Work for Hire

Mastering Intellectual Property Rights

Work for Hire
By Jason Stout

The Satellite Home Viewer Improvement Act of 1999: A bill amending U.S. copyright laws with respect to satellite re-transmissions of broadcast signals. Passed November 29, it gave satellite carriers the right to deliver local broadcast signals to subscribers. That meant that services such as Direct TV and the Dish Network could now offer their customers the local affiliates of major television networks -- ABC, NBC, CBS, etc. -- something they had been unable to do previously. Unbeknownst to nearly everyone involved with the legislation, the bill also took away a musician's ability to own his/her own master recordings once they'd signed a major-label record deal.

Four words was all it took -- buried in section 1011 of the legislation as a technical amendment: "Section 101 of Title 17, United States Code, is amended in the definition relating to work for hire in paragraph (2) by inserting 'as a sound recording' after 'audiovisual work.'" Those four words -- "as a sound recording" -- look harmless enough, but in reality, they did as much to drastically alter the music world as any four words since, "We signed Britney Spears." Essential to understanding the change is understanding works for hire.

"Works for hire" are a special category of U.S. copyright law exempt from the common wisdom rule that the author of a work is the owner of its copyright. If you write something, say a short story or maybe a poem, you own the copyright on it unless -- and this is the important part -- that work is done as a "work for hire," in which case someone else owns the copyright and is therefore entitled to all profits generated from it. Those poems can be pure gold, too, particularly if they're set to the right music. How'd you like to own the copyright to Pink Floyd's Dark Side of the Moon, perhaps the top album catalog seller of all time? You'd like it plenty.

There are two classifications of "works for hire" as delineated by the 1976 Copyright Act. The first are those made by employees in the normal course of work. If you show up to a job where somebody tells you what to do and when to do it, and for that you're rewarded with a paycheck, then your work product is classified as a work for hire and you don't own the copyright on it. Instead, it automatically becomes copyrighted in the name of the company. In other words, if you're a full-time employee of Microsoft and write some code for their software, Microsoft, not you, owns the copyright on that code. Simple.

The second type of work for hire is a bit more complex, and involves independent contractors -- such as musicians. For independent contractors to create works for hire, two criteria must both be met. Pay attention here because this is the important part if you are or plan to be a rock star.

The first criterion is that the work has to fit within one of the nine specific categories outlined in section 101 of Title 17. Prior to the passage of the Satellite Home Viewer Improvement Act, the categories were: a work specially commissioned for use (1) as a contribution to a collective work; (2) as a part of a motion picture or other audiovisual work; (3) as a translation; (4) as a supplementary work; (5) as a compilation; (6) as an instructional text; (7) as a test; (8) as answer material for a test; or (9) as an atlas.

Now if you're a cartographer and you made an atlas, that would qualify as a work for hire, because "as an atlas" is one of the nine categories. But that's only half of the equation; the atlas in question is still not a work for hire until a second criterion is also met. The other proviso states that there must be a written agreement signed by employer and employee stating that the work in question is a "work for hire." If you have that contract and you have the atlas, then you've got yourself a work for hire.

So recap: There are two criteria for works for hire. It has to fall into one of those nine specific categories, and there has to be a contract stipulating that it's a "work for hire." If either of those two elements is missing, then the work in question is not, repeat not, a work for hire. That means if something falls into one of those nine categories, but there's no signed contract stipulating that it's a work for hire, then it's not a work for hire. Or if you have a signed contract stating that the work in question is a work for hire, but it doesn't fall into one of those nine categories, again, it's not a work for hire. Whew. Got all that?

What the aforementioned amendment to the Satellite Home Viewer Improvement Act did, then, was add "sound recording" to the list of nine specific types of works (bringing the total to 10). Big deal, right? Yes. It's a very big deal. Huge even. Enough for artists like Sheryl Crow, Steve Earle, and Dwight Yoakam, plus dozens of others, to actually start dealing with politicians.

You see, the addition of those four words potentially prevents recording artists from recapturing the rights to their master recordings after the initial copyright period ends. What does that mean? Well, when you sign with a major label, or an indie, or anybody for that matter, you record some songs then turn over the master recording to the label. And the master is just the thing itself -- the completed, engineered, produced, final recording you give to the record company so they can put it onto CD and distribute it for the world to buy.

Almost without exception, artists assign ownership of the copyright on those masters to their record company. The label then controls said recordings and decides how to exploit them for profit. When the initial copyright period ends, which by law is after 35 years, the artist can then recapture those rights. Or at least they could prior to "as a sound recording" being amended to the copyright law.

