Ray Charles Foundation Loses Challenge to Heirs' Copyright Termination Notices

Posted by Tonya Gisselberg on February 08, 2013

Musician and composer Ray Charles signed several agreements in the 1950s regarding recording songs for Atlantic Records and composing songs for Progressive Music Publishing Co.  In 1980, Charles purportedly renegotiated his agreement with Progressive’s successor-in-interest, receiving royalties and a cash payment.  The rights that Charles transferred to Progressive are now owned by Warner/Chappell Music.  Charles entered into an agreement with each of his twelve children in 2002.  In exchange for an irrevocable trust funded with $500,000, each child agreed to waive any right to make a claim against Charles’ estate.  When he died eighteen months later, Charles left all of his rights in this works to The Ray Charles Foundation, including the right to receive royalties. 

Seven of Charles’s children served copyright termination notices in 2010, under 17 U.S.C. §304(c)(5) for transfers occurring before 1978 and §203 for transfers occurring in 1978 and later.  The Foundation brought a federal declaratory judgment action against the seven children who filed termination notices (defendants), seeking to invalidate the termination notices.  The U.S. District Court for the Central District of California granted the defendants’ motion to dismiss the Foundation’s declaratory judgment claim, ruling that the Foundation lacked standing to bring the declaratory judgment action.

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Loan-Out Corporations Ambush Copyright Grant Termination Rights

Posted by Tonya Gisselberg on May 11, 2012

I previously discussed the copyright termination of transfer provisions in my post, Termination of Transfer Provision Applies to All Authors, Not Just Musicians.  17 U.S.C. §203 provides for the termination of a copyright grant 35 years after the grant was made, if the grant was made after January 1, 1978.  Section 304(c) creates a similar right of termination for copyrights that were registered before January 1, 1978.  The law on copyright termination of transfers recognizes the unequal bargaining power between publishers and authors and is an attempt to allow authors and their families the opportunity to reclaim and benefit from the authors’ commercially successful works. 

The effect of loan-out corporations on the implementation of the §203 grant termination provision adds a potentially fatal wrinkle to an author’s ability to successfully terminate a copyright grant.  A loan-out corporation is corporation that is usually wholly owned by one person and is used to “loan-out” that person’s services to employers.  Actresses, musicians and professional athletes often provide their services through loan-out corporations.  Loan-out corporations generally limit the liability of the employee and provide tax benefits.  The use of loan-out corporations dates back to the 1930’s. 

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Marybeth Peters Speaks About Ongoing Copyright Issues

Posted by Tonya Gisselberg on September 24, 2011

This week I had the opportunity to hear former United States Register of Copyrights Marybeth Peters speak about ongoing copyright issues in the United States.  Her talk was entitled “Looking Back and Moving Forward:  Copyright’s Biggest Issues.”  Ms. Peters spoke at a Lewis & Clark Law School lunch in Portland, Oregon.  The lunch was co-sponsored by the Intellectual Property Section of the Oregon State Bar and the Copyright Society of the U.S.A., Northwest Chapter.  Lewis & Clark Law School is nationally recognized for its intellectual property law program, something I did not realize until I heard Dean Robert Klonoff’s remarks.

Ms. Peters must be the ultimate authority on events occurring at the Copyright Office since 1966, when she began working there.  It was fascinating to hear her speak about copyright issues.  Anyone who has a chance to hear Ms. Peters speak should jump at the opportunity.

Ms. Peters was the Register of Copyrights from 1994 to 2010.  The Register of Copyrights is the director of the Copyright Office of the Library of Congress. 17 U.S.C. §701. 

Ms. Peters stressed that copyright is a balance of interests and that compromise is essential in reaching that balance.  Here are some of the major issues she sees moving forward:

  • Recording artists’ public performance rights in the non-digital broadcasts of their sound recordings
  • Orphan works
  • Section 108 Reproduction by libraries and archives
  • Termination of rights
  • Section 104A restoration of copyrights for foreign works
  • Registration of photographic works by photograph licensing companies

Musical recordings are complicated because there are a number of independent copyrights associated with a single song.  Currently, recording artists and companies have no public performance right in non-digital broadcasts of their sound recordings.  17 U.S.C. §114.  Royalties for music broadcasts by a radio station, for example, go to the copyright owners of the musical compositions, but not to the recording artist or production company.  Recording artists and production companies are compensated through the sale of their recordings, but since there are now many ways to listen to a song without buying it, the possible revenue streams for recording artists are shrinking.  The Administration’s White Paper on Intellectual Property Enforcement Legislative Recommendations that I discussed in my post entitled “Illegal Streaming” a Felony? White House White Paper Directed at Activity that is Already Criminal proposes creating a right of public performance for copyright owners for sound recordings transmitted by over-the-air broadcast stations.

Orphan works are works for which the copyright owner cannot be located.  The problem is that these works are still protected by copyright law, even though their owners cannot be found, and are protected to the same extent as works for which the copyright owner is known.  The Importance of Orphan Works Legislation further describes the magnitude of the orphan works problem.

17 U.S.C. §108 allows libraries to reproduce copyrighted works under limited circumstances.  The problem is that the statute was designed to address reproduction by photocopying and does not adequately address the prevailing practice of making digital copies.

Termination of rights under 17 U.S.C.§203 was the subject of my blog post entitled Termination of Transfers Provision Applies to All Authors, Not Just Musicians.  This statute provides a mechanism for authors to terminate transfers or licenses granted on or after January 1, 1978, thirty five years from the date the grant was made.  Ms. Peters’ questions included:  What is an author?  What law governs works created after January 1, 1978, for contracts signed before that date?  Are the rights granted when a contract is executed or when the works are created?  The answers to the two previous questions determine whether the 1909 Act or the 1976 Act applies.  The Acts differ in important respects, so it matters which Act applies.

