This column will provide a quick look into certain copyright issues relating to Master recordings. In particular, this column deals with who owns the copyrighted work embodied in multitrack and master tapes, regardless of who owns the actual tapes the performances are recorded on. Before beginning, however, it is important to remember that the term "Master" has several meanings in the record industry. "Masters" can refer to individual recordings of songs (i.e., sound recordings) as well as the edited, mixed and equalized 1/4" or DAT audio tape these songs are embodied in. For convenience, I will refer to the copyrighted performances as "sound recordings".
SCENARIO NO. 1: BAND RECORDINGS
The issue of who owns a band's recorded material can sometimes arise after a band breaks up. Let's assume band member #1 purchased lots of expensive multi-track tape and a DAT for mastering, while band member #2 paid the studio and engineer for the recording time. Let's assume the self-proclaimed band "leader" (#3) kicks out #1 and #2, replacing them with beat-up Roland TR-606 drum machine and a cheap sampler. Who owns the material that was previously recorded?
Ownership of the band's sound recordings will likely depend on who is the "author" of these recordings. Because the performer is typically the "author" of a sound recording, it is likely that all three band members are joint authors of this copyrighted material (assuming there was no written agreement between them stating otherwise). If the sound recordings are jointly authored, any band member can license these recordings on a non-exclusive basis, so long as they pay the other co-authors their pro-rata share of earnings. Of course, it is still necessary to obtain permission from the copyright owners of the compositions before releasing these recordings. But assuming the songs were co-written by the entire band, any one band member could also grant this permission. (For more information on the rights of co-authors, click back to my previous column on that topic).
What about band member #1's argument that he purchased all the audio tape, or band member #2's argument that he paid for the recording sessions? They have a strong argument for being reimbursed for these expenses from any future income. But absent any written agreement between the band members concerning copyright ownership (which is sometimes included in a written band partnership agreement), the sound recordings probably belong equally to all three members as joint authors.
SCENARIO NO. 2: BAND RECORDINGS WITH A PRODUCER
Lets take the same facts above, except this time band member #2 also pays for a producer to help with the recording. Assume that the producer assists with the drum mix, suggests some overdubs, helps with the mixing and even incorporates some samples into dance remix (to keep things easy, lets assume the rights to the samples were cleared in advance). Has the producer contributed enough to be considered a co-author of the sound recording?
On the above facts, there's a good chance the answer is yes. While a performer is usually the author of a sound recording, it is also possible for producers or engineers to be credited as co-authors if their work is also embodied on the sound recording. To claim a copyright interest in the recording, their contribution must include an "appreciable" amount of original authorship. That's likely not the case when a sound engineer simply sets up a couple microphones and records a band live. However, when Congress enacted the Copyright Act, it specifically stated that the act of "capturing and electronically processing the sounds and compiling and editing them to make the final sound recording "may be enough for a claim of authorship." As a result, record companies frequently obtain releases from producers concerning any copyright interest the producer may have in the master tapes. As the next hypothetical suggests, it is possible for a situation to arise where failure to obtain such a release could result in unforeseen consequences.
SCENARIO #3: SPEC DEAL WITH RECORDING STUDIO
Now imagine the above band has reformed, but lacks any money to record (probably not too hard to visualize). However, the band is quite popular locally and a recording studio offers the band free recording time, with the understanding that the studio will be reimbursed if the band later becomes successful. The band and studio later have a falling out. As things happen, the band has recently started talking to record labels and publishing companies in Hollywood. Who owns the rights to the master tapes in the studio's possession?
The above hypothetical actually looks like a basic dispute over an oral contract. Here the dispute involves whether the studio time was actually "free." In some instances, a court could decide that an implied contract existed entitling the studio to recover its expenses. However, a Louisiana court actually reached the opposite conclusion in a matter involving similar facts. In that case, the court noted that the studio and the band never actually discussed whether the recordings might eventually be sold. While both parties believed the studio would be compensated if the master tapes were released, the court found no actual agreement to release the tapes, and no expectation that the parties would continue their relationship until the tapes were released. Because the court found there was no agreement, it threw out the recording studio's lawsuit for compensation. (If you're interested, the full citation for this case is Sound Doctor Recording Studio, Inc. v. Conn, 391 So.2d 520 (La. 1980)).
