In the midst of this global pandemic—as many musicians (like so many others) are struggling to make ends meet—courts in New York have continued to issue important decisions that impact musicians’ livelihoods. Within the last month, the Southern District of New York permitted two separate class actions against Sony Music Entertainment, Inc. (“Sony”) and Universal Music Group (“UMG”), respectively, to proceed. The class actions, styled Johansen v. Sony Music Entertainment, Inc. and Waite v. UMG Recordings, Inc. were brought by musicians and songwriters David Johansen, John Lyon (a.k.a Southside Johnny), Paul Colins (from Paul Collins’ Beat), John Waite, Joe Ely, Susan Straw Harris (a.k.a Syd Straw), Israel Caballero, and members of “the Dickies,” Leonard Graves Philips and Stan Sobol (a.k.a. Stan Lee). In both cases, the plaintiffs seek to prospectively regain the exclusive of right to reproduce and distribute sound recordings from the 70’s and 80’s that they previously granted to the predecessors of UMG and Sony.
By way of background, the Copyright Act of 1976 greatly enlarged the rights of musicians, songwriter, authors, actors, and the like (which I will generally refer to as artists), to both published and unpublished works. Two separate portions of the Act allow artists or their heirs to terminate transfers of a license or copyright in those works given to publishers—often at times when those artists were lesser known—and therefore regain the exclusive right prospectively to reproduce and distribute their works.
Under Section 304, which applies to grants involving copyright protected works and created before January 1, 1978, artists or their heirs may terminate grants to publishers (a) within a five-year window beginning the later of (i) 56 years from the date the copyright was originally secured or (ii) from January 1, 1978; or, if that time has expired and certain other conditions are met, (b) within a five-year window commencing seventy-five years from the date the original copyright was secured.
Section 203 applies to grants of rights that were executed in or after 1978, without regard to the date the copyright was secured. Under Section 203, an artist can terminate a publisher’s grant within a five-year window beginning thirty-five years from the date of execution of the grant or, if that grant covered the right of publication of the work, the earlier of thirty-five years from the work’s publication or forty years from the execution of the grant.
The dynamic between 304 and 203 creates a “gap grant,” where a grant may be executed prior to January 1, 1978, but the work not created until after that date, leaving open the question of which, if either, section is applicable to those works.
In order to effectuate a termination, artists, their heirs or representatives, must send a termination notice that must include certain specified information. The notices may be served between two and ten years before the termination date. The Copyright Office has provided a general rule that relieves artists from “harmless errors” in a termination notice.
In both Waite and Johansen, the songwriters/musicians had sent termination notices, but Sony and UMG refused to recognize those termination rights.
In Waite, in addition to arguing that the plaintiffs’ claims were time-barred—an argument that the Court rejected—UMG argued that the notices of termination were invalid because they omitted certain required information. The Court found, however, that those defects were harmless and that UMG had sufficient notice as to which grants and sound recordings plaintiffs were seeking to terminate.
The Court, however, did dismiss several claims, including the portions of Ely’s claims concerning works created after 1978 pursuant to grants executed in 1976 (i.e. recordings subject to a gap grant). The Court noted that while the Copyright Office promulgated a rule that works or recordings subject to a gap grant could be terminated under Section 203, the rule further states that the decision to accept termination notices for gap grants was “without prejudice” as to how a court might ultimately rule on whether a notice of termination is within the scope of Section 203. The Court ultimately did not resolve how the gap grant should be treated because it found that the notice of termination concerning those works was invalid because it failed to identify certain required information.
In Johansen, decided after Waite, Sony also argued that at least one of the sound recordings may be subject to a gap grant. While the Court found that for the purposes of the motion no gap grant existed, the Court accepted the Copyright’s Offices’ Rule that Section 203 is the relevant provision for gap grants.
Sony made three additional arguments—each rejected by the Court. First Sony argued that the notices were untimely because they referenced grants executed in or about 1984, which would only be terminable as early as in 2019—not 2017 (the date stated in the termination notice). In addition, Sony contended that Collins’ notice was one month late with respect to an album called the Beat. Sony also argued that the notices were deficient because they did not identify the grants to which the termination notices apply or the date of the execution of those grants.
As to the first argument, the Court noted that Johansen and Lyon’s termination notices were not limited to 1984 grants, but to all grants without limitation to those dated in 1984. More importantly, the complaint referenced agreements with Sony in or about 1978 as being the operable grants from which the sound recordings at issue were produced. The court therefore found it “plausible” that the artists’ granted their rights in those sound recordings to Sony in 1978, not 1984. Taking 1978 as the execution date, the effective termination window began in 2013 and ended in 2018, making termination notices in 2017 timely. In any event, the Court found that more information was needed to determine the execution date that was not available on that motion.
As for Collins’ claims concerning the Beat, the Court noted that the effective date of termination was listed only 23 months (as opposed to 24 months or 2 years) after the termination notice date. The Court held that it was “plausible that this was a ‘scrivener’s error’” and that the harmless error rule, discussed above, may apply to excuse it.
Finally, the Court held that the notices were not deficient. While they admittedly omitted the specific date of execution of the grants, the notices clearly identified the publication dates of the sound recording at issue. This information provided “Sony with ample information to identify the grants that cover the specific sound recordings identified” and that the harmless error rule may apply.
 This missing information was not found to be harmless here because of conflicting information given in the complaint that suggested that both the grants and the recordings occurred prior to 1978. Therefore, the court held that either the pre-1978 date in the complaint is correct—in which case there is no gap grant and section 203 is not applicable—or the date in the complaint is incorrect, but the termination notice is invalid because the creation date was not alleged, “inhibiting UMG’s ability to determine which grant and work [the artist] seeks to terminate.”
If you have further questions about this short article, please contact your SGR IP Counsel.