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    May
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    2016

    Representing Creatives – In Life and After

    Lawyers with the knowledge and skill to help artist-clients bequeath their copyrighted works help ensure that things of beauty bring joy to many generations.

    Elizabeth T. Russell

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    Copyright law calls anyone who creates copyrightable work an “author.” So whether you represent a sculptor, an architect, a composer, a choreographer, a filmmaker, or a writer, they’re all “authors.”

    They’re also humans.1 As such, they are individuals who might have estate planning, marital property, and general legal needs just like everyone else. Because their assets include copyrightable work, though, they aren’t exactly like everyone else. This article discusses practice tips and issues unique to the representation of authors.

    Intellectual Property: Intake and Inventory

    Intake. Many people will find this surprising, but it’s true – the term intellectual property is relatively useless. This discussion (about representing authors) focuses on copyright. Copyright, however, is but one category of intellectual property. Others are trademark, patent, trade secrets, publicity rights, and, perhaps, virtual property. Intellectual property is just an umbrella under which these various categories reside. Each category is distinct; each is governed by completely different legal principles. Failing to be specific about the particular category at issue thus renders a reference to “intellectual property” essentially meaningless and causes confusion.

    Elizabeth T Russellcom beth erklaw Elizabeth T Russell, Pace 1986, is a solo practitioner in Middleton. Her primary practice areas are copyright, trademark, and arts law. She is a past chair of the State Bar of Wisconsin Sports and Entertainment Law Section and is admitted to practice in New York, Connecticut, and Wisconsin. She is the author of Arts Law Conversations: A Surprisingly Readable Guide for Arts Entrepreneurs (Ruly Press, 2014).

    Many clients don’t understand the differences among the various kinds of intellectual property. So merely asking them what they have, during the intake process, can yield inaccurate information. For example, a client might tell you with absolute certainty that she has created volumes of copyrightable work – not realizing that copyright does not protect the work she is describing. Best practice, therefore, is to design intake forms and interviews to elicit facts (not conclusions) about the client’s creative work, so that you – and not the client – can determine which type of intellectual property is at issue.

    Inventory. Good recordkeeping is essential to effective representation. As early as possible, encourage the client to create and maintain an accurate inventory of work. You’ll need it for any kind of estate planning or marital property representation. Often, the client has no inventory and cobbles something together after the fact, when memories have faded and records have vanished. If you can avoid that too-common scenario by encouraging good inventory practices, the representation will be a better experience for everyone.

    Commercial inventory packages abound. If you’re not using a commercial product, an author’s copyright inventory should include (by way of example only) the title and the nature of the work (for example, literary, pictorial, musical), referencing, ideally, the applicable category of authorship under section 102(a) of the copyright law.2 (If the author has composed thousands of musical works, should each be a separate entry on the inventory? Yes!)

    The inventory should note when and where the work was created and when and where it was first published. (Note that “publication” has a specialized meaning in copyright law.3) If other people contributed authorship to the work, that fact is important information for the inventory. All outstanding licenses, transfers, and copyright registrations affecting the work should be mentioned, along with instructions for locating the original documents. The author’s affiliation, if any, with a collective rights management organization should be noted.

    Copyright Tips

    This article is not a primer on copyright law, but a few concepts that figure prominently in the representation of authors are highlighted below.

    Duration. Copyrightable work first published in the United States before 1923 is now in the public domain. As for all other work, you must undertake investigation to ascertain whether copyright remains in force, and if so, when it will expire. This is particularly significant for any work created before 1978. At the moment, copyright for post-1977 work (created by a known individual author) lasts for the life of the author plus another 70 years after the author’s death. In the case of work made for hire, anonymous work, and pseudonymous work, copyright lasts for a fixed term of 95 years from publication or 120 years from creation, whichever expires first.

    The important take-away is this: these rules are subject to change at any time, by act of Congress. And indeed they have changed often. It is essential, therefore, to determine which rules of duration apply to each particular work of authorship. Do not assume that today’s rules apply to every work in your client’s portfolio.

    Musical Works and Sound Recordings. Look closely at section 102(a)(2) and (a)(7) of the copyright law. Curiously, copyright law does not define “musical work” but it does define “sound recording.” A musical work, essentially, is a composition. It’s what the composer wrote, and it’s usually something you can depict on score paper. Sound recordings are “works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work.”4

    Here’s why this is important: a musical work and a sound recording are separate works of authorship, each with its own separate copyright. Accordingly, they are separate individual assets. If you represent a musician, it’s highly probable that the client holds both musical work copyrights and sound recording copyrights. You need to identify and separately deal with each.

    Copyright versus Copy. When one acquires copyright for a work of authorship, one acquires a “bundle” of six exclusive rights.5 This bundle of rights (the copyright) is one asset. The physical media in which the work of authorship is embodied is called a “copy” (or, in the case of sound recordings, a “phonorecord”).6 That physical copy or phonorecord (as opposed to the copyright) is a completely separate asset.7

    Estate and marital property documents must separately account for – and may separately dispose of – the intangible copyrights and the tangible copies and phonorecords. For example, a painter may wish for her son to receive the physical painting but for her daughter to own and control the copyright. In such case, the son inherits a piece of canvas. The daughter controls use, licensing, and everything else that flows from the copyright’s bundle of rights.

