John J. Tormey III, Entertainment Lawyer

The Written Agreement Amongst Band Members: Written By New York Entertainment Attorney And Music Lawyer John J. Tormey III, Esq.

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.

As a music lawyer and entertainment attorney, I have seen references to the above-mentioned “Written Agreement Amongst Band Members” document, as both “Inter-Band Agreement”, and “Intra-Band Agreement”. Rather than initiate any argument with grammarians, bands, groups, record labels, or other music lawyers or entertainment attorneys as to which term is correct - although “intra” is probably technically closer to the mark - let’s simply call this all-important document the “Agreement Amongst Band Members”; or, “AABM”, for short. (As for the grammarians who want to debate the use of “amongst” versus “among”, well... you can discuss this amongst yourselves!)

Now, on to the issues of interest to musicians, groups, and bands who might be reading this article, and of interest to this New York music lawyer and entertainment attorney who is writing it.

“If one is a musician playing in a multi-member band or group, is an AABM needed?”

Quoth the music lawyer: “Absolutely, yes”.

“Should the band or group consider closing the AABM, prior to seeking to place the band’s demo CD recording with A&R (artists and repertoire) executives at record labels?”

Again, to quote the entertainment attorney: “Absolutely, yes”.

There are some parallels to an agreement amongst band or group members, on the one hand, and a prenuptial agreement between prospective spouses, on the other hand. Music lawyers, and Dom Rel (domestic relations) lawyers as we were taught to call them in New York, might have more common ground than they would initially think. But I actually find the case for having an AABM for band members or group members more compelling than the argument for having a pre-nup. A marriage should be a function of love. A band or group formation, on the other hand, and even the recording and distribution to record label A&R executives of a demo recording, from the music lawyer and entertainment attorney perspective, is often a commercial exercise - with perhaps some attendant art and love themes to it playing in the background. The shopping of one’s band’s demo CD to A&R executives at record labels is a commercial exercise and a business proposition. Group business initiatives should not be made absent prior clear written agreement between co-venturers.

Written agreements should be considered required for any collaborative commercial endeavor between two or more people, including demo-shopping and A&R inquiries to record labels – from the music lawyer’s perspective regarding bands and groups, from the entertainment attorney’s perspective regarding other artistic co-ventures, or from any lawyer’s perspective. One should use one’s discretion as to whether or not to skip the pre-nup. After all, the prospective spouse could get insulted, if he or she originally thought the other spouse was in it for love only. But from the music lawyer and entertainment attorney perspective, no band member should skip the AABM if the group member takes his or her band, group, or career seriously, or takes the A&R demo-shopping campaign to record labels seriously. And from the music lawyer and entertainment attorney perspective, no one band or group member should ask another to leap into a state of blind trust, in default of a good operative document – with respect to a record label A&R demo-shopping campaign, the signing of a contract, or otherwise.

If the band or group formation is not viewed as a commercial exercise, then I suppose the band members can simply agree on a handshake, and then gig for free in the subways. The band or group could also in theory strike a handshake deal as to who gets paid what in the event of an A&R record label demo-shopping success. However, as an entertainment attorney practicing in New York, the majority of bands or groups that I hear from, are concerned about their financial, as well as their artistic, futures. And the handshake deal between band or group members regarding performances or A&R record label demo-shopping may well what keeps legions of music lawyer and entertainment attorney litigators in business, arguing between themselves about things that have gone south.

Many musicians in bands and groups are trying to find a way to become economically self-sufficient on music alone, through A&R demo-shopping submissions to record labels or otherwise, while preparing to quit their “day jobs”. This result is not easy to achieve. And, this result is even harder to achieve without careful prior planning and drafting regarding the band or group as a commercial venture, through use of a music attorney or entertainment lawyer. An AABM is one music lawyer planning-tool which is essential for the band - and one which can also become virtually worthless if “left to a later day”. If the demo-shopping A&R record label response comes in as hoped, the group or band may be too busy and distracted dealing with Sony and Warner and the music lawyers, than to deal with each other at that point. And, as in the case of the pre-nup, later on down the road if things don’t work out, band or group members typically won’t sign post-honeymoon after the relationship has gone sour. Most music lawyer entertainment attorneys have seen numerous bands and groups break up. The time for the AABM is now not later.

No music lawyer, entertainment attorney, or anyone else wants to be required to negotiate and close the AABM once the band or group is already successful, or once the band or group has already been furnished with a proposed recording agreement as a result of demo-shopping or other A&R or record label project placement initiatives. The optimal time to close the AABM is to do so between the respective music lawyer or entertainment attorney counsel while the group or band is just being formed or while it is still struggling – and prior to the record label A&R work and demo-shopping. Period.

When business partners or stockholders agree amongst themselves in connection with a business formation, they do so in one or more signed writings. So, too, the music lawyer or entertainment attorney suggests, should it be with band and group members as well. A good AABM should be firm enough to recite the substance of the agreement between band or group members at the moment, but should also be flexible enough to contemplate future changes, such as changes in personnel and in artistic direction. A good AABM should provide guidance on the administration of the A&R record label demo-shopping initiative itself. Once in place with signatures and countersignatures, a music lawyer or entertainment attorney upon client instruction can amend the AABM to contour to the band’s or group’s developmental changes as they might materialize, including edits in response to record label A&R demo-shopping eventualities.

If every marriage were a true 50/50 proposition, I suppose that one could say that no pre-nuptial agreements would ever be needed. Similarly, if every business partnership were truly 50/50, maybe a written partnership agreement could be viewed by some as a waste of time. But the fact of the matter is, the percentages of investment and return are seldom exactly identical amongst all co-venturers. A music lawyer or entertainment attorney will opine that the same is true for bands and groups. Seldom, for example, does each band or group member bear an equal burden with respect to record label A&R project placement and demo-shopping work. And seldom, for example, do each of four band or group members actually write precisely 25% of each song, and even if so, how would you measure it and prove it? Word-count? Note-count? Beat-count?

