Welcome to Skilled in the Art. I'm Law.com IP reporter Scott Graham. When John Waite, Joe Ely and other musicians from my era filed would-be class actions this week to reclaim their copyrights, I had a bunch of questions: Why now? Can rock stars really be considered “employees” of their record labels? And why are the labels raising so many different defenses? I'll lay out the dispute and provide one expert's commentary below. As always you can email me your own thoughts and follow me on Twitter.

Photo: Matthew Straubmuller via Wikimedia Commons

Will Class Actions Ignite Musicians' Copyright Battle?

Remember a couple of years ago when Paul McCartney sued Sony ATV Music Publishing in an attempt to reclaim copyrights in his Beatles recordings?

McCartney settled that suit, but the issue of termination rights under Section 203 of the Copyright Act of 1976 has continued to simmer. It blew up in a big way this week as John Waite, Joe Ely, David Johansen and others brought putative class actions against Sony Music Entertainment and Universal Music Group. They allege that the music companies are “routinely and systematically” refusing to honor the musicians' statutory right to reclaim copyrights in their sound recordings after 35 years.

Instead, Waite, Ely and hundreds of other recording artists have been met with “stubborn and unfounded disregard of their rights under the law and, in many instances, willful copyright infringement,” state the two complaints signed by Blank Rome partner David Kistler.

Section 203 provides that “in the case of any work other than a work made for hire,” the grant or transfer of a copyright executed after 1978 is subject to termination after 35 years. The idea was to give authors a second chance to exploit works they might have bargained away when in a weaker negotiating position.

Musical artists started serving notices of termination several years ago, but the recording industry has not been eager to oblige. According to letters attached to the complaints, Sony and Universal Music Group have argued that copyrighted sound recordings are works made for hire and therefore not subject to termination.

I know what you're thinking: a rock star and a record label don't seem to fit the classical employee-employer relationship. But Universal and its predecessors were thinking way ahead on this: Their contracts with the musicians state that they “shall be our employees for hire and all such master recordings shall be works made for hire under the United States Copyright Law.”

Further, they point out that Section 101 of the Copyright Act explicitly defines works made for hire as including “a work specially ordered or commissioned for use as a contribution to a collective work” or “a compilation.”

“The sound recordings were specially commissioned for use in compilations, i.e., long-playing record albums,” states Universal's May 31, 2018, letter to Waite signed by Cowan Liebowitz & Latman counsel Thomas Kjellberg. It demands that Waite cease and desist from publishing music from his 1982 album “Ignition” on Spotify.

I asked Orrick, Herrington & Sutcliffe copyright attorney Paul Fakler for his take. Fakler represents digital music services and doesn't have a dog in this fight—though he's upfront about his general disdain for the recording industry.

He points out the RIAA prevailed with Congress to add sound recordings to the list of works made for hire in 1999, in his words, “to try to screw over the artists in advance.” It led to such an uproar that Congress retracted the provision. That ought to dispose of the work-made-for-hire argument, Fakler says.

The idea that artists could contract away their termination rights is a non-starter, he says. Section 203 expressly says that “termination of the grant may be effected notwithstanding any agreement to the contrary.”

The “compilation” exception applies only to the selection and arrangement of works, Fakler says. It might apply if a publisher had commissioned individual artists to contribute tracks to, say, a Jimi Hendrix tribute album. It would not apply to an ordinary collection of songs that makes up a music album.

So why is this issue only being litigated now, five years after Section 203 began kicking in for sound recordings?

It's because the major music publishers have negotiated new deals with their superstars. “They're the only ones who can afford to take on the recording industry,” Fakler said, though the class action might change that. “I'm sort of surprised and disappointed that the litigation hadn't started before now.”

Trade Secret Verdict Leads to Bankruptcy Battle

Back in November, semiconductor design company ASML US won a trade secrets verdict against rival Xtal that was worth at least $223 million. Since then things have, as Jeff Bezos would say, complexified.

