. But this is not just a UK issue as copyright protection is, in general terms, harmonised across the European Community and the recording industry is seeking extension in copyright term in sound recordings on a European wide basis.

The UK Government has already responded to industry calls by appointing Andrew Gowers, formerly editor of the Financial Times, to review issues in intellectual Property. Mr Gowers has now issued a call for evidence relevant to his review. At the top of his list of the twelve areas of IP he wishes to address in his review is the current term of protection for sound recordings including raising the issue of whether or not an extension to ninety five (95) years, to mirror protection in the US, is appropriate; Gowers has asked for:

evidence that a change in term would impact on investment, creativity and consumer interest

evidence that extended terms in other markets has had an impact on investment, creativity and consumer interest

whether any alternative arrangements could accompany any extension of term

whether any change should be retrospective or just cover new works

The first two points may not quite result in evidence that members of the BPI (British Phonographic Industry) and the IFPI (International Federation of Phonographic Industries) wish to hear. The obvious similar subject market to compare (rather than different UK IP markets such as patents and trade marks) is the US. So what of the US? Well, the major record labels in the USA are presently embroiled in a „payola‟ scandal after being investigated by New York attorney general Eliot Spizer: Both SonyBMG and Warners have already settled in this matter (paying over $10 million and $5 million respectively) for illegal „pay for play‟ activities. Here it seems that the financial muscle gained by the major record labels in the US has done anything but enhance investment and creativity or 2

protect the consumer interest as the majors „pay‟ to have their records „played‟ at the cost of smaller labels, independent bands and less mainstream genres. A2IM (the trade body representing the US indies) has joined the payola debate and has called on the Federal Communications Commission to 'level the playing field' for small record companies. It feels that alleged payola practices between the majors and the broadcasters are locking the indies out.

When looking at the consumer interest it really should be noted that the very same labels who are lobbying in Europe for term extension and other copyright protections have simultaneously been indulging in some very dubious practices in the USA. In 2002 it was discovered that then five majors, EMI, Sony, BMG, Universal and Warner Music along with three major US retailers had been fixing the price of CDs. The defendants were penalised when US District Judge D Brock Hornby approved the settlement of a lawsuit filed on behalf of millions of record club members who alleged they had been overcharged in a price-fixing conspiracy. The sum $143 million was agreed by the majors and retailers in settlement of anti-trust claims that they had conspiring to set minimum music prices. This from the companies whose trade body, the Recording Industry Association of America (RIAA) warns Americans about the illegality of downloading without permission – and bangs the drum about copyright theft!

To add to major labels woes, there is now a new US investigation looming about the pricing of downloads. Following the lead of the New York Attorney General, The US Attorney General, Alberto Gonzales, has launched a widescale investigation into allegations that record labels are fixing the price of downloaded music. The department of justice inquiry centres on the activities of the majors and it is believed that federal witness subpoenas have already been issued. A law suit has also been filed in the federal courts in the US alleging that the major labels have fixed download prices and the suit, from leading class law firm Lerach Coughlin Stoia Geller Rudman and Robbins, also alleges that the record labels sought to shut down online music pioneer Napster at the same time they were introducing their own joint ventures to sell online music. The suit goes further and alleges that the labels own download services, MusicNet and Pressplay, "were not serious commercial ventures, but rather attempts to occupy the market with frustrating and ineffectual services in order to head off viable online music competitors from forming and gaining popularity after Napster's demise". A European investigation into download pricing is also expected soon.

In a separate matter, the majors are still suffering from the ongoing fall out from the SonyBMG „rootkit‟ fiasco (see Music Law Updates Archive February 2006) and other consumer resistance into heavy handed and sometimes plain daft digital rights management (DRM) initiatives from major labels. To cap it all there is the ongoing battle over the major label‟s (and indeed film industry) continual lobbying in the US for technology restricting laws such as the new Audio Broadcast Flag Licensing Act 2006. Comment from the Electronic Frontiers Foundation o this can be found at at http://eff.org/IP/Video/HDTV/fergus_bill.pdf ). With this and the bad news resulting from OAPs, single mums and teenagers being sued for illegal downloading, it has all got so bad that some independent labels (Canada‟s Nettwerk being one example) have distanced themselves from the actions of the major labels and the RIAA.

