Termination Trouble: The Upcoming Battle Over Copyright Grants
Record labels are about to face a wave of challenges from musicians looking to terminate copyright grants to the labels under a provision of the 1976 Copyright Act which takes effect next year. This provision allows artists to recapture previously granted rights after a thirty-five-year period and will allow artists to terminate copyright grants for the first time starting in 2013. However, a record label may be able to prevent a musician from terminating a grant if the record label can show that the musician’s work was created by the record label as a work-made-for-hire. The trouble for all parties involved is the rather ambiguous nature of the work-made-for-hire doctrine.
Section 203 of the 1976 Copyright Act provides that an author of a work can terminate a previously granted right to a third party either thirty-five years from the publication date or forty years from the grant’s execution. However, an author cannot terminate a third party’s right to use the author’s work if the work was created as a work-made-for-hire. In Community for Creative Non-Violence v. Reid, the Supreme Court noted that the work-made-for-hire doctrine can have “profound significance for freelance creators including artists, writers, photographers, composers, and computer programmers and for the publishing, advertising, music, and other industries which commission their works.” 490 U.S. 730, 737 (1989).
Section 101 of the 1976 Act defines a work-made-for-hire as either a “work prepared by an employee within the scope of his or her employment” or, if the musician is an independent contractor, as a work that meets one of nine categories of specially ordered or commissioned works. In addition, the parties must expressly agree in writing that the work is a work-made-for-hire.
Musicians and other authors may face opposition from the record labels when terminating their thirty-five-year-old grants because a work-made-for-hire can be determined by the courts on a case-by-case basis. The courts have had a difficult time defining “an employee” and activities “within the scope of his or her employment.” The Supreme Court has held that the term employee must be defined under the common law of agency. See Reid, 490 U.S. at 740. In addition, the Court listed a number of factors to determine whether an author is an employee. However, the Court has not provided any prima facie elements of employment as guidance. Another area of complication for authors is that there are no defined parameters for what constitutes an express written agreement. Thus, most authors may be uncertain about whether their works were works-made-for-hire. This ambiguity should make musicians, and other artists, nervous.
Record labels will face plenty of challenges of their own when they try to prevent musicians from terminating grants. The Second Circuit has narrowed the employer-employee relationship down to its critical elements which include the hiring party’s right to control the author’s work, the skill required from the author, any employee benefits received, the tax treatment of the hiring party, and whether the hiring party can assign additional projects. See Aymes v. Bonelli, 980 F.2d 857, 861 (2nd Cir. 1992). In addition, even when authors have expressly agreed in writing that a work is a work-made-for-hire, a non-employee’s work may still fail to qualify as a work-made-for-hire if the work does not fit into one of the nine defined categories of Section 101 of the Copyright Act of 1976.
As the above cases highlight, courts are still attempting to define the scope of a work-made-for-hire. However, with the vesting of the thirty-five-year termination right quickly approaching in 2011, it is important that record labels and musicians have clear guidance soon.