Why did Congressional lawmakers decide to further screw musicians when it comes to ownership of their material? They didn't. The offending clause was inserted into the legislation at the request of the Recording Industry Association of America (RIAA), which unfortunately wasn't alerting people to what they were doing. In fact, even members of the congressional subcommittee from which the bill came were completely unaware that such language was even in the legislation. According to Rep. Rick Boucher, D-Va., who sits on the House Courts & Intellectual Property Subcommittee and was one of 31 co-sponsors of the bill, the whole thing was as hush-hush as a hotel break-in. "The amendment was added literally in the dark of night by a staff member without discussion among the conferees," says Boucher. "It was inserted by a staff member in a conference report that wound up being hundreds of pages, and frankly, it wasn't observed."

Turns out the amendment was added by a staffer named Mitch Glazer from the office of Subcommittee Chairperson Howard Coble, R.-N.C., Glazer now works for the RIAA, the organization that sought to have those four words included in the first place, and did so with alarming quiet. Alarm would also be a good word to describe reaction to change.

Upon its discovery, an uproar rose from the recording community. A number of marquee artists like Sheryl Crow, Steve Earle, R.E.M., Beastie Boys, Shawn Colvin, Paul Simon, and the Black Crowes, among some 40-odd others, formed the ingeniously named Artists' Coalition and took to Capitol Hill. After lawmakers were made aware of the major implications of such a minor change, hearings were convened for May 25 of this year, hearings attended by Court & Intellectual Property Subcommittee members as well as representatives for both the artists and the recording industry -- the two parties on opposite sides of the issue.

At those May 25 oversight hearings on this issue, Hilary Rosen, president and CEO of the RIAA, testified to the subcommittee that the amendment was "intended to clarify the law and not change it." In fact, this seems be the party line taken by the RIAA as during a separate interview Amy Weiss, publicist for the RIAA, echoed Rosen's statement to Congress almost word for word, saying, "This didn't change anything. It clarified existing law." Jay Cooper, who serves as the attorney for the Artists' Coalition and has negotiated hundreds of recording contracts for the likes of Joni Mitchell, Sheryl Crow, and Etta James, disagrees. By his reckoning, it's not a simple matter of a difference of opinion.

"Prior to this," explains Cooper, "if the record company wanted to claim that a sound recording was a work for hire, they would have to prove that it came under one of those nine categories. And by the way, there have been three different cases decided by three different courts over the past number of years that all said sound recordings were not works for hire. So it couldn't be a clarification. There was no possibility of it being a clarification. It was a definite change in the law."

In fact, almost all recording contracts contain language saying something to the effect of: "This is a work for hire, however, if it's determined that this is not a work for hire, then you the artist do hereby assign your copyright to the record company." Of course such language only fulfills one of the two criteria for determining a work for hire -- that of the contract -- but now that "sound recording" has been added to the list of nine categories of criteria No.2, then it's a no-brainer: Joe Rock Star ain't getting his masters back. Ever. Worse, simply assigning rights to the record company is very different from giving them the masters as a "work for hire."

"Even when you assign your copyright for ever and ever," says Cooper, "you still retain the recapture rights by law."

If rights are assigned to the record company, then at the conclusion of 35 years, when an artist notifies the record label that they intend to recapture those rights, the scenario is a little different. The record company can still claim the recordings in question are a work for hire since they most likely have a contract stating this, and what's being negotiated is a "sound recording" and therefore fulfills the two criteria of works for hire.

So, why did the RIAA try to slip one past the goalie with something that's sure to infuriate artists? Well, the lobbying concern is very clear about the fact that they don't represent artists' interests. They represent the recording industry and their interests. That's who the RIAA is looking out for -- major labels. Because master recordings are labels' only real assets, they don't want to give them up. Ever.

Naturally the RIAA's public statements in testimony to Congress were of a different, far more benign-sounding ilk altogether. The RIAA's Rosen put forth four arguments as to the merits of the amendment. The first, which was pointed out earlier, was that it only clarified the existing law. Something that, as Cooper pointed out, is probably not the case.

Second, Rosen argued that the change did not automatically make sound recordings works for hire, it merely "confirms that they are eligible." True, but they were eligible before, and given the language of almost all record contracts, contrary to the RIAA's claim, it would have indeed made most recordings works for hire under those existing contracts.

