Season's Greetings from Your Friends at Boschan Corp.

(c) 2015 Howard Boschan

Calendar: Wednesday, December 9, 2015: Talk on Royalty & Participation Audits

The Beverly Hills Bar Association will present on Wednesday, December 9, 2015 a program on royalty and profit participation audits:

Our founder, auditor and forensic accountant Cedar Boschan, will lead top accounting and legal audit professionals in discussion about:

• Drafting accounting, objection and audit provisions in contracts
• Making the call to audit, hiring an auditor and issuing audit and objection notices
• Working closely with accountants to smoothly complete audits
• Negotiating tolling agreements, settlements and, at times, litigating

Forensic accountant and royalty auditor Cedar Boschan Moderates Panel at Lawry's

The panelists will discuss these and other elements of modern royalty and profit participation audits to empower attorneys in attendance to optimize settlements for your clients.  
Speakers include an auditor and a litigator who mutually represent plaintiffs including Richard Dreyfuss in a current case against Walt Disney Pictures, as well as an executive from MGM:

• Neville Johnson, Esq.; Partner at Johnson & Johnson LLP
• Edward Slizewski, Esq.; Senior Vice President at Metro-Goldwyn-Mayer Studios Inc.
• David Robinson, CPA; Owner at Robinson & Company
• Moderator: Cedar Boschan; Founder, Boschan Corp.

Attorneys who attend the lunch at Lawry's The Prime Rib in Beverly Hills (or who watch the program online) may receive 1.5 hours of MCLE credit.

Registration is now open - click here to register!

Revenue Stability in the Music Market - Materials from Cedar Boschan's October Presentation at The University of Southern California Posted

Our founder Cedar Boschan had a great time speaking last month at the University of Southern California's 2015 Institute on Entertainment Law and Business.  The topic was "The Search for Revenue Stability in the Evolving Music Market."

Image courtesy of NARIP (c) 2015 L-R: Tess Taylor, President of NARIP, Todd Brabec, Esq., author of "Music, Money & Success," Cedar Boschan of Boschan Corp., Kent Liu, Esq. of Rhino Entertainment

Ms. Boschan was honored to serve as a panelist at her alma mater (USC conferred Ms. Boschan's bachelor of science in music industry), where her instructors included fellow speaker Todd Brabec, attorney and co-author of the classic, "Music, Money & Success."  

Images courtesy of NARIP (c) 2015 Top, L-R: Tess Taylor, President of NARIP, Thomas White, program chair, Kent Liu, Esq. of Rhino Entertainment, Anita Rivas, Esq., materials chair, Todd Brabec, Esq., author of "Music, Money & Success," Cedar Boschan of Boschan Corp. 

Following the panel discussion, many audience members requested copies of Ms. Boschan's presentation.  Due to overwhelming demand, our sister site, Boschan.com today posted the presentation images as well as some written materials that were included in the materials that attendees of the USC event received.

Since Auditrix readers may find Ms. Boschan's presentation of interest, we are including a link here:

Click Here to View

Note: During the time since Cedar prepared the above-linked materials, updated music publishing revenues figures were released by the NMPA and CISAC.  Therefore, don't miss Cedar Boschan's next music industry presentation for the most up-to-date analysis.

Visualizing Decimated Revenue in the Record Business

Since 1999, the old "record business" (i.e., of manufacturing and distributing physical consumer products) has dropped over 70%.  See charts below based on RIAA data:

Record companies collectively lost control of music distribution, albums unbundled into tracks, and downloads have had their day (note: downloads are declining in market share at this point). 

A small number of digital music services have seized control of music distribution; YouTube, Spotify, Amazon and Pandora compete with Apple to offer consumers better, faster and/or cheaper experiences, making streaming one of few recorded music market segments with strong growth.