In the average four-person band or group, each member may play a different instrument. Some may have been in the group or band longer than others. Some may be older and more experienced in the business of music. Some may have more experience with A&R executives, demo-shopping, and dealing with the record labels. Some may have, or think they have, “connections” to clubs and record labels, where other group or band members don’t. Some group or band members may have more free time to invest in the running of the band’s business such as the A&R and record label demo-shopping work, while others may be working two day jobs. Some group or band members may be able to afford to pay for the demo CD’s intended to be furnished to the A&R personnel and record labels. Others may not. Some group or band members may want to talk to a record label or music lawyer or entertainment attorney. Others may not.

And finally, perhaps most importantly, some band members may have more of a hand in the writing of the words or the music of the group’s original songs appearing on the demo CD’s intended to be heard by the record label A&R executives, than other band members. This potential disparity is probably the best reason for creating the AABM for the band or group as early as possible and prior to the demo-shopping record label A&R campaign, as a music lawyer or entertainment attorney will tell you.

A good AABM drafted by a music and entertainment attorney takes into account all of these types of factors, and more. Put conversely, if none of these band-related questions came up while one was putting together one’s AABM with one’s music lawyer or entertainment attorney, then the resulting document is probably not worth very much today for the purposes of keeping the group harmoniously together. An AABM is a forward-looking document wherein the music lawyer-draftsperson continually asks “What if...?” about multiple foreseeable band and group scenarios based upon past entertainment law experience, including the potential outcomes of an A&R record label demo-shopping submission campaign.

A music lawyer and entertainment attorney like myself will also tell you that the real value of a contract - any contract, including the AABM - is as a dispute-resolution and dispute-avoidance tool. In other words, the band or group members should tackle the likely-occurring and even possibly-occurring long-range events that might come up in the band’s lifetime, fight over and resolve them now, and then put the results on paper – with respect to the A&R record label demo-shopping submission campaign, and otherwise. Better to do it now, than pay music lawyer entertainment attorney litigators thousands upon thousands of dollars to do it in the courts or arbitration hearing rooms later, at dramatic expense to the band or group or its individual members.

Oftentimes, the music lawyer or entertainment attorney discovers, band or group members want to send out their demo’s to record label A&R executives but just “don’t want to think about” what would happen, for example, if the band’s bass player departs to raise kids in Maui, or if the group’s singer-songwriter front-man just up and leaves to join the Air Force. But if the other band or group members at all value their investment of time, sweat, energy, and money in the band including the demo-shopping record label A&R exercise, then they should know and have fully thought-through - in advance - the answers to these types of questions.

The music lawyer or entertainment attorney should be told these answers for the purposes of the drafting of the AABM. Who in the band or group owns and administrates the copyrights in the songs? Who in the band or group is responsible for storing the masters? Who in the band or group decides which A&R executives and record labels to contact during the demo-shopping exercise, and when? Who in the band or group decides what the demo intended for record label A&R personnel should sound like? Look like? Which band member or band members has/have final say in the hiring and firing of a manager? If the group breaks up, which member or members, if any, may keep using the band’s name, and who if anyone benefits from the past demo-shopping A&R record label inquiries if they happen to come to fruition after the break-up? And these are just some of the questions that should come up. There are many more, and part of the job and function of the music lawyer and entertainment lawyer is to come up with them in the first instance by way of prediction.

Every band’s situation is different, every group is different, and every record label A&R demo-shopping campaign is different. The lists of questions to contemplate and discuss with the music lawyer or entertainment attorney will therefore be as different as there are different band personalities, different group members, and different demo’s. It is true that the band should be better off, if a music lawyer or entertainment attorney prepares the AABM and then handles the A&R record label demo-shopping work. In a perfect world, all band or group members would be separately represented by a different music lawyer or entertainment attorney, and the resulting AABM document would therefore have more presumptive fairness than if but one band or group member had counsel. It is also true that while anyone can in theory try to submit a demo or soundtrack reel to a record label or elsewhere - a non-lawyer lay-person cannot practice music law, entertainment law, or any law or form of law for that matter, without a license in the United States.

But should all these considerations prevent a band or group from taking their first shot at creating a good AABM – particularly prior to the first demo-shopping A&R campaign initiated to record labels? Absolutely not. The band should at least try to resolve amongst its own members, the answers to all of the “what if” questions that will likely come up in the life-cycle of any band. The band or group can try to resolve these questions on paper. Thereafter when affordable, one of the band or group members may decide to consult with a music lawyer or entertainment attorney to review and revise the band’s starting-point document – and perhaps then enlist the same music attorney for the demo-shopping record label A&R inquiries as well. Typically, this inquiring group-member turns out in practice to be the band member with the most at stake in the outcome.

Conversely, the band members need to be aware that one entertainment attorney may well not be able or be allowed to represent all group members simultaneously, even in the context of demo-shopping record label A&R work, due to concerns regarding possible conflicts of interest - especially if different band members have different percentage investments at stake in the band’s commercial endeavors, but even if otherwise. The music lawyer entertainment attorney should speak to that issue as and when it comes up.

There should be plenty of time in the future for the band or group to consider the technicalities regarding rules of attorney-client music lawyer representation, and the question of “who represents who?”, although it is wise to tackle and conclude these analyses prior to any record label demo-shopping and A&R work being undertaken. And when the time for entertainment lawyer representation is right, these are serious threshold questions that should be taken seriously. Besides, no music lawyer, entertainment attorney, or other lawyer would take on a client for record label A&R demo-shopping work or other work, without first carefully evaluating these types of issues, as well as asking a lot of additional questions about band and group inter-relationships himself or herself on his or her own.

In the meantime, all bands and groups, whether on the cusp of their first demo-shopping or record label A&R campaign, or otherwise, should carefully deliberate upon the question of what written agreement should be drafted and negotiated amongst the band or group members, and how and when the music lawyer or entertainment attorney can be used to put the signed and countersigned document in place. Doing so now, in the present tense, could save a lot of heartache and expense down the road in the future, could enhance the demo-shopping A&R campaign to record labels, and could actually end up keeping the band or group together.

