First, a Disclaimer (after all, I ‘m a lawyer).
This series of articles and the forms included in them have been created for informational purposes only and do not constitute legal advice. This article and other articles in this series should be used as a guide to understanding the law, not as a substitute for the advice of qualified counsel. You should consult an attorney before making any significant legal decisions.
What This Article Is About.
This is the ninth installment of an 11-part series I’m writing for Digital Music News on basic music industry agreements. It includes two different, though related, discussions. The first part of the article discusses business actions a band should take, and can take at no or little cost, without the services of an attorney.
The second part of the article examines the elements and benefits of an agreement between members of a band or musical group pertaining to important issues such as decision making, division of money (including performance and recording revenues), treatment of leaving members, and ownership of band property such as the band’s name, songs, and masters.
The bottom line is if there comes a time when a band starts making good money and it looks as if they have a real future, that is the right time to consider taking the time and spending the money to create an enforceable band agreement. In the meantime, any band or musical group can and should take these basic business actions discussed in Section I below.
Essential Business Actions Any Band or Musical Group Should & Can Do Without Incurring Legal Fees.
So, before you hire a lawyer:
- Sign a “split sheet” for every song written by more than one individual;
- Register all songs and masters with the U.S. Copyright Office;
- Register every song with the appropriate performing rights organization (PRO);
- Upload the setlist of any live performance containing original songs for payment by their PRO;
- Write up a simple agreement that no leaving member can use the name of the band without permission.
- Consider Registration of the Band Name with the U.S. Trademark Office
- Create a band agreement.
1. Sign a “split sheet” for every song written by more than one individual.
What is a Split Sheet?
A split sheet is a document that states who owns what percentage of a song and sets forth the credit each person should have. A sample split sheet is provided at the end of this section. A split sheet should be created for each and every song that was created by more than one person, and should be filled out and signed by all the writers before ever shopping it to a third party or trying to license it for placements.
Every day around the world, songwriters collaborate on songs and never clarify who wrote what. But if you are ever fortunate enough to license your song for a commercial, movie, or TV show, you may find yourself fighting over who owns what percentage of the revenues generated from your song.
All most songwriters and artists want to do is create great music, and it may feel uncomfortable to introduce a split sheet and start dividing up shares of publishing when you’re trying to be creative. Yet, it’s a necessary part of the songwriting process. Have a meeting about split sheets prior to hitting the studio. This way everyone understands that it’s not personal; it’s just business. Doing this makes everyone feel as though their interests are protected, which can enhance creativity rather than inhibiting it.
How to Complete a Split Sheet
Split sheets should contain the following information:
- The name of each writer.
- Percent of ownership. This is key. If the song makes money, this will determine how
- Credit for each writer, including who wrote the lyrics and who composed the
- Everyone’s signature.
Below is a sample split sheet:
2. Register All Songs & Masters With the US Copyright Office
Why Register?
Registration is not a prerequisite for copyright protection. Under the Copyright Act of 1976, a copyright comes into existence as soon as a work is fixed in a tangible medium of expression, and registration is not a condition of copyright protection. However, registration provides crucial benefits to copyright owners.
Those benefits, which are set forth in the U.S. Copyright Office’s website, include the following:
- Registration establishes a public record of the copyright claim.
- Before an infringement suit may be filed in court, registration is necessary for works of U.S. origin.
- If made before or within five years of publication, registration will establish prima facie evidence in court of the validity of the copyright and of the facts stated in the certificate.
- If registration is made within three months after publication of the work or prior to an infringement of the work, statutory damages and attorney’s fees will be available to the copyright owner in court actions. Otherwise, only an award of actual damages and profits is available to the copyright owner.
- Registration allows the owner of the copyright to record the registration with the U.S. Customs Service for protection against the importation of infringing copies.
Of the reasons to register set forth above, the most important are that a copyright owner
(i) cannot start a lawsuit for copyright infringement before registering, and
(ii) cannot secure statutory damages or attorneys’ fees without registering.
With respect to (ii), the Copyright Act provides for statutory damages of up to $150,000 per infringement and attorneys fees. It is crucial that if the work has been published (that is released for sale), the registration occurs prior to any infringement. Otherwise, the plaintiff must prove actual damages, which can be difficult to quantify, or may equal a negligible amount unless the defendant earned a lot of money from the infringing work.