Losing control of distribution to digital companies has weighed heavily on music license fees, resulting in controversially low royalty rates, which are often based on subscriber or ad revenues. See Boschan Corp.’s estimates below of roughly how many digital downloads or streams are required to achieve $1 Million in US recorded music revenue on many of the popular services:

Note that actual rates do vary based on the services deals with record companies and/or SoundExchange as well as the type of exploitation (e.g., subscriptions vs. ad-supported).

Also, it is important to note that while recorded music revenues have dropped, so have costs (e.g., for physical product), and that record companies have a multitude of other income streams that they classify as "investment" or other types of income or offsets to costs.  As a result of these and other factors, the profitability picture is not quite as grim as it appears when we focus solely on revenues of the recorded music sector.

Controlled Composition Clauses: Myths Dispelled

Entertainment lawyer Wallace Collins wrote an article for Music Think Tank entitled "Beware of the Controlled Compositions Clause."

While I wholeheartedly agree with the premise of Mr. Collins' post (i.e., watch out for controlled composition clauses) and I appreciate that he couldn't cover all of the details extensively in a single post, the piece does not appear to have been fact checked and when I tried to comment on the Music Think Tank site, I received error messages and the site would not allow my comments to be posted.

In any case, as a royalty auditor who audits compliance with statutory mechanical royalty rates as well as controlled composition provisions, I feel compelled to point out the following regarding Mr. Collins' and Music Think Tank's post. Thus, I am posting my comments here on The Auditrix blog:

Example of language similar to that found in typical controlled composition clauses

First of all, in practice, statutory royalty rates are effectively *maximum* rates, not minimum rates, as Mr. Wallace and Music Think Tank state. (The term "minimum statutory rate" as used in controlled composition provisions references the fact that there is a minimum rate that applies to uses that are five minutes or less; higher rates apply for uses that exceed five minutes.) As much as I wish that my music publishing and composer clients were entitled to minimum rates that would be equivalent to a minimum wage, they are not.  The statutory rates are simply the reportable rates for compulsory licenses and since negotiated licenses virtually never exceed statutory rates, statutory rates are effectively a cap and not minimum rates at all.

Secondly, while I understand that it used to be a common practice of record companies to cross-collateralize mechanical and artist royalties, which is an issue that Mr. Wallace and Music Think Tank warn readers to beware of, I believe many labels were sued over this practice decades ago and I haven't seen it in my 14 years of royalty audits. In fact, modern artist agreements specifically prohibit this. (However, many contracts do allow for recoupment from artist royalties of "excess mechanicals" which are mechanical payments to publishers that exceed the cap set forth in applicable controlled composition provisions. Despite this, such provisions do not prevent the publisher from collecting royalties and, in practice, we do not see many excess mechanical charges against artist royalties in any case.)

Finally, the Digital Performance Right in Sound Recordings Act of 1995 prohibits record companies from applying controlled composition provisions for digital phonorecord exploitations (i.e., permanent downloads) in most but not all cases, which is a glaring omission from the piece, since it drastically reduces the the impact of most controlled composition clauses.  Due to this law (and the fact that streaming services are responsible for paying US publishing royalties for streaming exploitations) the exploitations that are potentially subject to controlled composition provisions are mainly US sales of physical CDs and vinyl, which are less than half of overall US sales. (Not to mention that US sales are equal to or less than foreign sales for most of my clients, and the controlled composition provisions are largely inapplicable outside the US.)

Also, to Mr. Collins' point that there is a question as to whether one writing partner can bind another is the fact that the Department of Justice is considering requiring publishers (or their agents) to engage in what is called 100% licensing, in which any rightsholder can issue a license for 100% of a song. Sony/ATV's Martin Bandier recently wrote a letter to songwriters about this issue (which relates to much more than controlled compositions) and The Association of Independent Music Publishers (AIMP) (of which I am the national treasurer) recently presented a program on the topic, a video of which members can view at AIMP.org (viewing this discussion is well worth the cost of membership, if you aren't already a member).

Of course, there are many more crucial details to understand about controlled composition provisions, especially as they relate to audiovisual content and premium uses, which is why many attorneys consult with us during the contract negotiation process. No one can be expected to know everything about the arcane world of royalties, so such negotiations are usually a team effort.

