EU Extends Copyright for Sound Recordings by 20 Years

In the European Union, popular music recordings from the 1960’s from acts such as the Beatles and the Rolling Stones were poised to enter the public domain as a result of the expiration of their 50-year copyright term.  In September 2011, however, the European Union voted to extend copyright protection for these works for another 20 years. 

 Perhaps to assuage critics who claim that record labels (and not struggling musicians) will benefit most from the extension, the new EU directive contains a number of accompanying measures to provide balance to individual musicians who may not directly benefit from the copyright extension, including the following:

•  rights to a sound recording may revert to the artist if the record label does not make the recording available for sale to the public (the “use it or lose it” clause);
• a “clean slate” provision that prevents the record label from making any deductions during the extended copyright term from the contractual royalties due to featured artists; and
• creation of a fund, financed by record labels with a percentage of benefits obtained from the copyright extension, for session musicians who signed away rights when a recording was made.

Details as to how some of these measures will be implemented or enforced is not clear from the language of the new directive.  Nevertheless, it seems likely that EU Member States will be expected to implement these accompanying measures in addition to the term extension. 

U.S. Supreme Court Restores Copyright Protection to Foreign Works

On January 18, the U.S. Supreme Court, in a decision watched closely by musicians, publishers, educators, orchestra conductors, upheld a federal law restoring copyright protection to millions of books, paintings, films and musical compositions by foreign artists that were previously in the US public domain.  In doing so, the Court rejected constitutional challenges to the law, holding that nothing in the Copyright Clause or the First Amendment “makes the public domain, in any and all cases, a territory that works may never exit.” 

 The case, Golan v. Holder (docket 10-545), involved a 1994 law enacted by Congress (which became Section 514 of the Copyright Act) to implement certain provisions of the Berne Convention for the Protection of Literary and Artistic Works.  Article 18 of the Berne Convention required member countries to accord other countries minimum levels of copyright protection and treat authors of other countries in the same manner as they treat their own with respect to that protection.  While the U.S. joined Berne in 1989, it did not implement Article 18, in effect, disregarding protection for foreign works.  In 1994, the Berne Convention specifically mandated implementation of Article 18, leading Congress to enact Section 514, which was challenged in Golan.  Section 514 granted copyright protection in the U.S. to foreign works on the same basis as enjoyed under foreign copyright law. 

 Since prior to the enactment of Section 514, the U.S. did not recognize the foreign copyright protection of these works, they were considered to be in the American public domain.  Thus, upholding the application of Section 514, with its equal treatment of works under foreign copyright law, has the effect of providing copyright protection to works that were previously in the public domain.  As noted by Justice Ginsberg, the law merely puts “foreign works on an equal footing with their U.S. counterparts.”

Other provisions of Section 514 take into consideration its impact and attempt to ease transition to the new regime.  In particular:

•  restored works will only be protected until the expiration of the full copyright terms, whether that expiration occurs in the U.S. or in the origin country;
• reanimation of copyright will be limited to only the remainder of the copyright term the work would have been entitled had it never entered the public domain;
•  “reliance parties” who used or acquired a foreign work in the public domain prior to the enactment of Section 514 will be allowed to continue to use the work until the copyright owner gives notice of an intent to enforce; and
• derivative works based on restored or reanimated work must only pay the copyright owner “reasonable compensation” to indefinitely exploit the derivation.

As the Supreme Court noted, unanswered questions remain about how Section 514 will be implemented, but the Court did not consider those questions significant enough to require rejection of the law.  In particular, the treatment of “orphan works” (when the copyright owners of the newly regulated foreign material cannot be identified or located), will likely be among the first issues for Congress to resolve next.

“Termination Rights” To Take Effect in the U.S.        

On January 1, 2013, the controversial “termination rights” provision of U.S. copyright law will be triggered, allowing authors (and their heirs) to begin regaining control of their original works from publishers and record labels to whom the works were previously assigned.  For works assigned in 1978 and thereafter, Section 203 of the Copyright Act of 1976 allows an original author to exercise an option to terminate the existing owners’ rights if 35 years have expired since the assignment. 

The wording of this provision suggests that termination rights are absolute for the original author or heirs, and thus would prevail over any written agreements assigning ownership, even if the agreements state that they are in perpetuity.  There is, however, an important exception for “works for hire,” which are deemed the property of the publisher or record label.     

Termination rights are a particularly hot topic for the music business.  Once a master recording reaches its 35-year mark, it is “game on” for the artists and songwriters who wish to reclaim ownership of qualifying songs from publishers and record labels.  However, it is likely that any attempt to recapture rights will hinge on the language of the applicable contracts between the artists and songwriters, on one hand, and labels and publishers, on the other, specifically whether there is clear assignment language (which would be subject to termination) or “work for hire” language (which would leave ownership of the works with the applicable label or publisher). 

