Forget about Georgia - Ray Charles' Children have Copyright Royalties on their mind.

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**UPDATED BELOW**

When Ray Charles passed away in 2004, his twelve children had accepted a $500,000 irrevocable trust and agreed that they would not seek anything further from his estate following his death. Now, some eight years later, his children are reneging on this deal and have sought to terminate the assignment of copyrights on Ray’s songs. This posthumous litigation has been heavily contested by the Ray Charles Foundation, which holds many of Ray’s copyright interests including famous songs such as “Georgia on My Mind” and “I Got a Woman”.

Here’s a bit of background: in the U.S., termination rights (as codified under 17 USC  §203) allow artists to apply to terminate the assignment of their copyright interest 35 years after it was originally created. The termination of their assignment must occur within five years from the end of the 35th year, and they must give notice of this intention to terminate between 2 and 10 years before the date of termination. These termination rights apply to rights assigned as of January 1, 1978, so the first crop of songs that are eligible for termination are coming up in 2013.

Legislators granted these termination rights because of the increasing concern that artists were being taken advantage of by recording labels before they got their ‘big break’. This legislation allows artists to reclaim their copyright after 35 years so that they could renegotiate more favourable deals after their success. One important exception to these termination rights are “works made for hire”. Where an artist creates a work while employed by a record label, they are not entitled to apply for termination rights like other artists who independently assigned their rights to record labels.

Fast forward to the current litigation with Ray Charles’ children. His children are claiming that, as Ray Charles’ heirs, they have a right to apply to terminate the assignment of copyright on his songs under §203(2)(B). If they are successful, the Foundation is set to lose out on hefty royalty payments currently flowing from Ray’s copyright interests that were assigned to it.

The Foundation was bequeathed these rights by Ray Charles and are suing the children for breach of contract because they agreed to accept the $500,000 irrevocable trust and covenanted not to seek anything further from the estate. The Foundation is also siding with the record label and claiming that because the relevant works were made “for hire” they are precluded from asserting termination rights.

In Canada, section 14(1) of the Copyright Act provides protection to artists comparable to the termination rights in the U.S.:

Where the author of a work is the first owner of the copyright therein, no assignment of the copyright and no grant of any interest therein, made by him, otherwise than by will, after June 4, 1921, is operative to vest in the assignee or grantee any rights with respect to the copyright in the work beyond the expiration of twenty-five years from the death of the author, and the reversionary interest in the copyright expectant on the termination of that period shall, on the death of the author, notwithstanding any agreement to the contrary, devolve on his legal representatives as part of the estate of the author, and any agreement entered.

This means that any assignment in copyright will terminate and revert back to the author’s legal representatives 25 years following the death of the author. There are two important caveats: first, these reversionary rights are subject to any bequests made by the author’s will; and second, like in the U.S., works “for hire” do not qualify for reversionary rights because the artist would not be the first owner of the copyright – it would be the employer record label.

Let’s assume that Ray Charles was the first owner, and that this case was taking place in Canada. If he had bequest his copyright interests to the Foundation, this would preclude his copyright interests from reverting back to his estate 25 years following his death. If the Foundation is relying solely on the assignment of Ray Charles’ interests, then his assignment of copyright interests would terminate 25 years following his death (i.e., in 2030) and would revert back to his estate.

One question remains – can an artist assign away their reversion rights as well? Arguably, any contractual provision to that effect would go against the spirit of this provision but it has yet to be litigated in Canada. However, commentators in the U.S. seem to think that artists cannot contractually give up their statutory termination rights.

It will be interesting to see whether Ray Charles’ children will be successful in asserting the termination rights to their father’s works. This case has brought to light many issues surrounding this area of law, and following Victor Willis’ recent legal victory (of the Village People “Y.M.C.A.” fame), including the use of termination rights by artists and their estates may have a lasting and profound impact on the music industry.

UPDATE (November 12, 2012): As it turns out, our ‘one remaining question’ has already been answered in Canada. In Winkler v. Roy (2002) 21 C.P.R. (4th) 539 (F.C.T.D.), an author had contractually agreed to an absolute assignment of copyright in the work forever without reversion. However, the Federal Court held that the assignment of the reversionary interest in the copyright was void and devolved upon the applicant, as executor to the author's estate, pursuant to section 14(1) of the Copyright Act. Therefore, the copyright reverted back to the applicant 25 years following the author's death. A special thanks to Peter Wells, counsel for the applicant, for drawing our attention to this decision.

(Special thanks to Leslie Chong for her invaluable assistance.)

Published In: Art, Entertainment & Sports Updates, General Business Updates, Intellectual Property Updates, Wills, Trusts, & Estate Planning Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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