A Forensic Accountant Does Not a CPA or CFE Make

Beyond navigating all kinds of accounting and record keeping systems, a modern forensic accountant needs the ability to ascertain compliance with relevant regulations and/or contracts and, often, to process terabytes of information using sophisticated database software, plus the ability to communicate findings in a manner in which a layperson can comprehend.

It isn't easy to find an expert who possesses all of the above qualities and when you do, your counterparty will likely endeavor to bar the expert from auditing or testifying.

Some of the strategies to limit a party's top choice of forensic accountant include attempting to:

• Proactively limit contractually:
• Who can conduct an audit (e.g., requiring it be a CPA and/or nationally recognized firm, even though the "Big 4" accounting firms are not especially well regarded as royalty audit or forensic accounting experts and many are unwilling to take on such engagements)
• When an audit can be conducted by your auditor of choice (e.g., certain companies try to prevent the best auditors from conducting more than one audit at a time at any particular company)
• Reactively attempt to discredit your expert by attempting to equate the term "accountant" with "CPA" (although they are not the same) and frame your accounting expert's credentials solely in terms of CPA certification (or other certification or degree), even if the expert is opining on industry practice or damages calculations (and not a public-accounting-related matter, such as compliance with GAAP).

However, forensic accounting (including royalty auditing) is a private accounting service, not public accounting.  No official certification exists for "forensic accountants" or other forensic experts; neither CPA and/or CFE certifications, nor economics and/or statistics degrees validate that the bearer has the training or experience necessary to succeed in forensic accounting.  Although these and other degrees and certifications can have bearing on the suitability of an expert, depending on the particular case, a "forensic accountant" these qualifications do not alone make.

Modern forensic accounting is really a blend of:

• Accounting
• Eeconomics
• Industry expertise
• IT
• language arts
• Above-average understanding of certain legal concepts

While some CPAs, CFEs and economists have this, the vast majority do not, as I once observed when a highly degreed certified public accountant had a meltdown on the stand when he had to admit during questioning that he had no relevant expertise that pertained to the matter at hand.

Fortunately, the curriculum at the University of Southern California - where I studied under highly respected IP attorneys, accountants and economists - and my decades of work experience focus on all of the above areas, so I am a very well rounded forensic accountant, particularly in the entertainment and IP sectors, where I bring deep industry expertise.

My recommendations for finding the right auditor or forensic accountant for you or your client are to search for someone with a balance of industry expertise and relevant accounting and/or testimony experience.  Request the potential expert's CV, a list of cases in which they have testified and/or participated and client references.  If the potential expert forensic accountant doesn't ask a lot of questions and clear conflicts before learning details of the case, it is a red flag that he or she is inexperienced.

Finally, make sure you discuss your or your client's budget with the expert; a rate sheet alone won't tell you how many hours of work will be required on your case and if you think all you need the forensic accountant to do is spend an hour putting together a spreadsheet and signing a declaration that you drafted, you may be mistaken; although we often need to define the scope of an engagement to meet a budget, a forensic accountant's work is usually a bit more complex than meets the eye, so do not assume you know how much time a particular engagement may take.

Live Music: Is Growth of the Industry's Largest Source of Revenue Sustainable?

Live music is the largest of the music industry's three major revenue streams, representing over 40%:

Accordingly, nearly half of the money that the average U.S. consumer spends on music is for live music experiences.

Over the past few years, the live concert industry has had a good run, globally as well as in the US, as shown in the chart below:

Pollstar reported that North American concert revenues totaled $6.2 billion in 2014 and 2015 may be another record-setting year for live music events, in terms of revenues, attendance and high ticket prices.  Many credit such growth in live music to maturing audiences, as evidenced by trade publication Pollstar’s list of top five concert tours worldwide during the first half of 2015, which includes just one act with fewer than two decades of history (i.e., One Direction):

1. One Direction
2. Fleetwood Mac
3. The Rolling Stones
4. Garth Brooks
5. Paul McCartney

There is clearly a risk that the live concert industry (and industries that depend on it, such as pro-audio equipment), will suffer sharp declines as top-grossing entertainers and their audiences age out of the marketplace.

