Legal Perspective: Reversion Rights Come to Play in 2013
by Nicole Joyce, Arther Law’s Industry Insider
2013 is the year that copyrights owned by record labels expire and can revert back to artists. The Copyright Reversion Act of 1976 gives artists the ability to terminate the label’s copyright after 35 years.
The option of reversion for artists creates an interesting legal arena with no case law or business practice to guide either artists or labels. Some say that reversion to artists could completely change the music business, while others are more skeptical.
The Reversion Act gives a five-year window to file termination. The act was passed in 1976 but did not come in to affect until 1978.
Work for Hire?
In 1999 record labels started inserting the phrase “work for hire” to refer to sound recordings. This new phrase was added because a “work for hire” is one of the nine exceptions to the Copyright Reversion Act of 1976. Artists fought back against these provisions and successfully removed them from later contracts.
Artist contracts that contain “work for hire” provisions will be more difficult to overturn. Courts may find that both the artist and the label intended to enter into a work for hire agreement, leaving the artist with no reversion rights as a result.
Litigation or Negotiation?
When termination notices are filed by artists to reclaim the master sound recordings labels are left with two options: acknowledge the notices or litigate in court with each artist. Artists have filed for reversion for whole albums presumably because the possible legal costs outweigh the royalties of only one song.
Most people think that these termination notices will lead to increased incentive to negotiate and avoid litigation. The record labels have the exclusive right from the filing of the notice to the expiration of the copyright to make a deal for more time. Labels are able to offer incentives to artists to stay such as higher royalty payments from expiring works or higher royalties on works not yet due to expire.
The labels also have the tools and infrastructure to make the most out of the master sound recording rights. It is predicted, however, that only the top artists will file for termination and these artists will likely just switch to a new record label. The result will be a transfer of rights from one record label to another with no net loss by any of the record labels.
This is however changing with the digital world where online sites allow artists to post their sounds independently for a small fee.
Some artists are trying to wait out the fight by filing termination notices with later dates like 2018. These artists hope that legal precedent is set by these 2013 cases making their own reversion process smoother and cheaper.