The 9th Circuit is set to decide an important case involving the
children of Ray Charles and the charitable foundation to which Mr.
Charles willed his right to receive royalties from his music publishing
agreement with Warner-Chappell Music. With more artists and their
heirs terminating prior assignments of copyrights, this case will either
help affirm the protection afforded to authors and their heirs under
the U.S. Copyright Act or weaken the Act’s protection of authors and
their statutory heirs from premature transfers of their termination
rights.
Section 304(c) of the U.S. Copyright Act provides the statutory heirs
of deceased authors, in this case Mr. Charles’ children, the sole right
to terminate the assignment of copyrights from an author to a third
party. The termination right may not be transferred by will or by any
other “agreement to the contrary.” Mr. Charles died before he was
permitted under the statute to send the vast majority of termination
notices to Warner-Chappell, the owner of his publishing rights. Since
under the statute, Mr. Charles could not donate the copyright
termination right by will to his foundation, in order to ensure that his
foundation would continue to receive the music publishing income stream
after his death, Mr. Charles entered into agreements with each of his
children providing that in exchange for $500,000 they would not take any
actions to challenge the estate. Nevertheless, the majority of Mr.
Charles’ children decided to exercise their termination rights pursuant
to Section 304(c) of the Copyright Act, arguing that the agreement they
entered into with Mr. Charles is an “agreement to the contrary” that the
statute preempts. The Ray Charles Foundation, meanwhile, argues that
the children have the right to terminate the copyrights, provided that
they return the $500,000 they each received from Mr. Charles. The Ray
Charles Foundation also challenged the validity of the termination
notices, including on the grounds that the musical compositions were
created as “works made for hire,” which are not subject to termination
under Section 304(c).
The District Court previously ruled that the children did not violate
their agreement with the estate by filing the termination notices, and
that the foundation was not entitled to a return of the $500,000 that
each of the children had received.
On February 12th, the 9th Circuit heard an appeal by the Ray Charles
Foundation of a district court’s ruling that the foundation lacks
standing to challenge the termination notices Mr. Charles’ children sent
to Warner-Chappell. In this case, the fact that Warner-Chappell
appears not to have raised objections to the termination notices itself
suggests that the foundation may be grasping at straws. In the vast
majority of cases, publishers have declined to assert the defense to
termination that the musical compositions they own were created as
“works made for hire.”
The case, however, does pose a legitimate question regarding the
rights of non-copyright owner parties who may be affected by the
termination of copyrights to raise objections to the validity of
copyright termination notices. For example, imagine a scenario in which
an artist has a closely held entity that owns the artist’s sound
recordings. [NOTE: unlike musical compositions, which are almost always
subject to the termination right, there is a reasonable amount of
uncertainty regarding whether or not the work for hire language in
recording agreements prevents artists from exercising their termination
rights with respect to sound recordings.] Now imagine that the
artist-owned entity entered into a long-term distribution or licensing
agreement with a third party record label. The artist’s entity could
effectively terminate the third party label’s right to continue to
distribute or license the recordings by accepting the termination by the
artist of the closely held entity’s rights in the recordings. Yet,
there is a legitimate issue of first impression regarding whether the
work for hire provisions of a recording agreement would prohibit such a
termination under the Copyright Act (in this case, Section 203 of the
Copyright Act). The decision of the 9th Circuit in
The Ray Charles Foundation v. Robinson et al. 13-55421 (9
th
Cir. Filed March 12, 2013) will determine whether or not the third
party record label will have the standing to challenge the validity of
such terminations.