However, it is worth noting that the above list of top five concert tours during the first half of 2015 does not reflect the latest Taylor Swift tour.  Also, it does not reflect non-tour related events such as festivals and electronic dance music events, all of which attract a younger demographic of consumers with lower discretionary income than the typical Fleetwood Mac or Paul McCartney concertgoer, but who are likely to continue to attend music events for decades to come.

Regardless, some analysts believe that, as the over-saturated market for festivals contracts, live music revenues may decline.  Also, while electronic dance music has been a bright spot, notable EDM promoter SFX has struggled financially. 

The bottom line is that few experts think the record growth in live music is sustainable in the long term.

LA Calendar: October 17, 2015

The University of Southern California's Gould School of Law and The Beverly Hills Bar Association will present the 2015 Institute on Entertainment Law and Business on Saturday, October 17.

Mailer from USC's 2015 Institute on Entertainment Law and Business

Our founder Cedar Boschan will speak during the afternoon at The Institute about the search for revenue stability in the evolving music market.  Ms. Boschan earned her bachelor of science in music industry from USC's Thornton Music School in 1999, where her instructors included fellow panelist, attorney and author Todd Brabec, as shown in the Institute's new mailer, pictured below:

USC 2015 Institute on Entertainment Law and Business Music Industry Speakers Include: Cedar Boschan, Todd Brabec, Esq., Kent Liu, Esq., and Tess Taylor

Attorneys who attend the Institute may receive 6.25 hours of MCLE credit, including 1 hour of legal ethics credit.  CPAs may receive up to 5.5 hours of CPE credit.

Registration is now open - click here to register!

#Apple

If you are in interactive development, the below headlines about Apple may be of interest:

• App Analytics
• Apple may reduce its 30% subscription commission
• #Brands: Step up your game
• Apple's App Store passes 100B downloads and $30B paid to developers

Top Three: E3 Edition

Below are the Top 3 #E3 items shared in our @RoyaltyExpert Twitter feed:

Cedar Boschan and Evan Van Zelfden @gamelawpro at the Video Game Bar Association #VGBA #E3 cocktail reception sponsored by @LathamWatkins

• A day of surprises at the start of #E3 | VentureBeat

• EA: "We have to start building new #IP that might feel like a big risk today" | gamesindustry.biz

We extend an invitation for those of you visiting the next E3 event in Los Angeles:

Los Angeles Calendar: June 25, 2015 Music Publishing Valuation Panel

The Association of Independent Music Publishers will present music valuation panel discussion on June 25 at Lawry's in Beverly Hills, California.
Registration is now open - click here to register!

AIMP Catalog Valuation Panel:  Beyond the MultipleThursday, June 25 at 11:30 amLawry's Restaurant in Beverly Hills, CaliforniaTickets & Information: Click Here

Join the AIMP for lunch as speakers delve beyond the multiple to reveal how parties from buyers to banks price music assets.  Music valuation expert and AIMP Treasurer Cedar Boschan will moderate this highly informative discussion among world class valuation experts, so mark your calendars for June 25.
Speakers:

Jason Somerville, Managing Partner, EIG

Josh Gruss, CEO, Round Hill Music

Dan Coleman, Managing Partner, Modern Works Music Publishing

Derek Crownover, Esq., Partner & Entertainment Law Practice Leader, Dickinson Wright 

Cedar Boschan, Founder, Boschan Corp

Maximize Future Marital Settlement Agreement (MSA) Royalty Earnings with these Drafting Tips from Cheryl Hodgson, Esq.

Trademark, copyright, music law & digital media attorney Cheryl Hodgson of Hodgson Legal

The best family law attorneys know when to include outside experts on their team.  When it comes to intellectual property assets, family lawyers turn to attorney Cheryl Hodgson of Hodgson Legal for her expert advice.

