Monday 19 September 2011

Treat Me Nice: Fairness Compensation for Elvis Presley Enterprises?

In a recent post, I had a look at the growing number of cases in which § 32a UrhG (German Copyright Act) is invoked to try and obtain further compensation, more floweringly dubbed "fairness compensation", for authors or performers involved in bestselling works (see post here). A craze is not a craze without an iconic figure becoming somehow involved, and to be sure, we have one now. Elvis Presley is at the centre of yet another fairness compensation lawsuit (thanks to Jeremy for pointing this one out to me).

Elvis Presley Enterprises, LLC v Arista Music

In December 2010, Elvis Presley Enterprises, LLC, filed a lawsuit before the Landgericht München I, which has also dealt with some of the other fairness compensation cases outlined in my abovementioned post. The defendant is Elvis’s German record company, Arista Music (formely RCA Records). Apparently, in 1973 chronically ill-advised Elvis was persuaded by his manager Tom Parker and Arista Music to sign away all German rights in his entire back catalogue (allegedly some 1,000 recordings) for $5.4 million. What is more, his manager received 50% of that sum.

Elvis Presley Enterprises, LLC claims that this consideration is strikingly disproportionate in relation to the profits generated from Elvis’s songs by Arista Music. That is probably true. Indeed, § 32a UrhG was actually introduced with just such a situation in mind: a record company with considerably more bargaining power than the artist persuades him to agree to a buy-out for a comparatively meagre sum, the work brings in huge profits, and the author or performer does not benefit financially from his work’s or performance’s outstanding financial success.

Consequently, the Elvis case appears to be quite straightforward. Upon closer scrutiny, however, there are two problems that make this case a rather tricky one.

Applicable law

First, there is the issue of applicable law. “The law of the country where protection is claimed, silly,” some might be tempted to say. But wait, things are a bit more complicated. § 32a UrhG does not have anything to do with copyright infringement. It does not punish tortuous behaviour but gives a claim for the amendment of a contract. In other words, § 32a UrhG does not give the author or performer a copyright claim, but a contractual claim, albeit one pertaining to copyright law. The territoriality principle does not extend to copyright contract law.

In copyright contract law, the applicable law is determined according to ordinary private international law, i.e. the Rome I Regulation (EC 593/2008, see here There are three possible factual scenarios.

In the first possible scenario, the contract contains a choice of law clause that renders German law applicable. In the second possible scenario, the contract contains a choice of law clause that renders US-American law applicable (or indeed a third country’s law, but that would seem highly unlikely in the present case).

In the third possible scenario, the contract does not contain a choice of law clause. In the absence of a choice of law by the parties, Article 4 Rome I Regulation comes into play. Copyright contracts do not fall within the scope of any of the examples in Article 4 (1). According to Article 4 (2), then, the applicable law is the law of the country where the party required to effect the characteristic performance of the contract has his habitual residence. Alas, there is a dispute, or at least a profound lack of clarity, as concerns copyright contracts. One might think that the characteristic performance is the transfer of rights effected by the author. Yet there are voices that argue that the characteristic performance is effected by the publisher who exploits the works and pays the author. At least in case of a so-called buy-out where the author receives a one-off payment and no further royalties, I would favour the first position. If the court in the Elvis case happens to share my view, US-American law will apply.

The Merits of the Case if US Law is Applicable

Assuming the contract did contain a choice of law clause and German law was chosen, § 32a UrhG applies, of course.

Assuming American law is applicable either by the parties’ choice or due to conflict of law rules, it must be determined whether § 32a UrhG is an overriding mandatory provision for the purposes of Article 9 Rome I Regulation that must be given effect regardless of the applicable law. Fair enough, but how can we tell?

Now, as we all know one should always read the neighbouring provisions of the one you are dealing with. If you do that, you will encounter § 32b UrhG. § 32b UrhG makes the application of § 32a UrhG mandatory even if the applicable law is not German law. § 32b UrhG provides exactly that, namely that §§ 32, 32a UrhG remain unaffected by choosing a foreign law. There is a big BUT, though.

§ 32b UrhG only applies to authors. Whereas § 79 (2) (2) UrhG declares § 32a UrhG and a couple of other provisions to apply, mutatis mutandis, to performers, it does no such thing when it comes to performers. There is no room for an analogous application of the provision either (for an instructive article on § 32b UrhG – in German – see Hilty/Peukert, Das neue deutsche Urhebervertragsrecht im internationalen Kontext, GRUR Int 2002, 643). Since the Elvis case concerns performers’ rights, § 32b UrhG does not apply.

It follows that the case fails if US-American law is applicable.

The Merits of the Case if German Law is Applicable

Let’s assume that German law turns out to be the applicable law and § 32a UrhG can in principle be invoked. Before we can turn to the question whether the consideration received is strikingly disproportionate in the light of the profits generated (my guess would be that it probably is), there is the issue of legal standing (Aktivlegitimation).

The rights conferred by § 32a UrhG cannot be transferred. Upon the author’s or performer’s death, it passes on to the author’s or performer’s heirs. According to the official Elvis Presley website (here, his heirs were his parents and his daughter Lisa-Marie, and when his parents died they left everything to Lisa-Marie as well. Her inheritance was held in trust until she turned twenty-five; she then formed a new trust, the Elvis Presley Trust. Elvis Presley Enterprises, Inc. is the business entity of the trust and the parent company of the claimant.

Since the author or performer may not transfer their § 32a UrhG right and the heir cannot have better rights than the author or performer, it is impossible for the heir to transfer her § 32a UrhG right, too. Therefore, as I see it Elvis Presley Enterprises, LLC lacks legal standing. That would be more of a technical issue that could easily be rectified if Lisa-Marie Presley were still the sole proprietor, but she sold 85% of Elvis Presley Enterprises, Inc. in 2005. Consequently, I would be frankly astonished if the current claim by Elvis Presley Enterprises, LLC were successful.


Under any scenario, the likelihood of Elvis Presley Enterprises, LLC being successful in their § 32a UrhG claim would seem very small indeed.

Provided that German law is applicable, however, Lisa-Marie Presley stands a good chance of coming into some money if she claims further compensation pursuant to § 32a, 79 (2) (2) UrhG. 

1 comment:

Anonymous said...

Thanks for this insightful post.

"Apparently, in 1973 chronically ill-advised Elvis was persuaded by his manager Tom Parker and Arista Music to sign away all German rights in his entire back catalogue (allegedly some 1,000 recordings) for $5.4 million."

Presley signed away not only the German rights, but the world wide rights to his recordings.

At the time he received around $600.000 per year from global record sales: The price RCA paid was not unfair.

Could you please analyse in a future post what the american termination rights for performers/songwriters (after 35 years) means for foreign licensees:
Does Columbia (Germany) loose the rights to Dylans recording when Dylan terminats his contract with Columbia (US)?

Thank You.