Also, attorneys’ fees are only available for published works that are registered prior to the infringement. Similar to other litigation, a lawsuit for copyright infringement can take a great deal of work and time on the part of the attorney. That is why attorney fees can add up. It would be difficult or impossible to retain the services of an experienced copyright litigator without the potential for recovering attorney’s fees.
Note that the only way to secure the benefits of copyright registration is to register with the U.S. Copyright Office. These benefits, contrary to a popular myth, cannot be obtained by sending a copy of your song or master to yourself (even by certified or registered mail).
How to Register
To register a work, including a song or a master, you need to submit a completed application form, a nonrefundable filing fee, and a nonreturnable copy of the work. Here are answers to the most important questions regarding registration:
Where to apply?
You can find and complete the copyright registration application online at copyright.gov/eco (eco is an acronym for Electronic Copyright Office).
How much will it cost?
The basic fee for registering any work, including a song or master, was raised from $35 to $55 in May 2014. However, the fee is still $35 for registering a single work by a single author.
What else needs to be done?
It is also necessary to provide a “deposit” of the work. This can be done by uploading an MP3, or you can print out a “shipping slip” to be enclosed with a CD and mail it to the Copyright Office within 30 days of applying for the registration.
Is it possible to register a sound recording and a song in one application?
Yes. To register a master and a song in one application, click on “Sound Recording” in the drop down menu in the part of the application asking for the type of work to be registered. Later in the application, there will be a page allowing you to claim music and lyrics as well as the sound recording.
The U.S. Copyright Office’s website (www.copyright.gov) is an invaluable source of information not only on registration, but also on how copyright law protects songs and masters.
Multiple Writers and/or Producers
Any signatory to the split sheet can register the copyright in a song and/or master. They should include all the other signatories to the spreadsheet as joint “authors” in the application.
3. Register every song with the appropriate performing rights organization (PRO);
What is a PRO?
Any user of music that publicly performs a song must secure a license and pay a royalty to do so. Songwriters and their music publishers use Performing Rights Organizations (PROs) to collect these royalties. In the U.S. there are three: ASCAP, BMI, and SESAC. A fourth PRO, recently launched by music industry mogul Irving Azoff, is Global Music Rights, or GMR.
The PROs collect public performance royalties from radio, television, the internet as well as physical venues such as bars, nightclubs, concert halls, arenas, and other places where live or recorded music is played.
In order to collect public performance monies, you must be a member of one of the three PROs. Anyone can join ASCAP or BMI. SESAC, the smallest of the three, is selective.
When a song is registered with one of the PROs, the PRO will require the person registering the song to indicate the percent ownership of each writer. If the band has a manager, she can perform this function. The registration should reflect the breakdown of ownership in the split sheet. Even if no split sheet was ever signed, the registration will itself be a record of the percent ownership of each member in the band.
That’s why each member with an interest in a song should check to see if the information supplied to the PRO is accurate.
Live Performance Payments
It is also possible to register more than one song and/or sound recording at a time by carefully following the rules established by the Copyright Office. See Circular 1, Copyright Basics, p8.
However, it is important to note that if a recording is not released as a single, but is merely contained in an album, the album may be deemed to be “one work”, and statutory damages may be limited to one award per album. See the decision in Bryant v. Media Rights Productions, Inc., 603 F.3d 135 (2d Cir 2010)
“Based on a plain reading of the statute… infringement of an album should result in only one statutory damage award. The fact that each song may have received a separate copyright is irrelevant to this analysis.” Id.at 141.
4. Upload the set list of any live performance containing original songs for payment by their PRO.
Each of the PROs pays its writer and publisher affiliates for live performances at venues across the U.S. Basically, all the songwriter, who may also be an artist, has to do is submit a set list of songs performed at any venue showing which songs were written by him or her. Generally, he or she must also provide the venue name, address, size of venue and the dates of the performance.
The songs must be registered first in order to complete this process.
For more information on each of the PROs live performance programs, go to:
- SESAC: www.sesac.com/WritersPublishers/HowWePay/liveperformances.aspx
- BMI: www.bmi.com/creators/royalty/live_concert_royalties
- ASCAP: www.ascap.com/members/onstage.aspx
Anecdotally, I know a singer songwriter in New York City who played shows at bars and restaurants and made about $200 a gig from passing the hat. She made $1,250 from SESAC by reporting her set lists for a single calendar quarter (one accounting period).