As part of our collaboration geared towards helping family lawyers and their clients navigate the arcane world of intellectual property assets, we invited Ms. Hodgson to share three key drafting tips for family lawyers to consider in cases when the marital assets include royalties:

1.     Audit rights.  Audit rights are a vital component to any agreement that includes payment of royalties, whether or not a dissolution is involved. Without the direct audit rights as well as the right to participate in an audit of the source of the income stream, there is no means by which to verify the accuracy of accountings from an ex-spouse, or payments received by the ex-spouse. Moreover, without an audit to identify an ex-spouse’s non-compliance with the marital settlement agreement (“MSA”), it can be difficult or impossible to identify evidence to support legal action and hold the ex-spouse accountable for failing to properly pay. Therefore, one should always include a thoughtful audit clause in the MSA that grants access to the contracts that create the income stream. Moreover, rights to piggyback on direct audit rights are imperative.  (See this post for more audit clause drafting tips.)

2.     Earnings Periods.  The MSA should address dates governing receipts and payments prior to the date of dissolution since payments may be earned long before they are received. For example, in the case of foreign performance royalties from the broadcast of music on television and in film, earnings during the term of the marriage may not be received or paid in the United States for a year or even longer.

3.     Transfers of Title.   A court order detailing rights in the divided assets should be drafted in a manner that is both clear, detailed, and binding upon third party payees of royalties. Entertainment related companies are often loathe to make changes in existing payment instructions without clear agreements, letters of directions, and in many cases, a court order that clearly identifies the assets and the parties covered.

# # # 

Don’t wait for the next post in our ongoing collaboration – read more from Ms. Hodgson today on her own website.  Better yet, for a personalized consultation, call Ms. Hodgson today at 310-623-3515 and follow her on Twitter @CherylHodgson.

Mark Your Calendar: Cinco de Mayo

The Recording Academy and California Lawyers for the Arts will present a music industry panel discussion May 5 at The GRAMMY Museum in Downtown, Los Angeles:

The Legal Landscape for Compensating Content CreatorsTuesday, May 5 at 6:00 pmThe GRAMMY Museum in Los Angeles, CaliforniaTickets & Information: Click Here

The below experts will discuss why music revenue and royalties are at all time lows, the history of music distribution, how content creators (and artists) are paid, the applicable laws and legislation, and the present and future landscape for creating and selling music.
Panelists:

• Jay Cooper, Esq., Greenberg Traurig LLP
• Dina LaPolt, Esq., LaPolt Law PC
• Cedar Boschan, Boschan Corp. & Auditrix, Inc.
• Edwin McPherson, Esq., McPherson Rane LLP

Moderator:

• Keith Cooper, Esq., de la Peña & Holiday LLP

The GRAMMY Museum will be open at 6:00 p.m. for attendees to view the exhibitions. The program runs from 7:00 p.m. to 8:30 p.m.

The museum entrance is on Figueroa, between The Farm of Beverly Hills and Flemings.

Paid parking is available in nearby public lots.
Click here for more details.

2015 Quarter 1 Top 10 @RoyaltyExpert

Below are the items that had the highest engagement during the first quarter of 2015 on our RoyaltyExpert Twitter feed:

1. February's digital console sales drop 3.7%  http://t.co/Th9E0U85z4
2. Spotify launches today on PS4 and PS3 with PlayStation Music  http://t.co/YxoKVXG9v1
3. Allocation of Copyright Damages for Co-Owners - In re Isbell Records, Inc. | McDermott Will & Emery - JDSupra  http://t.co/a3HNW0EHR0
4. Boeing Patents Force Field Technology  http://t.co/xsPcM8gRc6
5. Machinima gets another $24 million in funding from Warner Bros.  http://t.co/1mQxC93Tto
6. GameMaker Studio creator acquired for $16.4 million  http://t.co/emDdnZmLkm
7. Why Being Under-Funded Could Actually Help Your Business  http://t.co/GquGaEsvl5
8. 20 Percent Of Mobile Gamers Are Mobile-Only | alistdaily http://t.co/sbbpOwxKpT
9. 15 Stephen Hawking Quotes That Will Change Your Life  http://t.co/xRKZe1iy10
10. Physical Game Sales Hit 24-Year Low in Japan  http://t.co/scVOe0UWkS

Introducing Boschan Corp.

