News of Warner/Chappell’s US$14 million settlement of the “Happy Birthday” copyright settlement made headlines world wide. It even made my local paper—and not much world news does. It is a story that everyone can relate to. The decision by Warner Music Group (WMG), parent of music publisher Warner/Chappell, to make this substantial payment (assuming the judge in the case agrees) to settle a lawsuit brought against it for enforcing its copyright over the lyrics to the popular song was based on the decision of a California court last year which ruled that WMG’s claim to the copyright was invalid. It is a complicated story, in which researchers had to find proof that the song was publicly published prior to the registration of copyright on the lyrics in 1935. A crucial piece of evidence was a 1922 songbook containing the lyrics to Happy Birthday, but absent any reference to copyright.
WMG had acquired the rights to the song when it purchased Birchtree Ltd., for some $25 million in 1988. Birchtree was an educational music company that had acquired the original catalogue from the company that registered the copyright in 1935, the Clayton F. Summy Company. The lawsuit challenging its copyright was brought against Warner/Chappell in 2013 by filmmaker Jennifer Nelson who objected to paying the $1,500 royalty that the putative rights holder required for licensing the lyrics for use in the documentary film she was making on the origins of the popular song.
Naturally the plaintiffs were delighted at their victory. Ms. Nelson is reported to have said, “This is a great victory for musicians, artists and people around the world who have waited decades for this. I am thrilled to be a part of the historic effort to set ‘Happy Birthday’ free and give it back to the public where it belongs.” Beyond the plaintiffs, however, there have been a number of commentators who have claimed that the case illustrated major problems with copyright law and demonstrated how copyright terms are too long. According to the EFF, “it’s too easy for concentrated copyright interests, even invalid ones, to beat back the diffuse public interest”. But is this in fact the case? I would strongly contend the opposite.
The story is long and convoluted, but suffice to say that the original piano arrangement of a common melody, and lyrics set to this music, were created by Mildred Jane Hill and Patty Smith Hill, two teachers of early childhood education in the US in the 1890s. Many years later, after the words of “Happy Birthday” were set to this tune and became popular in movies and even a Broadway show without any credit to the Hill sisters, a younger sister, Jessica, filed for copyright in 1934 in conjunction with Clayton Summy, a music publisher. The copyright was granted. A share of the proceeds from the royalties has been administered ever since through the Hill Foundation for the benefit of the heirs of Mildred and Patty Hill, as copyright law is intended to do. The fact that Warner/Chappell in good faith purchased the rights to the song for a not inconsiderable sum, which was based in part on the anticipated revenue flow from the portfolio they purchased, does not in the least invalidate the application of copyright in this instance. At the time of purchase, (and subsequently), Warner/Chappell had every right to expect that the copyright was legitimate since it had been in existence unchallenged for over 50 years, with royalties being collected regularly.
It is reported that Warner/Chappell was generating about $2 million dollars per year in licensing fees from the copyright in recent years. Given that the $25 million they paid in 1988 is worth approximately double that amount today in current dollars, and given estimates that up to a third of the value of Birchtree resided in the “Happy Birthday” copyright, then $2 million per year in royalties does not seem out of line. In fact, it would take Warner/Chappell roughly 8 years to earn back the cost of purchasing the copyright, before they turned a nickel of profit. Reportedly Ms. Nelson was asked to pay $1,500 for the use of the song in her film, and it was this request that led ultimately to the lawsuit. In the past others have reportedly refrained from using the song in their productions in order to avoid payment to Warner/Chappell, which leads to the question of what is the optimal charge for licensing a popular song. Is it better to grant ten licenses at $500 or two licenses at $1,500? What will the market bear? That is a commercial decision for the rights holder to make, and it is entirely within their purview to do so, popular song or not. They could have charged less; they could have charged more.
So while some commentators are claiming this case is further proof that copyright law is out of step with today’s world, and that there was something almost “immoral” in charging license fees for a popular copyrighted work, in fact it proves just the opposite. It demonstrates that the legal process related to upholding or challenging copyrights operates as intended. In this case while Warner/Chappell not unreasonably sought to earn a return on its investment, it was ultimately shown to have a legally tenuous claim to the copyright over the lyrics of this particular song, despite common acceptance of the validity of the copyright over many years, on the basis of new evidence that was turned up. If the decision had gone the other way, as well it could have, the critics no doubt would have been crying foul. Given the result, they are crowing, but the fact that the plaintiffs were upheld is based exclusively on the merits of this particular case, and has nothing to do with the underlying validity or concept of copyright.
The main conclusion I draw from the “Happy Birthday” judgment is that it is important to register copyright properly and ensure that the registration is properly documented. The passage of time and customary acceptance is clearly not sufficient to withstand a legal challenge, so it is “buyer beware” when purchasing rights. The lawyers will be happy.
© February 15, 2016