How A Louisiana Copyright Ruling Could Stir Up The Global Music Biz

A spicy copyright ruling from a federal court in Baton Rouge is causing indigestion among music publishers, record labels, and private equity investors, because it could upend contracts that musicians signed decades ago on a worldwide basis.

While content creators or their heirs currently have a right under US law to recapture copyrights they bargained away much earlier in their careers, that right has only had effect within US borders. But Vetter v. Resnik would extend those rights worldwide.

The case involves the song “Double Shot (Of My Baby’s Love),” a frat house rocker covered by Bruce Springsteen, George Thorogood, Better than Ezra and others, but not much of a moneymaker.

Nonetheless, if the ruling catches on in other content-generating circuits like the Ninth (including Los Angeles), Second (New York) and Sixth (Nashville), it could be financially devastating for music, media and other businesses and a windfall for creators and their heirs.

Until now, virtually no one has questioned that copyright terminations and reversions under artist-friendly sections of the US Copyright Act only have effect in the United States and that music licensing contracts remain in tact everywhere else in the world.

So the playbook play for lawyers representing copyright creators and heirs has been to wait for applicable rights to arise under the Act and then to threaten (in a very nice tone of voice) companies that licensed those copyrights with a termination of their rights. Then the executive on the other side of the table replies (also in a gentle tone) that the termination or reversion only applies in the US. So they evaluate US rights versus rest-of-world, go back and forth, do-si-do, and finally end the dance with a better deal for the creator or the heirs going forward … but no terminations.

But if the Louisiana ruling spreads west and east of the Mississippi, it could get loud and fists could get hurt banging on tables as attorneys who are resourceful and aggressive (or annoying, depending on where you sit in the negotiation) will argue that the termination is global and not limited to the US. They may not want to renegotiate a new deal but just get the copyrights back worldwide.

But How Does Vetter Get Around The “Territoriality” Problem?

There are at least two major problems with the Vetter ruling. First, the “Principal of Territoriality,” which says that laws generally don’t have extraterritorial application, and language Section 304 (c)(6)(E) of the Act itself, which states:

“Termination of a grant under this subsection affects only those rights covered by the grant that arise under this title, and in no way affects rights arising under any other Federal, State, or foreign laws.”

So how does the Baton Rouge court maneuver past these seemingly impassable roadblocks to reach the Shangri-La of global copyright termination?

On “territoriality,” US District Judge Shelly Dick, the Chief Judge of the Middle District of Louisiana, cautioned against “leaning too heavily” on that principle. Quoting the plaintiff’s pleadings, the judge said “this case is not about conduct (i.e., infringement); rather, this case concerns rights (i.e., ownership) in the Song. Plaintiffs argue that questions of ownership are treated differently than questions of infringement, with ownership questions being answered by the law of the country where the work was created (here, the United States).”

In other words, the “territoriality” principal only applies to cases about conduct, like copyright infringement, and has nothing to do with ownership issues, the judge writes, and to determine which country’s laws govern ownership of copyrights, one looks to where the copyright was first published.

There’s no such thing as an “international copyright,” Judge Dick says. Instead there’s one copyright in the country of origin and then other countries recognize and protect it according to their own laws, according to this argument. Quoting the plaintiff, the judge reasoned that “the plaintiffs’ recapture of that one copyright [through renewal or termination] leaves the defendant with nothing. In that instance, the plaintiffs’ domestic rights yield to them the right to exploit [the Song] everywhere without interference from its former owner.”

So again, if you want to know who owns a copyright, you have to look to the laws of the country where the copyright originated. But if you want to protect a copyright from infringement, you have to use the laws of the country where the infringement happened, according to this reasoning.

And How Does Vetter Escape The “Arises Under” Problem?

Next, Judge Dick took apart a few cases the defendant had relied on, primarily Siegel v. Warner Bros. Ent., Inc., and scholarly work from David Nimmer and William Patry, two leading commentators on copyright law, that support the current status quo view that a copyright termination or reversion under US copyright law doesn’t terminate any rights abroad.

The court summarized the argument this way: “Foreign protection for United States works ‘arises’ not from a multiplicity of foreign copyrights around the world, but rather when treaty partners agree to recognize copyrights that ‘arise’ in accordance with the Copyright Act.” Thus, Plaintiffs conclude that under Section 304(c)(6)(E), the termination results in the recapture of foreign rights because they, like domestic rights, ‘arise under’ the United States Copyright Act.”

So the rights that a foreign company might have in a US copyright don’t “arise” under the laws where that company is situated, the judge reasoned, but rather under US law which granted the copyright in the first place.

The judge dives further still into the depths of legalese: “One of the dictionary definitions of ‘arise’ is ‘to originate from a source.’ Applied here, in the Court’s view, both domestic and foreign rights to exploit the Song originated from the United States Copyright Act; once the United States copyright was obtained, the owner of that copyright had the ability to exploit the Song abroad. Although, as the court in Siegel explained, foreign exploitation “would be governed by the copyright laws of foreign nations,” the Court is unconvinced that the claim to such foreign rights “arises under” or “originates from” foreign law because the acquisition of the United States copyright already gives the owner the ability to exploit the work in other … countries.”

Sounds simple enough, but this reasoning would radically revolutionize the way the music business runs, because countless licensing agreements involving US-originated entertainment content would terminate globally on the snap of a finger, i.e upon registration of US copyright termination notices, and rights would revert to the creators, their heirs or assignees.

Note: licenses involving derivative works (like movies based on books) and works made for hire are not eligible for terminations under the US Copyright Act.