Is it legal for a company to hold your payment that is owed to you because someone threatens to sue ?
Say you write a song and a publishing company is sending you payments, Can they stop paying you for 7 years (the statute of limitations) because someone threatens to sue for copyright issues even though you have proof that there is none?
I think the only way they can hold off on paying you is on a court order.
depends on the contract between you and the publishers.
Answers:
They can put the money in escrow pending result of a lawsuit; and how far they can define 'lawsuit' will be up to the specific contract language, but I would say they certainly could.
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