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My law practice as a music lawyer and entertainment attorney includes all transactional and advisory matters relating to groups and bands, including recording agreements, A&R (artist & repertoire) matters including demo project placement work or “demo-shopping”, publishing, copyright registration, licensing, distribution, and all other matters in the fields of video production, film, performances, touring, and entertainment generally. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1636 Third Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

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The Written Agreement Amongst Band Members

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Clearances For Name And Likeness, Location License, And Life-Story Rights In Motion Pictures And Television: Written By New York Entertainment Lawyer And Film & Television Lawyer John J. Tormey III, Esq.

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer

John J. Tormey III, PLLC

1636 Third Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

Clearances For Name And Likeness, Location License, And Life-Story Rights In Motion Pictures And Television: Written By New York Entertainment Lawyer And Film & Television Lawyer John J. Tormey III, Esq.

An entertainment lawyer handling production and rights motion picture work can spend much of his or her time fighting off detractors. One example? It is actually quite common for individuals who incidentally appear in a film or television shot, to later sue or otherwise claim upon the production company or network, asserting violations of their personal or proprietary rights. It is also fairly common for those that believe their life-story in whole or in part has been used or referenced in a film or TV program, to put an adverse life-story rights claim on the motion picture project, even if the reference is but a passing reference. When such a claim is long on bluster but short on underlying legal merit, it is known as a nuisance claim, or “strike suit” if and once litigated.

Entertainment lawyers with a motion picture practice in the U.S. who have worked in Business Affairs or other in-house positions at entertainment companies, as well as most all entertainment lawyer litigators at outside law firms, will confirm all of this. I have served as both, prior to my solo law practice here in New York. One thing you learn quickly in this line of work, is that, while some claims are valid, more people claim more rights in more situations than actually have them.

Film and television producers usually complain to their own entertainment lawyers that the commencement of such a rights nuisance claim is a sleazy thing to do, and the sign of someone watching too many motion pictures with too much time on his/her hands. Often true. Yet the film or TV production can be out time and money by the time that same complaint can be made to the person with the power to dismiss the claim – that is, the judge in the applicable court system. The film or TV producer’s feeling is understandable, unless the person incidentally depicted in the motion picture program is truly ridiculed or hurt in some way. But many Americans use litigation as a sport, and greed is a powerful motivator. There is an entire section of the motion picture entertainment insurance industry and an entire cadre of in-house entertainment lawyers devoted almost exclusively to extinguishing rights nuisance claims and strike suits, often but not always through what is known as errors and omissions (E&O) insurance. Without insurance, even a strike suit can sometimes close a company down.

The first thing an entertainment lawyer does when fielding an adverse film or television claim – life-story, likeness, location, or otherwise - is evaluate the apparent sense and sensibility of the rights-complainant. So, let’s assume that the distinction has already been made between an unstable unfortunate soul who thinks that every successful Hollywood motion picture director is stealing his persona and private thoughts with implanted electrodes and radio waves, on the one hand – versus a person whose full name, likeness, and/or life-story in whole or in part actually appears in an exhibited film or television property. Let’s assume that the entertainment lawyer has reviewed the claimant’s identity with his or her film or TV producer client, and it turns out that the claimant has certain rights and is sane, stable, sympathetic, aggrieved – and unsigned. If the person’s name or likeness or life-story is recognizable in the film shot or in the television script, and no written “clearance” (to wit, signed “license”, “release”, or “agreement”) is in place, then the entertainment lawyer tells the producer of the film or TV production that rights may have been violated thereby and the motion picture production is that much more at risk.

Period.

In reply to the next likely question, the entertainment lawyer next opines that the dollar value at law of the risk or exposure to the rights violation claim cannot be accurately quantified, unless and until the issue is litigated between the aggrieved claimant on the one hand, and the film or TV company (or its insurer) on the other hand.

Period.

These decidedly-fuzzy motion picture law principles even apply to film and television location licenses and related rights, albeit under different legal theories than those corresponding to names, likenesses, and life-stories. As an example, the entertainment lawyer might next ask the motion picture producer to consider the Hollywood Chamber of Commerce that historically has licensed uses of the famous “Hollywood” sign located up on Beachwood Canyon. The Chamber has, at least in the past, asserted rights to claim and sue for unauthorized uses and depictions of the “Hollywood” sign itself - even though the sign is comprised of but a bunch of letters, and rights to letters of alphabet themselves should in theory be public domain and not owned by anyone. In any event, reasonable minds in the film and TV businesses and elsewhere, including as between entertainment lawyers themselves, have differed in the past as to whether there is legal support for these types of “location” rights claims in motion picture practice. Rather than risk it, though, a careful film producer, or television producer or executive producer, usually “clears” depicted locations rather than pay the entertainment lawyer to tell him to clear those (possible) rights post facto after the film or TV project is in the can - or else the producer moves the motion picture shot to a different location if the location license rights “clearance” is too expensive. This is particularly true of the film or TV executive that knows he or she must keep the company’s errors and omissions (E&O) insurance carrier happy and motivated to provide and not cancel coverage. Much of an entertainment lawyer’s detractor-fighting discussed above, includes the creation of alliances with the E&O carriers and their counsel. E&O carrier counsel are sometimes even more rights-sensitive and risk-averse than the motion picture studio or television network Business Affairs in-house counsel are, themselves.

Sure, a film or television producer - particularly one without an in-house or other entertainment lawyer to advise him/her, or an E&O carrier to chastise him/her - can try and fly under the radar on the “incidental use” issue, and hope no rights-violation claims occur. Many producers in fact do try this. But seemingly-incidental shots and uses cannot necessarily be safely assumed to be immune from rights claims. And Murphy’s Law will tell you that someone whose life-story truly appears in a picture in whole or substantial part, will always see it and recognize it. Some of these seemingly-innocuous motion picture uses can in fact turn out to be legally-actionable, and there are plenty plaintiff-side entertainment lawyer litigators out there who seem to be hungry to take on such causes. Even if not legally-actionable, a nuisance claim or lawsuit based on location, likeness, or life-story rights against a film or TV company can still be predicated upon an incidental-shot use in a motion picture, as a practical matter. Even with no supporting legal merit to it, it can still become an expensive headache. In other words, the law is what you read in the casebooks and statutes, but life is what happens out on the street, and rights are often what even undeserving allege until extinguished in a litigation.

