In artists’ battles to terminate, recover copyrights, $750-million Beatles catalog’s a legal behemoth

It’s a provision of copyright law that has proved advantageous for many—but not for Duran Duran. Now Paul McCartney, a titan of the music industry, has sent tremors through the business by asserting he soon will try it with his iconic tunes, which are worth tens of millions of dollars.

The music industry has braced for some time over what will happen with musicians’ termination notices and the subsequent recaptures of their compositions as permitted under the law. Some songwriters – who say they too were young, poor, naïve, and misinformed – insist they must seize back their copyrights after being taken advantage in earlier deals. Will this launch a new gold rush of innovative deal making early in careers? On the litigation front, will Sir Paul bring a new wave of lawsuits over copyrights to now-legendary works?

A long, winding road

McCartney’s tale is a winding one, like those of many young creatives. Paul McCartney and the Beatles lost control of their catalog due to various circumstances, and the rights to the works of McCartney and Lennon have ended up, after a trip through the hands of pop superstar Michael Jackson and his estate, in the hands of Sony/ATV.

McCartney, in January, took steps to get them back, filing a complaint for declaratory judgment against the music publishing company. The filing pits termination notices served by McCartney to Sony on the one hand, against, on the otherm the parties’ intent and the interpretation of their original music publishing contracts. McCartney has asked the courts to find that he is not breaching his contractual duty to Sony by exercising his termination rights under Section 203 of the Copyright Act of 1976.

Termination rights

As part of the 1976 act, Congress allowed authors to reclaim copyright interests they had assigned to third parties. Congress believed that such a “second bite at the apple” was needed to protect artists who had assigned rights to a publishing company, record label, or movie studio when they lacked the knowledge or bargaining power to make a fair deal.

The history of post-World War II popular music is rife with stories of young, struggling artists, who, on reflection, might believe they had been taken advantage of in their business dealings.  Victor Willis, the cop in the vintage band, the Village People, has argued that he unfairly lost his claims to a French publisher for some disco-era hits, including YMCA, as part of a complicated deal involving the songs’ translation. He since has sued and won to recover these rights, which have become ever more valuable now myriad venues play his tunes and touring groups reincarnate the Village People and cover their works.

But the various claims are affected by legal deadlines in the copyright act. In brief, some artists are covered under the Copyright Act’s Section 203, while others fall under Section 304. The distinction depends on when they granted rights to a third party. Those who granted rights before Jan. 1, 1978, can invoke Section 304 termination, while grants on or after that date will rely on Section 203.

Under Section 203, a grant can be terminated 35 years after their original agreement – meaning they could launch actions starting roughly in 2013. To do so, they have to send notice to the grantee. On the other hand, Section 304 grants can be terminated 56 years after their original agreements. Artists’ rights under 304 differ in that, unlike under Section 203, a grant made by an author’s heir may also be terminated under Section 304.

When the issue of copyright termination and reclamation reached, in timing terms, one of the key legal thresholds a few years ago, it further was enveloped in issues affecting the rights and streaming revenues for artists like The Turtles .

McCartney’s claims

Since McCartney had assigned rights in his songs before the Copyright Act of 1976, his action falls under Section 304. Sony, which, thus far, hasn’t contested the validity of his termination notices, also refuses to acknowledge that the claims will breach McCartney’s contractual agreements with the company.

McCartney’s case also may be affected by Sony’s recent win in a case involving Duran Duran. A British court held that Duran Duran could not exercise its Section 203 termination rights because contractual interpretation of original agreements between the band and Sony precluded it from doing so. That decision, due to its hearing in the United Kingdom and under British law, neglected the importance of termination rights under American law; it lacked testimony by expert witnesses on the subject.

In his complaint, McCartney focuses on the intent behind the copyright act’s termination provisions, stating that,“[t]ermination of the grant may be effected notwithstanding any agreement to the contrary.” His lawyers also note that the U.S. Court of Appeals for the Second Circuit has explained that “the clear Congressional purpose behind § 304(c) was to prevent authors from waiving their termination right by contract.”

As mentioned, the stakes in McCartney’s case may be among the highest in the industry: His claims affect classics like the songs I Want To Hold Your Hand and Love Me Do. The affected catalog is valued at approximately $750 million.

This also may be the reason why the entertainment lawyers involved will pursue resolutions other than through litigation. As many have pointed out, 2013 was a time when a significant number of artists filed notices they would terminate and seek to reclaim their musical copyrights. After the hue and cry subsided, news reports on actual litigation were far sparer than might have been anticipated.

That’s because rights holders and grantees may have renegotiated agreements that are beneficial to both the artists and the publishers-record labels. The companies do not want to lose superstar clients whose successes may actually fund long court battles over copyrights. For everyone involved, bracing for 203 or 304 terminations at the time of initial contract negotiation—as well as offering artists or writers incentives to keep their copyrights at the company long-term—may prove cheaper and sweeter than long bitter lawsuits.