Smack Dab in the Middle of a Termination Rights Dispute!

This case addresses the standing required to challenge a copyright grant termination.  Standing is the legal ability to sue another person or entity in a particular court.  Ray Charles entered into agreements with his twelve adult children that he would set up irrevocable trusts for each of them and that that gift would be their entire inheritance from him.  Ray Charles’ will named The Ray Charles Foundation as the sole beneficiary to his estate.  The Foundation received Charles’ copyright royalties upon his death in 2004.  Later, seven of Charles’ children filed notices under 17 USC §§ 203 and 304(c) with the Copyright Office, terminating Charles’ copyright grants to Warner/Chappell.  The copyright termination rights provide authors with a second chance to exploit their works. My Power Point presentation Copyright Grant Termination Rights – Ghosts of Copyright Grants Past, Present and Future discusses copyright grant termination in detail.

The Foundation’s only source of funds is through Charles’ estate.  The Foundation challenged the Terminating Heirs’ termination notices.  The district court dismissed the Foundation’s complaint, ruling that the Foundation did not have standing to challenge the copyright grant terminations.  The Ninth Circuit overruled and remanded the case to district court.

The Terminating Heirs argued that the Foundation stood in the shoes of the record company, Warner/Chappell, whose rights were being terminated and that the Foundation had to establish that it had third party standing – the ability to bring a lawsuit on behalf of the record company.  The Foundation argued that it had standing on its own and the Ninth Circuit agreed. 

It is undisputed that copyright ownership lies with Warner/Chappell, but just as the termination notices affect Warner/Chappell’s ownership of copyrights, they also directly affect the Foundation’s right to royalties.  The Foundation is the sole recipient of royalties flowing from Charles’s copyright grants and effective termination would deprive it of the right to receive prospective royalties.  We thus have little difficulty concluding that the Foundation is litigating its own stake in this controversy.

This conclusion is buttressed by comparing the Foundation’s interests to Warner/Chappell’s. The publisher’s interests will be prejudiced only if Charles’s heirs are successful in their efforts to terminate the existing grants and then either agree to grant copyright ownership to another publisher, or renegotiate grants with Warner/Chappell on terms less favorable to the publisher than the terms of the existing grants. Otherwise, it makes no difference to Warner/Chappell whether it continues to pay royalties to the Foundation under the current grants, or to Charles’s heirs under new grants. In their brief on appeal, the Terminating Heirs recognize that if they decide to renegotiate grants with Warner/Chappell, the publisher’s interests will be largely unaffected: A terminated grantee may well be more interested in maintaining an amicable relationship with the terminating author or statutory heir to facilitate re-licensing.  Because Warner/Chappell’s interests are not necessarily at risk, it has diminished reason to litigate, particularly because challenging the Terminating Heirs might endanger its interests.

(Opinion pdf pages 20 – 21).

The Ninth Circuit next examined the “zone-of-interests.”  The zone-of-interests test inquires whether Congress authorized the plaintiff to sue under that statute.  The Foundations argued that the works were works made for hire and not subject to the termination provisions.

As the holder of legal rights and interests that will be truncated if the termination notices are valid, the Foundation has standing to challenge whether the underlying works are subject to the termination provisions.  If the compositions are works made for hire, the termination statutes do not apply.

(Opinion pdf page 22).

The Ninth Circuit further determined that §§203 and 304(c) confer private rights of action, as opposed to governmental rights of action.  The statute can be enforced by private citizens and not just a governmental agency.

A private right and remedy are contemplated by the termination provisions; the statutes plainly accord authors and statutory heirs the ability to terminate prior grants and recapture copyright ownership for works that were not made for hire.

(Opinion pdf pages 26 – 27).

The Ninth Circuit next discussed whether the statutory causes of action included the Foundation’s claims.  The Termination Heirs filed multiple conflicting termination notices for some works.

Even if we concluded that Congress did not authorize a party in the Foundation’s position to challenge the validity of termination notices, the Foundation’s complaint also seeks a judicial determination establishing when the terminations come into effect for each of the 51 different works. This determination is particularly important because the Terminating Heirs issued duplicate notices with inconsistent termination dates. As the Foundation argued in the district court, ‘even if the Court were to determine that the terminations are valid and effective, the Foundation would, nonetheless, need a Declaration as to the timing so that it would know when, or if at all, its rights to continue to receive the writer share of the income might cease to exist.’ We agree. The Foundation is at least entitled to a declaration establishing when the right to receive royalties reverts to Charles’s heirs.

(Opinion pdf pages 29 – 30).

The Ninth Circuit reversed the district court’s judgment and remanded for further proceedings.

This case is The Ray Charles Foundation v. Robinson, No. 13-55421, Ninth Circuit Court of Appeals.

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