Infringement Claims
by Jeff and Todd Brabec

This article is written for the U.S. industry, but very relative to Australian artists, not to mention helpful for those negotiating contracts with U.S. publishers and/or releasing their work globally. The infringement clause in a songwriter or co-publishing agreement addresses what happens if someone claims that a songwriter's composition infringes on another writer's composition. Most contracts provide that the writer will compensate the publisher for any costs expended in defending or settling a claim in addition to any monies or profits that must be paid as a result of the infringement litigation or any settlements designed to resolve the claim. For example, if a third party files an infringement claim against a composition that costs $50,000 in legal fees and court costs and an actual judgment is rendered for another US$100,000, the writer will be obligated to reimburse the music publisher for the full US$150,000. This is true under most agreements even if the claim is defended successfully or is dismissed without merit, because the writer has agreed to indemnify his or her publisher against claims regardless of whether or not infringement is proven. Even though most writers never have to face an infringement claim, their lawyers do spend a great deal of time negotiating these clauses, since if a claim is made, the results can be financially devastating to a songwriter regardless of how successful he or she may be.

The writer is virtually always entitled to hire his or her own legal counsel to assist in defending and protecting the writer's interests. Because the stakes in winning or losing can be extremely high, with lawyer's costs alone ranging from US$25,000 to over US$150,000, the publisher normally retains the right to control the conduct and strategy of the defense—although in most cases, suggestions and input from both the publisher's and writer's lawyers will be shared, because everyone is really on the same side.

Since not all infringement claims have merit, some attorneys are able to negotiate a clause that provides that the writer is liable to the publisher only if the litigation results in a non-appealable judgment against the publisher or a settlement is reached with the songwriter's approval. Another alternative is to provide that the songwriter will have to reimburse the publisher only a portion of the legal costs if no infringement is found or if the third party withdraws its claim.

The value of these alternative approaches for the songwriter is that he or she will not be liable for money spent to defend claims that never should have been made. Since many of these claims (whether valid or not) result in settlements prior to actual litigation, some writers negotiate clauses that guarantee that the writer must approve any settlement payment over a certain amount (e.g., US$5,000), a provision that at least gives the songwriter some control over how the music publisher deals with a claim when it is received.

Since these claims can result in expensive judgments, most agreements give the publisher the right to withhold from the writer's royalties the amount of money that may have to be paid out if the claim is successful.

For example, if another writer or publisher is suing for US$200,000 plus a transfer of the entire copyright, the music publisher being sued will hold at least US$200,000 in royalty income due the writer (plus an additional amount to cover expected legal fees) to ensure that if the case is lost or there is a large settlement, the money will be in house, ready for payment.

The writer, on the other hand, will try to limit the withholding only to monies generated by the song in question and not the earnings due from other compositions in his or her catalog.

The writer will also try to limit the time during which the publisher can withhold royalties (e.g., "if a suit is not instituted within 1 year from the date of the claim, all monies will be released") or provide that if the writer gives the publisher a surety bond that has sufficient collateral attached to it, all "held monies" will be distributed.

Getting one of these protective clauses into the songwriter's agreement, however, depends on each party's relative bargaining strength, as well as the experience of the negotiators and whether the songwriter's lawyer has been able to negotiate such a provision in a previous agreement with the publisher.

-------------------------------------------------------------------------------- © 2004 Jeff Brabec, Todd Brabec
This article is based on information contained in the new, revised paperback edition of the book "Music, Money, And Success: The Insider's Guide To Making Money In The Music Industry" written by Jeffrey Brabec and Todd Brabec (Published by Schirmer Trade Books/Music Sales). www.musicandmoney.com

Reprinted with permission from TAXI: The Independent A&R Vehicle connecting unsigned artists, bands and songwriters with major record labels, publishers, and film & TV music supervisors.