Online Song Lyrics & Royalties

The exclusive rights granted to songwriters under U.S. Copyright Law and assigned rights under publishing agreements is a vital source of protection and income for copyright owners in the music industry. Copyright owners receive royalties when song lyrics are used, and it is generally understood that copyright owners are compensated when songs are used on television, in movies, and are otherwise performed.

So what about websites that compile the lyrics to songs?

Lyric aggregation sites are once again under scrutiny for copyright infringement allegations for posting song lyrics without paying royalties to songwriters. According to LyricFInd, lyric searches on Google reach an estimate of 5 million per day, which stacks up to serious cash for songwriters whose lyrics are found on non-paying websites.

Music publishers are reaching out to lyric aggregation sites to have sites obtain licenses or face take down notices for infringing activities. Not only will licenses help songwriters get paid for their works, but they can also help regulate the quality of lyrics posted to sites. Many lyric aggregation sites rely on user submitted lyrics, which often contain incorrect lyrics and can devalue the songwriters’ creation.

Some music industry professionals and lyric sites question the fight against unlicensed online song lyrics, finding the payout to songwriters is inconsequential compared to the time and money battling unlicensed use. According to a study by Peter DiCola of the Northwestern University School of Law, only roughly 6% of an artists’ revenue stream comes from songwriting royalties. Although this percentage is small in comparison to other revenue streams, it is not representative of the non-performing and non-touring songwriters.

Whether or not licenses from online song lyric sites will provide songwriters with a big payout, the battle over song lyric aggregation sites will perceivably continue.

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Covering Your Ass(ets) pt. 1 – Why Musicians should Get Their Ducks in a Row

Musicians usually think to turn to their attorneys for the big stuff: negotiating recording deals, licensing intellectual property and, of course, seeking legal ramifications when something goes wrong. An important part of a musician’s financial and personal interest, however, is the musician’s legacy.

While no one wants to think about the distribution of their assets upon their death, estate planning is critical to an artist’s legacy and, ultimately, the control of his or her property upon the artist’s death.  Although most people consider their estate to merely encompass money, cars and houses, an artist’s estate covers much more than this. When it comes to estate planning, artists should meet with their attorneys to discuss more than who will access to their bank account…especially since all of the artist’s financial and non-financial assets will affect estate taxes and estate debts!

Finances

Although there is much more to an artist’s estate than his or her finances, finances usually cause the biggest problems in estate disputes. For artists, finances can reach beyond the typical income flow. When creating an estate plan, there are a few considerations that artists may want to keep in mind:

  • Royalty escalation – a royalty escalation is a provision in some recording contracts in which an artist receives a higher royalty if a certain amount of sales – or other measuring unit – have occurred. For example, an artist may receive a 15% royalty for the first 100,000 albums sold, with a bump up to a 17% royalty for albums sold after the 100K mark. Because an artist may sell more albums after he or she has passed away, the artist may want to consider the legal – and tax – implications that such a bump in posthumous record sales will have on his or her beneficiary(s).
  • Licensing and Publishing agreements – many artist sign publishing agreements with an independent music publisher or incorporate a publishing deal into his or her recording contract. Likewise, many artists enter into licensing deals for the use of their music, image or other intellectual property for various uses, whether in conjunction with, or independent of, their publishing and recording deals. Depending upon the terms of these agreements, an artist may want to consult a lawyer to see how these deals will alter revenue streams that are paid out to his or her beneficiary(s).

Non-Financials

Non-financials are equally as important to the legacy of an artist, and his or her estate, as financials. As a result, artists should consider the distribution of their non-financial assets when creating a will. Such assets may include:

  • Copyrights and Trademarks – artists often retain interest in their copyrights and trademarks. As such, artists can assign an administrator to their intellectual property rights. Such an assignment is important with respect to the use of an artist’s intellectual property after he or she has passed on. This is an important consideration since whoever holds the copyright or trademark interest has the say as to the use of the intellectual property rights.
  • Internet and Social Media – Although the Internet and social networking is a relatively new component of the entertainment industry, it should not be ignored. As with intellectual property rights, an artist may want to consider who will control his or her online presence after he or she has passed away.
  • Memorabilia – many artists keep mementos from their music career. Rather it be concert posters, instruments, original lyrics or anything else of sentimental value, an artist should consider memorabilia when planning out an estate. As memorabilia can sold to help pay of estate debts, or used in a way that could be averse to an artist’s desires and interests, detailing who gets what can save an artist’s beneficiary(s) major litigation – and emotional – costs.