So now let's assume the studio decides to cut its losses and erase the band's master tapes. What's the result? Because the studio does not own the copyright to these sound recordings, it is actually destroying someone else's intellectual property. Even if the studio engineer or producer was a co-author of these sound recordings (see above), a co-owner of a copyright cannot act in a manner that will destroy the value of the work as a whole. As a result, if the tapes are destroyed the band may be able to recover the reasonable value of these lost recordings. If the band becomes later becomes successful, these recordings may be quite valuable.
What if the studio decides to release these recordings anyway, without the artist's permission? Well, under California law an individual may be sentenced to up to five years in jail, or fined up to $250,000, or both, for commercially releasing music without the owner's consent. Although this law was intended to target bootleggers, it could conceivably apply to situations like the one above.
On the other hand, assume the studio producer added enough original copyrighted
material to the recordings so that he is entitled to claim he is a co-author.
Under this scenario, the producer could arguably license the recordings on a
non-exclusive basis if he obtains a mechanical license from the band to use
their songs. Even if the band denies permission, the producer could theoretically
obtain a compulsory mechanical license and release recordings of any cover versions
that were recorded.
SCENARIO #4: DEMO DEAL WITH RECORD LABEL
Let's now assume the above band has entered into a "demo deal" with one of big record labels. A "demo deal" shares some elements with the spec deal described above. Here, the record label may not want to sign a new and unproven band until it hears what it is capable of in the studio. Another possibility is that the studio wants to buy additional time while deciding whether or not to sign the band. In either instance, the label will give the artist some money to go into the studio and record several demo recordings. The label then has a limited period of time to decide whether or not to sign the Artist based upon the demos that are submitted.
Because the record company pays the band an advance to record these demos, it will usually insist on owning the final product, although you can try to negotiate otherwise. If the record company decides not to sign your band, you may want to retain the rights to these recordings in order to release them yourself or shop the band to other labels. However, the record company may insist that you first reimburse them for the cost of the recording. One compromise may involve reimbursing the company if you are later offered a deal with another label based on the strength of these demos. However, the record company may demand a right of first refusal. In that instance, if another label offers you a better deal, the company who recorded your demos gets the right match that deal and sign your band on the same terms and conditions.
SCENARIO #5: RECORD DEAL
Finally, let's assume the above band recorded some fantastic demos, and finds itself signed to an exclusive contract with a major label. Unless there was a bidding war, or the band later achieves superstar status and acquires added leverage, most record companies will insist on owning the copyrights to master recordings made during the contract period. Record contracts usually stipulate that all recordings are transferred on a work-for-hire basis. This means that unlike a regular transfer of copyright, the record company's right to own the copyrighted material is not subject to termination after 35 years. (Whether or not sound recordings actually qualify as "works made for hire" under the Copyright Act is a separate question best left to a future column). Typically, record labels will also own the outtakes and alternate versions of the band's studio work.
On the other hand, if the band allows the record company to release its independently recorded material, the record label should not be granted any ownership rights to those masters. Instead, the label should retain only an exclusive (or better yet, non-exclusive) right to release the masters for a specified period. If the label is granted only a non-exclusive right, the band could try to find another label in a better position to release these same recordings in foreign territories. In addition, all rights to the masters should be returned after the license ends, enabling the band to enter into a new deal for these recordings with any label it chooses.
The above examples are meant to show how issues of contract and copyright converge in determining who owns Master recordings. Future columns of the Fine Print will be devoted to different issues surrounding record deals. In the meantime, we will next look at issues involving the use and protection of band names.
Law Office of Alan Korn
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