Moreover, most of the good film and TV rights and “clearance” stories, though perhaps bandied-about as anonymous and sanitized hypotheticals, never make it to the casebooks. Most of these types of motion picture rights and clearance claims are never litigated, much less revealed by the publication of judicial opinions thereafter. From a film or TV entertainment lawyer defense counsel’s perspective, it is often worth paying the motion picture rights claimant US$2,500 or more, just to go away. Oftentimes, the deductible on the errors and omissions (“E&O”) insurance policy for a film can be at least US$10,000. Sometimes the deductible is even more. (Life-story encroachments and celebrity likeness rights violations can be far more expensive). Therefore, in practice, in the case of an incidental use “passing shot”, the film or TV company, with or without its entertainment lawyer’s advice, may simply pay the rights claimant. The producer may elect to do this rather than (rightfully or wrongfully) even report the claim to the E&O insurance carrier, much less seek coverage on it. Moreover, the E&O carrier will typically not defend against the motion picture rights claim and staff it up with its own defense-counsel entertainment lawyers, unless and until the suit is actually commenced or filed. So it is often the film or TV producer’s or distributor’s exclusive headache unless and until the lawsuit is filed.

The New York statute on point for those in the film and television industries and other media and entertainment industries as well, is New York Civil Rights Law, Sections 50 and 51, a statutory lattice which should be deemed relevant to both name & likeness and life-story rights matters:

http://public.leginfo.state.ny.us/LAWSSEAF.cgi?QUERYTYPE=LAWS+&QUERYDATA=@SLCVR0A5+&LIST=LAW+&BROWSER=EXPLORER+&TOKEN=38256299+&TARGET=VIEW

http://public.leginfo.state.ny.us/LAWSSEAF.cgi?QUERYTYPE=LAWS+&QUERYDATA=$$CVR50$$@TXCVR050+&LIST=LAW+&BROWSER=EXPLORER+&TOKEN=38256299+&TARGET=VIEW

http://public.leginfo.state.ny.us/LAWSSEAF.cgi?QUERYTYPE=LAWS+&QUERYDATA=$$CVR51$$@TXCVR051+&LIST=LAW+&BROWSER=EXPLORER+&TOKEN=38256299+&TARGET=VIEW

If anyone thinks that an individual can’t sue for an unauthorized use of his or her likeness in a motion picture, then that skeptic should read that statute and the cases decided under it. California (Civil Code Section 3344) and most other American states have law similar to New York’s Civil Rights Law 50/51, on the books.

http://codes.lp.findlaw.com/cacode/CIV/5/d4/1/2/2/3/s3344

“50/51” and “3344”, are the bread and butter of entertainment lawyers. A private person usually sues a film or TV company on this type of likeness claim, under his or her “right of privacy”, whereas a celebrity usually sues the motion picture company on this type of likeness claim under his or her “right of publicity”. And the best way to evaluate a life-story rights claim is to navigate through a morass of prior case law, or else, better yet, have your entertainment lawyer do it for you.

It’s rough out there. One should obtain signed written rights clearances from those whose names, likenesses, or life-stories recognizably appear in one’s motion picture or TV production. Even a location-depiction claim could tie up a film or television shoot in a worst-case scenario, including that familiar case that many entertainment lawyers have dealt with on an incoming cell phone call when the location-landlord shows up on set 15 minutes before cameras roll and demands more money. When that happens, count your blessings, though. After all, the film likeness rights claimant or life-story rights claimant often doesn’t approach the production company until after the film is in theatrical release, when it is too late to cut the film’s negative.

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My practice as a film lawyer and entertainment attorney includes film and television rights, life-story rights, clearances, location agreements, licensing matters, and other aspects of motion picture development, production, exhibition, and distribution. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1636 Third Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

Page:

Clearances For Motion Pictures

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Sunday, December 30, 2012

Publishing And Digital And Electronic Rights - Part I: Written By New York Entertainment Attorney And Publishing Lawyer John J. Tormey III, Esq.

Law Office of John J. Tormey III, Esq. – Entertainment Attorney

John J. Tormey III, PLLC

1636 Third Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)
jtormey@optonline.net

Publishing And Digital And Electronic Rights - Part I: Written By New York Entertainment Attorney And Publishing Lawyer John J. Tormey III, Esq.

The following publishing industry article addresses some of the legal issues arising for publishing lawyers, entertainment attorneys, authors, and others as a result of the prevalence of e-mail, the Internet, and so-called “digital” and “electronic publishing”. As usual, publishing law generally and the law of the digital right and electronic right specifically, governing these commercial activities, has been slow to catch up to the activity itself. Yet most of the publishing industry “gray areas” can be resolved by imposing old common-sense interpretations upon new publishing lawyer and entertainment lawyer industry constructs, including the digital right and electronic right, and others. And if after reviewing this article you believe you have a non-jargonized handle on the distinction between “digital right” and “electronic right” in the publishing context, then I look forward to hearing from you and reading your article, too.

1. “Electronic Right[s]” And “Digital Right[s]” Are Not Self-Defining.

All publishing lawyers, entertainment attorneys, authors, and others must be very careful about the use of jargon - publishing industry jargon, or otherwise. Electronic and digital publishing is a recent phenomenon. Although as a publishing lawyer and entertainment attorney and unlike some others, I tend to use the phrase “electronic right” or even “digital right” in the singular number, there probably tends to be no single consensus as to what constitutes and collectively comprises the singular “electronic right” or “digital right”. There has not been sufficient time for the publishing, media, or entertainment industries to fully crystallize accurate and complete definitions of phrases like “electronic publishing”, “web publishing”, “electronic right[s]”, “e-rights”, “digital rights”, or “first electronic rights”.

These phrases are therefore usually just assumed or, worse yet, just plain fudged. Anyone who suggests that these phrases alone are already self-defining, would be wrong.

Accordingly, anyone, including a publishing lawyer or paralegal representing a book publisher or entertainment lawyer representing a studio or producer, who says that an author should do - or not do – something in the realm of the “electronic right” or “digital right” because it is “industry-standard”, should automatically be treated with suspicion and skepticism.