5. Write up a simple agreement that no leaving member can use the name of the band without permission.
It’s all about protecting the band name.
Even in the absence of a full blown band agreement, a band or musical group can handle the issue of who owns the name by using a form such as this:
Date: _______________
Re “__________” [Name of band]
This is to confirm that we, the sole members the above referenced band, hereby agree among ourselves that each member of the band is a joint owner of the name of the band, provided that no leaving member, whether that member leaves voluntarily or not, shall be able to use the name of the band in connection with the entertainment industry including the music business.
This Agreement contains the entire understanding of the parties hereto relating to the subject matter hereof and cannot be changed or terminated except by an instrument signed by all of the parties hereunder. The validity, interpretation and legal effect of this Agreement shall be governed by the laws of the State of _____ applicable to contracts wholly entered into and performed entirely within the State of _____. [Use the state where the band members reside]
Signature below will indicate agreement of the above.
Read and Agreed:
_____________________________________
Read and Agreed:
_____________________________________
Read and Agreed:
_____________________________________
Note that sometimes a band will want to handle ownership of the band’s name in a different manner than in the sample agreement. For instance, where two of the members founded the band and then added a third or more members later, the founders may want to exclusively own the rights in the name, or they may wish to allow leaving members the right to use the band’s name, provided that the leaving member uses the words “formally of”. For a band that wishes to treat the ownership or use of the band’s name in a different manner than the sample agreement, it may be wise to hire a lawyer.
6. Consider Registration of the Band Name with the U.S. Trademark Office
A band should also consider registering their name as trademark with the U.S. Trademark Office. [www.uspto.gov/trademark]. In the U.S., it isn’t necessary to register a mark to obtain protectable rights. You can establish “common law” rights in a mark based solely on use of the mark in commerce without a registration. However, owning a federal trademark registration provides a number of significant advantages over common law rights alone, including:
1. A legal presumption of your ownership of the mark and your exclusive right to use the mark nationwide.
2. The ability to bring an action concerning the mark in federal court.
3. The use of the U.S. registration as a basis to obtain registration in foreign countries.
Registration fees depend on the kind of form you use and the number of “classes” you file for. Classes refer to good and services for which you are using the mark. A band would always want to file under class 41 which includes entertainment services. You may possibly also consider filing for class 25 which includes clothing such as t-shirts and hats. The cheapest form is called
“TEAS3 Plus” and costs $225 per class. But this form requires somewhat more information and is slightly more difficult to complete than two other possible forms: TEAS Reduced Fee (which 3 Trademark Electronic Application System costs $275 per class), and TEAS Regular Filing (which has the least number of requirements, and costs $325 per class).
Unlike the other recommended business actions previously discussed in this article it is advisable to use an attorney. Filing a trademark application, or even deciding on the right form to use, is a bit tricky and experience in filling out the appropriate application and dealing with the Trademark Office is important. For instance, a failure to correctly list the goods/services with which you use the mark, or intend to use the mark, may prevent you from registering your mark, and you will not be given a refund of any fees paid.
7. Create a Band Agreement.
What’s a Band Agreement?
Band agreements usually require the services of an experienced music attorney to draft a legally enforceable contract. A sample band agreement provided by my friend and colleague, veteran music attorney Wallace Collins, is included in this article. If you take just a brief glimpse at it, you will see it takes a lot of thought and work. A lot of experts, especially lawyers, advise clients to prepare and enter into a band agreement as soon as possible after the band’s formation.
The reason, they argue, is that’s the time when everyone in the band is getting along well, whereas it would be difficult to complete an agreement if there is already a dispute among the members. On the other hand, the vast majority of bands and music groups rehearse and perform at clubs and other venues on a part-time basis, and make little if any money at the beginning of their careers.
It therefore may not be worthwhile (i) to spend the time needed to discuss and reach consensus on all the complicated issues usually covered by a band agreement; and (ii) spend the money on an experienced lawyer to draft an enforceable agreement.
The ‘General Partnership’
When two or more people associate for the purpose doing business, arguably they create a partnership in the eyes of the law. General partnership law applies to the association unless a written agreement states otherwise. General partnership law provides, among other things, that all partners equally own partnership property and share in profits and losses, that any partner can bind the partnership, and that each partner is fully liable for the debts of the partnership. In the case of most musical groups, a written agreement setting forth the arrangement between the group members as partners is preferable to general partnership law.
