Principles, policies and practices in the determination of fair terms in exclusive multi-option recording and music publishing agreements: an Anglo-American study Subathira Amarasingham University College London Ph,D. degree ProQuest Number: U643891 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. uest. ProQuest U643891 Published by ProQuest LLC(2016). Copyright of the Dissertation is held by the Author. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. Microform Edition © ProQuest LLC. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 Abstract Exclusive multi-option recording and music publishing agreements display extraordinary characteristics in the law. These contracts depict not only the exclusive nature o f the professional service(s) restraint of musical artists, but also the exclusive control over the copyright in the musical work(s). They illustrate the operation of two distinct forms of exclusivity which are unique to the practices of the music industry. Both types of restraint are significant because they usually operate over a number of years, and are influential in the shaping of musical careers. This thesis considers the principles, policies and practices which influence the iuterpretation of fair terms in these contracts. The function of specific contractual terms and their roles within the operation of the agreement will be examined. In particular, the interaction between the two types of exclusivity and the terms of contractual remuneration is considered in depth. This examination is quite unique not only because it considers the role of exclusive copyright within the operation of contract doctrines but also in terms of the recognition of the conceptual link between copyright and royalty payments. Bargaining priorities will also have to take into account crucial socio-economic background factors (including the effects of information technology), against which these contracts are being negotiated, as well as the theoretical foundations o f legal interpretation. With regard to the latter, the theoretical model endorsed in this thesis is one based on liberal egalitarianism. This theory emphasises a primary concern for contractors as individuals and interprets a successful contract as a product o f a co-operative rather than a competitive relationship. The laws and practices of the UK and the US (New York and California), which are the economic leaders in the ‘pop’ music industry (the focus o f my study) will be discussed. The volume of work, expertise and experience in these jurisdictions has provided the most important illustrations of law and practice in the music industry. Contents Abstract 2 Acknowledgements 1 Introduction 8 Chapter /. The Socio-Economic context o f contract making in the Music Industry 14 I (i) Introduction 14 I (ii) Music in the Digital Age: new pressure and new opportunities 14 I (Hi) Other Socio-Economic issues 18 (a) The economic sigoificance of copyright 18 (b) Global corporate monopolistic policies 20 (c) Socio-political activism 21 I (iv) Conclusion 22 Chapter II. The Contractual Relationship: co-operation^ collaboration and competition 24 II (i) Introduction 24 II (ii) The Exclusive Contract 24 (a) Advances 25 (b) The Control of Copyright 28 (c) Royalties 30 (d) Artistic and Financial Control 34 (e) The Extent of Exclusivity 36 II (Hi) The Enterprise 39 (a) The Payment o f remuneration 39 (b) Freedom 43 II (iv) Other matters 46 Chapter III. Exclusive multi-option recording and music publishing agreements in the UK 48 III (i) Introduction 48 III (ii) Concepts o f Fairness in Caselaw 48 III (Hi) Conclusion 75 Chapter IV The negotiation and formulation o f exclusive recording and music publishing agreements in the UK 79 IV (i) Introduction 79 IV (ii) Negotiating ability and disability: issues ofprocedural fairness 79 (a) Access to independent legal advice 83 (b) Package Deals 86 IV (Hi) Freedom, property and remuneration: substantive fairness 88 (a) Issues of contractual and professional freedom 88 Duration 88 Release Rights 91 Rights of Termination 95 Liability of band members 96 Product endorsement 97 (b) Copyright and Related Rights 98 The control and exploitation of copyright 99 Moral rights 105 (c) Identifying and measuring fair remuneration 106 IV (iv) Conclusion 112 Chapter V. Exclusive multi-option recording and music publishing agreements in New York and California 114 V (i) Introduction 114 V (ii) The law in New York 115 (a) M. Witmark v. Peters and itsprogeny 116 (b) Obligations to exploit the work 120 (c) Procedure and substance 127 V (Hi) The law in California 133 (a) Notions