The fact of the matter is, this is a great era for authors as well as author-side publishing lawyers and entertainment attorneys, and they should seize the moment. The fact that “industry-standard” definitions of the electronic right and digital right have yet to fully crystallize, (if indeed they ever do), means that authors and author-side publishing lawyers and entertainment attorneys can take advantage of this moment in history.

Of course, authors can also be taken advantage of, too – particularly those not represented by a publishing lawyer or entertainment attorney. There is a long and unfortunate history of that happening, well prior to the advent of the electronic right and digital right. It has probably happened since the days of the Gutenberg Press.

Every author should be represented by a publishing lawyer, entertainment attorney, or other counsel before signing any publishing or other agreement, provided that their own economic resources will allow it. (But I am admittedly biased in that regard). Part of the publishing lawyer and entertainment attorney’s function in representing the author, is to tease apart the different strands that collectively comprise the electronic right or digital right. This must be done with updated reference to current technology. If your advisor on this point is instead a family member with a Smith-Corona cartridge typewriter or a Commodore PET, rather than an entertainment attorney or publishing lawyer, then it may be time to seek a new advisor.

Even authors who cannot afford publishing lawyer or entertainment attorney counsel, however, should avoid agreeing in writing to give broad contractual grants to publishers of “electronic publishing” - or the “electronic right”, or “electronic rights” or “digital rights”, or the “digital right”. Rather, in the words of “Tears For Fears”, the author and author counsel had “better break it down again”. Before agreeing to grant anyone the author’s “digital right: or “electronic right”, or any elements thereof, the author and his or her publishing lawyer and entertainment attorney need to make a list of all the possible and manifold electronic ways that the written work could be disseminated, exploited, or digitally or electronically otherwise used. Notice that the author’s list will likely vary, month to month, given the fast pace of technological advancements. For example, these kinds of questions can be considered by the author and publishing lawyer and entertainment attorney alike:

Electronic Digital Right Question #1, Asked By The Publishing Lawyer/Entertainment Attorney To The Author: Can the work be published in whole or in part on the Internet? In the context of an “e-zine”? Otherwise? If so, how? For what purpose? Free to the reader? For a charge to the reader?

Electronic Digital Right Question #2, Asked By The Publishing Lawyer/Entertainment Attorney To The Author: Can the work be disseminated through private e-mail lists or “listservs”? Free to the reader? For a charge to the reader?

Electronic Digital Right Question #3, Asked By The Publishing Lawyer/Entertainment Attorney To The Author: Can the work be distributed on CD-Rom? By whom? In what manner and context?

Electronic Digital Right Question #4, Asked By The Publishing Lawyer/Entertainment Attorney To The Author: To what extent does the author, himself or herself, wish to self-publish this work, either before or after granting any electronic right or any individual “electronic publishing” rights therein to someone else? Will such self-publication occur on or through the author’s website? Otherwise?

Electronic Digital Right Question #5, Asked By The Publishing Lawyer/Entertainment Attorney To The Author: Even if the author does not self-publish, to what extent does the author wish to be able to use and disseminate this writing for his or her own portfolio, publicity, or self-marketing purposes, and perhaps disseminate that same writing (or excerpts thereof) electronically? Should that be deemed invasive of, or competitive with, the electronic right as otherwise contractually and collectively constituted?

The above list is illustrative but not exhaustive. Any author and any publishing lawyer and entertainment attorney will likely think of other elements of the electronic and digital right and other uses as well. The number of possible uses and complexities of the electronic right[s] and digital right[s] definitions will increase as technology advances. In addition, different authors will have different responses to the publishing lawyer and entertainment attorney, to each of the carefully-itemized questions. Moreover, the same author may be concerned with the electronic right in the context of one of his/her works, but may not care so much in the context of a second and different work not as susceptible to digital right exploitation. Therefore, the author must self-examine on these types of electronic and digital right questions before responding to the author’s publishing lawyer or entertainment attorney and then entering into each individual deal. Only by doing so can the author avoid the pitfalls and perils of relying upon lingo, and relying upon someone else to dictate to them what is the electronic right or digital right “industry standard”. As the publishing lawyer and entertainment attorney should opine, “There is no such thing as ‘industry standard’ in the context of a bilaterally-negotiated contract. The only standard that you the author should be worried about is the motivational ‘standard’ known as: ‘if you don’t ask, you don’t get’”.

Finally, the author should be aware that while the electronic right, digital right, and components thereof can be expressly granted, they can also be expressly reserved to the author, by a mere stroke of the pen or keystroke made by the publishing lawyer or entertainment attorney. For example, if an author wants to expressly reserve the “portfolio uses” mentioned in Electronic Digital Right Question #5 above, then the author should ask his or her publishing lawyer or entertainment attorney to clearly recite this reservation of the author portfolio electronic/digital right in the contract, and leave nothing to chance. In addition, if the author has some negotiating leverage, the author, through the publishing lawyer or entertainment attorney, may be able to negotiate the “safety net” of a “savings clause” which provides words to the effect that: “all rights not expressly granted to publisher, be it an electronic right or digital right or otherwise, are specifically reserved to author for his/her sole use and benefit”. That way, the “default provision” of the contract may automatically capture un-granted rights including any electronic or digital right for the author’s later use. This publishing lawyer and entertainment attorney drafting technique has likely saved empires in the past.

2. Publishers and Entertainment Companies Are Revising Their Boilerplate Agreements, As We Speak, In An Effort To Secure The Electronic Right[s].

It is well-known and should come as no surprise that right now, as we speak, publishers and their in-house and outside counsel publishing lawyers and entertainment attorneys are furiously re-drafting their boilerplate contracts to more thoroughly capture the digital and electronic right – that is, all of an author’s digital and electronic rights. The typical publishing agreement drafted by a company-side publishing lawyer or entertainment attorney will recite a broad grant of rights, then followed by a whole laundry-list of “including but not limited to” examples. If the author receives such an onerous-looking rights passage from a publisher or the publisher’s publishing lawyer or entertainment attorney, the author should not be intimidated. Rather, the author should look at it as an opportunity to make some money and have some fun. The author can first compare the list suggested in Electronic Digital Right Questions #1 through #5 above, to the publisher’s own laundry-list and the author’s own imagination. Then, the author can decide which if any of the separate digital or electronic rights the author wants to fight to keep for himself or herself.

