Do You Believe in Copyright Interest After Love?
By Monica Miecznikowski; Photo Credit: WWD via Getty Images
Introduction
Termination is a federal statutory right that was enacted in the Copyright Revision Act of 1976 (CRA).[1] The amendment, among other things, allows songwriters to terminate a transfer of copyright interest in a musical composition, and reclaim the interest for themselves.[2] This termination can only be done by the author of the composition on the 35th anniversary of the copyright transfer for songs published post-1978,[3] and on the 56th anniversary for songs published pre-1978.[4] This copyright ownership termination is not automatic,[5] but rather the author has the option to send notice to the transferee and subsequently terminate their ownership.[6] This option to exercise the right lasts for five years and is inalienable until such time that the right becomes vested.[7] It also automatically transfers to the heirs of the author at their death.[8]
While not all songs have become eligible for termination, many have, as the first generation of eligible terminations began in 2013.[9] Most of the termination notices have been used as leverage for obtaining more money in exchange for abstaining from exercising such interest once the right becomes vested,[10] but some artists have utilized the statute to regain control for themselves. A notable example would be Paul McCartney, who although faced complications as his claim involved both US and UK laws, was able to reach a settlement outside of court regarding his early work with the Beatles.[11]
Past Ambiguities: Are the Royalties Generated Under a Grant?
With the creation of the inalienable right to reclaim interest in a copyright, a few disputes over its application have arisen, most of which surround who gets paid royalties after termination. The first issue was over royalties generated from derivative works licensed under the now terminated grant. While the CRA created a right to reclaim copyright interest in a work, it was explicitly limited to the original interest transferred.[12] All derivative works that were licensed under the original copyright grant were permitted to remain in effect.[13] While this continuing license for derivative works was explicit in the act, it was less clear on who collected the royalties from the derivative work after termination. This question was eventually answered in the case of Mills Music Inc. v. Snyder where a publisher of derivative work, argued that under the derivative works exception, they should continue to receive the royalties because the license for the derivatives was still in effect, and they were the ones that licensed it.[14] The Supreme Court of the United States sided with the publisher, seemingly settling the dispute over royalties past termination.[15]
However more recently, with the passage of the Music Modernization Act in 2018, the question of who should be paid royalties after termination resurfaced. The Music Modernization Act created a new statutory license for use of a musical composition, and enabled an entity, the MLC, to grant such licenses to third parties, despite not holding the copyright.[16] The MLC also collects and distributes the subsequent royalties derived to the copyright holder. With the creation of the new license, disputes ensued regarding whom the MLC should give the royalties to when the copyright interest reverts to the author, or their heirs.
In response, to the contrary of the MLC’s view, the copyright board issued an advisory opinion siding with the original authors. The board explained that the royalties in question come from a statutory grant and were not licensed under any grant of copyright interest, unlike the derivative works featured in Snyder. In other words, the license the MLC gives out is not done under any grant of copyright interest, it is the federal government granting the license independent of who owns or is granted the copyright, and thus is not affected by termination. Additionally in 2023, Congress amended Federal Regulation Title 37, to include a provision clarifying that the enactment of the blanket mechanical license [and subsequent guidance] should not be read to alter or affect the scope and effectiveness of the exercise of termination rights including as pertaining to derivative works.”[17] This provision seemingly reaffirms that the 1985 Supreme Court opinion still stands for royalties derived under a grant.
These decisions establish a clear distinction between royalties and licenses generated under a grant of a copyright and royalties which are independent to the grant of interest. But within the last two years, a new issue has arisen. What if one only transfers their interest in royalties that are generated from such intellectual property? Can the royalty transfer survive termination?
Recent Dispute: What Constitutes a Copyright Interest?