o f fairness and unfairness: the doctrine of unconscionability 133 (b) Duration and remuneration 136 V (iv) Conclusion 150 Chapter VI. The negotiation andformulation o f agreements in New York and California 151 VI (i) Introduction 151 VI (ii) Determining issues o f Substantive Fairness 152 (a) Term 152 (b) The control of copyright 158 (c) Remuneration 163 VI (Hi) Contractual assent: issues o f procedural fairness 168 (a) Standard form contracts 169 (b) Renegotiations 171 (c) Independent legal advice 173 (d) Other issues of conflict of interests 176 VI (iv) Conclusion 180 Chapter VIL A commentary on theoretical matters 184 VII (i) Introduction 184 VII (H) Future Freedom o f trade: Liberal Peifectionism 187 Scope 190 Legitimate interests 191 Reasonableness 193 Future Freedom 194 Proportionality 198 Some observations 200 VII (Hi) Industry standards and the perfectly competitive marlæt: Economic Efficiency 203 Empirical standards 204 The perfect market 205 Standard Forms and Transaction costs 208 Calculating the risk 210 Reasonableness 214 Judicial interpretation ex post facto 215 Some more observations 219 VII (iv) The meaning ofFairness: the Doctrine of Unconscionability 22 1 Assent 222 Substantive evidence of assent 225 The ‘spirit’ or ‘iron core’ of the contract- implying terms and interpreting intentions 226 Fairness as welfare 229 Maximum welfare and social markets 230 Personal individual welfare and mutual respect 233 Principles, policies and practices 237 Chapter Vlll. Final thoughts 242 VIII (i) Tying some loose ends 242 (a) Mutual respect 242 (b) Incentives 243 (c) Assent 249 VIII (ii) Conclusion 250 Bibliography 254 Acknowledgements Special thanks are due to my supervisors Professor Ewan McKendrick and Professor Eric Barendt. Professor McKendrick’s supervision has been particularly crucial to the manner in which I have directed the arguments in this thesis, and I am grateful that he continued to supervise my work even after leaving UCL to take up a professorship in Oxford. I appreciate the advice and guidance which 1 have received from Professor Barendt, who has also kindly taken care o f the many administrative duties arising from the supervision of my thesis. I am grateful to Professor Lon Sobel, in Los Angeles, for his enthusiasm and extremely helpful advice on US law and practice. I also appreciate the encouragement which I received from Anne Barron (LSE). I would like to thank Professor Dawn Oliver (Head of Research Studies, UCL) for supporting my doctoral studies. I am also very grateful to Professor Jeffrey Jowell QC (Dean of the Faculty of Laws, UCL) for his interest and aicouragement in my work. I am especially indebted and extremely grateful to Professor Jeremy Phillips (Professor o f Intellectual Property Law, UCL) for his advice, enthusiasm, wisdom and support which has always inspired my work. I have benefited from the kind advice of many people in the music industry. 1 am grateful to the following music industry lawyers for assisting me with my empirical research: in New York, Michael Pollock and Ira Selsky; in Los Angeles, Richard Greenstone and Charles Robertson; in London, Darrell Panethiere, Jo Okpaluba, Michael Smith, Jane Dyball, Cyril Classer, Andy Edwards, Nicole Touchard, James Mullan and Andrew Kemp. I would also like to thank Sylvia Lough and Helen Ghosh (UCL, Laws Admin.) for their co-operation, particularly at times when I desperately required their administrative assistance. I am thankful for aU the encouragement and support which I have received in the writing o f this thesis. The responsibility for the contents of this work remains mine alone. Introduction Commercial and anployment relationships are regulated in law by specific legislation addressing particular terms and practices necessary to make a ‘fair’ contract. By enacting specific legislation to regulate economic relationships which are of great economic disparity, the state has recognised the potential for unfair contractual obligations and practices. Particular state regulation has been targeted at the prime socio-economic institutions of general employment and consumerism. However, most long-term creative contracts within the entertainment sector do not fall within this general field o f public policy making. The contractual regulation of fairness in exclusive multi-option recording and music publishing agreements in both the UK and the US is not generally governed by specific legislative policy. This is a curious point since the entertainment industries in both countries are perhaps one of the most lucrative sectors in their own respective