Random Thoughts on Celebrity Estate Planning

                I have been thinking about death lately; not in any kind of a morbid way but simply because I have had a few friends pass away unexpectedly and because I have been helping clients deal with their loved one's estates.

                A number of things that I had thought about only theoretically have become really important.  For example, the whole concept of managing so‑called digital assets (which I wrote about here : http://tripaldredgelaw.blogspot.com/2012/06/digital-estate-planning.html)  took on new meaning in a case I recently looked into.  Without going into any of the details, I see how an awful lot of angst could have been spared if the decedent had left some instructions as to how he wanted his digital afterlife to be handled.

                I've also been thinking about Michael Jackson and Whitney Houston.  There is a really sad article in the new Vanity Fair which details how Michael Jackson's family has been fighting over his estate.  The key thing that I take away from both Michael Jackson's and Whitney Houston's estate planning is that while both of them are to be commended for providing trusts and guardianships for their minor children, neither appeared to have undertaken any significant tax planning which could have saved their estates millions of dollars.  This is not a reflection on their advisors because clearly these were not the most stable clients in the world but still the lack of any type of sophisticated planning for estates of this nature is kind of shocking. 

                Finally, I have to say how impressed I am with Adam Yauch's will.  The late Beastie Boy left a will which included the phrase "notwithstanding anything to the contrary, in no event may my image or name or any music or any artistic property created by me be used for advertising purposes".  Thus although Yauch amply provided for his surviving wife and daughter , he made his wish clear that to the extent he could control it, he did not want the Beastie Boys' music to be used to peddle merchandise.  Such dead hand control raises many questions, especially as to enforceability but the intent is devastatingly clear.

                I am of two minds concerning the use of music in commercials, I see positives and negatives (and ultimately my opinion really doesn't matter) but I have to admire Mr. Yauch's willingness to take a stand on something he obviously believed in.  It's a good example of how an artist can use estate planning to preserve their principles as well as his or her  assets. 

The James Taylor lawsuit

Digital Music News recently reported on the lawsuit filed by James Taylor against Warner Bros Records, arising out of a 2007 audit.  When it comes to a dispute between artists and labels, I am not shocked by much.  But being a child of the 70’s, a period when Warner Bros represented the gold standard of artist-friendly record companies, I am still a little saddened to see that an artist like James Taylor could be treated this way.

                The audit in question covered the period between 2004 and 2007 and included sales of such records as “Sweet Baby James,” “Mud Slide Slim and the Blue Horizon,” “Walking Man” and several greatest hits compilations.  The amount of underpayment alleged by Taylor is $1,692,726.  The  number of damage claims in the lawsuit total 52 in all and they comprise such elements as:

                1.             Over calculating the amount of “non‑royalty bearing units”

                2.             Underreported sales

                3.             Excess free goods

                4.             Improperly applying a mid‑line reduction

                5.             Violating the contractual restrictions on compilations

                6.             Charging manufacturing costs as “recording costs”

                7.             The current hot button issue of treating downloads as sales rather than licenses

                8.             Not paying for record club sales

                9.             Not paying for master use licenses

                10.          Missed interest payments

                11.          Misapplying royalty rates

                What surprises me further is that though these claims total over $1,000,000.00 they are in fact comprised of some relatively small dollar amounts (e.g. misallocated returns: $800.00 charging manufacturing costs as recording costs $3,700.00) as well as the big ticket digital claims.

                All in all this is a reminder that underneath the mystique of classic records, this is a still a penny business and one that is becoming more difficult to navigate  as the pennies get smaller.  .  I hope this is not a sign of things to come.

Bill Monroe and Selling of the Right of Publicity

The time I spent on the periphery of the music business from the late 1970s through the 1990s really now seems like a different world.  I crossed paths with so many legends who are gone now.  I had several friends who worked with Bill Monroe and I was around him many times – to the point that I just kind of assumed that he would always be there.  I was thus somewhat surprised when Bill Monroe died in 1996.  He was truly a legend. What happened to that legacy after the fact is strange and fascinating.  Apparently Bill’s son James Monroe sold the rights to Bill’s name, image and likeness to the Ohio County Kentucky Industrial Foundation in 1999.  Those interested in this obscure area of the law know that celebrities have an economic right to exploit their name and likeness (this is called the right of publicity) and that, at least since the death of Elvis Presley (and years before in New York and California) a celebrity’s estate has the right to exploit that right after his or her death.