Estate planning is difficult for most people, but the lack of estate planning is difficult on family members and loved ones who may not see eye-to-eye on the distribution of assets. Often times, poor estate planning can force families, friends and other loved ones into long and bitter disputes that, often times, end in litigation. By sitting down with a lawyer to create a will, an artist can save his or her loved ones a lot of time, money and hurt feelings while preserving the desires and the interest of the artist.

Capitol v. ReDigi: Just the Beginning

Citigroup, Inc.’s Capitol Records was denied a preliminary injunction against ReDigi in a decision rendered earlier today.

The preliminary injunction was denied by U.S. District Judge Richard Sullivan, stating that Capitol failed to show proof of irreparable harm. Judge Sullivan also dismissed ReDigi’s motion to dismiss the case, finding the motion premature.

With ReDigi – a website that “recycles” digital music files – having previously come under the scrutiny of record labels for copyright infringement claims, Capitol’s lawsuit is no surprise.

As preliminary injunctions temporarily restrict a party from undertaking a certain action during the course of litigation, today’s decision is just a stepping stone in what’s sure to be a closely-watched case.

Protecting Your Brand

Branding is key in maintaining a loyal fan base, gaining new listeners and ensuring longevity in all aspects of the music industry.  As such, protecting one’s brand is just as important as branding itself.  Artists and music entities can use various federal and state laws to protect their brands. Here are just a few:

Trademark/Service Mark – A trademark is a word, phrase, symbol or design used to identify and distinguish the source of a good.  A service mark is just like a trademark, but instead identifies the source a service.  The symbol  and  are used to identify an unregistered trademark or service mark, respectively, and ® identifies a federally registered trademark.

Although registration is not required, there are many benefits to registration; such as having a public notice of ownership, a presumption of ownership, the ability to bring a trademark claim in federal court, and international protections.

Copyrights – A copyright provides exclusive rights to the author of an original work of authorship, and extends to literary, musical, dramatic, artistic and other forms of intellectual work.  The symbol © is often used to notify the public of a copyright, but this notification is no longer mandatory.

Like trademarks and service marks, the owner of a copyright is not required to register the copyright, but registration provides the owner with a number of advantages.

Defamation – Defamation is a cause of action that arises when a person makes a false statement about another, which subsequently causes harm.  Classifications of defamation are (1) slander – an oral representation, and (2) libel – a fixed representation, such as a comment made in writing.

Some harmful comments are not considered defamatory, such as statements of truth, opinion, and fair comment on issues of public interest.

Misappropriation – Misappropriation is the intentional and unauthorized use of property or funds belonging to others.  This cause of action extends to the unauthorized use of intellectual property, as well as the unauthorized use of a person’s name, likeness and other personal attributes.

Moral Rights – Moral rights refers to a creator’s right to control his or her work.  This protects the reputation of a creator, rather than the value of the work.  Moral rights are generally not protected in the United States, but protection can sometimes be loosely granted under copyright, trademark, privacy and defamation laws.

Right of Publicity – The right of publicity protects persons from the unauthorized use of one’s name, likeness or personal attributes for commercial purposes.  This rights gives a person the sole right to license his or her persona commercially.

Right of publicity is generally found under state law, and is often classified as a right of privacy.

False Endorsement – False endorsement is a claim under federal trademark laws, which protects a trademark owner from the unauthorized use of his or her mark to show sponsorship or endorsement.

EMI v. Karen Records: Willful Infringement After License Termination

In August 2011, the New York District Court found that selling music after receiving a notice terminating a license to use a copyrighted work constitutes willful infringement.

In EMI Entertainment v. Karen Records, Inc. et al, No. 1:05-cv-00390 (S.D.N.Y. Aug. 26, 2011), EMI brought a suit alleging that defendants infringed EMI’s copyright by selling four compositions without payment of royalties and after EMI terminated the defendants’ license.

In a tumultuous relationship, with the parties having a history of royalty disputes, this lawsuit began in 2004 when the Harry Fox Agency (HFA) sent defendants a letter complaining of unpaid royalties.  In the letter, HFA stated that the defendants’ license to sell the four compositions in dispute would be terminated within 30 days if the owed royalties were not paid.