In 1978, Cherilyn Sarkisian, the artist now known as Cher, finalized her divorce from her then husband, Salvatore Bono, known as Sonny.[18] As part of their divorce, the two created and signed a Marriage Settlement Agreement (MSA), which among other things, divided their assets.[19] The MSA specifically gave Cher, 50% interest in “[a]ny and all of [Sonny’s’ right, title and interest’… in and to contingent receipts payable and paid after July 14, 1978, ‘from musical compositions and interests therein, written and composed, in whole or in part, by [Sonny] or others prior to February 1, 1974.’”[20]
Cut to 2021, Sonny’s heir, Mary Bono believed that termination of a copyright grant in the musical compositions would also terminate Cher’s interest in the royalties;[21] she subsequently ceased forwarding payments to Cher.[22] Cher believed, and argued before the United States District Court for the Central District of California, that the interest transferred to her was solely in royalties and not the copyright.[23] She believes that the royalty transfer is not governed by copyright law and thus is independent to the termination and cannot be stopped, and by doing so Bono breached their contract.[24]
The main issue comes down to what is a right created under the CRA. Cher’s argument addressed this question focusing on Section 304(c) of the CRA. The section states that “termination of a grant… affects only those rights covered by the grant that arise under [the CRA] and in no way affects rights arising under any other Federal, State, or foreign laws.”[25] Cher argues her royalty interest is not a right derived under the CRA, and thus is not governed by the act nor subject to termination.[26] She argued that the royalty interest she was given was merely a property interest in 50% of royalties that Sonny receives from his interest in the copyright.[27] Textually this argument may be persuasive as there was no transfer of property that was created by the CRA, the only property was income derived from manipulating and capitalizing on the copyright interest.
However, it is not this argument that seemingly won over the court. On May 29th, 2024, the US District Court of California issued a ruling in Cher’s favor regarding this claim, but its reasoning leaves something to be desired. The court’s opinion focuses heavily on the fact that the MSA “did not refer to a ‘grant of a transfer or license’ of the underlying copyrights”.[28] It is because of this, the court felt that the transfer arises solely under state law.[29] Surely laws cannot be side stepped merely by calling the agreement something other than what it is not. Penalty clauses are frequently not enforced despite being framed as liquidation clauses, spending bills have been found coercive despite presenting the funding as optional, and waivers for gross negligence are unenforceable even when titled as mere negligence waivers.
Moreover, Cher’s case was not just about royalties, there was one other aspect substantively overlooked. Cher was not just granted royalties from the copyright of the musical compositions. The MSA also stated that “all agreements with third parties respecting the [musical compositions] would be subject to Cher’s approval.”[30] This provision crosses the line between a grant of property derived from the exploitation of a copyright interest and a grant of copyright interest itself. Cher was given the power to prevent others from using the copyrighted work, a controlling power in intellectual property that is created by the CRA.[31] Furthermore, once approval rights are combined with royalties, there is seemingly no difference between this transfer and that of a partial copyright grant, meaning there is no control to be desired as one might if only receiving royalties. While the approval right is not complete control, it should still be subject to termination because the CRA allows termination to be exercised over a grant regardless of whether it was a whole or partial transfer.[32] Despite this, the court, like its ruling on the royalties, granted summary judgment for Cher, ruling her right of approval could not be terminated.[33] But unlike the halfhearted explanation for the royalties, the court does not even attempt to explain any reason for the right of approval to not be considered a copyright interest.
Possible Ramifications of Cher v. Bono
This ruling has potentially rendered the termination right useless. This was an argument initially raised by Bono but later filings focused more on proving that Sonny had no ability to transfer royalties past termination because the renewal term is a “new estate… clear of all rights, interest or licenses granted under the original copyright.”[34] Bono argued in an early motion to the court, that Cher’s position completely undermines the purpose of the termination right under the CRA.[35] She explained, “Congress’s intent in enacting the copyright termination provisions was to allow authors and their heirs to recapture the ownership and economic value of any copyright that they bargained away.”[36] She further explained that such an interpretation allows for publishers to require artists to not just transfer the copyright but also sign away royalty interests even after termination.[37] This is precisely the type of work around that Congress was trying to prevent by making the termination right inalienable so publishers could not require artists to sign away their option to terminate. As it was, Bono abandoned that argument early on seemingly because the district court appeared either to be unpersuaded by the purposivism argument and favored a textual analysis, or felt the congressional purpose would not be significantly frustrated as complete control over the copyrighted work may still be a valuable enough interest to give artists bargaining power over publishers.[38] Whatever the court’s motives were, it seems that so long as a publisher is careful not to refer to the royalties and right of approval as a copyright interest, an interminable transfer in copyright interest can be included in every contract. New artists may find themselves just as powerless as they were pre-1976.
[1] Copyrights, 17 U.S.C. § 203 (2002).
[2] 17 U.S.C. § 203(b).
[3] 17 U.S.C. § 203(a).
[4] 17 U.S.C. § 304(c)(3).
[5] 17 U.S.C. § 203(b)(6).
[6] 17 U.S.C. § 203(a)(4).
[7] 17 U.S.C. §§ 203(a)(3), (b)(4).