Dear readers,

It is my great pleasure to announce that audit and forensic expert services successfully launched this week at Boschan Corp., the sister company of Auditrix, Inc.

Boschan Corp. is dedicated to empowering attorneys to optimize client claims / counterclaims through:

• Contract and royalty audits
• Damages, property and restitution valuation

Personally speaking, I am thrilled to return to an entrepreneurial role focused on music, IP, interactive and other select clientele, not to mention a commute that saves hundreds of hours!

Please update your contact records as follows:

Cedar Boschan
President & CEO

Boschan Corp. & Auditrix, Inc.
8383 Wilshire Blvd.
Suite 800
Beverly Hills, CA 90211

Web: Boschan.com
Tel: 424-248-8866
E-m: clientservice@boschan.com

I hope to hear from and see you soon!

Have a wonderful week ahead,
Cedar

March 2015 Music Business Top Ten

Here are the top ten music industry highlights from our Auditrix twitter feed:

1. Cheryl Hodgson moderated a fantastic panel discussion about brands and music at the California Copyright Conference:

   

   Pictured L-R: Navine Karim - Legal Counsel, Red Bull Media House; Kyle Hermans - Brand Innovation, Gap Brands; Cheryl Hodgson - Music Attorney and Founder of Brandaide; Marshall Eskowitz - Marketing Executive, Creative Artist Agency

2. By David Oxenford, who represents #broadcasters: Songwriter' Equity Act Reintroduced - What Does It Propose?
3. Hollywood Reporter: We nominated our favorite power lawyers! 
4. Daily Mail Online: Jay-Z to pay Swiss jazz musician 50% of royalties after 'stealing' his instrumental for 'Versus'
5. Fast Company: Spotify Unveils A Bold New Brand Identity
6. New York Post: Spotify to spend $1B on renewal deal with Universal Music
   
   
   
7. Billboard: 'Blurred Lines' Trial Verdict: Jury Rules Against Pharrell Williams & Robin Thicke
8. Disruptive Competition Project: Transparency at the Intersection of Music Licensing and Antitrust
9. Sonicbids: 5 Not-So-Obvious Revenue Streams for Musicians
10. Digital Music News: 12 Reasons to Fire Your Bandmates

February Financial News Recap - Music Royalties

MIDEM as we know it may be no more, but the music business always kicks off the new year with The Grammy Awards.  This year, we celebrated nominated clients during #Grammy #Week with many out of town guests from New York, The Southeastern US and Texas (see photo here by Christianne Kinney, Esq. featuring Tamera Bennett, Esq., Ken Freundlich, Esq. and Auditrix founder Cedar Boschan at the Fox Rothschild Pre-Grammy Party)

Our music royalties highlights so far this year:

• A popular post on the Auditix blog "Five Things to Consider Before Filing a Music Copyright Case" by trial lawyer Gerard P. Fox, Esq.
• Cedar Boschan was re-elected to a second term as national treasurer of The Association of Independent Music Publishers.  She was also honored to be featured in discussion with the following music industry professionals in Berkeley at California Lawyers for the Arts' "Crossing the Digital Divide" 32nd Annual Music Business Seminar:
• Keith L. Cooper, Esq., Partner who heads de la Pena & Holiday LLP's new Los Angeles office and focuses on clients in  transactional, copyright and trademark matters, as well as lawsuits
• Angela Rose White, Esq., COO of David Rose Publishing Co. where she concentrates on music publishing/administration of a catalog including “The Stripper” 
• Mikael "Count" Eldridge, San Francisco-based record producer and filmmaker (projects include DJ Shadow, Frank Sinatra, Radiohead, John Cale, No Doubt, RUN DMC)
• Vivek Sridharan, Esq., Partner at Counsel LLP who advises on digital strategy for independent record labels, music technology start-ups
  
