As described in greater detail below,  the 1976 Copyright Act sought to reduce the transaction costs uniquely associated with collaborative works by designating categories of collaborative works, such as collective works and motion pictures, that can specially qualify as works made for hire under Clause (2) of section 101's definition of "work for hire".  The contribution of an individual sound recording as one of several selections on a CD or other album will typically constitute a "contribution to a collective work" under the terms of Clause (2),  with the result that it will qualify as a work for hire if the parties so expressly agree in a signed instrument. In fact, these albums were regularly registered as works made for hire even before the 1999 amendment.  Because questions, however groundless, have been raised about the status of sound recordings as collective works, it was logical for Congress to add sound recordings as a tenth category of work for hire, an addition that does not substantially change current work for hire law or allocations of rights.  By reducing transaction costs associated with the licensing of recorded music, this express acknowledgment benefits not only record companies and principal performers, which will typically qualify as commissioning parties, but also secondary contributors to sound recordings.   

I.  BACKGROUND

                A.  Legal Background

                Section 201(b) of the 1976 Copyright Act provides that “[I]n the case of a work made for hire, the employer or other person for whom the work was prepared is considered the author for purposes of this title, and, unless the parties have expressly agreed otherwise in a written instrument signed by them, owns all of the rights comprised in the copyright.”  Section 101 of the 1976 Act, as amended, defines a “work made for hire” in two clauses: “(1) a work prepared by an employee within the scope of his or her employment” and “(2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a sound recording, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.”

                For a work to be one made for hire under Clause (1) requires the existence of a traditional employment relationship, and if objective factors indicating such an employment relationship are not present, the parties cannot by agreement confer for-hire status on the work.  (The United States Supreme Court listed the principal objective factors in Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989).)  By contrast, if a work is specially ordered or commissioned and falls within one of the categories listed in Clause (2), no employment relationship need exist, and the parties can confer for-hire status on the work by a signed, written instrument to that effect.

                B.   Historical Background 

                The work for hire doctrine traces to a 1903 United States Supreme Court decision, Bleistein v. Donaldson Lithographing Co., 188 U.S. 239, 248, which ruled that "[t]here was evidence warranting the inference that the designs belonged to the plaintiffs, they having been produced by persons employed and paid by the plaintiffs in their establishment to make those very things.”  Section 26 of the 1909 Copyright Act enacted the doctrine into positive law, providing that “the word ‘author’ shall include an employer in the case of works made for hire."  Although the 1909 Act nowhere defined "work made for hire," the legislative history reflects an intention that, at the least, they encompass “composite” works, the forerunner to the collective works included in Clause (2) of the 1976 Act’s definition of work made for hire.  House Committee on the Judiciary, 86^th Congress 2d Session, Copyright Office Study No. 31, Renewal of Copyright 137-139 (Comm. Print 1961).   The 1976 Copyright Act effectively restated the 1909 Act’s work for hire doctrine in Clause (1) of its definition: a work made for hire is  “a work prepared by an employee within the scope of his or her employment.”  Clause (2), new to the 1976 Act, listed nine categories of principally collaborative works on which the parties could confer work for hire status by an agreement to that effect signed by both.

                C.  Economic Background

                The economic rationale for the 1976 Copyright Act’s work for hire provisions is rooted in the well-documented problem of transaction costs.  Clause (1) of the Act’s work for hire definition resolves one aspect of this problem.  If it were necessary for an employer to negotiate an assignment of copyright with each of dozens, or even hundreds, of employees each time they joined to create a copyrighted work,  time and energy that could be better spent on creating new works would instead be devoted to the wasteful task of negotiating, drafting and executing contracts.  When taken together with section 201(b), Clause (1)’s solution is to vest copyright initially in the employer; as stated in section 201(b), however, this is only a default solution, and in the relatively unusual case where the parties agree that the employee should own the rights in the work, they may transfer the rights accordingly.

                Clause (2) of the 1976 Act’s work for hire definition addresses an even more vexing problem of transaction costs: the problem of identifying ownership in collaborative works.  With the possible exception of translations, each of the ten categories listed in Clause (2), including sound recordings, characteristically involves collaborative contributions among a large number of authors.  Without the agreement contemplated by Clause (2), some of these contributions could take the form of joint works, some could be individual works – and some might even be works for hire under Clause (1).  The ownership interests in such contributions would be speculative as well as multifarious, for it would rarely be clear what legal status – joint work, individual work, work for hire – attached to each contribution.  By allowing the parties to definitively confer for-hire status on these works, Clause (2) promotes marketability by making it possible for parties to eliminate an otherwise chaotic state of copyright title, centering full ownership in a single individual or entity and thus facilitating the secure and fluent transfer of ownership interests over the life of the copyright.

