Songs in movies, TV shows, and ads: How do the licenses work?

George Howard

I get asked this question (or a variant on it) more than just about any other music business related topic. I get it; it ain’t easy to understand, but it’s not that hard, and, understand it you must.

Also, as much as I believe that the “music business” is dead, and it’s all just business; the one thing that is unique to the music business is how copyright is handled. That’s not to say that you have different intellectual property interests in music than in other businesses; you don’t. Rather, there are just various “terms of art” related to © that are unique to the music business.

So…here we go: an attempt to explain the rules and licenses around songs being used in films, tv, and ads. Let me know if you have any questions; I’ll try to answer them in the comments, and maybe this can be an evolving document that we can reference.

Any time a song is used in a film, TV show, ad there are two licenses required:

1. A synchronization (synch) license: This is a license the producer of the above must obtain from the writer of the song (if the writer has assigned her © to a publisher, the producer must go through the publisher). 


This license gives the producer of the above the right to synchronize the ©’d song (important: not the recording of the song, but the underlying composition - the lyrics and melody) with the moving images in the tv show, ad, or movie.


2. A master usage license: the producer of the above must negotiate a license with the person who holds the © to the recording of the above underlying composition (i.e. the version of the song found on the CD). 
Typically, the master usage holder is the label. If there is no label (i.e., it’s self-released by the artist), then the producer of the movie, etc. negotiates directly with the artist who self-released.


Thus, in the case of an artist who has not assigned their publishing rights to anyone and self-releases their own record, the producer of the movie, etc. negotiates “both sides” (i.e. the synch and the master usage) with the artist herself.


If the artist has done a publishing deal and a record deal, the producer negotiates with the publisher for the synch rights and the label for the master usage rights.


Unlike with mechanicals (i.e. the payment labels make to songwriters for the rights to mechanically reproduce a ©’d song on the album the label releases), there is no compulsory license for either synch or master licenses. Because there is no compulsory license for the synch or master usage, the producer must negotiate both of these licenses, and either the master holder or the publisher can deny the request.


In reality, the producer will approach one of the parties (the label or publisher - typically, publisher first - see below for why), and see if they can get the writer interested in the synch (most writers, of course, are falling all over themselves to have their music used).

The producer makes the publisher/writer an offer, and then tries to shift the burden of the master clearance to the writer/publisher. At that point, they (both producer and the publisher/writer) push on the label to clear the master side (most labels, of course, are falling all over themselves to have their music used), and a deal is struck. 


The fee is divided (typically evenly) between the publisher for the synch rights and the master holder for the, er, master rights.


Sometimes, the publisher will want to do the deal, but the label won’t. In this case — as you saw, for instance in I am Sam, where the publisher for the Beatles cleared the synch rights for the song, but the label wouldn’t make a deal for the master usage — the producers used different masters (i.e. they had artists cover the songs).


It doesn’t work the other way; if the publisher won’t grant the synch license, the party is over - this is why producers go to publishers first: they’re the dispositive party.


Importantly, in the US, when the Ad or TV show or Movie is publicly performed on TV (i.e. it’s broadcast), a performance royalty is generated for the writer and publisher of the song (often the same person). The performer (i.e. the person on the master) sees none of this performance royalty. Do note, that no performance royalty is generated from public performance in movie theaters, as they are (wink, wink, nod, nod) exempt from paying public performance royalties.

Additionally, in 1995 Congress enacted the Digital Performance Right in Sound Recordings Act (DPRA). This act — in conjunction with the Digital Millennium Copyright Act of 1995 — created a performance royalty obligation to be paid by webcasters whenever they broadcast a ©’d work over the Internet. Significantly, this performance royalty compensates the performer and content owner (i.e., label) of the work. The publisher and writer are still compensated when their ©’d works are publicly performed online via the Performance Rights Organizations (ASCAP, BMI, SESAC), but now — due to the DPRA — the featured performer and content owner are also compensated. This brings the US in line with the rest of the world (with some glaring exceptions, like North Korea) with respect to paying a performance royalty to both the writer and performer. Of course, to date (though efforts are afoot to change this) this only applies to public performance when it is digitally transmitted; for terrestrial radio (i.e. FM/AM), only the writers are paid a performance royalty. SoundExchange collects from webcasters on behalf of their registered members. SoundExhchange's authority to collect for/distribute to these SRCOs comes from a designation by the Librarian of Congress and the US © office.

So, when you’re watching Hulu and an ad comes on with music underneath that has been licensed by a producer of the ad from a label/artist, both the performer and the writer of the song are paide a performance royalty.