If the publisher tells the author to blindly subscribe to their entire digital or electronic right[s] clause (or clauses), then the author still has the ultimate leverage, which is to walk away from the proposed deal prior to signature. Of course, this strategic approach wouldn’t be advisable in most cases - unless perhaps if the author has other written offers from other publishers already on the table. However, an author shouldn’t be forced by any publisher or any company-side publishing lawyer or entertainment attorney to sign away the electronic right, digital right, or any other rights that the author would rather keep - particularly rights which the author never specifically intended to shop to the publisher in the first instance.

The author should keep in mind the psychology and motivations of the publishers and their publishing lawyer and entertainment attorney counsel when doing all of this. A Vice-President (or above) at the publishing company probably woke up one recent morning, and realized that his/her company lost a great deal of money on a particular project by not taking a prospective license or assignment of an electronic right or digital right from another author. The VP probably then blamed the company’s in-house legal department publishing lawyers or entertainment attorneys, who in turn started frantically re-drafting the company boilerplate to assuage the angry publishing executive and thereby keep their jobs. When in-house publishing lawyers, entertainment attorneys, or others engage in this type of practice (some may call it “drafting from fear”), they tend to go overboard.

Accordingly, what you will probably see is a proverbial “kitchen sink” electronic right clause which has been newly-drafted and perhaps even insufficiently reviewed by the company-side publishing lawyers and entertainment attorneys, internally and themselves - wherein the publisher will ask the author for every possible electronic and digital right and every other thing, including (without limitation) the kitchen sink. The only response to such a broad-band electronic right or digital right clause is a careful, deliberate, and methodical reply.

Using the approach outlined in Section #1 above, the author and the author’s publishing lawyer or entertainment attorney counsel must separately tease apart each use and component of the electronic right and digital right that the publisher’s broad-band clause might otherwise capture, and then opine to the publisher a “yes” or a “no” on each line-item. In other words, the author, through his or her publishing lawyer or entertainment attorney, should exercise his or her line-item veto. It’s the author’s writing that we are talking about, after all. The author should be the one to convert the singular “electronic right” or “digital right” into the laundry-list of electronic rights. That’s why I use the singular number when referring to “electronic right” or “digital right” – I like to let the technologically-advanced author have all the fun making the list. That way, too, the author can tell me what he or she thinks the phrases actually mean, and what the difference between the two meanings really is, if anything.

The next installment of this article, Part II, will - believe it or not - have a few words in defense of the publishers and the publishing lawyers that work for them!

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My law practice as a publishing lawyer and entertainment attorney includes the drafting, editing, negotiation, and closure of agreements including digital and electronic rights matters as they may arise therein, as well as in the fields of music, film, television, Internet, and other media and art forms. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1636 Third Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)
jtormey@optonline.net

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Publishing and Electronic Rights - Part I

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Trickle-Down: Written By New York Music And Entertainment Lawyer And Film Attorney John J. Tormey III, Esq.

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer

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Trickle-Down: Written By New York Music And Entertainment Lawyer And Film Attorney John J. Tormey III, Esq.

Reports in the press of contract disputes of years past - one favorite of this music, film and entertainment lawyer which is entitled “Dixie Chicks Sue Sony” - discussed another installment in the seemingly-perennial process of music recording artists suing the record labels with which they previously signed contracts. According to “Dixie Chicks Sue Sony”, the Dixie Chicks claimed that they were due at least US$4.1 million in royalties under their contract, from their music label. See, e.g.:

http://news.bbc.co.uk/2/hi/entertainment/1514747.stm

There is a commonality between this type of music dispute, and a “net profits” or “points” dispute in the context of film or television.

This music, film, and entertainment lawyer article, on the other hand, can offer no opinion on the merits of the Dixie Chicks litigation or contract, or opine with regard to the oft-wondered question in litigations of “which side is in the right?”. The statistical odds in any music, film, or other contract litigation about royalties, net profits, or “points”, are that the case will settle pursuant to a stipulation of confidentiality. Even if we learn of the details of the Dixie Chicks contract or the case’s resolution, we’ll therefore never really know for sure about how other similar music royalty or other contract disputes may have been reconciled. But notwithstanding the sizable amounts of money at stake, the Dixie Chicks-Sony case will likely be governed by certain principles common to all music and film industry contract disputes of its kind, as any entertainment lawyer like myself will tell you.

It really boils down to the timing of when a music artist, film talent, or other artist for that matter, is or should be paid under the contract. Though this may sound pedestrian, the equation is simple. The music and entertainment lawyer opines that, “Agreeing in a contract to be paid the bulk of one’s compensation later rather than sooner, increases the odds that one will be unhappy with the dollar amount of the royalty, “back end”, “net profits”, or “points” payment(s) at that later date”. Would the Dixie Chicks-Sony music contract litigation have never occurred, if the band’s paid-up-front recording advances had been larger? No one – not music and entertainment lawyer, and perhaps not even the parties to the lawsuit themselves - will ever really know that answer for sure, either.

But one cannot argue with the equation. As argued and hammered-out between music or other entertainment lawyer counsel in the contract negotiation, a larger up-front advance to the artist or group at least reduces the magnitude of later artist dissatisfaction with the “net profits”, “points”, or royalty stream of payments that follow. Arguably the Dixie Chicks would be in a better economic position, if suing under the contract for “only” US$1.1 million rather than US$4.1 million. The general form of equation holds up across film, television, publishing, and all other entertainment, media, and related realms. You are better off the earlier you are paid.

