On Monday, a high-profile copyright dispute was resolved in favor of artist Victor Willis, the original lead singer of the Village People.  In 2011 Willis provided Scorpio Music with a notice of termination of copyright for 33 songs.  Scorpio Music responded by filing suit to invalidate the terminations.  The court ruled for Willis, dismissing Scorpio Music’s case.  See Scorpio Music SA v. Willis, 3:11-cv-01557, Dkt. 30 (S.D. Cal. May 7, 2012). 

The Copyright Act allows artists or authors to terminate a grant or sale of a copyright pursuant to either § 304(c) or § 203.  Section 304(c) allows an artist or author to terminate the grant of a copyright in a work after 56 years if the work was transferred or sold before 1978.  Section 203, on the other hand, allows an artist or author to terminate the grant of a copyright in a work after 35 years if the work was transferred during or after 1978.  Under these provisions, many copyright terminations become effective as early as 2013.

While the legal arguments in Willis’ case might interest some, we find the impending cascade of artists’ copyright grant termination suits to be substantially more significant.  The initiation of copyright grant terminations like Willis' has been expected for a number of years, but Willis’s case is the first high-profile case to be resolved in favor of the artist.

Moreover, Willis’s victory comes in the midst of another torrent of lawsuits being brought by music artists regarding the appropriate classification of digitally downloaded songs.  In a dispute over songs by artist Eminem, the Ninth Circuit held that digital downloads of songs are “licenses” and not physical “sales.” FBT Productions LLC v. Aftermath Records, 621 F.3d 958 (9th Cir. 2010).  The distinction means that under a large number of contracts in the music industry, artists are entitled to a substantially higher royalty percentage (50% for licenses versus 12-20% for conventional records). 

After FBT, other artists filed a flood of similar digital royalty suits.  See, e.g., James v. UMG Recordings Inc., 3:11-cv-01613 (N.D. Cal.); Zombie et al. v. UMG Recordings Inc., 3:11-cv-02431 (N.D. Cal.); Williams v. UMG Recordings Inc., 3:12-cv-01289 (N.D. Cal.); Harris v. UMG Recordings Inc., 3:12-cv-01305 (N.D. Cal.); Toto Inc. v. Sony Music Entertainment, 1:12-cv-01434 (S.D.N.Y.); The Youngbloods v. BMG Music, 1:07-cv-02394 (S.D.N.Y.); Shropshire v. Sony Music Entertainment, 1:06-cv-03252 (S.D.N.Y.); Ear Booker Enterprises Inc. v. Sony Music Entertainment, 1:12-cv-02385 (S.D.N.Y.); Rogers v. Capitol Records LLC, 3:12-cv-00180 (M.D. Ten.); Wright v. Warner Music Group Corp., 12-cv-0870 (N.D. Cal.). 

While the music industry has been evolving to adapt to digital music and increased artist independence for some time now, these types of digital royalty suits are likely to accelerate that evolution.  Now the battle is likely to be waged on two fronts.  Just as a rush of artists followed in FBT’s footsteps, we expect that a rush of artists will follow in Willis’s, and there will be more termination notices served on music publishers and record labels.  As more artists begin to reclaim copyrights in their songs, the music industry’s evolution will likely further accelerate, with re-negotiations of distribution rights undertaken to handle the likely annual waves of copyright grant terminations. 

We expect artists to leverage both the Willis and the FBT (Eminem) rulings to increase their share of royalties received for sales or licenses of their music.  For example, an artist might give a notice to terminate copyright grants as a precursor to royalty rate negotiations and agree not to terminate the copyright grant in exchange for higher royalty rates.  And, with established artists reclaiming copyrights in successful tracks, publishers are subject to losing significant revenue.  For example, Willis can bypass traditional distribution channels for his well known songs and target the market directly.  While start-up acts may still need the help of the labels to market and distribute new sounds, famous artists can rely upon the inertia of their popularity to maintain continued licenses (downloads) of their music.  The combination of the digital royalty and copyright grant termination disputes will inevitably cause many industry contracts to be rewritten.