Please note, the above really only scratches the surface with respect to licensing. There are, of course, complexities. For instance, when doing a deal for a TV show, you also have to factor in home video, etc.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally. 

[source]

http://www.artistshousemusic.org/articles/

The Magic of Copyright

John Snyder

The following article is the beginning of your journey to self-reliance. Understanding your rights under the Federal copyright statutes is the first step towards creating revenue from those rights. In the articles that follow this, we will continue to drill down into the topic by exploring each right individually, its limitations and opportunities, how these rights can be made to produce income, and the agreements that govern those transactions. It’s a beautiful trip and you’ll love it, so, bon voyage! Feel free to comment and ask questions and tune in for our weekly webcast beginning at the end of August for more information and interaction.

-John Snyder

The Magic of Copyright

The magic of copyright is simple: you render an original work in a tangible form, that work is copyrighted. Under federal copyright statutes you have, at that moment in time, six exclusive rights that attach to that work that you own. (That’s assuming you haven’t already somehow managed to sign away your rights.) The words “original”, “work”, “tangible”, “author” have definitions, rules and exceptions, but it’s pretty simple really: if you made it up and you made it real by writing it down or typing it in or recording it, it’s copyrighted and it’s yours.

The first two of those six exclusive rights are the right to copy and the right to distribute. That makes you a publisher or a record company or both. The right to control the public performance of your music makes you a radio station. The point is this is something that just happened to you. You really don’t have a lot to say about it: you are a business whether you like it or not. You have then two choices, run your business responsibly and successfully or not.

The default position is “or not”. Do NOT let this happen to you! We call that the stupid switch! You must flip it off or you will always, I’m sorry to say, be on stupid. And nobody, not even your momma finds stupid illuminating.

“What about mailing my song to myself”, you ask. Do not mail it to yourself! That is stupid (check the switch!). About the only thing that can do for you is become evidence in a copyright infringement suit, which you can’t even initiate until you register your copyright with the US copyright office anyway! You want to mail it to somebody? Mail it to them!

Just do it: go to the copyright office (link) and register your work. (You can register a bunch of them on one form and save some money, since you’re broke.) You register to get the remedies for infringement and to be able to sue someone who’s used your stuff without your permission. You don’t register to get your rights, you already had those.

Got it? OK, you need to know generally more about “business” (can you read?) and specifically, you need to know more about how to make money from (i.e., monetize) the rights you have under copyright law. We’re going to tell you about that and we’re going to go over contracts, licenses, and agreements as well. Remember, the work is YOURS, so when you transfer it, license it, sell it, YOU are in control. If you have to make a bad deal because you need the cash or the exposure, at least you’ll know the trade-offs.

Our motto is: you didn’t know till we told you now we told you now you know. So, you’ll be hearing the phrase “now you know” a lot. What that means is: now you’re responsible; now it’s on you.

OK, I’m passing it on to George at this point, and he’ll take you through some specifics in the coming weeks. Remember this one last thing: copyright protection is in the Constitution of the United States, ratified by all thirteen original states in 1790. The roots of copyright go back hundreds of years before that. Article I of the Constitution lists the powers of the legislative branch of our government, of Congress. Protection of the creative work is one of the powers granted to the Congress. It comes right after the power to print money and before the power to declare war or sign treaties. THIS IS IMPORTANT! This means that your “work” is considered to be so valuable to the culture and the society that it is protected in the country’s founding document.

YOUR creativity is protected by the United States Constitution! You have the ability to create wealth from your imagination! And Federal laws give YOU exclusive rights that you can “monetize”. So, monetize them! You have great advantages as a musician, as an artist: you are naturally entrepreneurial, you understand method (you can create goals and make plans that achieve them – it’s call practicing!), and you can create wealth from your imagination. So, without even stirring a pot or buying a lottery ticket, you are a business, with assets that can generate revenue. That’s also called “rent money” and “food money”. How lucky are you? Now you know.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally. 

[source]

http://www.artistshousemusic.org/articles/

Understanding How to Profit from the Digital Performance Royalty

Introduction

As discussed in previous articles when an author creates an original work, and then “fixes” that work in a tangible medium (writes it down or records it), the author has created a copyright, and is granted six exclusive rights . Each right is important for different reasons, and each ties directly to potential revenue streams that are crucial for artists to understand in order to build sustainable business models around their creative output.