  The panel discussion focused on digital distribution of music and its impact on the music business.
• Green Hasson Janks published its final Entertainment Newsletter (GHJ is switching to a blog, to be announced soon)
• Cedar and her team at GHJ attended several educational programs about the music industry, including an International Panel at the AIMP and the first music-oriented program held by The Beverly Hills Bar Association in quite a while:

February 18, 2015 at The Beverly Hills Bar AssociationMusic Industry Update: Getting a Manager, a Record Deal, and the Money in 2015
L-R: Dean Wilson, President, Three Six Zero Group, Dina LaPolt, Attorney, LaPolt Law PC, Donald Passman, Partner, Gang Tyre Ramer & Brown, Rand Levin, Senior Vice President, Business & Legal Affairs, Universal Music Group, Dinah Perez, Law Office of Dinah Perez

• We also attended The AIMP's International Royalties program featuring:
• Michel Allain, Director General/CEO, FastTrack (Paris, France), who cogently pointed out that, unfortunately, $1M Euros equals $1M U.S. Dollars
• Ger Hatton, Director General/CEO, International Confederation of Music Publishers (Switzerland)
• Teri Nelson Carpenter, President & CEO, Reel Muzik Werks/AIMP Vice President
• Check out our top tweets here!

Top Tweets YTD from the Auditrix 2015 Twitter Feed

Below are the popular tweets from the Auditrix twitter feed, which focuses on music economics and royalties, during 2015 YTD:

• Duff McKagan on royalty audit of Geffen: "Well, they didn't pay us on something like 6 million records."
• YouTube Music Key Drew Criticism from Indies
• Apple spent up to $50 million for a music data company 
• Swedish songwriters called for more clarity and fairness over digital royalty distribution
• Sly Stone testified in royalties lawsuit against his former manager and won   
• Katy Perry's lawyers demanded takedown of 3D printable Left Shark and filed a trademark claim for Left Shark
• Federal District Courts "have been improperly applying a quantitative and not qualitative #copyright analysis... "
• Elvis Presley Turns 80: What Is the King's Legacy Worth?
• Sony's Lynton said: No Plans to Sell Music Publishing Business
• The Best Time to Release Your Album: A Month by Month Guide
• The U.S. Copyright Office Embraced Big Shake-Up to Music Licensing Regime 

Best Unfinished Twitter Conversation with Glenn Peoples @ Billboard and John Strohm @ Loeb

• Jas Prince Sued Birdman For Drake Royalties
• Tony Braxton's Ex-Husband Auctioned Off Royalties To Pay Back Child Support
• Kiplingers: Shouldn't Music Streaming Sites Pay Higher Royalties?
• Medium: Why Do All Records Sound the Same? 

Five Things to Consider Before Filing a Music Copyright Case

By Gerard P. Fox, Esq.

Gerard P. Fox, Esq. and his firm
handle general business, contract
and IP litigation across the
entertainment industry and
beyond.

Attorney Gerard P. Fox has acted as lead trial counsel for corporate clients such as Vivendi and Clear Channel. Mr. Fox has also represented high profile entertainers including Madonna, Anita Baker and the Isley Brothers.  

From hiring experts to damage awards, in his post below, Mr. Fox shares some very useful tips from his years of copyright litigation experience.  For a personalized consultation, contact the Law Offices of Gerard Fox and also check out his Fox's Litigation Strategies Blog.

1.      In my opinion the Federal District Courts have been improperly applying a quantitative and not qualitative copyright analysis in music and film cases. This means that they take the totality of your copyrighted work which you claim has been infringed, and hold it up against the totality of the infringing work and actively look for dissimilarities.  This is incorrect under the law because in truth a song often includes many small, integrated and unique copyrightable works. Unfortunately, because the courts are taking this approach, it is much harder to win a copyright case in district court.  I tried one of the last published wins where I represented an artist claiming a part of their song was infringed. See Three Boys Music (Ronald Isley) v. Michael Bolton.  It’s not common.

