Monday, April 8, 2013

Ray Charles Foundation told to "Hit the Road Jack."

In The Ray Charles Foundation v. Robinson (C.D. Cal. 12-cv-2725), the court takes an interesting side-step around what will undoubtedly be the hottest copyright issue in the very near future – termination.  The musician Ray Charles composed and recorded numerous musical works which were copyrighted.  From the facts listed in the case, it is an open question about whether the works were works made for hire with Atlantic (sound recording) and Progressive (composition).    Charles negotiated new terms (including royalties) for these works with the record companies.

Prior to Charles’s death, he made an agreement with his 12 children which stated:

My father, Ray Charles Robinson, has told me that he will set up an irrevocable trust for my benefit, to be funded with $500,000.  This gift is my entire inheritance from him and I understand that I will not inherit anything further under my father’s estate plan and that I am waiving any right to make a claim against his estate. 

Upon his death, the rights in his works were left to The Ray Charles Foundation.  In 2010, seven of Charles’s children served copyright termination notices on parties who had interests in Charles’s works, including Progressive. 

The Ray Charles Foundation sued the children claiming a breach of contract and seeking declaratory judgment on a variety of grounds.  The Foundation alleged that Charles’s works were works made for hire and thus not subject to the termination provisions of the Copyright Act.  17 U.S.C. Section 203 (thus maintaining the Foundation’s continued royalties). 

However, the Court was unsympathetic to The Foundation’s claims.  First, it found that the termination notices are not claims against the Charles estate.  The estate was closed in 2006, 4 years before the termination notices were served in 2010.  Second, the Foundation’s claim that Charles’s works were works made for hire would mean that the works were never in the estate anyway.  Third, even if the works were not works made for hire, the Court cannot interpret Charles’s agreement with his children as limiting a termination right under the Copyright Act.  The termination rights are unalienable notwithstanding any agreement to the contrary.  17 U.S.C. Section 304(c)(5).   The Court finds that the language would be an agreement to the contrary and is not able to prevent the right to terminate.  The Court goes on to award attorney’s fees to the Defendant under California’s Anti-SLAPP statute. 

The Court does not stop there.  It found that The Foundation does not even have standing to bring the lawsuit.  The Foundation is not the owner of Charles’s works if they are a work made for hire. (Progressive and/or Atlantic would be.)  The Court further found that The Foundation is not within the zone of interests protected by the statute invoked in the lawsuit.  The statutes (Sections 203 and 304) provide for authors, statutory heirs owning a termination interest, and grantees of transferees and their successors as those within the zone of interests.

While beneficial owners may have the right to sue for infringement under Section 501(b), no similar provision exists under Section 203 or 304 for the right to terminate.  Thus, the Court also rejects The Foundation’s claim that they have standing as a beneficial owner.  Finally, the Court rejects The Foundation’s third-party standing argument because it cannot show a close relationship with Progressive or its successors-in-interest. 

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