This article highlights an anomaly with respect to United States copyright law as it relates to the exclusive right to publicly perform copyrighted material (in particular, when your music is “publicly performed” – i.e.played - by AM and/or FM radio). The goals of this article are: 1. To increase awareness of the rules around this public performance royalty; 2. To provide suggestions on how artists can best focus their energies in the ever-evolving landscape.

The Exclusive Right to Publicly Perform a Copyrighted Work
When you compose a song and record it or write it down, it automatically gets protection under U.S. copyright laws. One of these laws states the no one else can “publicly perform” your song without paying you. As one example, the exclusive right to publicly perform a copyrighted work means that only the copyright holder of the song (the songwriter) may, for instance, play the song in a club. Additionally, it means that in order for a radio station to broadcast that artist’s copyrighted song, the radio station must have an agreement in place with the artist. Same deal if, for instance, a TV station airs a show in which a copyrighted song by the artist plays during, for example, the opening credits or in the background of a show.

AM/FM radio stations get the right to pay and publicly perform a song by paying a Public Performance Organization.

The Public Performance Organizations (PROs): ASCAP, BMI, SESAC
In order for the above to take place, clearinghouse agencies were created – that is, a place an entity can go that represents a whole lot of songwriters. In the United States, these agencies are known as Performance Rights Organizations (PROs). There are three dominant ones in the United States: ASCAP, BMI, and SESAC. Each do the same thing: they act on behalf of the songwriters who have affiliated with them, and issue licenses to those who wish to broadcast (i.e. publicly perform) these artists’ copyrighted songs. Further, these PROs distribute the money they collect in license fees from these broadcasters to their affiliated writers whose copyrighted songs are publicly performed.

For instance, club owners pay the PROs a flat annual license fee that allows artists to perform copyrighted music in their club. This is how any artist is able to stand up on any stage (assuming the owner of that stage has paid the PROs their license fee) and sing a Bob Dylan song. The PROs use a variety of methods (including visiting clubs) to determine which songs are being publicly performed.

In a similar fashion, the PROs monitor radio play (via playlists submitted by the radio stations) and music played on TV (via “cue sheets” submitted by the networks) in order to determine which of the writers who have affiliated with them (i.e. the PRO) is having their copyrighted works publicly performed.

The United States’ Inconsistent Stance on Performance Royalties
Hopefully, to this point, this all seems (relatively) clear and logical. There is a wrinkle. Recall that for each song, there are two copyright holders – the songwriter is one, The second is the entity that controls the right to the actual recording of the song (traditionally a record label).

For all of the above, only one copyright holder gets paid: The Songwriter. This means, for instance, that every time Frank Sinatra’s version of Paul Anka’s song “My Way”* is played on radio, broadcast on TV (for instance, if it’s playing in a scene on a TV show), or (when he was still alive) performed by Sinatra in concert it is Paul Anka (and, assuming he has one, his publisher) who receives the public performance royalties from the PRO, and not Frank Sinatra.

It’s important to be clear here: Frank Sinatra, obviously, got paid a fortune when he performed in concert. However, in order for the venue where these copyrighted songs were publicly performed to not infringe upon the songwriters’ exclusive right to publicly perform their copyrighted works, they (the venues) have to pay a license fee to the PROs who represent the songwriters. Similarly, when Frank Sinatra’s records are played on the radio, it may increase sales, which results in Frank Sinatra’s estate earning royalties from the record label. However, Frank Sinatra (or his estate) don’t see a dime from the public performance of “My Way”; Paul Anka — via the PRO with whom he is affiliated, and who collects fees from the radio stations and pays out to its affiliated writers — makes money every time the song is played on terrestrial radio.

The disquieting detail is that every industrialized country except the United States has a public performance right that is paid to the Sound Recording Copyright Owner (typically, the label). This means that not only the writer, but also the label/performer gets paid when a song is broadcast on terrestrial radio or analog TV.

Further unsettling is the fact that when American-made music is played overseas, other countries collect royalties for it, but don’t pay American artists, because we don’t collect for artists here (only writers).

In the example above, if Paul Anka’s song “My Way” is recorded by Frank Sinatra, and the song is played on the radio in France, money is paid to a French PRO for BOTH the songwriter and the label/performer. The French collection agency then gives the U.S. PRO the money for the songwriter NOT for the label/performer. The U.S. PRO then gives a % of the money it collected to the songwriter.

Reforming the Performance Royalty
As you would expect, there are initiatives afoot to normalize the United States’ stance on public performance; most specifically, bill S. 379, the “Performance Rights Act.” Here [link: http://www.scribd.com/doc/29299229/Commerce-Department-Letter-on-Performance-Rights-Act] is a letter from Senator Leahy supporting granting copyright owners and performers a public performance right when their sound recordings are transmitted by over-the-air-broadcast stations.