The parties had been scheduled for a bench trial Dec. 19 before Santa Clara County Superior Court Judge Sunil Kulkarni on punitive damages and ASML's motion to permanently enjoin XTAL from using or disclosing ASML's trade secrets. XTAL filed for bankruptcy protection two days before the bench trial, putting the state court proceedings on ice. The company is looking to auction off assets, including software that it says it developed on its own. “Everything as far as trade secrets has been deleted,” Alston & Bird partner Leib Lerner told U.S. Bankruptcy Judge M. Elaine Hammond at a Jan. 24 hearing.

Bartko, Zankel, Bunzel & Miller partner Patrick Ryan, who represented ASML at trial, urged Hammond to send the trade secrets dispute back to state court for completion. “What they're essentially trying to do, your honor, is to use this court as a fence for stolen goods,” he said.

Hammond sounded as if she would not characterize it that way, but she granted ASML's motion Tuesday. While punitive damages are “unlikely to ever be recovered,” she said it made more sense for Kulkarni, who presided over the trade secrets trial, to take the first pass at imposing an injunction on XTAL assets.

“Once the initial question of whether and to what extent an injunction is appropriate is determined, this court can better answer the bankruptcy question of whether debtor's assets may be sold or sold free and clear of any such interest,” she wrote.

Richard Lapping of Trodella & Lapping also represents ASML in the bankruptcy proceedings.

Juniper: In Case You're Wondering, We Didn't Settle

When a patent infringement complaint is voluntarily dismissed just before the defendant's answer is due, the usual assumption is there was some sort of confidential settlement.

Juniper Networks wants to make clear that's not what happened in its short-lived dispute with Beck Branch LLC.

Beck Branch is a non-practicing entity that has sued Microsoft, Huawei, Juniper and about 15 other companies in Delaware and the Eastern District of Texas over the last eight months, asserting a single patent on network protocol conversion.

Beck Branch has already dismissed most of the cases, often within a couple of months of filing. In some instances, the company has stated that the defendant consented to the dismissal.

Not so Juniper. Instead, Beck Branch gave notice Tuesday that it was invoking Federal Rule 41(a)(1)(A), which provides for dismissal without a court order so long as the opposing party hasn't yet answered.

To make things crystal clear, Fisch Sigler partner Alan Fisch filed a “Notice Regarding Dismissal” the next day. It states in its entirety: “Defendant Juniper Networks, Inc. hereby provides notice that Plaintiff Beck Branch, LLC's notice of voluntary dismissal (Dkt. No. 7) was not the result of any settlement agreement, license, payment, or other consideration to Beck Branch or any other entity.”

Meredith McKenzie, vice president and deputy general counsel at Juniper, said via email that a Rule 41 dismissal can leave some ambiguity about how and why a case was resolved. “Juniper Networks feels it is important to ensure there is no confusion as to the nature of this dismissal,” she said, “and therefore decided to file this clarification.”

Katten DQ'd From Pharma Appeals

Valeant Pharmaceuticals has succeeded in disqualifying Katten Muchin Rosenman from representing Mylan Pharmaceuticals in appellate litigation against Valeant and a subsidiary.

Valeant moved to disqualify after the lead partner on the cases, Deepro Mukerjee, lateraled from Alston & Bird to Katten. Valeant sought disqualification on the ground that Katten is longtime counsel to Valeant affiliate Bausch & Lomb. Valeant pointed to outside counsel guidelines that Katten had signed, which demand “a significant degree of loyalty from Valeant's key external firms,” namely, those that bill more than $1 million per year.

Katten had argued that it “never came close” to the $1 million figure and so was free to take positions adverse to Valeant affiliates, so long as the firm acted within ABA rules of ethical conduct.

Katten faced a lot of pushback from the Federal Circuit at a hearing last fall, which I wrote about at some length here. Friday's order was issued under seal, at least for the time being.

Finnegan, Henderson, Farabow, Garrett & Dunner represents Valeant.

That's all from Skilled in the Art this week. I'll see you all again on Tuesday.