                An example from the motion picture industry will suggest the problems of marketability that collaborative works present.  If Film Studio B desires to make a sequel to a popular film produced by Film Studio A, it must, in the absence of work for hire status, determine which of an indeterminate number of contributors owns rights in the film individually, as joint authors, or as employers.  Further, since the joint work doctrine in the United States prevents any single joint owner from granting more than a nonexclusive license – an interest that will rarely, if ever, suffice for a purchaser in the position of Film Studio B – the studio must be certain that it has identified, and obtained transfers from, each joint author.   One purpose of Clause (2) is to enhance copyright transactions by replacing these uncertainties with a signed agreement designating ownership in the commissioning party as a work for hire.  As Judge Richard Posner observed in a decision enforcing Clause (2)’s signed statement requirement, the purpose of the requirement “is not only to protect people against false claims of oral agreements,” but also "to make the ownership of property rights in intellectual property clear and definite, so that such property will be readily marketable.”  Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F. 2d 410, 412 (7^th Cir. 1992).

                Even in the event that all contributors to a collaborative work transferred their interests to a single party by instruments that left no doubt about the scope or term of the transfer, the absence of work for hire status for these works would only postpone the problem of marketability for thirty-five years, when one or more of the contributors terminated the earlier transfer under section 203 of the 1976 Act.  For instance, section 203(a) provides that, in the case of a grant executed by two or more authors of a joint work, a majority of the authors who executed the grant may effect termination of the grant.  If any of these authors is dead, his or her termination interest may be exercised by a majority of statutory successors specified in section 203(a)(2).  To take the simplest possible example, if two joint authors of a sound recording executed a grant and one is dead at the time the termination notice is served, the surviving joint author can effect termination only if he or she is joined by a majority of the interests held by the deceased joint author’s widow or widower and children or grandchildren per stirpes.  By exempting works for hire from the termination of transfer provisions, and by enabling collaborative works to obtain work for hire status under the terms prescribed in Clause (2), Congress effectively removed such obstacles to fluent copyright transactions.

II.  WHAT SECTION 1011(d) DOES AND DOES NOT DO

                A.  What Section 1011(d) Does        

                Section 1011(d)’s modest but central achievement is to remove any doubt that sound recordings can qualify as works for hire under Clause (2) of section 101's definition of that term, just as do the contributions to such collaborative efforts as other forms of collective works, compilations, motion pictures and instructional tests.  Although, as explained further below, such contributions could be – and, before section 1011(d)’s amendment of Clause (2), regularly were – treated as collective works under Clause (2), the failure of two contemporaneous District Court decisions to expressly acknowledge this fact, and the attempt by one article to question it,  may have warranted Congressional clarification in the form of section 1011(d).  See Staggers v. Real Authentic Sound, 77 F. Supp. 2d 57, 64 (D.D.C. 1999); Ballas v. Tedesco, 41 F.Supp. 2d 531, 541 (D.N.J. 1999); Randy Frisch & Matthew Fortnow, The Time Bombs in the Record Company Vaults, Entertainment, Publishing and the Arts Handbook 111, 116 (1994).[1]                Similarly, in Staggers, the court’s treatment of Clause (2) works for hire was limited to the conclusory statement that "a sound recording does not fit within any of the nine categories of specially ordered or commissioned works," without any specific examination of whether the sound recording in issue constituted a collective work.  The court cited as authority for this proposition only Ballas, which was similarly conclusory, and Lulirama Ltd. v. Axcess Broad. Servs. Inc. 128 F.3d 872 (5^th Cir. 1997), which involved neither sound recordings nor the collective works category.

                B.  What Section 1011(d) Does Not Do

                       1.                Section 1011(d) Does Not Generally Confer Work for Hire Status on Works that Could Not Previously Qualify for Work for Hire Status.

