You’re both absolutely right that there is the “composition” and then the “recording,” and that the rights in each are distinct, that the distinction is a source of problems here, and that Activision at least technically had the ability to record a cover that didn’t sound like the original.

But while nothing in Section 115 requires that the cover artist distinguish the cover from the original (there are plenty of covers out there that sound a lot like the original), a cover version that deviates too far from the original isn’t covered by the license. If the publisher did give Activision a synch license (I may be able to find out the answer to this question; Bill Patry writes that Activision obtained a synch license), then it surely had the power to negotiate for a non-sound-alike recording (EMI presumably would care as much as the band about competition for the original), or to adjust the royalties accordingly, or both. (The fact that the publisher *didn’t* do this is what suggests to me that Activision acquired mechanical rights, rather than a synch license. Also, of course, a mechanical license would likely be much, much cheaper. But I will try to find out.) As Rebecca points out, Section 114 limits rights in the sound recording pretty substantially.

Conceptually, the distinction between the composition copyright and the recording copyright has never struck me as particularly persuasive, at least not in the context of contemporary popular music. “Fundamental character” in Section 115 does refer to the composition, but much contemporary popular music has no “fundamental character” beyond what is recorded in the studio. Go to the Rock ‘n’ Roll Hall of Fame and check out the scraps of paper and napkins where the “fundamental character” of famous pop songs got recorded. Certainly, those songs end up as sheet music, but those versions are often (if not always) post-hoc reconstructions based on the recordings themselves. Nor am I a big fan of Section 115 in general. If I were designing the system from scratch, I might merge all rights into the recording. Control over the master would govern control of covers.

As long as we have the system that we have, however, I don’t have a lot of sympathy for the band here. If you look at the game itself, you’ll see that The Romantics are credited with the song. This isn’t a question of undisclosed plagiarism. The game maker isn’t misleading anyone.

One might argue that a TM claim here should be decided on the facts; a sufficiently distinctive “sound” deserves protection. Tom Waits might pass that threshold, but The Romantics — a very fun but standard-issue power pop one-hit-wonder — absolutely does not. I don’t see the reason to subject courts and consumers to that risk. Rather than have Tom drive the TM train and let flaky claims in the courthouse door, I’m comfortable with a rule that denies TM relief if the copyright has been cleared.

I don’t think sec. 115 would cover a video game, since it’s an audiovisual work, not a phonograph. Activision would have needed a synch license, which I assume it got from somebody–probably the publisher, EMI. The Romantics wrote the song, but they probably no longer control the publishing rights. The complaint is unclear on this, but it does note that the Romantics derive substantial income from performing the song and licensing reproduction of the master (and is silent regarding publishing revenues). Looks like the likely business issue here is a split in ownership of the rights–the Romantics make money when a third party uses the sound recording but may make nothing (or at least less) when the publishing rights are exploited. Wonder how long until their termination of transfer comes up?

I’m not quite clear on how this is a “damned if you do, damned if you don’t” situation. Whatever the merits of The Romantics’ Midler-like claim (which sound pretty weak to me), wouldn’t one of Guitar Hero’s options have been to record the song using a band that didn’t sound like the original group? The “fundamental character” of the work referred to in section 115 seems, to me, to go to the composition itself, not to the way it’s performed.