As the defendants failed to make sufficient royalty payments, the court found the defendants to have infringed EMI’s copyright.  Looking at the defendants’ “industry experience and copyright ownership; prior lawsuits regarding similar practices; and a specific warning,” the court additionally found the defendants’ infringing behavior to have been willful.

The court awarded EMI $25,000 in damages for each composition, totaling $100,000, and held defendants jointly and severally liable as the defendants each had the right and ability to supervise, and as each had a direct financial interest, in the infringing activity.

Wait, Can You Resell a Digital Music File? – Exploring the First Sale Doctrine

With the launch of ReDigi, a website that “recycles” digital music files by allowing people to buy previously owned music downloads for cheaper prices than via online retailers, the RIAA and the Big Four record companies have had a major reaction.

The RIAA and the Big Four have expressed their concern to ReDigi, issuing the company a cease and desist letter.  ReDigi’s business model brings up a hot topic that has been circulating within the e-book, e-music and online gaming communities: the applicability of the Copyright Act’s First Sale Doctrine to digital files.

Under the section 109(a) of the Copyright Act:

…the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.

Under the First Sale doctrine, music fans can typically sell, trade or otherwise dispose of music, and the copyright owner does not have the right to recoup a royalty from the subsequent transfer.  In the physical form, this is easy to understand: you buy a vinyl record and later sell it to a friend, and the copyright owner cannot say anything about the transaction.

In the digital space, however, the First Sale Doctrine is much different.  To begin, digital music files are typically distributed to listeners via license agreements.  These licenses usually prohibit the listener from transferring the file to others and limits the amount of devices on which the listener can play the file.

Even when the listener obtains more than a license when buying digital music files, the First Sale Doctrine is difficult to apply.  Going back to physical music purchases, listeners give possession of the actual phonorecord (i.e. vinyl record, CD, etc.) to the transferee – the person buying the album.  In the case of ReDigi, and similar services, the company makes a copy of the original music file, and then deletes the original file  from the listener’s computer.  In such an instance, ReDigi never takes possession of the original file.

In this situation, the listener is giving up possession of the original music file by deleting it. However, ReDigi is not gaining possession of the original; ReDigi is gaining a copy of the original, which is typically disallowed under the Copyright Act.  Another concern revolves around the adequacy and legitimacy of the security measures that are in place to ensure the deletion of the original music file from the listener’s computer.

The applicability of the First Sale Doctrine is also sketchy when it comes to music files because of illegal downloading.  The First Sale Doctrine only applies to legally obtained copyrighted works.  Since illegal downloading is extremely widespread, there are few – if any – methods that can ensure that a listener has obtained the music file legally. As such, a listener will likely have insufficient proof showing that he or she legally purchased the particular music file, and will therefore have a difficult time gaining protection under the First Sale Doctrine.

Services such as ReDigi can also set listeners up for potential copyright infringement liability if the First Sale Doctrine does not come into play.  Under section 106 of the Copyright Act, copyright owners have the exclusive right “to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership.”  Without the First Sale Doctrine coming into play, listeners who use ReDigi or similar services will themselves be engaging in infringing activity by distributing copyrighted works without the authorization of the copyright owner.

YouTube Licensing Offer Opt-In Gives Indie Publishers an Advance

Between November 17, 2011 and January 16, 2012, independent music publishers and non-U.S. mechanical collection societies that have reciprocal agreements with Harry Fox Agency who choose to opt-in to a direct license agreement with YouTube is eligible for a share of an up-to $4 Million advance, based on the participant’s relative market share.

The YouTube Licensing Offer is a result of a 2007 class action law suit brought by the National Music Publishers Association (NMPA), and several music publishers, against YouTube/Google.  In the suit, the plaintiffs alleged that YouTube used the publisher’ copyrighted works without authorization, thereby infringing the publishers’ copyrights.  The District Court granted summary judgment in favor of YouTube.  Plaintiffs appealed the judgment, and the suit is currently pending.

NMPA and music publisher who enter into the YouTube License Agreement with YouTube will have dismissed their appeal and will release YouTube from all past, and accrued, copyright infringement claims.  Since the agreement is not a class-wide settlement, publishers wishing to participate in the agreement must opt-in.  Moreover, publishers wishing to receive a portion of the advance must opt-in by the January 2012 opt-in period; but publishers are free to opt-in thereafter.