Holding aside the Dixie Chicks contract dispute example for a moment, the practical reality for other artists in the music industry is that they often sign record contracts - or now, 360 deals - without the help of a music and entertainment lawyer, before they become commercially successful. Every successful recording artist in the music industry has historically had a “breakthrough” album. What looks like a huge advance in a contract to a starving music artist in the context of an earlier record deal, may later look like a per diem to that same artist several years later after she or he has “made it”. And indeed, the record label’s frugality is understandable. Few if any economically-rational record labels are willing to plunk down a huge contractual advance for an artist who has yet to “make it” commercially, even if they have already retained the services of the best of music and entertainment lawyers. The music and entertainment lawyer can protect the artist. But under most all circumstances (apart from one great band and keyboard player that I know in Pittsburgh), the music and entertainment lawyer is not the one also making the music.

Again, these artist-payment contract disputes, in the music industry, film industry, and otherwise, are a function of time and timing. In this light, the Dixie Chicks are essentially fighting the economic identities that elements within the music industry unilaterally assigned to them several years ago, before they were hugely famous and successful. I do not know at what point in the timeline the Dixie Chicks may have retained high-powered music and entertainment lawyer counsel. But if the band was comparably famous and successful several years ago when they signed their deal, they would have likely commanded much more by way of sizable contractual advances, and would presumably thereby have been better secured against the risk of (alleged) back-end royalty payment deprivation by the record label.

It is ironic that within the past several months prior to the suit, the Dixie Chicks were the subject of a TV news magazine show, in which at least two relevant things were said: (1) one band member suggested that the ladies in the band might soon want to leave the music and entertainment business; and (2) one band member boasted on-camera about having procured the “best [recording contract] deal in Nashville”, or words to that effect. As far as the viewer of the TV program could see, no music or entertainment lawyer was physically present on-camera along with the ladies when these statements were made.

The thrust of the news magazine program was that even with “the best deal in Nashville”, (and presumably able music and entertainment lawyer counsel), an internationally-famous musical recording act had to endure a contractual situation wherein their label was accused of holding most of the money. According to press reports, the Dixie Chicks albums “Ready to Run” and “Wide Open Spaces” sold more than 19 million units, resulting in more than US$175 million in revenue. That approaches a quarter of a billion dollars, and would normally seem to justify the retention of music and entertainment lawyer counsel, at least for future deals. And yet the band’s lead singer dolefully attested on camera that she didn’t “even” have US$1 million in the bank herself at the time of the interview. She jokingly added that her label must have remodeled its Nashville offices based upon the success of her band’s music.

“Where is all of this money going?”, asks the artist-side music and entertainment lawyer, particularly. Well, we know or suspect where it is going. It is true that launching and promoting albums, and developing artists, requires major expenditures by the record label, likely in the millions of dollars. The label has to spend money to make money. The label has to spend money on its own music and entertainment lawyers to draft and negotiate the contracts, for that matter. The film studio or television production company will deploy similar rationales when defending “net profit”, “points”, or other back-end payment arrangements. But in the case of a successful recording and touring act, at least some of the incremental money above expenditures is going towards someone’s profit. It is reasonable to assume that the Dixie Chicks sued because they didn’t think they were receiving their fair share of same under the signed contract, and then convinced one or more music and entertainment lawyer litigators to same effect.

What logical deductions can we make from this case study, that apply to other individual musicians and bands – and perhaps to other media and art forms like film, television, and publishing in the context of royalties, “net profits”, and “points”? First, we need to back up, and keep in mind the first thing that music and other entertainment lawyers learn in practice. There are two principal ways for an artist to get paid for services under a contract: (1) “fixed compensation”, and (2) “contingent compensation”. Royalties are “contingent compensation”, and in the traditional but now fast-evaporating record contract model usually contingent upon either the manufacture or the sale of (non-returned) units. Strictly defined, “contingent” also means that it is possible they will never get paid. In film, television, and other realms, “points”, “back-end”, and “net profits” are all terms suggestive of forms of contingent compensation in a contract. One of my law professors back in the 1980’s was a well-known practicing entertainment lawyer with a music, film, and television practice, and much of our classroom workshops were comprised of haggling over proposed net profit definitions in draft contracts. The song remains the same today, in large part.

Music royalty calculations and film and TV “net profit” or back-end “points” definitions often take many pages of contract text to define - as a music, film, or entertainment lawyer will tell you. In defense of the companies, this verbosity is not always simply a product of the labels and studios and their entertainment lawyers so conspiring. Rather, the income streams in the music and film and TV businesses are truly hydra-headed and fairly sophisticated, and take some care and patience to define. As an entertainment lawyer I realize that this is all scant consolation to a screenwriter working through a studio’s or network’s 50-page written contract definition of “net profits” - or, in the music context, a recording artist immersed in arcane label record contract text purporting to delineate methods of royalty computation. Yet the complexity of calculating contingent compensation is a reality of the industry to which the film net profit or music royalty definition relates.

However, make no mistake about it. Accepting any form of contingent compensation, be it net profits, “points”, music royalties or otherwise, is tantamount to accepting someone else’s “trickle-down”, as any artist-side music and entertainment lawyer will argue. That is, the artist deputizes the company to collect the artist’s money, hold it (presumably) in trust, and then remit it in installments to the artist over time on a deferred basis. Do most people even do that with their own family members? As the music and entertainment lawyer will attest from observing others, and human nature and greed being powerful motivators that they are - the company will often thereupon pay the musical or other artist when it feels like it, and how much it feels like it, sometimes no matter what the contract says. And company “deductions” from the gross payment stream to arrive at “net” or “royalties”, can become extremely creative to say the least. Music and other entertainment industry audit contract disputes often revolve around the acceptability and fairness of such “deductions” from “net profits” or “points”, as fought and argued between entertainment lawyers on either side.

There are contractual ways for musical and other artists to even the proverbial scales of justice regarding their royalties, “net profits”, “points”, or other form of contingent compensation - typically best deployed through the artist’s entertainment lawyer. The most familiar method is the deployment of contractual “accounting” and “audit” clauses or provisions. The music or other artist can endeavor to contractually require the company to remit detailed written accountings of all revenues collected, and (carefully-circumscribed) deductions taken therefrom, on a regular basis. The clauses can be drafted by the artist’s entertainment lawyer. Accordingly, the music artist can also endeavor to reserve the contractual right to audit the books and records of the record company to ensure correct remittance of royalties. In the professional entertainment industry context, audits like this take place all the time, thus ensuring a livelihood for many entertainment industry accountants, entertainment lawyers, and others. It has been reported that wholly two-thirds of all entertainment industry audits result in findings of underpayments. Usually thereafter, the parties reach an economic settlement and move on with their lives. Sometimes, they don’t, and they litigate using music or entertainment lawyers instead. And as indicated above, the majority of litigations themselves settle before going to trial.

