Tuesday 6 December 2016

Wild Boys Sometimes Lose It: Duran Duran fail to reclaim their US copyright

This post is by David Brophy writing on the IPKat

A few weeks after his eighteenth birthday, Duran Duran co-founder Nick Rhodes signed a music publishing agreement assigning his existing and future copyrights to a publisher, as did the other band members. None of them was aged more than 21 at the time.

Had they taken advice from a copyright lawyer at the time (1980), one can imagine a conversation along the following lines:

Duran Duran: Please please tell me now: Is there something I should know? Is there something I should say?
 Lawyer: You mean, is there something you should say, before your copyright goes away?
Duran Duran: That's funny, for a lawyer. But we didn't agree to pay you a hundred quid for your songwriting talents. What do you think about this contract?
Nick Rhodes, co-founder of Duran Duran (photo: Eva RinaldiCC BY_SA 2.0)
Lawyer: Well, you're agreeing here to assign all of your existing and future copyrights worldwide for their full term. That's pretty standard stuff. But there's a new Copyright Act in the United States, just two years old, and it will allow you to reclaim your copyright from the publishers after 35 years. Which is nice, though it does rather assume anyone will be buying your records in 2015 (no offence). 
Duran Duran: Eh thanks. What exactly should we do? 
Lawyer: When the 35 year mark is approaching, you'll simply serve a notice on the publisher. Tell them you want your copyright back, lodge a copy of the Notice with the Copyright Office and hey presto it will revert to you. So in your contract, you could include a clause stating that the assignment is without prejudice to your rights under section 203 of the US Copyright Act to terminate the assignment of the US copyright. 
Duran Duran: They'll never go for it. Have you seen our haircuts? They won't change their standard contract for us. And if they don't sign us up, nobody will.
Lawyer: Well don't worry about it. When Congress was passing the law, they had unequal relationships like that in mind. Here's what they say in House Report 94–1476 introducing the law: 
"A provision of this sort is needed because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited ... Instead of being automatic, as is theoretically the case under the present renewal provision, the termination of a transfer or license under section 203 would require the serving of an advance notice within specified time limits and under specified conditions. However, although affirmative action is needed to effect a termination, the right to take this action cannot be waived in advance or contracted away."  
And it's right here in section 203(5): "Termination of the grant [of a transfer or licence of copyright] may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant." So basically, it doesn't matter what you sign now. You can't contract away the right to claim the copyright back when the time comes. 
Duran Duran: Cool. Now about your fees. We've been thinking. Maybe we can cut you in on the royalties for our first three albums instead? 
Lawyer: Thank you, but my understanding is that you have never even been inside a recording studio. I think I'd prefer the hundred pounds we agreed on. In cash please, boys.
Factual background

This conversation never happened of course, and indeed we don't know if the band took any advice or knew about the possibility of claiming the US copyright back in the future. What we do know is the band members signed a music publishing agreement assigning the "entire copyrights" in their existing and future works for the "full term" of the copyrights, to Gloucester Place Music Ltd (then called Tritec Music Ltd, and now part of the Sony/ATV group).

In 2014, with the 35 year point approaching, band members Nick Rhodes, Simon Le Bon, John Taylor, Andy Taylor and Roger Taylor, duly served Notices under section 203 in respect of 37 songs, including most of their best-known works like "Girls on Film", "Rio", "Hungry Like The Wolf" and "Is There Something I Should Know?".

Gloucester Place Music responded by seeking a determination from the English High Court that such Notices, if not retracted, would represent a breach of contract, i.e. by improperly terminating an assignmentwhich the band members had no right to do.