The debate — as all are — is complicated, and opponents to the bill argue that such legislation would essentially put those terrestrial radio stations who are still playing music out of business or push them towards talk radio.

The important distinction is that it is only AM/FM terrestrial (i.e. non-digital) broadcasters who are exempt from paying a public performance royalty to copyright owners and featured performers of sound recordings. If music is played on Pandora, satellite radio, via a net simulcast etc, both the songwriter and the label/performer get paid.

The Digital Performance Right in Sound Recording
The Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998 (DMCA) granted a performance right in sound recordings for certain digital and satellite transmissions. This means, generally, that whenever a song is streamed (in a non-interactive manner — i.e. without the listener’s ability to rewind, etc.) online, not only must the writer of the song be paid, but also the Sound Recording Copyright Owners (SRCO) and the performer.

The PROs we’ve already discussed (ASCAP, BMI, SESAC) continue to collect fees from these web broadcasters on behalf of their affiliated writers when a song is streamed online, but now another organization, SoundExchange [link] collects on behalf of Sound Recording Copyright Owners (SCROs) and featured and non-featured artists.

When viewed in the appropriate light of inexorable technological trends and innovation, what all of this means is that, irrespective of what happens with the Performance Rights Act, an increasing amount of music is being streamed online and over digital TV (i.e. cable, Satelite), while a decreasing amount of music is broadcast over terrestrial radio/analog TV.

Strategy for Artists
As artists, it is therefore imperative that you both understand the rules governing the public performance of your music, but also take the necessary steps to ensure you are paid when your exclusive copyrights are used in this fashion.

These specific steps are to affiliate with the PRO of your choice (ASCAP, BMI, or SESAC), and to register with SoundExchange (free).

My hope is that, in so doing, you will receive the maximum amount possible each time your music is used. In order for this to occur you must be the writer, the performer, and your own label. So, get out there, start your own label, and get your music — the music you made, and control — used, and make some money so you can make more music!

Question on Copyright Law and Sync Licenses

I’m planning to start a record label and publishing company with a partner and I’m just trying to find some clarity on this subject.

 I’m trying to find out exactly who licenses our product.  If we promote our music, and say someone contacts us wanting a sync license/master use license - how is the licensing handled exactly? 

Do we just agree to let them use our music over the phone and then they negotiate the license through a PRO?  Or does the PRO handle ALL licensing from top to bottom without even contacting us?  Also, does the PRO negotiate all the rates for us?  Or do (we) the publisher have to draw up an actual paper contract license to fax and etc?  We’re rather confused about the ways of licensing.

I ask because we’re rather inexperienced as far as negotiating rates - we wouldn’t even know where to start if we have to do it ourselves just starting a company.  However, we don’t want to sound like we’re completely incompetent if a music supervisor contacts us over the phone and tells us to give them rates.

 (Our main focus is working to license music out for film/tv/etc).

 We’d really appreciate if you could break this down for us.

Thank you!

 Answer:

Basically, it’s all about copyright law.  When create an original work and “fix it” in a tangible form, you receive a copyright as if by magic and also six exclusive rights under federal copyright statutes, including the right to copy, distribute and public perform the work.

There are eight categories of protected work, including songs and sound recordings, and there are six exclusive rights, but it’s those first three rights that are most pertinent to your question.

As the author if the work, you may “authorize” someone else to use your “rights” of copy, distribute, publicly perform.  You can license your right to publicly perform your song to ASCAP and BMI and they will collect your money for you, and keep a small percentage for their effort.  All TV, radio, schools, clubs, venues, etc. pay a bulk licensing fee to all them to publicly broadcast music.  The rates vary depending on use and reach.  Basically, PROs collect for the public performance on the radio.

If someone wants to use your song on a record, you (or your publishing company - the entity to which you assign your rights under copyright statutes) can grant them a mechanical license for that use.  The statutes allow anyone to use a previously publishing song on an audio recording WITHOUT permission as long as the user pays the statutory rate of 9.1 cents per unit manufactured for each song. That’s called a compulsory license.

For use in a film or visual, that’s a synchronization license and that’s a negotiated license.  The owner author can set whatever fee he or she wants to set.  The use of the sound recording is another license:  a master use license.  That too is a negotiated license.

