Musicians: Double Your Royalty Income Pt2

October 26, 2012
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Cheryl L. Hodgson

Stories abound of songwriters and recording artists “who never received a dime” in royalties. Can anything be done to right the wrong?

An earlier article discussed recapture of rights based upon statutory notices of termination. In this article, review principles found in cases that offers alternative ways for artists, songwriters and recording artists to recover their rights based upon failure to account and pay.

Is it possible to recover title to the asset, namely the songs or the master recordings, or even recover unpaid royalties which have never been paid? Of course, the lawyerly response is, “it depends.” Since our firm successfully rescinded the recording agreements for the 1960’s group The Kingsmen, and recovered title to their hit record Louie Louie there are options. Unpaid composers, writers and recording groups may, instead of seeking money, opt to recapture rights in their creative works based age principles of contract law, which until the Kingsmen case, Peterson v. Highland Music, Inc. had never been successfully argued. 

In order to be binding, every contract must have “lawful consideration.” Common law and statutory principles governing consideration, failure of consideration can be used to “rescind” or “prospectively terminate contracts transferring copyright to a third party, where there has been a total failure to account and pay royalties owed under the contract. The legal term is “failure of consideration” based upon a proving the existence of a material breach.

If an artist or composer has a contractual right to receive royalties, can prove current earnings were generated by the owner of the copyrighted work during the last 4-6 years, and can show that no payments were received, the author has the option to elect remedies. In lieu of seeking to recover unpaid royalties, the aggrieved party may elect to recapture rights in the copyrighted work based upon a failure of consideration, namely the duty to account and pay royalties as called for in the contract.

U.S. courts limit the right to recover unpaid royalties to “current earnings,” namely amounts earned during the relevant “statute of limitations” governing contracts in each state. That same time period can be used to prove material breach, since the only ongoing promise, or legal consideration under these old agreements is the on-going duty to account and pay.

Soon to come… Pt 3: “Was there fraud in connection with signing the agreement?”