                The contribution of an individual sound recording as one of several selections on a CD or other album will typically constitute a “contribution to a collective work” under the terms of Clause (2) of section 101's definition of "work for hire," with the result that it will qualify as a work for hire if the parties so expressly agree in a signed instrument.  Section 101 of the 1976 Copyright Act defines a “collective work” as “a work, such as a periodical issue, anthology, or encyclopedia, in which a number of contributions, constituting separate and independent works in themselves, are assembled into a collective whole.”  Courts have, for example, protected as collective works a television program that combined several songs and dances created by others, Apple Barrel Prods, Inc. v. Beard, 730 F. 2d 384, 387-88 (5^th Cir. 1984); a television station’s selection and arrangement of several television programs produced by others into a “broadcast day,” National Ass’n of Broadcasters v. Copyright Royalty Tribunal, 675 F 2d 367, 377-78 (D.C. Cir. 1982); and a film consisting of excerpts of Charlie Chaplin motion pictures, Roy Export Establishment v. Columbia Broadcasting Sys., 672 F. 2d 1095, 1102-03 (2d Cir.), cert. denied, 459 U.S. 826 (1982).  As indicated by the last-cited decision, it is no bar to classification as a collective work that all of the contributed works originate with the same author.[2]

2.                Section 1011(d) Does Not Confer Benefits on One Class of Sound Recording Proprietor Over Another.

                There is no reason to believe  that record companies, as opposed to recording artists, will be the exclusive beneficiaries of work for hire status, including the immunity this status confers from terminations of transfer.  In those instances where it is the record company alone that commissions the individual contributions to a sound recording, the company will be the exclusive beneficiary of work for hire status, just as it may formerly have enjoyed commissioning party status under the collective work category of Clause (2).  But, in the many instances where the contributions of back-up vocalists, musicians and recording engineers are commissioned not by a record company, but by another entity or individual – they may be commissioned by the featured artist, for example – the immediate transactional benefits of work for hire will be enjoyed by that entity or individual.

                An example presented in Frisen & Fortuno, The Time Bomb in the Record Company Vaults, supra at 111, although inaccurate, illustrates the benefits that performers can derive from work for hire status:

Imagine that in the year 2013 Sony Music is planning a boxed set of the greatest hits of Bruce Springsteen.  The record company is eagerly anticipating the profits from this release by one of its all-time biggest-selling artists, whose music continues to generate income, much like the Led Zeppelin catalog earns significant revenues for Atlantic Records in 1993.  As Sony is about to release the set, the time bomb goes off: a letter arrives from Springsteen’s attorney, informing Sony that the artist is exercising his right under copyright law to terminate Sony’s ownership of the sound recording.  Upon this termination Springsteen will become the sole owner of the copyrights.  If Sony wants to continue to use the recordings, it must repurchase those rights from Springsteen. [Emphasis added]

Assuming for purposes of analysis that the termination of transfer provisions applied in this situation, it is more than likely that Bruce Springsteen would not become “the sole owner of the copyrights.”  Far more likely, each of the other creative contributors to the sound recording – vocalists, musicians, producer, engineer – each of them a copyright owner in his or her own right, would jockey for position to control the disposition of terminated rights.  As a consequence, and as described in the discussion of joint work terminations of transfer above, Springsteen would be in no position to renegotiate with Sony nor to convey exclusive rights to a third party without first coming to terms with each of his several co-authors.  As noted above, any such transaction would be seriously vexed from the outset because of the complex and fact-sensitive determinations that would have to be made respecting the joint authorship status, if any, of each participant’s role in the creation of the sound recording.

                As this example suggests, the benefits of enhanced marketability of title in a sound recording will be spread among all those – record companies, producers and featured performers alike – who enjoy the bargaining power to order or commission works, and to get creative contributors to agree in writing that their contributions are works for hire.  Although this result may deprive some creators, particularly background artists and engineers, of the economic benefits of termination of transfers, Congress decided when it introduced Clause (2) into the Copyright Act -- well before it passed section 1011(d) -- that any possible slight to artists in this position would be more than compensated by the increased revenues available to all creative participants as a result of the increased marketability of copyright titles to collaborative works.

III.  CONCLUSION

                The amendment adding sound recordings to the list of works eligible for work for hire status did little more than confirm the eligibility for such status already available to sound recordings as "contributions to a collective work".  The benefits of this clarification are likely to be enjoyed not only by featured recording artists, record producers and record companies – the individuals and entities that typically are commissioning parties under copyright law – but also by all of the other contributors to a sound recording who benefit from the increased marketability of the copyrighted work made possible by the work for hire doctrine.