Terminating Ownership Rights: The Past, Present, and Future of an Artist’s Right to Terminate Record Companies’ Ownership

Marena Diaz
Associate Editor
Loyola University Chicago School of Law, JD 2019

Starting on January 1, 2013, Section 203 of the U.S. Copyright Act of 1976 became a tool for songwriters and musicians to recapture control of their work that was registered with the United States Copyright Office on or after January 1, 1978. Who are they recapturing control from? Record companies. Songwriters own the copyrights in their work, but in making a deal with a record company to publish and promote the work, writers transfer those rights or license the work (only granting certain rights) to the company. Section 203 came into effect in 1977 and specifically concerns music created after 1978. (Music created prior to 1978 is governed by Section 304 of the Copyright Act.) Due to the limitations of Section 203, January 1, 2013, was the first opportunity for artists to terminate ownership of their songs and/or recordings from the record companies that previously owned them.

Putting that into perspective, in 2017, artists that created the major hits of the 80’s (think AC/DC, Michael Jackson, and Journey) can file a notice of termination with record labels that were previously granted ownership rights at the time the music was created in an attempt to regain all control of their work. Issues with termination rights have caused quite the battle between record companies and musicians both publicly and privately. Those battles can become more complicated in cases with multiple writers, vague copyright agreements, and the death of musicians. As artists seek to exercise their termination rights, it will be interesting to see if and how the music industry will change.

Section 203 of the U.S. Copyright Act of 1976

Section 203 provides that for all works granted from the artist to the record label after January 1, 1978, there is a 35-year time frame in which the record label retains the ownership is was granted. When the 35 year period expires, the artist has 5 years to terminate the copyright license and regain complete ownership of their works. To do this, the artist must follow the outlined procedures, which includes filing a notice of termination with the record company. January 1, 2013, was a groundbreaking day for artists like Tom Petty, Bruce Springsteen and the Eagles. These artists finally became eligible in 2013 to take back full control of the music they wrote, and, basking in the glory of their modern-day fame, could find a better deal with another record company. This provision presents a wide range of legal issues, including the details of the paperwork involved in effectuating the ownership transfer and the question of who specifically can terminate ownership. Section 203 also excludes “works for hire” (creations by one entity that were made within the scope of employment) from being subject to ownership termination, giving record labels a chance to fight for retention of some ownership.

Back in 2011, record labels and publishing companies became concerned as artists began to file notices of termination in preparation for the ownership of their works to be transferred in 2013. With termination rights continuing to come into effect, there are huge amounts of money at stake for the record companies that currently own records like Michael Jackson’s “Thriller”. With 29 million copies sold, at its initial 1982 release, it’s no wonder that record companies have not been ready to totally comply with Section 203 and just hand everything over.

A Village Person Fights for the “Y.M.C.A”

The first publicly announced termination lawsuit began in 2011 when Victor Willis, former lead singer of the Village People, filed a notice of termination to regain ownership of 33 songs from song publishers, Scorpio Music and Can’t Stop Productions. The song publishers filed suit in Federal District Court in California against Willis and claimed that he was barred from terminating ownership of those 33 songs because they were actually “works for hire”. Stewart L. Levy, the attorney who represented the publishing companies argued, “The Village People were a concept group, created by my clients, who picked the people and the costumes…We hired this guy. He was an employee, we gave them the material and a studio to record in and controlled what was recorded, where, what hours, and what they did.”

On the other side, Willis was fighting for the portion of the songs he co-authored. A spokeswoman for Willis said that royalties from the recordings would triple or quadruple from what he earned per year at the time, about $30,000-$40,000, if he regained ownership of the songs he performed as a member of the Village People. Think about the amount of times you have done the “YMCA” at social events or heard the hit song, “In the Navy” in video games and on television. Those were both included in the 33 songs Willis attempted to regain control of, each earning one million dollars or more annually. Everyone in the entertainment industry knew that the decision in this case would mean much more than just who walked away with the money. This decision would impact the future of record companies and the ownership rights of all the creatives involved in recording and producing music.

Just as Willis hoped, in 2013, the court rejected the publishing companies’ claims and dismissed the case, thereby granting Willis the termination rights he was entitled to for all 33 songs. Although Willis regained control of those recordings, the question became exactly how much ownership he was entitled to. Willis was listed as a writer on some of the songs along with Jacques Morali and Henri Belolo. Morali died in 1991, but Scorpio Music and Can’t Stop Productions asserted that Belolo was credited on copyright registration certificates because he wrote the songs in French before Willis translated them into English; Willis contended those certificates were fraudulent.

This dispute went to a jury trial and resulted in Willis receiving a royalty bump from a 12% rate to a 20% rate, licensing rights, and 50% share of the songs as a co-owner.

The Implications & Complications of Copyright Ownership

The ruling in Willis’ case is just one piece to a puzzle that artists, record companies, and entertainment lawyers will continuously work to figure out. Willis was the first case to deal with interpretations of termination rights as covered by the Act. The judge clarified that, “the purpose of the Act was to ‘safeguard authors against unremunerative transfers’ and address ‘the unequal bargaining position of authors,’ resulting in part from the impossibility of determining a work’s value until it has been exploited.” This case opened the floodgate for artists wanting to exercise their right to file notices of termination. Going forward, with copyright holders having the right to control performances of works, we may begin to notice a sharp change in music played in places like sports stadiums, concert venues, and shopping malls.