YOU as the copyright holder would issue these licenses.  There are examples on the Internet and in various books.  Or you can make a deal with the Harry Fox Agency to license your songs to record companies, any users, really, including sync licenses.  

Anyway, these can be rather complicated little agreements so if you should consult an entertainment lawyer before you start signing over your copyrights.  Remember, everyone who got ripped off in the music biz did it in writing.

Check out “Music, Money, Success” by Todd and Jeff Brabec, “The Musician’s Legal & Business Guide” by Halloran (and a bunch of Beverly Hills lawyers”, or just about any copyright book.  We use “The Music Business Handbook” by Baskerville (9th edition) in our intro classes.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally. 

Good luck!

John Snyder

When a Song is Used in a Motion Picture…

QUESTION: When a song is used in a motion picture. I know the writer is paid a flat fee. So is that a negotiated fee, or a flat fee. Also, when a song is also used on the soundtrack for a motion picture, do they use the regular statutory rate for those songs to pay out royalties..?

ANSWER: The owner of the song (would be the songwriter unless you’ve transferred your copyright to another) has the right to determine the fee and use of their songs when they are used with visuals.  The compulsory license for audio recordings does NOT apply.

You may charge whatever you can get the user to pay, and they MUST have a license from you, the owner of the song, to use the song.  Then there’s the sound recording.  The film production co will have to obtain a master use license for the use of the recording.  now, if they produce the recording themselves, and they’ve negotiated a sync license with you, they do not have to pay a third party for the use of the recording (only the musicians and producers involved in making the recording).

Your question tries to distinguish between a flat fee and a negotiated fee but that’s the same thing.  A flat fee just means that it’s a one time payment that has been negotiated.  

The amount of the fee is determined by various factors, like the budget and reach of the film and the use of the song in the film (credits and repeated uses pay more).

You can find out more about this on the ascap.com site.

Good luck!

John Snyder

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally. 

Breaking Benjamin Dispute Lays Bare Dirty Laundry Behind The Scenes Of Record Label Deals

However, due to a legal dispute involving the band Breaking Benjamin, that band's full contract was filed as part of the court documents in the case (embedded below). We asked Fascogna if he'd like to analyze the actual contract, and he did us one better, and did a full analysis of the lawsuit itself as well. He also created a new video -- embedded in the story, about the role of trademark for bands. Enjoy. 

Breaking Benjamin’s internal struggle has left the group in shambles. I promise this will only get worse, but, in the interim, the dispute has me mildly wanting more. Chalk this up to the fact that I didn’t know people cared so much about the group, nor did I know they had so many albums out on the market, which is partially the cause of their internal problems to begin with.

Internal disputes are commonplace in the music industry, and honestly I’m thankful -- otherwise I would be an unemployed attorney. Call it snooping but I decided to poke around into the vast 98+ page suit/band agreement/and recording contract. It’s a fascinating soap opera. The dispute is filled with villains, heroes, bad actors, flashes of comedic relief, and loads of drama. Before breaking down the intricate legal components, it’s important to first understand the players, potential players, and the significant roles each play.

Benjamin Burnley – The group’s front man put the entire controversy in motion. Essentially, Burnley was under the impression he fired fellow band members Aaron Fincke and Mark Klepaski. Stated in their Band Agreement, any internal dispute would be handled via arbitration. If you don’t know what this means, arbitration is a method of settling disputes outside of court. This route is extremely common in the music industry because arbitration records typically remain private unlike court documents that can be publicly accessed. Burnley, via his legal counsel Brian Caplan and Jonathan Ross, requests to activate the arbitration clause in the band agreement and demands an award of $250,000. More on the amount later.

Aaron Fincke and Mark Klepaski, through counsel, James Oschal of Rosenn, Jenkins and Greenwald LLP, claim the Band Agreement is null and void therefore making an arbitration clause irrelevant. They request that the Pennsylvania state court hear the case and dismiss the validity of the arbitration clause. At this time, they are not seeking any monetary damages. Believe me that’s coming.

Hollywood Records – Currently they are a non-factor but I promise they’ll become the star of this dispute in no time. Basically all the label wants is to release the album(s) allegedly agreed upon between the label and band. Sideline this thought for a minute as it will become a significant legal stance later on.

The time frame of events will also prove to be vital in this case.