2.     You will need to hire a musicologist up front.  If you want to have any chance of negotiating an early settlement or defeating an early motion for summary judgment (see below), you will need to retain an accomplished and respected musicologist. First, you should secure their independent opinion as a consultant, then if their opinion is one you respect and one that supports your contentions you should retain them as a formal expert.  Good musicologists, who are respected by defense counsel and the court, will usually ask for an up front retainer of no less than $5,000 or $10,000. Keep in mind that this retainer is not a cap of their total billings.  If the case proceeds through to depositions, summary judgment and trial, the musicologist would likely charge you upwards of $25,000. 

3.     Another consideration is that the defendants will most assuredly make an early motion for summary judgment wherein they will argue that the infringed elements of your song are common and not unique, and that the two musical works are not substantially similar.  They may make other arguments that are common to these type cases, but these are the two most likely arguments.  In making these arguments, they will put forth cases that move away from the proper application of Copyright law to a quantitative analysis of the works.  It is imperative that you retain attorneys who have a deep and up to date understanding of the case law, legislative history and this process to have any chance of defeating this type of motion.  This is no area for a general practitioner.  Defeating this summary judgment motion is essential, because if you do, which is rare in these cases, you will have all the leverage, as the defendants would be left to face a public jury trial.

4.     The prevailing party may be awarded their attorney’s fees under Copyright law.  Under 17 U.S.C. § 505 “the court may also award reasonable attorney’s fees to the prevailing party” in a copyright infringement case.  This is a huge issue to consider if you are the artist because if you lose, you could be ordered to pay hundreds of thousands of dollars of defense fees.  Now, awarding attorney’s fees and costs is discretionary with the district court judge, and many of these judges will NOT award the defendants their fees even if they win, on account of their very human concern about the financial devastation such an award would cause the artist, but this is a risk.

5.     Finally, when it comes to estimating your damages, you will not be awarded all of the infringing defendants’ net profits from the infringing distribution and use of the song, but an apportioned amount.  17 U.S.C. § 504(b) provides that the defendants are entitled to prove that certain elements of the profits are “attributable to factors other than the copyrighted work.” See Mackie v. Rieser, 296 F.3d 909, 915–16 (9th Cir.2002) (In the Ninth Circuit, on a claim to recover profits that are attributable to the copyright infringement, a plaintiff must show that the infringement itself, that is, the use of the plaintiff's work, was causally linked to the gross revenue claimed.).  This means that the defendants will argue that their notoriety, other songs on an album, the marketing behind them and their songs, the market that pre-exited for their music and other non-infringing parts of the song at issue were responsible for most of the profits earned, and that you should only be awarded a small apportioned amount of the net profits.  Of course, most defendants are not truthful about their actual net profits and will try to hide the true amount of their profits. To combat this it is important that you hire a forensic accountant who is knowledgeable about the music industry, such as Green Hasson Janks, to figure out the actual net profits, and then use your musicologist and maybe another music industry expert to argue that the piece of music stolen from you drove the sales and as a result defendants’ profits.

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Gerard ("Gerry") Fox graduated from Georgetown Law School, magna cum laude, and earned an accounting degree from the University of Richmond. Mr. Fox acted as lead trial counsel for clients such as Vivendi, Clear Channel and Dow Chemical.

Gerry started his career at Covington & Burling, followed by Kaye, Scholer, before forming Fox & Spillane, where Mr. Fox honed his trial skills for twelve years. Four years ago, Gerry began the Law Offices of Gerard Fox.

Gerry handles General Business Litigation, Contract Litigation and Intellectual Property Litigation across the entertainment industry and beyond.

Gerry is admitted to practice in Maryland, Washington, D.C., California, has served as a media commentator, and wrote the book “Sue the Bastards.”