            I had never heard of an estate selling this right to a governmental entity but I suppose that in some circumstances it makes sense.

            All of this came to light recently because a former employee of the county-run Bill Monroe Bluegrass Foundation is involved in litigation with the county after it stopped him from using Monroe’s name to promote a Bluegrass Festival in Monroe’s hometown of Jerusalem Ridge, Kentucky.  Apparently the former employee, Campbell Mercer claimed to have an oral license to use the Monroe name based upon previous negotiations with the county. After a 2011 trial, 100 years after Bill Monroe’s birth, the case is now set for arguments before the Kentucky Court of Appeals next month.

            The real point to all of this, besides the fact that it makes me miss Bill Monroe, is that it illustrates the ever-evolving law of the right of publicity.  When I wrote a thesis on the topic in law school there were only a handful of reported cases in the area. I remember one concerning Bela Lugosi and interestingly enough, one concerning Flatt & Scruggs.  Today, there seems to be an interesting case reported in every circuit and nearly every state.  It seems only right that we now might be about to have a major case reported from Kentucky.

Radio Radio

Life and work have gotten in the way of my blogging recently and I have not had the opportunity to review some of the topics that I am really interested in. I resolve to do better. In the interim, NPR’s Morning Edition has run three fascinating reports this week on some current controversial topics in the music industry.

On Tuesday of this week, they ran a long  study of the pros and cons of crowd funding vehicles such as Kickstarter. The story was important because it showed that for everyone who raises a million bucks on Kickstarter, there’s another artist who couldn’t even meet half her goal. This is also the first story that I recall that brings up the important point that not all artists want to shill for themselves on the internet. It was a fascinating piece and I recommend it to anyone who is interested in trying to start a Kickstater (or similar) campaign. Here’s the link: http://www.npr.org/blogs/therecord/2012/09/25/161702900/crowd-funding-for-musicians-isnt-the-future-its-the-present

The next day they ran a story on Spotify and how record labels, publishers and artists actually receive money from the service.  Although I am not sure that the reporter did a great job explaining the economics, the piece did show the current state of Spotify’s royalty payments in all the grim reality. I found this fascinating. Here’s the link: http://www.npr.org/blogs/therecord/2012/09/26/161758720/how-musicians-make-money-by-the-fraction-of-a-cent-on-spotify

Finally, today’s story focused on You Tube and how it has rapidly become the music on demand spot for new music listeners (and I thought it was just a place for watching old Rolling Stones videos…) Again, fascinating/controversial stuff. Listen especially to the comments made by the guitarist from the Dead Kennedys.: http://www.npr.org/blogs/therecord/2012/09/27/161837316/youtube-shares-ad-revenue-with-musicians-but-does-it-add-up

All in all, three really important stories from NPR.

The Myth of The Poor Man's Copyright (revisited)

I am not in the habit of recycling my blog posts but since this question has been asked of me twice this week, I sense that it is "in the air"...so here we go:

For the past 15 years, I have taught copyright law at a local college. Every year, without fail, I wind up in an argument with a student over the legitimacy of a so-called “Poor Man’s Copyright.” Folks, the Poor Man’s Copyright does not exist.

However, the myth is so pervasive that many of my students have told me that they were been advised by other professors of the important merits of this method.

Basically, the strategy is this: you take whatever work you have created that you want to protect (song, novel, epic poem, etc.) and mail it to yourself (sometimes the myth suggests certified or registered mail but I am not sure of the distinction for this purpose). The belief is that this somehow proves you created the work. In actuality, this proves that you mailed yourself a package.

The problem lies in a fundamental misunderstanding of copyright law. Our law provides that one’s copyright exists in an expressive work as soon as it is “fixed in a medium of tangible expression” (i.e., this is what creates the actual “copyright.”) The second step is registration of the copyright. Registration is not required to sustain a copyright. It is advisable, though, for purposes of proof AND it is a prerequisite to any sort of copyright infringement litigation. For those purposes, there are no short-cuts or alternatives to copyright registration; one must follow the procedures laid out in the Copyright Act.

