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Musicians Attempt Class Actions Against UMG, Sony to Reclaim Rights to Recordings

7 February 2019

From The Hollywood Reporter:

For the past decade, a number of prominent musicians including Tom Petty and Bob Dylan have quietly attempted to reclaim rights to songs by serving notices of termination to publishers and record labels. Often, like in the case of Prince, these notices become invitations to renegotiate deals for more favorable royalty arrangements. But according to lawsuits filed Tuesday in New York federal court, in the face of hundreds of termination notices, UMG Recordings and Sony Music have “routinely and systematically refused to honor them.”

The named plaintiffs in the UMG case are John Waite, a solo artist and former lead singer of the 1970s group The Babys, and Joe Ely, who has recorded 18 solo albums and also was a performer on works by The Clash and Rosie Flores. In the Sony case, David Johansen of The New York Dolls, John Lyon (known as Southside Johnny) and Paul Collins of The Beat are hoping to lead the charge.

They are looking towards the Copyright Act of 1976, which extended the term but also gave artists who bargained away rights during the early part of their careers a second bite at the apple by allowing them to terminate copyright grants during the latter portion of the copyright term.

. . . .

The newest lawsuits state that UMG and Sony are regularly taking the position in response to termination notices that recordings are “works made for hire” because of contractual language in recording agreements.

“As a result of UMG’s policy, UMG has refused to acknowledge that any recording artist has the right to take over control of the sound recordings, or enter into an agreement with a different label for the exploitation of recordings, after the effective date of termination,” states the complaint. “In many instances, UMG has continued to exploit the recordings after the effective date, thereby engaging in willful copyright infringement of the United States copyright in those recordings.”

. . . .

Not only are UMG and Sony being sued for infringing the copyrights of many of the songs in their respective catalogs, but the plaintiffs seek declaratory relief that sound recordings can’t ever be considered “works made for hire” under the law, that release of sound recordings in album format doesn’t constitute a “contribution of a collective work” or “compilation” (other exceptions to termination), that foreign choice of law provisions in contracts don’t have any effect on U.S. copyright law with respect to the termination powers, that sound recordings aren’t “commissioned works,” and that recording artists aren’t barred from terminating based on the use of loan-out companies.

Link to the rest at The Hollywood Reporter

Attentive readers will note the term, “loan-out companies” in the OP and wonder what those are.

From Forbes:

Entertainers such as actors and musicians often set up loan out corporations as a way to protect their assets and obtain certain tax benefits. The basic way a loan out corporation works is that the entertainer – an actor, for instance – is an “employee” of the loan out corporation. The corporation then enters into contracts with other businesses such as a production company. Then the loan out corporation “loans out” the services of the actor to the production company.

How does it work? The loan out corporation receives monies from contracts with other businesses and pays a salary to the entertainer for services performed. Meanwhile, the loan out corporation provides essential services to the entertainer, from accounting and legal, to coaching and agency fees. All business expenses incurred are deductible because the entertainer is officially an employee of the loan out company. 

“Wealthy celebrity clients are increasingly approaching advisors about the benefits of loan out corporations. The structures are easy to establish and maintain while offering a wide array of tax mitigating possibilities,” explains Evan Jehle, a partner at LVW/Flynn. “Loan out corporations are also being utilized as vital components of asset protections strategies for high-profile ultra-wealthy families. Wealth and fame make athletes and entertainers particularly attractive targets for financial predators and frivolous lawsuits. Because loan out corporations are separate legal entities, the personal wealth of the entertainers is protected from liability connected to the corporation.”

Link to the rest at Forbes

Copyright/Intellectual Property, Legal Stuff

4 Comments to “Musicians Attempt Class Actions Against UMG, Sony to Reclaim Rights to Recordings”

  1. The artists will probably get slapped down just like George Michael was when he sued Sony back in the early 90s.

  2. But they thought that contract they signed looked so good back then …

  3. PG, Where are these loan-out companies incorporated? Nevada?

  4. Sounds like a body shop. They have been around forever in construction. But the ones in the OP have just one body.

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