• January 2009 – Burnley, Fincke, and Klepaski enter into a Band Agreement.
• March 2010 – Breaking Benjamin allegedly enter into a Recording Agreement with Hollywood Records.
• March 2010 – Burnley allegedly communicates to band members, Fincke and Klepaski, along with the band's attorney, Nick Farrara, that he didn’t want to proceed with the Recording Agreement.
• March 2011 – Burnley dismisses Fincke and Klepaski from the band.
• June 6 2011 – Burnley seeks arbitration and a remedy of $250,000 from Fincke and Klepaski.
• DATE UNCLEAR ON COURT DOCUMENTATION – Fincke and Klepaski request a declaratory judgment from the Pa. State Court.

There three principal legal issues in the dispute:

1. Is the Band Agreement valid because the Band Agreement essentially dictates who entered into a contract with Hollywood Records? Meaning – Did Breaking Benjamin as a collective group OR as Finckle and Klepaski acting as individuals and unauthorized representatives of the band sign the Recording Agreement.
2. Who owns the Breaking Benjamin trademark? The trademark dictates how the band proceeds with future recordings.
3. What happens to the Hollywood Records Agreement?
4. Bonus: Because label haters probably want me to dissect the Recording Agreement into a bloody carcass, due to the cyber-bullying and arm-pulling, I’ll reluctantly do so. However, I warn you that during this time of the legal dispute, the Recording Agreement is somewhat irrelevant as the Band Agreement and the Breaking Benjamin internal drama must unravel first.

THE BAND AGREEMENT: 

Every major recording artist has an internal Band Agreement (if they don’t, they should). The agreement dictates how overall band business is handled in times of dispute, fund disbursements, etc. Courts traditionally look no further than the Four Corners Rule, meaning they only look at what’s taking place in the four corners of the legal document (i.e. – Band Agreement) that the group collectively signed. Sometimes the group’s intentions allude to one conclusion but the actual language interprets otherwise. In the Breaking Benjamin Band Agreement, it’s unmistakably clear that Burnley started the group, is the creative force behind the group and essentially dictates the group’s decisions. Evident in the agreement, Burnley can dismiss a fellow band member for “just cause.” This is interesting. This type of language is fairly standard in a “Band Agreement” but not so standard in a “Partnership Agreement.” These are two different agreements entirely. Some groups operate as a partnership, meaning each active member plays an equal role. For example if the group is made up of four members, each member essentially has a 25% stake and so forth. Here, through legal arguments stated by both sides, they use the language interchangeably – Band agreement and Partnership agreement. If the document is indeed a Partnership Agreement, this entire dispute could quickly end because Fincke and Klepaski, acting as a majority vote, could enter into band decisions on behalf of the group without Burnley’s authorization. Oddly enough, this legal stance hasn’t been made nor does it appear it’s going to be. The big city attorneys must know something I don’t. Because we’re led to believe the group has entered into a Band Agreement (as opposed to a Partnership Agreement), the contract’s four corners language will run the show. 

The contract clearly states that Burnley can dismiss members with “just cause,” that disputes will be addressed via “arbitration” and that any “departed member has no right to ‘ID Materials License Terms’ nor shall they have the right to utilize the group trademark” as addressed in Section 5. Lastly, “all decisions must be collectively made,” which makes it clear we’re dealing with a Band Agreement. A Partnership Agreement would allow for a majority vote, not collective. In addition, apparently back when the group was friends, there is some language anticipating Burnley’s poor health and slew of unstable disorders and how it could affect the band’s income stream. For example, the agreement would become invalid should Burnley decease or become disabled prior to any studio album completion. Personally speaking, this is where the drafter of the contract went wrong because they didn’t identify what happens if this clause is activated, rather it just states that the contract becomes null and void. 

Because the agreement in place appears to be a Band Agreement (not a Partnership Agreement), (a) no departing member has rights to a trademark, (b) all band decisions must be decided upon by all three members, and (c) Burnley could dismiss members with “just cause.” Therefore, since all three members agreed to these terms it appears (1) Burnley’s request for arbitration is valid, (2) Breaking Benjamin (as a group) didn’t enter into a Recording Agreement with Hollywood Records because Burnley, allegedly, didn’t agree to the terms, and (3) the dismissed members couldn’t enter into a Recording Agreement on Breaking Benjamin’s behalf because they weren’t authorized to make this decision. 

