Is Diddy a Copyright Bad Boy?

Stanford Law School has some of the most amazing legal programs in the world dealing with the Internet and fair use. The umbrella program is the Law, Science and Technology program, of which the Center for Internet and Society (CIS) is a part, and of which a subpart is the Fair Use Project, founded in 2006 “to provide legal support to a range of projects designed to clarify, and extend, the boundaries of ‘fair use’ in order to enhance creative freedom." A sub-sub part of the Fair Use Project is Documentary Film program, which “provides filmmakers with information about fair use, access to insurance for liability arising out of copyright litigation, and access to lawyers who will defend copyright claims pro bono or at reduced rates.” CIS’S CPU consists of Anthony Falzone, Brandy Karl, Chris Ridder , Jennifer Urban, Julie Ahrens, and Lauren Gelman. They are truly doing God’s work; they almost make me wish I was back in law school.

Anthony Falzone recently posted a blog on a sampling case, which I recommend .
He gives some important history of other cases, which links to the samples, but he focuses on including Bridgeport Music, Inc. v. Justin Combs Pub., 2007 WL 3010525
(6th Cir.October 17, 2007). I blogged on the punitive damages part of this opinion. Mr. Falzone is interested in why fair use wasn’t raised as a defense:

Diddy (CEO of Bad Boy) and B.I.G. (real name Christopher Wallace and, sadly, deceased more than 10 years) are giants of hip-hop music, a genre that has always been underpinned by fantastically innovative sampling that lets us experience old sounds in new ways. If anyone would rise to defend the legality of this technique, and the wonderful creativity is spawns, I would think it would be Diddy and his label (even if it is half-owned by Warner). Yet the fair use defense is nowhere to be found in the Sixth Circuit decision, and was apparently not raised by the defendants. Why is that? Was it inadvertence? I doubt it. Was it a "strategic decision?" Perhaps, but if so, it was a bad one in hindsight. Or was it simply a reluctance to raise a defense that lots of music publishers and record labels fear -- one that supposedly threatens their "control" over their music, and by extension, over future creativity and musical expression? The question I'm left with is why, Diddy? Why didn't you -- an artist who has helped shape this art form that uses sampling so beautifully and so creatively -- stand up for the right to sample?

Perhaps Mr. Diddy will answer, or not. Mr. Diddy featured controversially in another case, one involving the infamous controlled composition clause. The case was Universal-MCA Music Publishing v. Bad Boy Entertainment, Inc., 2003 WL 21497318 (N.Y. Sup 2003).

Plaintiffs were the named record company and three individual songwriters. Defendants were Mr. Diddy and the company of which he was the president and CEO. In 1996, Combs signed a multi-year, multi-album recording agreement; that agreement contained a controlled composition clause. Combs's controlled composition clause apparently had a few variations, including one that treated fees paid for use of samples as royalties.

The effect of a typical controlled composition clause may be summarized as:

(1) The clause pays royalties only at 75% of the statutory rate. If we assume the rate is eight cents per song, this means the rate is only six cents;
(2) The rate does not increase if the song is more than five minutes, contrary to the statutory rate;
(3) The clause caps payment at 10 songs per album. If there are 12 songs on the album, this means two are not compensated for.
(4) The clause limits the rate paid to the rate in effect on the date the masters are delivered, so if the statutory rate increases, the spread between the statutory rate and the controlled composition rate increases.
(5) Royalties are paid only on “Records Sold,” a practice which is reputed to further reduce payments by 15% to 20%.

Controlled composition clauses are implicated in joint authorship situations because they apply when the composer subject to the clause writes the song in question as a joint author. Joint authors may bind others to the terms of a controlled composition clause even where, as typically happens, the clause is contained in an earlier contract to which the other joint authors were not a party. The effect of controlled composition clauses extends well beyond reducing payments received by all joint authors: the clause also provides a right of recoupment against the composer for royalties the record label is obligated to pay above the cap. In practice, this means where, on a particular album, compositions owned by publishers or writers who are not bound by the controlled composition clause are included, royalties the record label has to pay above the controlled composition limit (the difference between full statutory rate and the controlled composition rate) are deducted from royalties that would otherwise be due. If, for example, the fee payable to the artist under the controlled composition clause works out to 60 cents per CD, but the label is obligated to pay 70 cents per CD to others, the artist under the controlled composition clause ends up paying the record label 10 cents per CD. This problem is particularly serious where multiple albums are involved, where the number of noncontrolled or “outside” songs may be much higher.

The recoupment provision was an issue in Universal-MCA Music Publishing v. Bad Boy Entertainment. In 1997, the three Universal Songwriters coauthored with Combs six songs to be included in the album “No Way Out.” The three writers plus Combs were to share equally in the royalties generated. Combs then licensed the songs to his company, Bad Boy. The three songwriters were not subject to a controlled composition clause, but Combs was. It was alleged Combs did not inform them of that fact. After four years of not receiving any royalties, Combs finally informed plaintiffs that no royalties were allegedly owed because of the offset provision, even though the album sold more than five million copies in the four years. The offset was paid, of course, to Combs' own company.

Plaintiffs sued Combs and Bad Boy for breach of a fiduciary duty. Even though co-authors don't have such a relationship as a general rule, in Combs's case, the claim survived a motion to dismiss due to “special circumstances”: Combs's status as the owner of the label that he had signed the controlled composition clause with. In ordinary cases, though, where one joint author has no such special relationship, the others are plain out of luck.