One concern with “termination rights” is the lack of clarity in this provision as it may relate to musicians.  For example, it is unclear who exactly can qualify as an “author” of a sound recording, casting some ambiguity over who can share the rights after they revert.  The law is also murky for non-U.S. artists and whether those artists can exercise termination rights on American recordings.  What is clear, however, is that to enforce termination rights, authors (or their heirs) must comply strictly with the law.  Some of the provisions to be aware of include:

•  a requirement to file termination notices as much as ten years in advance of the effective termination date, but no less than two years before the date an author hopes to recoup their work;
• a provision stating that once a song or recording qualifies for termination, the author has five years in which to file a claim or else the right to reclaim the work relapses;
• a rule that, for works created post-1978 with multiple authors or heirs, a majority must agree to terminate; and
• a caveat that the law only has effect in the U.S., so that a publisher assigned a worldwide copyright will still retain control in foreign markets.

For publishers and other existing owners of copyrighted works who face pending terminations, there are certain considerations to keep in mind:

• time is of the essence to reach out to songwriters or their estates to attempt to negotiate a new deal; 
• if a notice of termination has already been issued, only the current publisher may try to enter into a new deal with the songwriter or his estate before the termination takes effect;
• opportunities may exist for new copyright acquisitions from authors who seek to enforce their termination rights against existing copyright holders, but who may be in the market for a deal with a new publisher; and
• consider whether the “works for hire” exception applies. 

We will keep abreast of developments in these areas, particularly as the new implementation and enforcement schemes are developed.  And we are available to assist any copyright stakeholder seeking to assess how these changes in the copyright law may affect their rights.

**  Betsy Pierce, an associate with the Firm, assisted in the research and drafting of this post.

In October 2009, the France’ high court approved “Loi favorisant la diffusion et la protection de la création sur Internet”, or “HADOPI” (see our previous post: Three Strikes and You’re…OUTTTT! (Of French Cyberspace)).  Now almost one year into the life of the law, results have been mixed. The French government has said that it is prepared to begin issuing warnings and sanctions under the law, but no action has been taken yet. Commentators have questioned the feasibility of the law (e.g., the ease with which offenders can regain access to the Internet), and some original supporters of the legislation have qualified their original support of the law in response to adverse political reaction.

The U.K.’s Digital Economy Act  was enacted on June 8, 2010. Aimed at regulating the access of copyrighted material by end-users, one controversial section of the law establishes a system for identifying users who access illegal materials and for gradually increasing technical restrictions on their Internet access. These restrictions involve initially downgrading the quality of a user’s connection (the hope being that slower upload and download speeds will act as a deterrent to piracy) and culminate in a complete denial of Internet access.

Since the enactment of the DEA, the Office of Communication (Ofcom), an independent regulator and competition authority for the UK communications industries, has developed a protocol/obligations codefor implementing the legislation (but has said that plans to disconnect end-users from the Internet would not come into force until next year). ISPs are tasked with identifying and compiling a list of those end-users believed to be engaging in infringing conduct via a three-stage notification process, which includes sending letters to such end-users (which must include certain “standardized” information in connection with the allegations made against the end-user and what actions such end-user can take both to challenge the allegation and to protect their network). Rights’ holders can also request the ISP to identify those end-users who have breached an Ofcom-defined threshold for continued violation of access to information (i.e., following the third notification to a particular end-user), after which the rights’ holder may petition a court for identification of the user for purposes of initiating litigation.

Not surprisingly, the DEA has been subject to criticism from many perspectives.  Certain commentators have claimed that the complete denial of Internet service may violate existing European Union principles and regulations intended to preserve EU residents’ “basic rights and freedoms”, one of which is the right to access and use the Internet, and say that even worse is the manner in which the act was passed into law (which ISPs claim was rushed through Parliament with insufficient scrutiny). Further criticism focuses on the fact that the DEA provides only for an independent, limited appeals process for end-users who believe they have been wrongly accused of copyright infringement (as opposed to due process in a judicial proceeding). Consumer rights groups have raised concerns that an innocent user who has not encrypted her wireless network may be sanctioned if others access the network to engage in authorized conduct.  In addition, some have predicted that the threat of disconnection may alienate the most avid legalbuyers of entertainment content, encouraging them to switch to anonymized, encrypted alternatives so as not to reveal their identity.  Lastly, because the DEA only applies to ISPs with more than 400,000 customers, one consequenceof the law could be a flight of consumers to smaller ISPs, placing the larger ISPs at a commercial disadvantage.

Many major ISPs have recently spoken out against the DEA.  TalkTalk and British Telecom (the UK’s largest providers of broadband to homes) have initiated legal challenges, with their core claim being that the DEA conflicts with existing European Union regulations relating to individual privacy and electronics communications directives, as well as e-commerce directives.  They have also raised concerns about the role of ISPs in policing the Internet (i.e., that ISP’s are mere conduits of content and should not be held responsible for traffic on their services). 

