Protecting the artist’s professional name (commercial prenups)

This article provides a UK perspective on the professional names used by musical groups and bands and how to try to avoid disputes about who owns them and how much they’re worth. The answer lies in planning ahead by entering into a written agreement dealing with name related matters as well as other pertinent matters. Ideally, this should be done by the band at the start of their career before they achieve success. It will involve careful consideration of the options available.

More name related disputes than necessary arise in the UK because very few bands enter into adequate written agreements governing relationships between band members. There are understandable reasons for this, including that:

They don’t think ahead.
They don’t want to consider unpalatable eventualities.
They don’t want to pay lawyers to help draw up an agreement when they’re at the start of their career and have only limited financial resources.

Bands are like couples wishing to get married. They don’t regard prenuptial agreements (“prenups”) as very romantic. They just want to get on and “make music”.

In most cases, bands will be constituted as partnerships under English law. This means they will be governed by the Partnership Act 1890. This sets out the default terms governing the relationship between the partners unless they have expressly agreed to vary those terms.

The result is that an Act of Parliament passed around half a century before Rock and Roll was invented will, in the UK, determine issues affecting the name of a band. The problem is that the relevant terms of the Partnership Act are stated as general principles and there has been little helpful judicial guidance from the English courts, particularly regarding issues surrounding band’s names.

So in the absence of an express agreement reached by the parties in a band, what does the Partnership Act say should happen if an individual leaves a group or if it disbands altogether?

The answer is quite simple: in either eventuality, the partnership automatically dissolves. All the partners effectively become leaving partners. The assets of the partnership then have to be realised and distributed between the former partners. Some assets will be sold with the proceeds being brought into a final dissolution account, others (such as equipment) may be divided in equal value terms between the leaving partners. The leaving partners will be entitled to equal shares of the proceeds unless otherwise agreed by all of them.

In the UK, the band name is treated as an asset of the partnership, just like any other class of assets such as musical equipment. That means it has to be valued and realised at the time of the partnership’s dissolution.

How should it be valued?

There have been four decided cases over the last decade in the UK, aspects of which involved band names. These concerned the bands Liberty X, Saxon, the Rubettes and Busted. All these cases were more concerned with competing rights to use a name, similarity of names or related issues rather than valuation itself and the decisions all turned on their particular facts. So they don’t help in establishing principles of valuation.

It was hoped that a recent dispute involving a leaving member of Snow Patrol would shed light on this but like practically all such cases, the dispute was settled just before the hearing.

On a dissolution of a partnership, the partners will usually agree a valuation of all assets for the purpose of preparing dissolution accounts. If they can’t agree this, they can petition the Court to establish the relevant values. In such circumstances, the Court will be guided by expert opinion. Expert opinion will therefore be critical. The problem is that there may be no methodology for such valuation which is generally agreed between experts.

Until the last decade and with the exception of stadium filling artists, performing live was only occasionally a profit centre. Many artists working in popular music considered performing live, from an earnings point of view, to be subsidiary to their earnings from recording and publishing. The position has to an extent been reversed and many artists are now advised to see their recording activities as promotion for their live performances – rather in the manner of classical artists. And in the case of iconic, so-called heritage bands, the lucrative nature of their live performances gives that activity particular significance.

So where does that leave valuation of the name?

Some experts argue that the value of a band’s name has been enhanced by this shift. They maintain that it is the name as a brand that attracts the live performance revenue since it is a “badge” of authenticity. A share of profits from future live performance income is therefore a measure of its value. But that still begs the question of what measure and for how long.

Some experts will contend that the value of a name diminishes rapidly in the live arena if not refreshed by continuing use and by new product. That refreshing impact on the value will be created by the continuing group which under English law is a new partnership. The member who has left plays no part in that. In such circumstances that continuing value should not accrue to the dissolved partnership.

Indeed, it is sometimes argued that the name itself has almost no value and that all value in a band resides in the quality of its live performances and recordings made and songs written by those of the band members who are prepared to work together. The consequence of that argument is that a leaving member shouldn’t have any continuing entitlement to receive a share of live or other profits from future uses of the name once that member has left.

In the absence of an effective prior agreement and some judicial guidance, establishing a value to a band name and settling the matter between warring band members will be a painful and expensive business. In fact it will be just like many domestic divorces.

