Ray Charles Foundation Loses Challenge to Heirs' Copyright Termination Notices
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.
Sections 304(c) and 203 of the Copyright Act “generally allow a majority of an author’s children, if the author is dead, to terminate most transfers or licenses of the author’s works, upon timely notice to the transferee or licensee.” (Opinion pdf page 4).
The Foundation lacked standing under §§304(c) and 203.
Standing is the ability of a party to bring a lawsuit in a particular court. At the federal level, the U.S. Constitution requires that there be an actual case or controversy. Constitutional standing was not an issue in this case, as the Foundation alleged it was entitled to receive royalties and that the defendants’ termination notices threatened to adversely affect the Foundation’s receipt of royalties.
There are other limitations on standing, one being that “a plaintiff’s grievance must arguably fall within the zone of interests protected or regulated by the statutory provision or constitutional guarantee invoked in the suit.” (Opinion pdf page 20). The “zone of interests” varies according to the statute in question.
Referring to §§304(c) and 203, the district court stated:
The plain language of these sections therefore indicate that only authors, statutory heirs owning a termination interest, and grantees of transfers and their successors fall within the “zone of interests” Congress contemplated in enacting these provisions.
(Opinion pdf page 23).
The Foundation argued that it was a “beneficial owner” under §501(b), which allows the beneficial owner of an exclusive copyright right to sue for infringement. A beneficial owner is entitled to the use and enjoyment of the property even though she does not hold legal title. Section 501(b) allows both beneficial owners and legal owners to sue for copyright infringement. The Foundation argued that because it is a beneficial owner under §501(b), it is within the zone of interests protected by the Copyright Act and should be allowed to challenge the termination notices under §§304(c) and 203.
The district court declared that the Foundation’s beneficial ownership/§501(b) argument was flawed. Firstly, the Foundation argued that the works that were the subject of the termination notices were works made for hire. If the works were works made for hire, the Foundation is not a beneficial owner under §501(b), making the inquiry of whether the zone of interest created by §501(b) extends to §§304(c) and 203 irrelevant. Secondly, if the works were not works made for hire, §501(b), which expressly provides that beneficial owners have standing to sue for infringement, cannot be interpreted to support standing for beneficial owners under §§304(c) and 203, which do not mention beneficial owners. Congress must have purposely excluded beneficial owners from the termination sections, §§304(c) and 203.
The Foundation argued that even if its standing under §501(b) did not extend to §§304(c) and 203, its interests in continuing to receive royalties bring it within the “zone of interests” protected by §§304(c) and 203. The district court pointed out that the loss of royalties is a potential harm, but that the “zone of interests” doctrine protects interests, not harm suffered by the plaintiff.
The interests protected by §§ 304(c) and 203 are the rights of authors and statutory heirs to recover ownership of previously transferred copyright interests, and, to a lesser extent, the rights of a grantee or its successor in preserving or renegotiating the transfer. The Foundation is not asserting any of those interests here. Indeed, because the Foundation is not a grantee of the rights to be terminated or its successor, Congress did not even require the statutory heirs to provide it with statutory notice of the termination, let alone give it a seat at the table during the termination process. The Foundation’s claims therefore fall outside the “zone of interests” to be protected under §§ 304(b) and 203.
(Opinion pdf pages 25 – 26).
The Foundation lacked third-party standing.
The district court indicated that the Foundation was really asserting the interests of Warner/Chappell, the current owner of the rights transferred by Charles.
Third-party standing exists only when three criteria are satisfied: (1) an ‘injury in fact’ that creates a ‘sufficiently concrete interest’ in the outcome of the dispute; (2) a close relationship to the third party; and (3) the third party’s inability to protect its own interests.
The district court found that the Foundation did not show that it had a close relationship with Warner/Chappell or that Warner/Chappell was unable to protect its own interests. Significantly, Warner/Chappell has not challenged the validity of the termination notices, implying a lack of common interest and lack of a sufficiently close connection to assert claims on Warner/Chappell’s behalf. The district court ruled that the Foundation did not have standing to assert Warner/Chappell’s interests in seeking to invalidate the termination notices.
The district court also granted the defendants’ motion to strike the Foundation’s two state law claims, pursuant to California’s anti-SLAPP (strategic lawsuit against public participation) statute. The district court indicated that the termination right is inalienable under the Copyright Act, so that the agreement between Charles and the defendants is unenforceable as against the termination notices.
This case is The Ray Charles Foundation v. Raenee Robinson, No. CV 12-2725 ABC (FFMx), Central District of California.