Third, Rosen said that virtually every recording registered with the U.S. Copyright Office is registered as a work for hire. This is true as well, and that's because in almost every instance the record label files the copyright and that's how they file it. Just because it's filed that way with the Copyright Office, however, doesn't mean it's a work for hire. Again, refer to those two criteria that have to be met for something to qualify as a work for hire. How it's registered has no bearing on those criteria.

Fourth and finally, according to Rosen:

"Work for hire status benefits everyone involved in the creation and distribution of recorded music -- including artists and producers, as well as record labels -- because work-for-hire status is essential to preserve the marketability of highly collaborative works like sound recordings."

Work for Hire
By Jason Stout

The substantive portion of this last argument goes something like this: Think about the chaos that will result if, 35 years after each record is made, every backup singer, production coordinator, engineer, second engineer -- whoever -- tries to reclaim copyright ownership of a track on an album. Litigation reigns and prevents anyone from effectively distributing and marketing records.

While not inconceivable, it's highly unlikely that Marcy Levy is going to sue Eric Clapton because she thinks she's the rightful copyright holder on half of Slowhand. Or a little closer to home: Anyone think that Margo Timmins is the primary or featured artist on Robert Earl Keen's Picnic because she sings backup on four of the album's tracks? No. Even if either woman does make that claim, the RIAA's workaround -- that labels just keep everything -- would seem to disproportionately benefit the record companies.

Maybe the better question is why do this now? Well, one answer might be that 2003 isn't too far off and that's the magical year in which artists can begin notifying labels they intend to recapture the rights to their masters. See, prior to 1972, sound recordings were not copyright protected. Then Congress passed the Copyright Act of 1976, which changed that. Unfortunately, the effective date of that legislation wasn't until 1978; add 35 years to '78 and you get 2013. Missed it by a decade, right? Wrong. Subtract 10 years because an artist can notify his or her intent to recapture rights up to 10 years before the end of the assignment period, and that gets you to the year 2003.

But if you have to assign copyright on your masters to a major label for 35 years, why even give them to the record companies in the first place? Valid question. If you're an artist and maintain ownership of your master recordings, theoretically, you can simply license them to a label to manufacture, distribute, and promote, and avoid this whole mess altogether. Rosen's comments to Congress suggest that musicians are free to demand this when they are negotiating their contracts with a label.

"Some artists have the determination to own their own masters in their recording agreements," she testified. "They make it a priority in their negotiations. Others choose to take a larger advance and give up the ownership of the master. The point is the issue of ownership is decided in the marketplace."

That's all well and good in theory -- and Rosen might indeed believe this to be the case -- but in the real world, where contract negotiations actually take place, nothing could be further from the truth. The truth of the matter is something more akin to what Britt Daniel once noted a couple of years back when, during Spoon's negotiations with Elektra, he told his lawyer he wanted to own his own masters. The lawyer responded by saying, "Okay, when the Easter Bunny gets done blowing Santa Claus, then what do you want."

Cooper, who again has negotiated literally hundreds of contracts, estimates that the number of people with enough clout in the marketplace to actually maintain ownership of their masters is "far less than 1%." He notes that if it were simply a matter of trading the advance for ownership of the masters then people would give up the advance almost every time out.

"You can say, 'Don't give me advances, I just want ownership,'" says Cooper, "but you won't get a deal."

Artists with enough clout who have been able to swing ownership of their masters include Metallica, Dave Matthews, and R.E.M. The list isn't much longer than that. As local singer-songwriter and Sony signee Bruce Robison quips, "You can count them on half of one hand." Almost.

The whole situation begs the question: Why sign with a major label in the first place? The terms of record contracts have never been favorable for artists. Generally, artist shares top out at around 15%, and they don't see any of that until they pay back every penny of the hundreds of thousands of dollars of recoupable expenses the label charges back to them. Even after paying that back, they still don't own the masters. As things stand right now, they won't get those back until after the original 35-year assignment period ends. Of course most musicians, almost as a rule, go ahead and sign contracts with those terms because, historically, there has been no viable alternative, at least not if you want your music to reach the widest possible audience. Until recently, that is.

Nowadays, you can pony up the dough for your own recordings, put up a Web site, and distribute your music over this thing called the Internet. The media would have you believe it's that easy and you would own and control every aspect of your music. Moreover, popular belief (wishful thinking?) has it that the Internet will be the death of the major labels as we know them. You can be part of the revolution. How very Che of you.

On the other hand, once you have your music up on the Internet, a person could download your songs legitimately via one of the "file sharing" services like Napster, Macster, Gnutella, Rapster, Ragester, Insert-word-herester, whatever, and thus allow the rest of the world to take it for free. Good promotion, bad business. For all of the promise of the Net, it still has some serious flaws, most importantly getting money to musicians.