Record company practices have recently been scrutinized to a far greater extent than previously: Prince‟s action in famously painting the word „slave‟ across his face in reaction to his contract terms with Warners and George Michael‟s withering comments on his 90s relationship with Sony give some indication of the contractual and financial imbalances created by record deals. Having heard the complaints of artists, California State Senator Kevin Murray says this about US recording industry practices: “Much like the public generally dislikes politicians, but love their individual representatives, Artists have respect for their record company handlers, but distrust the companies themselves and the system they operate under. They see themselves as victims of an indentured servitude system designed to keep them perpetually indebted to the companies who also own the product of their labor. Some artists expressed gratitude for the initial investments made by the record companies in their talent, but feel cheated by their meager share of the proceeds when the gamble pays off. One artist's representative went so far as to accuse the record companies of running a continuing criminal enterprise ” although Senator Murray accepts that the labels often make substantial investments in promoting Artist‟s careers. Senator Murray went as far as to launch a bill (SB1034) in the Californian Senate to force labels to account properly to their artists under a „fiduciary duty‟. This was strongly resisted by the Recording Industry Association of America (RIAA) and the major labels. 3

In the UK it has been the decisions of the law courts starting with A Schroeder Music Publishing v Macaulay in 1974 through to ZTT Records Ltd & Perfect Songs Ltd v Johnson (1988) and Silvertone v Mountfield (1993) that have unscrambled unfair and often iniquitous contracts between artists and labels, using the common law doctrine of unreasonable restraint of trade and concepts such as undue influence and inequality in bargaining power to try level the playing field.

In the US the Recording Artists Coalition are actively campaigning to improve the lot of artists and this is an area in the UK where perhaps new copyright legislation might even the imbalance between majors (labels) and artists by giving statutory protection to artists and statutory guarantees of a fair share of revenues from the exploitation of sound recordings. There is also a move to force record labels to account on a far more frequent basis and account transparently. Some of the accounting periods used by labels are based on a time when parchment and a quill pen were the normal tools of accountancy and take little account of the fact the labels (surely!) now have computerised systems running from point of sale right through to record label head office. If the charts can be compiled on a weekly (or even daily) basis then surely artist accounting could be better managed! Both the Rolling Stones and the Beatles have recently taken action over the alleged underpayment of royalties by their labels. In 2003 (and rather alarmingly) a District Court in Los Angeles found that record clubs owned by the now merged BMG and Sony had underpaid mechanical royalties due to songwriters from the distribution premium records – the songwriters‟ lawyers estimated that these sums ran to tens of millions of dollars.

However, it is perhaps the third point that Mr Gowers raises that must alarm the majors most: Gowers asks whether any alternative arrangements could accompany any extension of term. Whilst Music Week acknowledges concerns over “artist‟s influence and their ability to control how their music is exploited many years after it was created”, Music Week also argues that the “extension of copyright term‟ must be a priority issue over the coming months”. This seems a very „label‟ friendly position and if I were an artist or an artist manager I think I might take a very different view on this and indeed have different priorities. Fortunately artists do now have a voice with the globally active Music Managers Forum and the US based Recording Artists Coalition both challenging the accepted thinking and practices of the recording industry, putting forward the interests of artists. To be fair, the Music Week editorial (04/03/06 at p8) does say that the Music Managers Forum are supporting a copyright extension and the MMF are looking to increase the term sound recording copyrights to seventy (70) years after the death of the last surviving performer. But the MMF‟s position is not that simple and they have produced a Policy Statement regarding possible extension of the term in sound recordings.