For instance, if one person decided to create a band and came up with the band’s name, he or she may want exclusive rights to make the band’s decisions and the right to fire any new band member. That person may also want a bigger percentage of band profits, especially if she pays more money than other band members for touring or studio time. As an example, I represent one person who started a band in China. He created the name and moved to the U.S., where he selected all new band members. He’s the lead singer and writes all the songs. In this situation, it may be better to simply employ the other band members as freelancers and pay them a certain percentage of money from live gigs, but stipulate that he can replace them at will.
When Is the Right Time to Draft an Agreement?
When a time comes that a band is beginning to make decent money and it’s clear that they actually have a future together, that may be a good time to take the plunge. It will involve taking the time to consider the issues discussed below, coming to a consensus among all the members of the band, and then hiring an attorney to draft an enforceable agreement.
Basic Elements
A band agreement is an agreement between the members of a band that covers basic business issues. The most important issues are:
- Decision making
- Hiring and firing
- Profits and Losses
- Treatment of Leaving Members
- Band name
- Ownership of Songs and Masters
- Decision Making
The issue of control is very important. In most cases, each member will have an equal vote and a majority will rule. However, as set forth in the sample agreement provided by Wallace Collins, a particular member may have two votes and the manager may have a tie-breaking vote. The agreement may also provide that certain matters such as requiring financial contributions from group members or incurring debts on behalf of the band require a unanimous vote.
Again, there are endless variations, including situations where a particular member makes all of the decisions, or where new members do not have a vote on band business. For instance, a band could agree on what might be called a “reverse democracy”: each member has one vote but if any member voted against doing something then the band would not do it. In other words, this arrangement requires unanimous consent to proceed with an activity.
Hiring and Firing of Band Members
Another issue of control that must be decided concerns the hiring and firing of band members: how votes are calculated (e.g., will each member get one vote or will a particular member’s vote count double or more) and how many votes are needed (e.g., a majority or a unanimous vote) to fire a group member and/or hire a new member.
In most cases, a new member voted into the group will then be required to sign on to the band agreement. It must also be decided how to vote on any amendments to the band agreement since this may materially affect the relationship between the members after the group has started. In most cases, a majority vote will be deemed determinative but some members may prefer a unanimous vote on such things as amending the agreement (as well as hiring or firing). This will have to be decided between and among the members of the group.
Profits and Losses
The band agreement should contain provisions regarding the sharing of profits and losses. One provision may pertain to revenues earned during the term while each member is in the group and another may pertain to after the departure of a member or the break-up of the group. In most cases, a new group will have a provision that all profits from the group are shared equally between all members with an exclusion for songwriting monies (which each of the respective songwriter members would keep). Where an established group adds new members, the provision may provide that a new member gets a smaller percentage than the founding members.
Treatment of Leaving Members
The more complicated problem of revenue division arises after a member departs. The agreement may provide that the leaving member is entitled to his full partnership share of profits earned during his tenure but a reduced percentage (or no percentage) of profits derived from activities after his departure; or the agreement may provide for a reduced percentage for a short period of time after departure (e.g., 90 days) and then nothing thereafter.
This is an easier issue to deal with regarding live performances than record royalties. In most cases, bands will agree that leaving members should receive their share of live performance during the rime the member was in the band, even if it is received after the member’s departure. But the group also needs to determine what happens, for example, when a member performs on three albums but leaves before the fourth album is recorded. Although it might be acceptable to refuse to pay the leaving member any royalties on the fourth and future albums recorded by the group under a record contract, the leaving member signed as part of the group, it might not be fair to refuse to pay that leaving member his share of royalties from the three albums that he did record with the band. Of course, this might vary depending on whether the leaving member quit or was fired.
Another important financial issue is the question of the leaving member’s share of partnership property such as band recording equipment or a sound system. Again, the agreement might specify a monetary payout to the leaving member if he is terminated but a forfeiture if the leaving member quits. If merchandise with the leaving member’s name and likeness still in inventory is sold after the member leaves, a decision will have to be made about whether and how much the departed member might receive for the use of his name and likeness.
