By Jeffrey Pietsch

The last decade has been tough for record companies. Record sales drastically fell with the advent of the internet and with the prevalence of unauthorized music downloading. Now, the record companies face a new foe in the Copyright Act of 1976 (“Copyright Act”). Under the Copyright Act, artists are able to exercise termination rights on grants made for copyrighted works which will allow artists to regain control of their work after 35 years from the date of such grant. This provision of the Copyright Act applies specifically to grants made on or after January 1, 1978. Because 2013 will be the first year an artist may exercise their termination rights, it is likely that record companies will resort to litigation to maintain their rights to such works. One example is the declaratory action filed recently by Scorpio Music and Can’t Stop Productions, Inc. against Victor Willis (aka the Cop or Naval Officer) of the Village People in an effort to prevent the exercise of termination rights for such popular songs as Y.M.C.A. and Macho Man.

Before examining the action filed against Victor Willis, it is instructive to first review and analyze the termination provision of the Copyright Act at issue. Section 203 of the Copyright Act provides for the termination of transfers and licenses granted by an author. Specifically, § 203 states: “In the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination.” The following conditions must be met for the termination:

(1)      the termination must be made by an authorized person

(2)      a 35-year period exists between the grant and the termination date; and

(3)      advance notice must be provided not less than two years and no more than ten years before the termination date.

There are two issues raised by the declaratory action filed against Victor Willis. The first is whether Willis has authority to terminate the grant, and the second is whether the work in question was a “work made for hire.” On the first question, Scorpio Music and Can’t Stop Productions argue that the songs in question were joint works which were granted to the record companies by each author. Under Section 203, if a grant is exercised by two or more authors of a joint work, the termination of such grant must be made by the majority of work’s authors. So in order for Willis to properly terminate the rights held by the record company, Willis needs a majority of the authors of the Village People’s songs to execute the termination.

Obtaining a majority of the Village People to consent to the group’s termination rights will likely not be a large hurdle to overcome. However, showing that the group’s songs were not “works made for hire” may be more difficult and will be the crux of most litigation related to termination rights. Section 203 specifically states that “works made for hire” are not subject to termination rights. Scorpio Music and Can’t Stop Productions argue that each employed Willis solely as a writer to translate certain songs and provide English lyrics for some foreign compositions. Scorpio Music and Can’t Stop Productions also claim that each supervised and controlled the manner and means by which Willis worked, including his location and time of work. Based on the significant control that these record companies claim to have exerted on Willis, they may have a strong argument. This is especially true considering that the members of the Village People were each selected by the record companies.

Although the “works made for hire” argument may resolve in favor of the record companies in this dispute, this argument will likely be unsuccessful for most other artists. The U.S. Supreme Court held that whether a work prepared under the Copyright Act is a “work made for hire” depends not on the language of the contract but on the “hiring party’s right to control the manner and means by which the product is accomplished.” Recording artists typically do not work under the control of the recording company. Traditionally, artists have paid for making their records themselves using advances (which are deducted from the royalties) provided by the record companies. Recording artists and their artistic products generally are created independent of the record company. Nonetheless, the Recording Industry Association of America, a lobbying group representing record labels, believes otherwise, which would mean that most works will not be subject to termination rights because they were “works made for hire.” Litigation on this issue will only intensify in the coming years, and this issue may ultimately be resolved only when it reaches the U.S. Supreme Court.