The Policy, written by MMF copyrights and contracts sub-committee chairman David Stopps, calls for two new provisions in copyright law: The MMF have suggested that any assignmentto a record label should be for a limited period of time – twenty five years – after which the rights revert back to the artists. Stopps suggest that „after 25 years the copyright will come back to the original performers and they can put out on their own label or exploit it as they wish”. If this could be linked in some way to artist recoupment then this would certainly be an interesting move forward. Coupled with this is the MMF‟s „use it or lose it‟ policy whereby c opyright holders who did not make a work available for public access for a period of (say) 2 years would see the copyright automatically reverted to the creators and performers who created it. The MMF say that this change would enhance competition and cultural diversity and bring great benefit to creators, performers and consumers.

Dennis Collopy adds "Copyright is intended to reward the creative effort and endeavour and provide the creator with the benefits and fruits from his labour. I would argue that the law must function to restrict their [record labels] actions and any extension of copyright law must be to the benefit of the original creators and authors and not just the companies themselves. If we are going to allow USA law to encroach into the European intellectual property system then we should also adopt the same registration system that operates in the USA – but make it mandatory for the labels to register their renewal rather than the renewal being automatic. The renewing company would have to evidence the accountings to the artist over the initial copyright term to prove they have honoured the terms of the original agreement"

I always teach that copyright protects the „creative effort‟ although I must say that now has to be qualified: Copyright law has evolved to protect the product of the creative effort which is often neither owned nor controlled by the creator. It can be argued that in the modern world copyright really 4

protects big business and has little to so with the creators of copyright who are badly served by the law. The recent moves to give artist‟s a long term re-sale royalty when works of art are re-sold gives a glimmer of hope but otherwise there is little to protect original authors. Moral rights can protect author‟s interests to an extent by allowing the author to assert paternity or object to derogatory treatment – but moral rights „don‟t help pay the bills‟. In February 2006 the story of Solomon Linda put this in perspective. Linda wrote Wimoweh, which formed the melody of The Lion Sleeps Tonight, which featured in Disney‟s blockbuster The Lion Ling. Linda died so poor that his family could not even afford a headstone for his grave and yet even before the Disney Film, Wimoweh had been a major hit and recorded numerous times. But neither Linda or his estate received ongoing royalties of any real value. Luckily the provisions of the 1911 Copyright Act which applied in South Africa at the material time allowed his family to regain control of the song(s) and reach settlement whereby they would be paid for the use of the copyright. Before the settlement Linda‟s widow received just 3/24ths of the royalties from Wimoweh and nothing from The Lion Sleeps Tonight. It seems strange that this old statute seemed more in tune with the notion of protecting authors and artists rights than much modern legislation. I haven‟t seen many artists praising the provisions of the USA‟s Digital Millennium Copyright Act and many consumer groups actively criticise the Act for being far too industry friendly and in reality against the best interests of consumers.

So what might be some relevant suggestion to Mr Gowers?

That there should be an extension of the copyright term in sound recordings to say seventy years from the date of recording. It is possible to argue that this should go further - for seventy years after the death of the last performer on a recording. This would then mirror other copyrights.

And a similar extension of the term for performers rights (in live recordings – again to seventy years or life plus seventy years)

But if we want to protect and encourage our creative community - the very people who actually make sound recordings - then perhaps any change in copyright term might be accompanied with some new provisions:

an automatic and irrevocable re-assignment of copyright in sound recordings to the recording/performing artist(s) after 25 years and

Earlier return of copyrights to recordings artists (and indeed songwriters) where the work is not commercially exploited by a record label (or a music publisher).

A legal recognition of recoupment by artists in terms of a return of ownership of masters or joint ownership and/or joint control with labels when an artist recoups.

a fiduciary duty placed on labels to account to the recording artist(s) on a regular basis for an equitable share of all revenues for the life of copyright / term and/or

An obligation placed on record labels to account transparently to artists and account on source income.

The automatic return of copyrights where there is a failure to account.

Criminal sanctions (as with copyright infringement) for directors of companies for failure to account to original authors, composers and performers.

