The next big copyright battle in the music world will be over termination rights

When the Copyright Act was revised in the mid-70’s, artists and composers were granted “termination rights,” allowing them to apply to take control of their works after 35 years.  According to the New York Times, many have already applied to the copyright office (the law calls for applications to be filed a least two years in advance).

The record companies stand to lose millions from old masters, and argue these records are “works made for hire,” an exception to the general rule that the person creating the work is the author of the work and, therefore, the owner of the IP rights.

Here’s what the issue will center on:

Section 101 of the copyright law defines a “work made for hire” as:

1) a work prepared by an employee within the scope of his or her employment

or

2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.

The employee/employer relationship is not what one might think. The Supreme Court in CCNV v. Reid identified certain factors that characterize an “employer-employee” relationship as defined by agency law:

1. The “employer” may determine how the work is done, has the work done at the employer’s location, provides equipment or other means to create the work, etc.
2. The “employer” controls the employee’s schedule in creating the work, has the right to have the “employee” perform other assignments, determines the method of payment, etc.
3. The “employer is in business to produce such works, provides the employee with benefits, withholds tax from the employee’s payment, etc.

Valuators need to add a review of masters over 35-years old in a music company's portfolio while reviewing Copyright Office records to see if anyone has applied to exercise termination rights. In addition, those termination rights represent still another intangible asset, some with considerable value. IPBlog will watch this closely.