Buy-out/Pay-out Provisions
A band contract should contain a comprehensive Buy-out/Pay-out provision that deals with departing members. Whether the leaving member quits or is fired, the agreement may provide that the leaving member waives all rights in the intangible assets of the partnership (e.g., the group name, the group contracts, etc.). If the member quits, he may waive any right to and benefit derived from the hard assets such as band sound equipment. If the leaving member is fired, the agreement might provide that he or she is entitled to the pro-rata percentage (i.e., a proportionate share) of the current value of the hard assets. With respect to this payout, the band contract may provide that if the valuation exceeds a certain amount (e.g., $25,000) or would put the partnership in financial distress, the payout would be in a certain number of equal monthly installments (e.g., over 12 months).
Again, this Buy-out/Pay-out provision can be as simple or as complicated as the band members deem necessary. There are as many variations in this as there are differences in personalities between the members of a group. Each member and each group, with the help of an attorney, has to find its own solutions.
Band Name
As previously discussed, an important issue is who owns the group name if one member leaves or if a group breaks-up. Under partnership law, the partners would be the owners of the name and any member would arguably be permitted to use the name. Trademark rights are determined based on the ‘use’ of a mark, not on who thought of it, so each of the members of the group would be an equal co-owner of the group name under trademark law. The end result could be chaos, with several bands all with the same name but different players.
One solution would be to use the brief agreement previously discussed. Or, the matter can be handled in the context of a full scale band agreement. In most cases, the band agreement will state, as the short form agreement previously discussed, that if a particular member leaves the band, either because he quits or is fired, he will not be entitled to use the band name. The band agreement could fine tune this provision by stating that the leaving member may describe himself as a “former member” of the band.
However, if one member thought up the group name, then the band agreement may state that only a group including that member can use the name. This will apply whether one other member leaves or if the group disbands and only the founding member creates a new band.
Rights in the group name may also concern revenues in addition to the use rights, specifically as they concern merch such as t-shirts, caps, buttons, and posters. The band agreement may deal with how much each member of the band will receive from sales of such merchandise.
Ownership of Songs and Masters
We previously discussed how important it is to confirm who the writers of a band’s songs are and that a split sheet can be used to confirm ownership. The band agreement could include a provision incorporating split sheets, or the agreement could provide that any song created by any member of the band would be jointly owned by all the band members. This would only make sense where the band operates as a collective and every member is invited and does make contributions to the creation of each song.
The band agreement could also confirm that every member of the band is a joint owner of any recordings made during the life of a band. This makes sense if each member of the band is performing on recorded tracks.
Advantages of Forming an LLC and entering into an “Operating Agreement” instead of a Band
An alternative to a traditional band agreement would be forming a limited liability company (or LLC) and then drafting an “operating agreement” which would look pretty much the same as a band agreement expect each member of the band would be a “member.” The big advantage of this approach is that when the band enters into agreements with third parties, such as an investor, the personal assets of the band members would not be at risk. This is called “limited liability.”
Role of the Lawyer
If each member of a band or music group could afford her own lawyer, then each lawyer could work out an arrangement on behalf of their client. In the real world, that will usually not be the case. Instead, after a band decides on the issues discussed above, they should engage an attorney to review their decisions and write up a legally enforceable agreement. An attorney cannot represent each member of the band. That would create a “conflict of interest” on the part of the lawyer. What an attorney can do is be a “scribe” who enforces the decisions of the band by preparing an agreement that is legally enforceable. Fees can range from a $1000 to $5000 or more depending on the lawyer and the complexity of the deal.
This model band agreement has been graciously provided by Wallace Collins, Esq. Wallace is an entertainment and intellectual property lawyer. He was a recording artist for Epic Records before attending Fordham law school.
Steven R. Gordon, Esq. (steve@stevegordonlaw.com, www.stevegordonlaw.com) is an entertainment attorney specializing in music, television, film and video. His clients include artists, songwriters, producers, managers, indie labels and music publishers as well as TV and film producers and digital music entrepreneurs. He also provides music and sample clearance services for producers of any kind of project involving music. Mr. Gordon is the author of The Future of the Music Business [link to www.futureofthemusicbusiness.com] (Hal Leonard 4th ed. 2015).
The author would like to thank attorney Wallace Collins for contributing a model band agreement contained in this article. He also gratefully acknowledges the assistance of Ryanne Perio, Esq. in the preparation of this article.
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