The automatic return of copyrights in the case of the bankruptcy/liquidation of a company

The Royal Society of Arts recently published its Adelphi Charter and this seems to be a far better thought out piece of work than the „Extend The Term!‟ campaign. The Charter is looking for a thorough review of United Kingdom (and international) intellectual property laws to better serve the 5

public interest. In particular, the Adelphi Charter calls for a better balance between rights protection and the public domain, since the RSA suggests that the current schemes overly favour the protection of rights. The Charter lays out a “public interest” test that governments should have to meet before creating or extending intellectual property rights. The proposed test includes a presumption against creating new areas of intellectual property protection, extending existing privileges or extending the duration of rights, unless those seeking the change can establish though rigorous analysis and proof that the change will promote basic rights and economic well-being.

The review of copyright extension is imminent and both the creators of recorded music and the consumers of recorded music need to make their aspirations known to Mr Gowers and government. The recording industry certainly will. As a creative industry, perhaps the general feeling is that the proposed extension in termshould be a good thing and should be supported – within reason. But if the campaign ends up as one which is purely designed to suit the needs to the major record labels then any extension in term might well have the very reverse effect to what the government might intend to achieve – which surely is a well funded, creative, vibrant and healthy music industry in the United Kingdom and indeed elsewhere.

The writer is the Editor of Music Law Updates.

References

Majors and retailers reach settlement http://www.musiclawupdates.com/news/05Decembernewsupdates.htm

SonyBMG settle payola claim http://www.musiclawupdates.com/05Septemberlawupdates.htm

A2IM call on FCC to level playing fieldhttp://www.hollywoodreporter.com/thr/music/brief_display.jsp?vnu_content_id=1002155566

Spitzer targets radio stations Music Law Updates Archive March 2005

Solomon Linda: see Music Law Updates archive March 2005

Stopps, David (2005) MMF policy statement regarding the possible extension of the term of copyright protection Regarding Sound Recordings: MMF www.ukmmf.net

Class action against majorshttp://billboardradiomonitor.com/radiomonitor/news/business/sales_marketing/article_display.j sp?vnu_content_id=1002157462

Murray , K (2003) Recording Industry Practices The Recording Artists Coalition website at http://www.recordingartistscoalition.com/industrypractices.php

A Schroeder Music Publishing v Macaulay (1974) 1 WLR

Panayiotou v Sony Music Entertainment (UK) Ltd (1994) EMLR 229 ( the’ George Michael’ case)

Silvertone v Mountfield in (1993) EMLR 152 (the ‘Stone Roses’ case)

ZTT Records Ltd & Perfect Songs Ltd v Johnson (1988) EIRP 175

Evans, Andrew (2003) The Doctrine of Restraint of Trade in Relation to Music Business Agreements Dissertation submitted to Buckinghamshire Chilterns University College for the award of Master of Arts by Brunel University 6

The Adelphi Charter http://www.rsa.org.uk/acrobat/adelphi_charter.pdf Royal Society for the Arts: London.

For some interesting articles with a US perspective see the Future of Music Coalition website at http://www.futureofmusic.org/articles/

The IFPI website is at www.ifpi.org and The BPI website is at www.bpi.co.uk

US Opens inquiry into the pricing of music download s The Guardian 4 th March 2006

The Beatles‟ audits (1984) http://query.nytimes.com/gst/fullpage.html?res=9C02E4D61238F937A25751C1A962948260 a nd 2005 http://www.thelawyer.com/cgi-bin/item.cgi?id=118253&d=122&h=24&f=46

The Rolling Stones‟ audit www.simkins.co.uk/ebulletins/STBStonesAuditDispute.aspx and the Times November 13 th 2004.

For another alterative view on how copyright law should apply the concept of creative commons might be of interest. See http://creativecommons.org/ and http://en.wikipedia.org/wiki/Creative_Commons

And see the classic US case of Eldred v Ashcroft on the issue of extending the term of copyrights which upheld the constitutional validity of the Sony Bony Copyright Term Extension Act 1998. Eldred v Ashcroft (2003) 537 US 186

My thanks to Dennis Collopy MA, Buckinghamshire Chilterns University College, for his sterling help with this article.