And there is hope. Industry custom, and film, music, and entertainment lawyer practice, does often contemplate that recording and other artists may also be paid on a “fixed” as well as on a “contingent” basis. In theory, the contractually-specified recording “advance” represents a fixed up-front payment to the music artist. But many - uh - “creative” record label forms transform the advance into a contingent payment as well, at least in part - this is sometimes referred to as the “recording fund” concept. Film producer compensation may be manipulated by the studio in similar fashion, by payment into a budget as opposed to payment directly to a producer’s bank account. For example, if the musical artist receives a US$300,000 “advance” under the contract, but must himself or herself direct-pay for the first album’s recording expenses out of his or her “own” pocket, then it would behoove the artist not to blow all US$300,000 on one weekend at Monte Carlo. In other words, the bulk of that US$300,000 may not in fact be a fixed payment to the artist, but instead may need to be applied to things like studio time and fees for session musicians. There are many artists out there who briefly thought they were rich for this reason, until the record contract was actually read and reviewed with their music and entertainment lawyer. Similarly, maybe the film producer should not write a check for that Lamborghini just yet, either.

What independent and unsigned artists will discover with or without a music or entertainment lawyer, particularly those music artists with talent, is that there may be plenty of folks along the road who will be willing to bargain for their exclusive recording services, promising no money in advance, but some fuzzy and inchoate “points” later on – with or without waving a proposed contract in front of the artist. This phenomenon is usually exactly what it sounds like - Wimpy’s “I will gladly pay you Tuesday for a hamburger today”. Would-be entertainment company impresarios try to play actors and writers like this, all the time, too.

Sure, the music company and its entertainment lawyer may have a valid point that the artist should be required to share in some of the down-side risk that the recorded finished product will not sell. But by that analysis, the artist-side entertainment lawyer must also conclude that the musical artist should be paid some fixed compensation or “earnest money” up-front, and then some additional contingent compensation later should the project succeed. Otherwise, what assurance does the artist have that this company is truly serious, committed to the music project, and acting in good faith? And arguably, the up-front fixed payment to the artist should be at least sufficient to enable the artist to retain music and entertainment lawyer counsel to draft and negotiate an agreement clearly specifying how the back-end contingent compensation should be paid, and what the artist’s accounting and audit rights should be. The same rationale applies for back-end “net profits” or “points” deals in the film and television realms. The up-front payment at minimum should be the glue that cements the contract.

It is astounding, however, how many artists, typically without music or entertainment lawyer counsel, will agree to be paid for their hard work and their music or other work-product by “points” or “net profits” or other “back-end” alone, perhaps commemorated with writing on the back of a cocktail napkin, or even (gasp) on a handshake alone. Why are these artists selling themselves so short? Perhaps because they are dying for their first big break, and perhaps because they do not have sufficient confidence in their abilities such that they believe that another valuable opportunity will come along. So they don’t enlist the help of a music or entertainment lawyer, and often sign bad contracts or otherwise agree to bad deals.

But the point is, there should be some minimum standard of decency, perhaps along the lines of a well-known California case on point, Foxx v. Williams, and a California statute on point, Civil Code Section 3423:

http://codes.lp.findlaw.com/cacode/CIV/5/d4/1/3/3/s3423

http://scholar.google.com/scholar_case?case=7532225346992492111&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Some deals are simply not worth an artist’s making. Some contracts are not worth signing, and perhaps shouldn’t even be allowed to be signed. Even a Santa Monica tenant desperate for a beachfront apartment should not move into a condemned premises where the floor is in danger of collapsing. And in that real estate situation, the local government - through the building code or equivalent - serves as “watchdog”, and prevents those tenants from striking those bad lease deals even if the tenant otherwise wants to do so. However, there is typically no governmental or other “watchdog” that prevents a music artist from entering into a bad recording contract, only perhaps case law and statutes that can be invoked only if the question is ever later litigated – and additionally perhaps, only an artist-side music and entertainment lawyer, if ever enlisted for the situation. Rather, as a practical matter, in the recording agreement context, the “watchdog” needs to be prospective and internalized. So too must the watchdog be internalized in every artist, in the film, television, and other industries and art forms. The music or other artist can only look to his or her common sense, and hopefully in some cases the artist’s music or entertainment lawyer’s experience and judgment - and this assessment must be made before signature of any contract.

In any case, the following is for certain. If a proposed music recording agreement with royalty covenants as exchanged between the music and entertainment lawyers does not contain these 3 components:

(A) an up-front advance “fixed compensation” payment to the music artist, (if only to show the company’s good faith, but sufficient enough that the artist will have been happy to have done the deal even if no back-end compensation is ever later collected by the artist); and

(B) an accounting clause; and

then, serious doubts should be raised as to whether the music artist should indeed look elsewhere for other career opportunities. At minimum, the proposed deal, as the Dixie Chicks might say, needs fixin’.

And the music artist should take heart, I suppose. Getting the “back-end payment”, “net profits”, or “points” bum’s contract rush from a company happens to music artists and other types of artists in all media and sectors, at all calibers and levels of experience and success, whether or not they are represented at the time by a music or entertainment lawyer. No matter how commercially-successful a musician becomes, there may always be doubts as to whether he or she is being royaltied or otherwise paid correctly – and sometimes it takes the music and entertainment lawyer litigators and the court system to scrutinize the contract to find out.

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My music and film law practice as an entertainment lawyer includes the drafting, editing, negotiation, and closure of all contractual matters relating to film, music, television, publishing, Internet, and all other media and art forms. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1636 Third Avenue, PMB 188

New York, NY 10128 USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)
jtormey@optonline.net