So that’s where the commercial prenup comes in. It is only by addressing these issues up front that it may be possible to avoid so much of this misery further down the line.

In the first place, this is clearly not an issue for solo artists, so they are relieved of such concerns.

It becomes mainly of relevance to what we in the UK rather disparagingly call heritage bands. In relatively few cases do these comprise the original members. If they do and their membership has been uninterrupted then they will, in the absence of agreement to the contrary, have equal rights to the name as they would in relation to all assets of the band.

Heritage bands have often take some years out of the business, maybe because the original members couldn’t stand working with each other any longer. Sometimes a number of those band members overcome their differences and reform, principally to perform live together mainly for the purpose of generating income. The lure of significant earnings can prove a powerful factor in helping artists to overcome their creative differences.

If the members of a band have entered into a clearly drafted agreement with one another at the outset of their relationship, this can limit the scope of a dispute about use of the band name when they reach iconic, heritage status and go back on the road. That assumes they have addressed the issue of what should happen if a member decides to leave or if the group disbands altogether. But if they haven’t, then the outcome of any dispute will depend on the as yet relatively un-evolved legal principles outlined above.

There are many differing options open to band members in establishing what rights in the band’s name would vest in a departing member whether that member leaves voluntarily, is pushed aside or becomes incapacitated. Here are some of the alternatives that they can agree at the outset of their relationship will apply to a departing member:

The member gives up all that member’s rights in the band name. This would be the most commonly agreed position where the band is to continue without the departing member, but the question remains whether that departing member should derive any continuing financial benefit.
The member’s only entitlement could be to continue to earn publishing and recording royalties on songs that member had written and recordings on which that member had performed. The departing member would get no further income from use of the name. The argument would be that the departing member’s back catalogue earnings would be enhanced by the continuation of the group so the departing member’s post departure equity in the name is reflected in that enhancement.
Additionally, the member could continue to receive a percentage from live profits and merchandising and sponsorship income where the band name is used.
That continued entitlement could be for a fixed or reducing percentage and for a shorter or longer period.
It could even be agreed that a leaving member should be entitled to receive a proportion of recording advances or royalties where the band name continues to be used. Again this could be for a fixed or reducing percentage and for a shorter or longer period.
The agreement between the band members could provide that in the event of disbandment of the group, either one key member or a specified number of the original members or even none of the original members could continue to use the name. It is often undesirable from everyone’s point of view to agree that a name cannot be used by any of the band members without the consent of the others (or their heirs). The effect of such a veto would be that any departing member (or that member’s heirs) could stymie the continued exploitation of the name. That would be undesirable since their motives may just involve revenge, whereas the continued use of the name in active exploitation will have the effect of increasing the value of the publishing and recording income arising from songs written and recordings made before that individual left. In other words, the continued use of the name is for their common, future benefit. It is also in the public interest that all members gain the benefit.
One seemingly intractable problem would arise where a departing member or members wanted to continue to use the name as did the remaining ones. In fact, in those circumstances, it can become impossible to decide who is departing and who is remaining. One way of resolving this commercially is to agree that the name would be acquired by the individual(s) who is (are) prepared to pay X plus Y to the other(s). X could be a single capital sum which reflected the ongoing value of the goodwill in the name. That could be a percentage of profit arising from use of the name. This could be a fixed percentage attributable to the first annual cycle of touring (with associated merchandising and sponsorship income) dropping to a lower percentage for the second annual cycle and so on for the next two or three cycles. Y in the above formula could be whatever sum one party was prepared to pay the other in addition to X. Whoever was prepared to pay more as Y would thereby secure the goodwill in the name.

All sorts of variations on such terms could be agreed and each has its advantages and disadvantages. It is important for band members to consider all these options carefully at the start of their relationship and for whatever agreement they reach to be clearly spelled out in writing so that there is less room for argument later.

Such provisions could be regarded as a form of commercial prenuptial agreement. It can be structured as a partnership, joint venture or shareholder agreement.

Rights in relation to use of the name and its value seem to be top of the list of areas of disagreement once a band becomes successful. Securing prior agreement on this goes right to the heart of the brand. The “prenup” is the most prudent way of averting the negative energy and cost that is often expended in trying to clarify who continues with the brand and on what basis.