WHAT HAPPENS TO THE TRADEMARK - 

Because a band isn’t worth too much money if they don’t have a trademark, who will own the Breaking Benjamin trademark after this entire ordeal? For example, should it be Burnley, he could then hire new band members and continue touring, recording, promoting, etc. under the name Breaking Benjamin. Should it be Fincke and Klepaski, they may/may not be able to hire new members and keep operating under the name Breaking Benjamin without the group founder Benjamin Burnley. Trademark ownership is no joke because depending upon who legally filed for the mark (i.e. – the name on the registration form with the USPTO) and what the agreements say about the rightful owner(s), somebody will have to stop using the mark. Trademark ownership essentially means leverage and control because whoever owns the mark has both. To explain this further, I've created this video, which breaks down why trademark is important to music professionals. Section 5 of the Band Agreement states: “Fincke and Klepaski hereby irrevocably assign to Burnley any and all rights, title and interest that Fincke and Klepaski may have in the band name “Breaking Benjamin” as well as any and all logo(s) and/or trademarks in any manner collected thereto.” Therefore, regardless of how the court interprets the contract (i.e. – Band Agreement v. Partnership Agreement), Fincke and Klepaski have assigned their rights to the Breaking Benjamin trademark to Burnley. Further meaning Burnley can be the only surviving member of Breaking Benjamin as Fincke and Klepaski, whether rightfully dismissed from the group or not, can NOT use the name Breaking Benjamin. If future albums are to be released, Benjamin Burnley must be on the album and must authorize the use of the trademark. 

WHAT HAPPENS WITH HOLLYWOOD RECORDS? 

The recordings being disputed are (1) a remake of “Blow Me Away”, and (2) the “Rarities” project. In order to be granted permission on these additional projects, Hollywood Records would have to secure the authorization of all the active members of Breaking Benjamin. Under this agreement, just as the previous Hollywood Records agreements with the group, Hollywood Records would be granted universal territorial rights with the recording, along with various other legal nuances such as trademark use, etc. Universe? Hollywood Records clearly anticipates a large expansion project. Oddly enough “universal territorial” rights are somewhat standard, as this got started when some overly cautious attorney was concerned about radio signals being sent out into outer space and who would legally own the music. Yes, I’m serious. Personally, I like to protect my clients throughout the galaxy just in case there is some intergalactic distribution system established during my lifetime, but that’s neither here nor there.... 

The Hollywood Records contract proves pretty standard for a Recording Agreement. They scream big numbers, make grand promises, etc., all while the actual language of the contract slowly chips away at Breaking Benjamin’s potential income stream. 

Just as my earlier video states, you’ll see huge reductions with recording costs (Section 5), Reserves deductions, Advances, etc.. Honestly, the amount being disputed, $250,000, could actually be $0, because Breaking Benjamin has yet to make money off the new recordings, rather than just racking up debt. Within the Recording Agreement, which was originally entered into by Burnley and Hummel (a former band member), then later amended to include Fincke and Klepaski, “Hollywood shall NOT remix, edit, or materially alter without the BANDS consent.” This clause would leave one to believe Hollywood Records illegally released the new version of Blown Away, because they didn’t have the band's consent; and because they didn’t receive authorization from Breaking Benjamin’s entire band (i.e. – Burnley, Klepaski, and Fincke), they couldn’t release the “Rarities” project. Clearly this is the end of the story, right? Wrong. I anticipate Hollywood Records is getting revved up. 

Carefully drafted and tactfully scattered throughout the Recording Agreement, Hollywood has built in an insurance policy to assure they don’t get left out in the cold. Individually, these clauses may not mean a lot but you have to piece them together like a puzzle to see the major effect. The Recording Agreement, much like all major label agreements, has four really sneaky language elements that assures they’ll never get screwed over:

1. “In our reasonable effort”
2. “Unique Services”
3. “Notice must be mailed”
4. “Members will be joint and severally liable”

This doesn’t appear to be alarming on its face, right? Unfortunately all of these statements pack a heavy legal punch. “In our reasonable efforts” is what’s referred to as cautious language. Let’s decode that statement to find its real meaning - “we’ll try really really hard (subjectively speaking).” Apply this language to the Hollywood contract and they have essentially agreed to make their best efforts to agree to the terms with Breaking Benjamin. They may not have to fulfill the contract, but they’ll try really really hard. Ouch, this is getting shaky already. 

How about “unique services?” Contractually speaking, Hollywood acknowledges that the band is unique (i.e. – there is nobody else in the entire universe like them). What a great stroke of ego for a band, but what this means is if the group can’t carry out their contractual obligations due to the fact that they are so “unique,” the label will be unable to recover from such damages because they can’t find a comparable group which could mitigate the damages. Oh no, this is getting worse. 