    Tangible versus Intangible. Wills often contain a standard clause disposing of the testator’s “tangible personal property.” The copies and phonorecords are tangible personal property and will pass under that standard clause. But the copyright itself will not. Copyright (the bundle of rights) is personal property.8 It is, however, intangible personal property. In the absence of a specific bequest or a clause disposing of intangible personal property, therefore, the copyright will pass unintentionally with the residue of the estate. Chances are, that is not what the testator would have intended.

    The Copyright Termination Right

    If you’re inclined to skip this section, don’t. The copyright termination right is little known among lawyers who don’t practice in copyright law and can throw a wrench into estate and marital property plans. We have to set the stage historically, but it won’t take too long!

    Before 1978, copyright duration was divided into two possible terms: an initial term of 28 years and then, if properly exercised, a renewal term of another 28 years. The rationale for this scheme was that if an author transferred copyright to a publisher or other transferee on conditions that turned out to be unfavorable, the author would have a chance to renegotiate for the renewal term (when, presumably, the author would have developed greater bargaining power). The actual result, however, was that licensing deals started requiring up-front assignment of rights through any renewal term, thus defeating the objective of providing authors with an “out.”

    In 1978 the law changed to eliminate renewal terms and, instead, provide for a single term of duration (as mentioned earlier, that single term is currently [life of the author] + [70 years]). The 1978 amendments also introduced the “termination right” as a new way to accomplish the original intent of renewal terms: to provide authors with an opportunity to recapture their rights from those with greater bargaining power.

    Estate and marital property documents must separately account for – and may separately dispose of – the intangible copyrights and the tangible copies and phonorecords.

    As applied to post-1977 works, the law now states the following: “In the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination[under a very long string of conditions].”9

    Breaking that down: the termination right does not apply to transfers of copies, phonorecords, or other tangible assets; the termination right does not apply, either, to transfers of copyright by will. However, any lifetime transfer of copyright automatically activates the termination right. This includes any lifetime transfer to a trust. And once the termination right has been activated, there’s no going back.

    Once a lifetime transfer activates the termination right, the owner of the termination right (either the author or the author’s statutory heirs10) is empowered to exercise the right and terminate the lifetime transfer. There are many conditions and technical requirements for exercising the right.11 Once properly exercised, however, all rights that were covered by the lifetime transfer revert to the author or other persons owning the termination interest. In other words, the author or the author’s statutory heirs reclaim the copyright.

    Here’s why this is important for estate planners and marital property lawyers.

    • Once the triggering lifetime transfer has been made, and the termination right activated, the client’s intent regarding eventual copyright ownership might be impossible to achieve. For example, if an author wants copyright to pass to a nonstatutory heir, but a lifetime transfer has occurred, the author’s statutory heirs hold the termination right and the power to reclaim copyright for themselves. The statutory heirs might or might not choose to exercise the right, making it impossible to predict who, ultimately, will end up with the copyright.

    • It might be necessary to keep an estate open until all termination windows have closed. (The right can only be exercised within a prescribed window of time).12

    • There can be gift-tax consequences of activating the termination right by making a lifetime transfer and thus bestowing the benefit of the right onto the statutory heirs.

    • The termination right is, itself, a separate asset that might not qualify for the estate-tax marital deduction (because of possible classification as a terminable interest).

    • Outstanding termination rights reduce the value of the copyright.

    • Disclaimers won’t work, because the termination right is inalienable and cannot be waived.13

    If a lifetime transfer of copyright has already been made, the lawyer should identify the likely owner(s) of the termination right, calculate the applicable termination window, address any tax issues, and ascertain whether the client’s intent is likely to be achieved. If the author is contemplating but has not yet made the lifetime transfer, the author should be counseled thoroughly about possible effects on estate and marital property plans.

    Conclusion

    If you represent authors, copyright is key. Identifying the author’s assets, classifying them appropriately, and taking steps to achieve the author’s intent all require careful consideration of copyright law and provisions that govern these very specific types of assets. Be especially wary of transferring copyrights into trusts, during life. If copyrights or tangible copies comprise a substantial part of an author’s estate, the author should consider appointing an “artistic executor,” or someone with applicable expertise, to assist the personal representative, trustee, or fiduciary. Keep good records. Plan ahead.

    Do what artists do: think outside the box.

    Endnotes

    1 “The U.S. Copyright Office will register an original work of authorship, provided that the work was created by a human being.” Compendium of U.S. Copyright Office Practices § 306 (3d ed.).

    2 17 U.S.C. § 102(a).

    3 17 U.S.C. § 101.

    4 Id.

    5 17 U.S.C. § 106.

    6 17 U.S.C. § 101.

    7 17 U.S.C. § 202.

    8 17 U.S.C. § 201(d)(1).

    9 17 U.S.C. § 203(a).

    10 17 U.S.C. § 203(a)(2).

    11 17 U.S.C. § 203(a)(3), (4).

    12 17 U.S.C. § 203(a)(3).

    13 17 U.S.C. §203(a)(5).




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