What Can Go Wrong When Contracts Are Not Clear
The Ed Sheeran vs. Marvin Gaye Estate Trial
The Ed Sheeran trial ended just as we were writing this. It pitted Ed against the heirs of Marvin Gaye and his writing partner over “Let's Get It On”. It was hardly a judicial first, music copyright lawsuits are as old as recorded music, as are judgments and settlements resulting in some kind of royalty split. Those are serious contracts that stay in place for decades.
Sheeran won, thereby eliciting sighs of relief from every artist who ever has used or has planned to use an I, iii, IV, V chord progression (that would be everyone). We're writing today about a copyright matter that did result in findings of copyright infringement - specifically, the agreements that followed.
The Kanye West vs. King Crimson Dispute
In 2010, Kanye West released his acclaimed album, “My Beautiful Dark Twisted Fantasy”. One song, “Power”, sampled from the influential, but largely forgotten, British progressive rock band, King Crimson. This time there was no need for a jury, West used a long track from the band's 21st Century Schizoid Man without asking permission. Shortly after West uploaded the video to YouTube, the band's representatives threatened lawsuit.
An agreement was quickly hammered out - West agreed to "pay the band a royalty rate of 5.33 percent for copies of “Power” that are sold or “otherwise exploited,” with a specific clause that stated that UMG had to pay the same for streaming royalties as it would for a song from a physical CD." To his credit, West had already listed the members of King Crimson as writers on the credits for “Power”. Everything, then, worked out fine.
Until 2017 when King Crimson sued, claiming that West's publisher was underpaying them. The case is headed to court. The publisher claims that:
A purchase of a CD gives permanent ownership of a copy of the recording, which entitles the owner to play the recording as many times as they wish. By contrast, exploitation of a recording via a streaming service or platform is ephemeral, and only provides the listener or subscriber with conditional access to, rather than ownership of, the recording. The latter is of an intrinsically different nature to the former, and the price of such usage is accordingly very much lower.
We'll just note here that this is not exactly how subscribers to Spotify, Apple, Amazon Music, and the rest see the 'ownership' issue.
What's clear is that no one seriously discussed what 'otherwise exploited' meant. Maybe it was a standard term used indiscriminately in the music industry at the time. Whatever the reason, it was not defined further - an egregious oversight in 2010 after years of changes in the industry brought on by new technologies.
It's hard to believe that no one in the conference room said, "Hey, you know what? We really should talk about 'otherwise exploited.' I mean, we're getting past mp3, there's this Spotify thing in Europe heading our way . . . "
Because no one did, this is headed to court and the legal costs are mounting as quickly as Kanye West's Spotify play count.
When you've negotiated as many contracts as we have, one look at a term like 'otherwise exploited' sets off alarm bells. That kind of ambiguity cannot be allowed to stand without a list of what the 'otherwises' might encompass.
The Tetris Copyright Dispute
Apple+ recently released Tetris. Thankfully, it's not an action film where international operatives try to avoid falling bricks while saving Earth. Instead, it's the fascinating story of how Tetris went from a fad game in the Soviet Union to invading dreams with geometric patterns for tens of millions of players. There are a dozen contracts discussed in the film, they are crucial plot points. None more crucial than this: the original contract granting the rights to Tetris was voided because in 1988, no one thought to define what a personal computer was. How serious was this, um, oversight? Four hundred and eighty-five million copies sold, $1.63 billion in profits serious.
Einstein Was No Einstein When It Came to Contract Law
There's a story about Albert Einstein that has floated around for decades, recently boosted by YouTube. It goes like this:
Einstein is on a long flight with a fellow scientist. Somewhere over the ocean (it's a different ocean in every telling) Einstein, bored, proposes a deal [read contract]. "I'll give you five hundred if you ask me a question that I don't know the answer to . . .and you give me five bucks for every one of my questions you can't answer."
"Sure, good deal, shoot," the scientist answers.
"What is the exact distance between Earth and the moon? Exact."
"Beats me," he answers and hands over five dollars, "my turn, what goes up a hill with four legs and comes down with three?"
Einstein is nonplussed. After a long pause, he pulls his wallet out and hands over $500
After the scientist gleefully pockets the cash, Einstein asks, "So, what does go up a hill with four legs and come down with 3?"
The scientist smiles, pulls out five bucks, and hands it to him.
Alfred inadvertently created a Grand Canyon-sized loophole, and his scientist friend was only too happy to take advantage of it. Moral of the story: if the smartest [non-lawyer] man in the world can't execute a simple contract . .