I am not sure what the historical background of the Poor Man’s Copyright is. A quick Google search reveals that it is a system recommended to this day in several European countries where there is no central copyright registration authority. It also may date back to the days before the Copyright Act of 1976, when there were legal concepts like “common law copyrights” and other anomalies.

I suppose there is nothing wrong with mailing yourself a package, but please do not rely on that action as any sort of substitute for proper registration.

Read Those Old Contracts

I had a long conversation with a friend/client yesterday.  She mentioned that she had been reviewing some of her old publishing contracts and discovered that she was entitled to a reversion of some of the songs in her catalogs.  It is not unusual for songwriters, especially those who have been at this for awhile and have had multiple publishing deals to find out that there are elements of their contracts that they might not remember.

 Reversion clauses in contracts can be tricky because they are sometimes limited in terms of the amount of time the writer has to notify the publisher to exercise the reversion.

I can think of other types of reversions; for example some recording contracts may feature a reversion of masters and  all master license agreements essentially function the same way.  Again, the trick in all of these instances is that the artist has to take some affirmative action to get their materials back.

There are other dates to keep in mind. Old management contracts may contain sunset clauses-you don’t want to be paying commissions when it’s no longer required. Of course, all contracts have limitation periods after which one can no longer object to a statement or accounting.

Finally, as I have discussed before, with the coming onslaught of statutory terminations under the Copyright Act, keeping up with dates is going to be of more importance than ever before.

As a lawyer, I try to keep up with these important dates for my clients but it’s not always possible, especially when a client has changed attorneys, moved, etc.  Therefore, it is important for all artists to undertake this process-of going back through their old contracts.  You never know what you may discover.

On The Legal Status of a Rock and Roll Band

Dealing with disputes among band members (and former band members) is one of the most difficult areas an entertainment lawyer can get involved with.  The legal organization of a musical group involves intersecting area of corporate law, copyright law and trademark law, as well as basic human emotions.  When group members function together in perfect harmony their business models can be a source of inspiration.  However, when human conflicts enter the picture, even the best organized entity can show its shortcomings.

            I have read about two interesting cases recently.  The first involves the 1980's band Queensryche.  According to published reports, the band's corporate entity voted to remove founding member Geoff Tate as lead singer of the band, following a Spinal Tap-like series of events.  The other band members apparently set forth very good reasons why they felt they could no longer continue with Tate in the band and based on provisions set out in their original partnership agreement, they expelled him-subject to a duty they recognized to account to him for his share of profits.  In order to avoid even further controversy, the "new" entity even began performing under a different name, "Rising West" to avoid potential trademark problems.

            Nonetheless, Tate has sued his former partners alleging a host of indignities the most significant being corporate oppression.  This seems to be a text book case in using corporate law to attempt to wrestle some benefit out of an entity and to essentially punish former band mates from working without him.  This scorch the earth technique is far from certain in most cases, especially those involving human feelings and egos.

            An even stranger case  I just read about involves a former member of the J. Geils B Band who happens to be named J. Geils, who is apparently involved in a trademark battle with his former band mates.  It seems that both J. Geils and the J. Geils Band (under their corporate entity T& A Research and Development Corp.) have filed competing trademark applications to try and protect the band's trademark.  This has apparently led to litigation in both the Patent and Trademark Office and in federal court. Buried in the evidentiary murk of all of this, is the fact that at some point in the past all the band members signed a shareholders agreement restricting their right to use the name "J. Geils Band" independently.  If that is true, we may end up with a case of an individual being able to perform under his own name due to activities he once undertook as a shareholder.

            All of this seems to demonstrate the point of this tale,  which is that dealing with disputes among band members is usually very, very difficult.  I've been involved in a lot of these disputes and I can say that more often than not, corporate structures and shareholder agreements as well as form cookie cutter LLC agreements have been virtually worthless in resolving these disputes; while a good well thought out partnership agreement always seems to be both enforceable and convincing to all parties involved.  The moral here is that a band needs to have these discussions early on in their careers and to commit their agreements to writing in a cogent, equitable manner.  It is a discussion that no band wants to have, but it is absolutely vital.