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Royalty Audit Law Takes Effect In California
On January 1, 2005, the Recording Industry Accounting Practices Act took effect in California. (See Title 10, commencing with Section 2500, of Part 4 of Division 3 of the California Civil Code.) The law, which was proposed by California State Legislator Kevin Murray (D-Culver City), gives artists minimum statutory audit rights that override several of the disputed audit provisions of standard recording agreements.
The legislative intent of the measure was to “authorize a royalty recipient under a contract for the production of sound recordings, notwithstanding any provision of the contract, to audit the books and records of a royalty reporting party … to determine if the royalty recipient has earned all of the royalties due pursuant to the contract.” The legislature also found, “This act is important public policy and establishes minimum audit procedures that apply to all royalty contracts in the recording industry.”
The statute defines a “Royalty Recipient” as “a party to a contract for the furnishing of services in the production of sound recordings … who has the right to receive royalties under that contract.” This portion of the law may provoke argument and challenges as to who may be considered a royalty participant. Presumably, producers signed directly to a record company to produce the company's featured artist would be covered under the act. But a question could be raised as to the rights of a producer who has contracted with the featured artist's production company and not the label directly.
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