Section 104A restores lost copyrights to foreign authors under certain conditions.  In essence, it removes works from the public domain and gives foreign authors back their copyrights in those works.  It was enacted to bring the U.S. into compliance with the agreement on Trade Related Aspects of Intellectual Property (TRIPs).  Golan v. Holder challenges the restoration of copyrights to foreign authors under the Copyright Clause and on First Amendment grounds.  It is currently set for review before the U.S. Supreme Court.

The issue regarding the registration of photographic works by photograph licensing companies, such as Corbis Images, is that these companies were allowed to register photographs in batches, without listing each photographer individually.  The validity of some of these registrations is now being challenged.  Many of these photographers did not independently register their works.  Copyright exists from the moment a work is fixed in a tangible medium (17 U.S.C. §102), so these photographers still have their copyrights in these photographs.  Statutory damages are what is at stake in this issue.  17 U.S.C. §412(2) provides that statutory damages are not available unless the work was registered within three months after the first publication of the work.  If statutory damages are not available, the copyright owner must prove her actual damages and the infringer’s profits (17 U.S.C. §504), a fact intensive and extremely expensive process.

Ms. Peters discussed the Google book settlement case in the context of the orphan works and the §108 library reproduction issues.  She stated that the Google book settlement case has changed the way people view copyright throughout the world.  See my blog post entitled Google Book Settlement Rejected – For Good Reason for the highlights of the Google book settlement case.  Related to the Google book settlement case, but not directly involving Google, is a lawsuit filed by author groups against the HathiTrust and several universities for creating digital copies of books without the permission of the authors or other copyright holders.  Ms. Peters pointed in particular to the part of the lawsuit that objects to the HathiTrust’s plans regarding orphan works.  Authors, Copyright, and HathiTrust by Kenneth Crews briefly summarizes the issues involved in the litigation and provides numerous relevant links.

Ms. Peters obviously enjoys discussing copyright issues and is an entertaining speaker.  It was well worth my trip to Portland from the Seattle area to hear her speak.

Termination of Transfers Provision Applies to All Authors, Not Just Musicians

Posted by Tonya Gisselberg on September 08, 2011

The New York Times recently published an article entitled Record Industry Braces for Artists’ Battles Over Song Rights, by Larry Rohter.  The article describes how, “thanks to a little-noted provision in United State copyright law,” artists with 1978 hit albums “now have the right to reclaim ownership of their recordings, potentially leaving the labels out in the cold.”

That “little-noted” provision is 17 U.S.C. §203, Termination of transfers and licenses granted by the author.  For grants made on or after January 1, 1978, §203 allows an author, or her surviving family or estate if the author is dead, to terminate a copyright grant after 35 years from the date the grant was made, if a certain procedure is followed.  The word “author” is not defined in the Copyright Act of 1976.  Merriam-Webster defines “author” as “one that originates or creates.”  Thus, a broad range of creators is covered by the word “author,” including writers, composers, photographers and software developers.

The effect of the termination is that the rights granted go back to, and become the property of, the author, her surviving family or her estate.  Authors’ termination rights are becoming an issue now, not in 2013, because the statute requires that the terminating author give the grantee at least a two year notice of the effective date of termination.  §203(a)(4)(A).  This termination right does not apply to works made for hire, for example, a work created by an employee within the scope of her employment.

Why does this provision exist?  The Copyright Act of 1976 is a major reform of the Copyright Act of 1909.  One of the 1976 Act reforms is the creation of a single term, ending the 1909 Act scheme of an initial term and a renewal term.  According to Gorman and Ginsburg:

Under the 1909 Copyright Act and its predecessors, the principal purpose of the renewal format was to assure that a transferred copyright, when the transfer was made in the initial term, could be recaptured by the author (or his surviving family, or legatee, or next of kin) after a reasonable time.  The economic rewards during the renewal term could thus be fully enjoyed by the author, unencumbered by any rights, interests, or licenses previously contracted away.  The author, or her statutory successors, was to have a “new estate,” a second chance to license or assign for a new consideration.

Copyright Cases and Materials, Robert A. Gorman and Jane C. Ginsburg, 7th Edition, 2006, page 447. 

The Gorman and Ginsburg discussion of this topic refers the reader to House Report No. 94-1476, 94thCong., 2d Sess. 124-28 (1976).  Essentially, §203 is a recognition of the unequal bargaining power of authors.  This inequality is partially caused by “the impossibility of determining a work’s value until it has been exploited.”  (H.R. Rep. No 94-1476, 124.)  Section 203 is a compromise that attempts to further the objectives of copyright law and address the interests of all stakeholders. 

Getting back to the New York Times article, this transfer termination provision was enacted in 1976 and went into effect on January 1, 1978.  Record labels and publishers in general have had 3 decades to make any necessary adjustments and preparations.  Two different thoughts come to my mind.  The first is how studios will respond to artists seeking to reclaim their copyrights.  It seems to me that the grant terminations must be dealt with on a case by case basis and even a song by song basis.  I think the recording labels’ approaches to this issue will have a direct impact on the second issue:  Given the rise of viable alternatives to the traditional author/publisher model, what will recording labels and traditional publishers do to keep their businesses relevant?  I think recording labels have an opportunity to further alienate recording artists with their approaches to this copyright termination issue.  The copyright termination issue is relevant to all right grants made after January 1, 1978.  This issue will not go away until the law is changed.

Many thanks to Gil Price for suggesting this blog topic.  Gil is the Principal of Price Management Group.  Gil’s firm provides lawyers with business development, marketing, finance and accounting, human resources, IT development, and facilities and operations services so that lawyers can spend more time practicing law and less time on law firm administration.