That, however, doesn't mean flaws can't be fixed. Neil Rosini, lawyer for the organization Artists Against Piracy, a group which includes Aimee Mann, Alanis Morissette, Garth Brooks, Hanson, Nanci Griffith, and Sarah McLachlan, among others, sees four possible remedies to the current epidemic of piracy facilitated by the Internet.

First: encryption. This is the panacea, making illegal copying and redistribution all but impossible. Second: The business model changes to where the music is free and the distributors generate revenue through advertising (like TV), with musicians making their living playing live or selling T-shirts or whatever. Third: Doing it legally, through an authorized source, becomes so inexpensive that the convenience and cost moves people to be better Netizens. Fourth: punishment. Currently the RIAA's method of choice. If you can't beat 'em, sue 'em. It worked against Still, artists are hopeful.

"The Internet takes power away from the people that control the distribution and puts it more in the hands of the people who create the intellectual property," explains Rosini. "The main thing [major labels] have had in the past is mass distribution and mass publicity. With the Internet, anybody can do that. But not if we keep giving our masters away."

Even if something or someone is successful at stopping Internet piracy, that doesn't necessarily translate into a major-label wasteland. Whereas artists can undertake their own distribution and publicity, they're still at a disadvantage, particularly with respect to the publicity.

Major labels have always had financial supremacy over independent labels and artists when it comes to marketing, but now with both Warner Bros. and EMI-Capitol part of AOL-Time Warner, and MCA, Geffen, A&M, and Interscope all part of Universal-Polygram, these companies are now part of the handful of corporations that own many of the major media outlets themselves. You can put up a Web site just like Warner can, but they have more resources to direct people to their sites. And they will outspend you to continue getting their artists on radio, television, and in magazines.

For all the hype, the Internet has yet to produce a Blair Witch Project of the music business. The best DIY success story of recent lore is still perhaps Ani DiFranco, who has forged a lucrative, high-profile career mostly without the Internet. She toured and recorded, toured and recorded, toured and recorded relentlessly, and it took her the better part of a decade to get to the point where she had developed a mass following. It still takes time and work at the DIY level, and more time and more work, plus digital technology isn't likely to supplant either of those two factors. And as Cooper says of DiFranco, "Now she's a business person, and most artists don't want to be business people -- that's why they're artists."

Major labels might be starting to look like dinosaurs, but even if their extinction looms somewhere out on the horizon, they're still big, powerful beasts.

"Don't you find it interesting," notes Cooper, "that Prince, who got his freedom after a long fight and was then putting out his product on the Internet and doing things of that nature, then went back and signed with a label? And you say, 'Why is that?' It's because the labels -- and I do my battles with them and fight word for word with them on these 100-page contracts and deal with the obsolete provisions that they have -- the artist needs them for promotion, and marketing, and their clout to get product out there and get them on radio stations."

Until the Internet produces its music business equivalent of The Blair Witch Project, that will continue to be more true than not.

The story, in all likelihood, does have a happy ending, however -- for now, anyway. After the May 25 hearings, most Congresspeople on the Courts & Intellectual Property Subcommittee were taken aback when they learned what they had done, albeit unknowingly, to artists. Better still, the Artists' Coalition was successful in getting the RIAA to agree on repealing the amendment. That hinges upon two things, though: One is language that voids the amendment without prejudice, and the other, Congress passing the legislation. And it's not just a simple matter of repealing those four little words, "as a sound recording."

The contention on behalf of the RIAA is that such a repeal might prejudice future legal claims made regarding sound recordings as works for hire. The RIAA put forth that if the amendment were simply stricken, that might be interpreted to mean that sound recordings could not be considered works for hire, period. That means the two parties have to agree on language that makes it look like the original amendment and the amendment undoing the original were never passed in the first place.

As for getting the new language passed as law, Frank Coble, Chairman of the Courts & Intellectual Property Subcommittee, expressed doubt that this would happen before the end of this election-year session. Others, such as Rep. Boucher and Artists' Coalition attorney Cooper, were optimistic about a repeal, or rather an "undoing," happening before the end of the year, and perhaps as early as September.

Even if the changes do get made, the whole episode serves as a warning to artists and even fans that, despite the liberating promise of new technologies, the old copyright laws not only still apply, they still carry enormous weight. The sad irony there is that while enforcement has yet to catch up to the speed with which the technology is moving, laws are being amended to deprive artists of their very own creations. end story

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