Many reporters and commentators have also started to speculate about the practical ramifications of the DEA.  These include concerns that the increased costs borne by ISPs in identifying and notifying infringing users may be passed onto subscribers, raising access costs across the board.  Additionally, there is speculation that additional taxesmay be imposed on ISPs for transmission of pirated content by their subscribers.  Finally, the potential ramifications of long-term end-user tracking (e.g., data retention issues) have raised additional privacy concerns.

Reception of the three-strikes legislation, or graduated response, has been mixed elsewhere in the European Union and around the world.  In some countries, such as Belgium and Singapore, active or proposed legislation has tried to establish administrative oversight of illegal access to copyrighted material. In others, such as Germany, the government has taken a more laissez-faire approach by asking individual ISPs to handle content regulation and restriction without active government intervention.  

The point of restriction of content access varies as well. Graduated response, such as the process promulgated by HADOPI, puts the onus upon the individual end-user (i.e., if the end-user infringes upon copyright and accesses copyrighted material, she suffers the potential sanction of denial of Internet service). In other proposals, this remedy is rejected in favor of putting the burden on ISPs: the service provider must actively block websites known to provide copyrighted material illegally. Yet other proposed regulations include targeting the website itself and have imposed (or have tried to impose) sanctions against individual websites for their presence within a certain country.

These alternate approaches clearly reveal the competing, deeply-rooted political philosophies and interests engaged in the debate.  Is digital piracy something that should be primarily policed by the government through stringent regulatory schemes?  Or should the responsibility fall to commercial stakeholders, such as content owners and ISPs?  How does one resolve the competing interests between content owners (who seek the most stringent protections available) and ISPs (who may view themselves as a passive provider of a basic service, not an active enforcement agency)?  And will innocent end-users find that they are adversely impacted by the actions of true infringers?

While there may be universal agreement that infringing activity must be inhibited, it is unlikely that a single, unified approach to the problem will emerge any time soon.  However, through trial and error and the experience of “early adapter” nations such as France and the UK, it is possible that a consensus will emerge on a scheme that achieves a balance among the concerns and interests of the various stakeholders.

We will obviously keep an eye on future developments in this area of the law and relevant industry practices.

Although in general the entertainment industry’s position is that imposing responsibility on ISP’s to monitor illegal activity is about educating users and responding to a higher standard of evidence for illegal activity via their networks, ISP’s have consistently argued that it is not their job to police the Internet.  Perhaps France’s implementation of  a separate agency to work with the ISP’s in enforcing piracy policies will serve to alleviate some of the concerns of ISPs.

The new French law, which initially empowered French ISPs to terminate user accounts,  was first rejected back in April by the French Constitutional Council, which said  that free access to public communication services online was a human right that only a judge should have the power to disconnect.  Without this protection, the court said that the law would have violated free speech provisions.  The latest version was approved due to the inclusion of an amendment that requires judicial review prior to any account suspensions. 

Critics of the new law argue that it denies the accused the right to due process, pointing out that Internet subscribers will be held liable if someone uses their Internet connection to illegally download copyright works, even if the computer was under someone else’s control.  The critics further argue that the discontinuance of Internet access is an unfair penalty because of the increasing importance of the Web as a channel for expression and commerce.  It is believed that this new law could result in sanctions against 50,000 people per year.  David El Sayegh, the director general of the French music industry association,  Syndicat National de l’Edition Phonographique, counters those arguments by saying that the laws are not meant as a punishment against Internet users but instead hopes that the mandated warnings will have a strong deterrent effect, rendering termination of access a rarely invoked penalty.          

Many policy makers across Europe agree with the bill’s critics and have been apprehensive toward France’s adoption of the solution since they believe it is more important to increase broadband access, not deny citizens their rights to it.  Despite such skepticism, it appears that Britain will introduce similar legislation next month.

Dan Glickman, Chairman and CEO of the Motion Picture Association of America (MPAA), applauded the French court’s decision and said that it is an enormous victory for creators everywhere.  In addition,  Rick Cotton, Executive Vice President and General Counsel at NBC Universal and Chairman of the U.S. Chamber of Commerce-led Coalition Against Counterfeiting and Piracy (CACP), acknowledges that the new French law recognizes that jobs in the creative industries are under assault by digital theft.  Copyright piracy has taken a huge toll on the U.S. movie and music industry due to the current global economic situation.  The MPAA has determined that illegal downloads/streams are responsible for about 40 percent of the revenue the industry loses annually due to piracy.

Although the U.S. entertainment industry has not been as aggressive as the French in lobbying for a “three-strikes” law, the music and film industries are proponents of instituting a graduated-response program, which encourages the implementation of a warning system similar to the warning notices that will be issued to potential copyright infringers under the French law. In addition, the CACP is currently seeking to change federal law enforcement emphasis so that intellectual property crimes are given priority over other kinds of crime.   Although it seems unlikely that we will see a “three strikes” policy instituted in the U.S. anytime soon, the developments in this area of the law will inevitably influence the terms under which content providers distribute and protect their content as well as how consumers access such content.

*    Kari Hirsch, , who recently joined the Firm, assisted in the preparation of this article.