The morality of termination rights

Raustiala and Sprigman over at the New York Times Freakonomics blog take on the morality of copyright termination rights, “an obscure provision of U.S. copyright law…[that] allows songwriters and musicians to…take back from the record labels many thousands of songs they licensed 35 years ago”:

In general, if you decide to sell or perpetually license a piece of property, you can’t later take it back, no matter how much you might want to. So If I sell my house and two years later the city decides to build a lovely public park in my neighborhood, the value of my former house may rise substantially. But no one contends that I can take the house back, or that I’m due a bonus payment from the lucky buyer.  A deal is a deal.

So why the exception for copyright owners?

I have to start somewhere, so it might as well be here:  it’s disingenuous to invoke a home-sy (literally) analogy, show that it fails, and use that failure to “prove” your point.  Raustiala and Sprigman note that “in general,” residential homes are sold outright.  So what?  Equally “in general,” commercial property leases for retail outlets (e.g., stores in shopping center developments) explicitly vary rent payments based on sales (i.e., higher store sales this month/year = higher rent).  Both systems are unobjectionable, assuming one simple fact:  the parties know what kind of deal they are making at the time they make it.

Thus, Raustiala and Sprigman’s analysis falls apart right off the bat.  Termination rights are not a recent phenomenon that nobody knew anything about until a year ago.  Unlike, say, Congress’ decision to re-copyright works that had already fallen into the public domain, termination rights have clearly been a part of U.S. copyright law since 1976.  They may have been “an obscure provision” to the general public reading the Freakonomics blog, but they certainly weren’t obscure to artists and labels.  Raustiala and Sprigman’s characterization is like calling the infield fly rule “obscure”–and then implying that a bunch of MLB players should be out because they didn’t know it existed or how it worked.

They go on:

Think for a moment about the economic effect of the termination provision on the behavior of parties to copyright transactions. Because buyers can expect, on average, to make lower profits when the law contains the termination provision, they will offer less in the initial transaction. Thus, sellers will be more willing to accept less, because they know that if a work later proves valuable, they can terminate and demand some additional payment. So the most likely effect of the termination provision is to force deal prices down across the board….Put differently, the termination provision is a regressive tax.  And in that light, the “fairness” justification for the termination provision is less than overwhelming.

Even assuming this is true, the record labels’ supposed “offer [of] less in the initial transaction” has already happened–35 years ago.  Changing the rules at this point to favor the labels over artists would also seem to invoke its own set of fairness issues.  To put it mildly.

Tenenbaum oral arguments on YouTube

Having attended the oral arguments before the 1st Circuit Court of Appeals in Sony BMG Music Entertainment et al v. Tenenbaum yesterday and analyzed my initial impression here, I was pleased to see that the court posted (MP3) the audio of the oral arguments on its website.

Unfortunately, it is often difficult to tell who is speaking given the bare audio.  Therefore, I have decided to post the audio on YouTube and annotate it so that listeners can know who is speaking when.  I hope many find this helpful.

Here are the links, in 5 parts:

The argument was before a panel of three First Circuit judges:

  • Sandra L. Lynch, Chief Appellate Judge
  • Juan R. Torruella, Appellate Judge
  • Rogeriee Thompson, Appellate Judge

For even more fun, you can download the briefs here to follow along with the audio.  Happy analysis!