Smart contracts
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This article is written by Shreyas Shetty who is pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

What is a phonogram recording contract

The term “Phonogram” in general parlance refers to the sound made by an individual while pronouncing a particular term or a word. However, in the legal world it is used in reference to the master recordings of music, speeches, audiotapes, cassettes, compact disks and other such recordings. Therefore, the term “phonogram recording” is a term used in reference to the recording of music, sounds, speeches and other such recordings. While the term “phonogram” is certainly archaic in nature and has been replaced with an even more modern terms such as music, audio and sound recordings, in most legal documents and laws such recordings are still referred to as phonogram recordings. 

A Phonogram recording contract is generally between the individual creating the particular recording (Hereinafter “Artist”) and a production house / producer / sound engineer (Hereinafter “Producer” “Company”). Given the intellectual property in play under a Phonogram recording contract, drafters of such contracts must have base knowledge of the Copyright Act 1957, the 2012 and 2019 Copyright amendments and international conventions such as the Rome Convention for Protection of Performers, Producers of Phonograms and Broadcasting Organisations.

Important clauses in a phonogram recording contract

Under the Phonogram Recording Contract there are certain terms and clauses which need to be given special attention by a prospective draftsmen in order to make sure that such a contract can benefit both parties well and harmonise their working to the best.

Definitions

The Definitions Clause is a basic clause that must be included in all contracts. As the heading suggests, this particular clause defines certain particular terms in the spirit of the Agreement and also lays down interpretations of certain words that is different in common parlance. 

A definitions clause in a phonogram recording contract must be detailed for there are a plethora of terms used which may be either misinterpreted or not understood at all by the Parties to the Agreement .Some terms that a draftsmen must know for the purposes of phonogram recording contract are here

Term and Territory

The Term clause specifies the extent of time that the Agreement shall be in effect between the two parties. For the duration of the Agreement as specified under this particular clause the Parties are bound to follow the terms, obligations, representations and warranties as specified under the same.  In some cases, the Term clause is extended to include the option of extension of the Agreement and how the Parties to the Agreement can go about the same.  

In a phonogram recording contract, the draftsmen must make certain that to lay down a detailed timeline of the project by dividing the overall time period into smaller divisions and laying down a buffer period between each such division to maintain a smooth running of the Agreement. 

In the event the Parties wish to include an option of extension, the draftsmen must tailor such additions in line with the spirit of the Agreement and make sure that the rights under this Agreement continue during the extended period. 

The Territory clause specifies to what area is the contract and all of its contents, schedules and amendments if any. This is an important distinction to make for all the rights and titles so granted under this clause shall be in effect only in the area so specified. The Draftsmen must take care to specify the area as per its official title recognised in the courts of law in that country and by others as well.  

Example: 

“The Agreement so signed on____________ (Hereinafter “Effective Date”) shall be in effect for 2 (years) from the said date in the Republic of India including Jammu and Kashmir.” 

Authorisation of Exploitation/IP rights

The authorisation to exploit clause, as the name suggests, is a clause that pertains to the granting of rights / titles and authorization to a Producer to carry out any and all necessary modifications, additions, deletions, edits and other such changes generally. The Parties can expand the scope of the clause to include to what extent the said recording may be exploited; the form, manner and nature of such recordings and any other additional details deemed necessary for the purposes of the agreement between the Parties.

This clause is a basic clause in any phonogram recording contract and therefore must be given extreme importance while being drafted. A draftsmen must attempt to keep this clause as simple as possible for it deals with a plethora of rights and titles, intellectual and otherwise which move from one party to another. Such rights are extremely lucrative and therefore must be drafted in a water tight manner so as to avoid any form of illegality or ambiguity. 

Given that in the present case there is a need for an exclusive contract, the draftsmen must take particular care to specify in this clause that the authorisation and granting of rights and titles of the recording are “sole and exclusively granted to the Producer / Company”. 

Recording Sessions

This particular clause pertains to the manner in which the Parties to the contract wish to conduct the recording sessions of the particular sound/audio/music in question. This clause must be drafted to include all details, however small, that are needed to successfully complete the contract. A draftsmen must keep in mind certain points such as recording date, location, technical and musical instruments needed, studios, professional musicians / troupe to be hired and time period of completion.

Usually there are multiple recording sessions under a particular contract and therefore this clause must be drafted accordingly so as to suit the needs of the Parties involved. The draftsmen must make sure, in the event of multiple individuals and multiple dates being present, to maintain clarity and showcase the same in the clause without it appearing overtly convoluted.  

Remuneration

Simply put, this clause specifies the fees that the Artist seeks from the Producer or vice versa for the works carried out under the phonogram recording contract. 

Generally, the entire fees that the Artist claims from the Producer/Company is divided into two parts, a certain definite sum of money termed as “remuneration” and a subsequent percentage based fee from the total sales of the recording post publication called “royalty”. It is imperative to note that the terms remuneration and royalties are two different terms and must in no manner be confused at all. 