[8] 17 U.S.C. §203(a)(2). Note, “heirs” is specific language to mean familial relations that is passed down (or up if no descendants) statutorily. The author does not get to pick who receives this interest after their death.
[9] Thirty-five years from 1978 is 2013.
[10] 17 U.S.C. § 203(b)(4).
[11] Don Gorder, A Paul McCartney/ Sony-ATV Brief, Music Business Journal (Aug. 07, 2017), https://www.thembj.org/2017/08/a-paul-mccartney-sony-atv-brief/.
[12] 17 U.S.C. § 203(b).
[13] 17 U.S.C. § 203(b)(1).
[14] 469 U.S. 153, 155-56 (1985).
[15] Id. at 177-78.
[16] 17 U.S.C. § 115(d) 2018.
[17] 37 C.F.R. § 210 (2023).
[18] First Am. Compl. for Declaratory Relief; & Breach of Contract at ¶12-3, Cher v. Bono, No. 21-cv-08157, (C.D.Cal. Mar. 28, 2023), ECF No. 45 [hereinafter Cher’s Compl.].
[19] Id.
[20] Def. Mary Bono’s Answer to First Am. Compl. for Declaratory Relief and Breach of Contract; Restatement of Countercl. for: 1. Declaratory J. (Admin.) 2. Declaratory J. (R. Royalties) at 6, Cher v. Bono, No. 21-cv-08157, (C.D.Cal. Mar. 28, 2023), ECF No. 47 [hereinafter Bono’s Resp. & Countercl.].
[21] The case is even more complex because the notice of termination that Bono served was to twenty-five various publishers, none of which were Cher. Statement of Disputed Facts at ¶4, Cher v. Bono, No. 21-cv-08157, (C.D.Cal. Oct. 13, 2021), ECF No. 87. But Bono argues that the termination would also end Cher’s interest. Bono’s Resp. & Countercl., supra note 20, at ¶35-6. This leaves an avenue for the court to settle this matter on a procedural issue and not clarify the law.
[22] Cher’s Compl., supra note 18, at ¶37.
[23] Id. at ¶42(g).
[24] Id.
[25] 17 U.S.C. § 304(c).
[26] Cher’s Compl., supra note 18, at ¶42(a).
[27] Id.
[28] Cher v. Bono, No. LA CV21-08157 JAK (RAO), 2024 WL 2789419 (C.D. Cal. May 29, 2024).
[29] Id.
[30] Id.
[31] See Bono’s Resp. & Countercl., supra note 20 at 9.
[32] 17 U.S.C. § 203.
[33] Cher v. Bono, No. LA CV21-08157 JAK (RAO), 2024 WL 2789419 (C.D. Cal. May 29, 2024).
[34] Compare Def. Mary Bono’s Reply in Further Supp. of Mot. to Dismiss at 5, Cher v. Bono, No. 21-cv-08157, (C.D.Cal. Oct. 13, 2024), ECF No. 20 [hereinafter Bono’s First Mot. to Dismiss] (“Indeed, if the terminable rights were limited to the enumerated rights of the Copyright Act, then publishers could eviscerate the termination provisions through such simple schemes, leaving authors and their heirs with worthless copyrights which bear no additional royalties and whose every use must be approved by the publisher.”), with Def. Mary Bono’s Statement of Disputed Facts & Conclusions of Law in Opp’n to Pl. & Counterdef. Cher’s Mot. for Summ. J. & Alternative Mot. for Partial Summ. J. at 74-6, Cher v. Bono, No. 21-cv-08157, (C.D.Cal. Mar. 28, 2023), ECF No. 87 [hereinafter Bono’s Mot. for Partial Summ. J.] (“Congress identified exactly who it was protecting and benefiting by naming the heirs who can terminate the grants if the author is deceased: the author’s surviving spouse and descendants. 17 U.S.C. §304(c)(2). The author is not permitted to disrupt this statutory scheme by naming other heirs”).
[35] Bono’s First Mot. to Dismiss, supra note 34, at 5.
[36] Id. at 4.
[37] Id. at 5.
[38] The purposivism argument was included in a motion filed in response to the first complaint and not in subsequent filings. Bono makes similar arguments of inalienability and frustration of purpose in her Motion for Summary Judgment regarding the new complaint, but focuses more on the argument that Sonny had no vested interest to transfer to Cher as termination rights can only be waived after the author is eligible to exercise it, which did not occur during Sonny’s lifetime. Bono’s Mot. for Partial Summ. J., supra note 34 at 74.