Effect of contractual agreement

Mr Justice Arnold has decided in favour of the publisher and against the band members. The case is Gloucester Place Music Ltd v Le Bon & Ors [2016] EWHC 3091 (Ch). His decision is based on the fact that the contract was made under English law, and on its proper interpretation the parties are assumed to have been aware when entering into the Agreements, at least in general terms, of the effect of section 203, and to have nevertheless contracted away the US copyright for its full term. He summarised at [44]:

"The language of clause 3(a) is wide and general. Particularly when read together with clause 4, I consider that what the language would have conveyed to a reasonable person having the relevant background knowledge was that the parties' intention was that the "entire copyrights" in the Compositions should vest, and remain vested, in the Claimant for the "full term" of the copyrights. That implicitly precludes the Group Members from exercising rights under US law which have the result that the Claimant's ownership of the copyrights is brought to an end prior to their expiry. Moreover, this interpretation is reinforced by clause 6(b), by which the Group Members promised not to transfer any interest in the copyrights to any other person, which I read in context as meaning any person other than the Claimant. (This is clearer from the wording of clause 6(b) of the Service Company Music Publishing Agreements, which refers to "any person, firm or corporation other than Tritec".) In effect, what the Group Members have done by exercising their rights of termination is to transfer the reversionary interest in the copyrights from the Claimant to themselves."
The reference to "a reasonable person having the relevant background knowledge" was held to include some knowledge of US copyright law. In other words, someone signing a contract such as this was assumed to know, at least in general terms, about the possibility of reclaiming copyright in the US.

Insofar as it goes, this may be a pretty unremarkable interpretation of a contract under English law. But what about the fact that under US law the right to terminate the assignment cannot be contracted away?

Conflict with US law

Arnold J. noted the US law aspect but pointed to the fact that Article 7(1) of the Rome Convention, which provides for effect to be given to the mandatory rules of the law of another country with which the situation has a close connection, does not have the force of law in the United Kingdom by virtue of section 2(2) of the Contracts (Applicable Law) Act 1990.

The issues of US law were treated as questions of fact. No expert evidence had been provided as to the meaning of the US statute, nor had permission been sought to do so. So efffectively they were never brought properly before the court.

The solicitor for the defendants (i.e. the band members and their service companies) had made a statement in his witness statement that:

"As a consequence of Section 203, a US Court would not allow a claim for damages for breach of a contractual agreement because the statutory termination right supersedes any contractual right. This applies whether that contract was governed under English or US law." 
The defendants argued that this was admissible evidence, and was unchallenged. Arnold J had little time for this argument. It was no more than a statement of case with which they could expect the other side to take issue at trial. It was a statement made by an English solicitor who, he noted, claimed no expertise in US law, with no basis given and no citation of any decided cases supporting the assertion, and nor did it address whether the position was the same in the period 1980-1983.

To the IPKat it appears that this failure to introduce evidence as to US law represented a major oversight by the defendants, or at least a very risky assumption that the point was self-evident. This Kat cannot tell whether the outcome would have changed if the judge had evidence that the position as stated by the solicitor was both correct as to the law now and at the relevant time, but the failure to adduce this evidence undermined the defendants' reliance on the US law point.

Nick Rhodes, commenting on the judgment, said "We are shocked that English contract law is being used to overturn artists’ rights in another territory. If left untested, this judgment sets a very bad precedent for all songwriters of our era and so we are deciding how properly to proceed."

The IPKat would like to see the case appealed, and would prefer to see artists free to exercise their statutory rights, but is less convinced that the decision sets a "very bad precedent". A future litigant who introduces strong expert evidence on the US law point would at the minimum ensure that the court would have to consider afresh the conflict of laws question.

Rhodes also commented that the band members signed the agreement as "unsuspecting teenagers ... when we knew no better". This bears out the "unequal relationship" rationale for section 203, and is another reason why it would be extremely interesting to see the US law point properly considered.

Arnold J's decision serves a salutory purpose, reminding anyone signing a publishing agreement that the court will interpret the agreement from the viewpoint of a reasonable person with the necessary background information, including some knowledge of copyright law. This makes obtaining good advice all the more critical when the bargaining position is unequal. 

Posted By David Brophy to The IPKat on 12/06/2016 

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