Perhaps the two silent killers come with the last two clauses. “Notice must be mailed” means that if a group can’t perform their obligations, they must provide the label with a written notice. Here, based upon their previous contracts with Breaking Benjamin, Hollywood Records could take the stance that they were under the impression they could move forward on additional projects plus they were under the impression based upon Fincke and Klepaski statements that they could do so. Because no formal notice was mailed, no breach occurred. Right? It’s a legal argument, which may play out soon enough. Finally, buried in the contract Hollywood states that each member will be held jointly and severally liable. This means that if one party has done something wrong, they will all be held accountable. This alone will hang the group. 

Breaking Benjamin has some tough times ahead. As the courts will likely determine Fincke and Klepaski were rightfully dismissed from the group, that’s also about the time Hollywood Records will come calling with their own suit about Breaking Benjamin. At least that’s what I would do if I worked as counsel for Hollywood. Unfortunately Burnley, Fincke, and Klepaski will have to reunite to defend the case. It’s beside the point who’s a member of Breaking Benjamin and who isn’t at that point, because in Hollywood Record’s eyes, authorization by one member means authorization by all. If Fincke and Klepaski agreed to the project, so did Breaking Benjamin. The group will be sued and then Fincke, Klepaski, and Burnley will once again turn to the Band Agreement to determine who’s paying who.

When To Never Grant “Universal” Rights

BY 

M FRASCOG

Is it realistic to negotiate territorial rights in music contacts?  Seeing almost all agreements contain language granting “universal rights” it appears stripping the territory down to specific regions is an unrealistic request.  To the contrary, there’s a time and a place to allow universal control so always negotiate the terms.  Surely you’ll be laughed out of the room but the request to limit territorial rights is no more outlandish than the request to grant them.   Despite the fact this is a standard term, it’s essential to understand the proper situations when to allow such widespread control.

It’s delivered in a simple package: “Artist, herein stated, grants Company rights within the territory also known as The Universe.”  This little clause packs a massive contractual punch.  As an artist, if you ask why the territory is “the universe” you’ll probably be ridiculed by the party who issued the contract.  Just know it’s all a ruse.  You’ll hear things like “It’s standard”, “all of our contracts are universal”, “you must know much about the music industry”, blah blah blah. The reality is a majority of these people have no idea why contracts use “universe” as the territory but you’re about to.  Back in the early early early days of Recording Agreements, it became highly debated what would happen to music in space.  Not kidding…..stay with me.  The thought process was that radio signals might have the ability to penetrate “unknown areas” such as outer space.  Spawned from an abundance of caution, label attorneys began to draft the territorial rights as “universe” in case future technology and radio waves hit territories not stated in the contract – hence “universal” rights were born.  Because labels used the terminology, managers, agents, publicists, etc. followed suit even though it didn’t necessarily apply to these professions.  Ridiculous? Yes. Personally, I believe universal rights to be limiting.  For my clients, I go well beyond the unknown, asking for territorial rights in Realm of Mordor on Mt. Doom.  You’ve got to gain control beyond the universe and The Shire to assure middle earth.  Call me old fashioned.

Even though it’s ridiculous, unfortunately it’s the starting point.  Despite this it’s important understand the appropriate circumstances to fight it and grant it.  For starters, bands should never allow for universal rights with managers and agents unless the situation calls for it as identified below.  Not a knock on managers or agents, rather it just doesn’t apply in a blanket format.  Typically managers are centrally located (North America, Europe, Asia, etc.), therefore meaning their expertise are centrally located as well.  If they don’t have expertise outside of their location it’s unreasonable to give away rights elsewhere in the world.  Example – a band from New York who has success in North America and Australia shouldn’t sign universal rights away to a booking agency in NYC if that booking agency has no professional penetration in Australia, otherwise the band has limited their potential expansion in Australia.  Scenarios in which bands may grant universal rights with management and agents is when their using a well know individual/firm that has a global experience or reputation.  With labels, never sign over universal rights unless the label has specifically identified a global marketing plan or a royalty structure for international territories.   Both of these areas are clearly defined in major label contracts but typically remained unaddressed in indie label contacts.  If unaddressed, address it.   Regardless, one tactic to use while negotiation territorial rights is to deny the Company universal rights.  You’ll lose, but fight like hell to keep it in the agreement knowing you’re going to lose it in the end.  Essentially territorial rights become a throw away negotiation point.  If you make the Company think it’s a big negotiation element even though it’s not, demand changes in return.  “Fine, if we grant you universal rights, we must receive a 1% royalty in return.”  Quid Pro Quo at it’s finest.  Use it.  Got more questions on how to fight territorial rights? 

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally. 

[SOURCE]:

@Frascognamusic or mff@frascognalaw.com