Remuneration is the fees sought prior to the publication of the particular recording and is generally in regards to the services and work done for the purposes of the creation of the recording. Remunerations are generally divided into two – three parts in the following manner:

  1. On signing the Agreement;
  2. On completing the recording;
  3. On the date of the Publication of the recording.

The draftsmen must take care and ensure to incorporate all relevant details such as amount to be transferred, the date of each transfer of amount, bank and the bank account details to whom such amount is to be transferred. 

Royalties Clause

The term “Royalty” is used to refer to the payments made to the author of a work so that he / she assign their rights to the Producer / Company. Such amount is generally paid on the basis of the gross sales of the particular work in the public and can be fixed a lump-sum, monthly payment or even a yearly payment. The Royalties clause is a very important clause for the creators of original works and helps them maintain a steady income from the exploitation of their intellectual property. This type of payment is particularly seen in art houses, book publishing houses and drama institutes. This clause must be drafted carefully so as to avoid it being excessively in favour of either party to the detriment of the other. 

Generally, payment of royalties is divided in a tabular manner as follows so as to make it easier for the Parties to understand the method of payment. An example is as follows:

Example: Royalty on the basis of total no of books sold:

Sr No

No of books sold:

(per/month)

Percentage of  Gross Sales revenue to Author

1

50,000 – 100,000 books

2.5%

2

100,000 – 500,000 books

3%

3

Above 500,000 books

5%

Accounts and Payment of Royalties

This clause is generally a sub-clause to the Royalties clause but can be mentioned as a separate clause as well. This clause pertains to the manner of payment and Account details to which such payment is made. 

The draftsmen must pay close attention to bank account details, date and amount of transfer and notices, if any to be sent from either party. Royalties are maintained in a separate account so as to maintain an ease in the accounting duties of the Producer and /or any individual so given the task of doing the same. 

Promotion and Advertising

In order to maximise sales of the recording, the Parties may add a Promotion and advertising clause to the contract. Given its elaborate and intricate detailing, this clause can become a whole separate agreement by itself.

The clause entails the responsibilities and tasks to be carried out by the Parties of the Agreement so as make sure that the recording shall be sold to as large a customer base as possible. The draftsmen must pay particular attention to specify the obligations of each and every party under this clause in a clear and concise manner so as to avoid any future confusion between the Parties. The obligations of the Producers, the Artist and their associates can be given in a detailed manner in a schedule while covering the general duties in the contract.   

Assignability of Agreement

The term “Assign” refers to the transfer of rights from the Producer to another individual / third-party. This clause gives the Producer the right to transfer any and all rights and titles that the artist vested in him to another third party. 

The Artist usually has some power in the extent of rights, fees and party so selected. The draftsmen must be careful to recreate such specifications in the clause so that the interests of all parties are accurately represented.  

Boilerplate Clauses

Boilerplate clauses have gained a special significance in the lockdown era, especially on the clauses pertaining to termination, dispute resolution and force majeure. Therefore, it is of utmost importance that a draftsmen pay specific attention to these clauses and draft them with particular care. 

Termination

The Termination clause specifies the grounds under which both and / or either parties can proceed to terminate the contract. This clause serves an important two fold purpose, namely:

  • This clause lays down the process to be initiated in the event either party wishes to proceed with the termination of the agreement including but not limited to the notices to be sent, time period and any termination fee to be paid. 
  • The second and perhaps more important role played by this clause is determining with whom the rights and titles so assigned under the agreement lie with on termination of the Agreement. 

Example: rights in regards of commissioned artwork:

“That on termination of Agreement prior to completion, the Owner shall be the sole and exclusive owner of any and all rights arising and accruing from all prototypes, works, designs created, developed, designed and/or reproduced in any medium prior to such date of Termination.”

Dispute Resolution

The world has been moving increasingly towards various forms of alternative dispute resolutions and the same can be seen in the change in drafts of a dispute resolution clauses. In the present era mediation, negotiation and arbitration are utilised to iron out any differences that may arise between parties in regards to the agreement between the parties. 

The draftsmen must make sure to ensure that the process under this clause should be fair, fast and carried out in an expeditious manner to the benefit of all parties. 

Force Majeure

This particular clause has gained a dramatic redraft due to the prevailing COVID situation. Therefore the draftsmen must make sure to draft this clause keeping in mind all possible situations which shall be of such nature and force that it cannot be reasonably expected for the parties to continue working as specified under the contract.  

Conclusion

Phonogram recording contracts, at first glance, may seem extremely imposing given the voluminous nature of the contract and the sheer legal weight of all rights and titles that are dealt with under the same. A draftsman must however not be intimidated by the nature of phonogram contracts for as long as he is able to maintain a clear and concise flow in the contract and draft all clauses as per the need and satisfaction of the Parties to the Agreement. UNESCO has attempted to put up a simplified version of the contract, both exclusive and non-exclusive in nature which may help in the drafting process of a phonogram recording contract. 


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