Ninth Circuit reverses lower court’s dismissal for lack of standing of action brought by Ray Charles Foundation, finding that Foundation, sole beneficiary of music legend’s estate, had standing to challenge validity of notices of termination filed by Charles’ heirs of copyright grants conferred by Charles.
Soul music legend Ray Charles Robinson entered into several contracts with music publisher Atlantic Records and its subsidiary Progressive Music Publishing early in his career in the 1950s, entitling him to advance payments and future royalties. The contracts indicated that Charles was an employee of the Publisher, who was to be the copyright owner of the works. In 1980, Charles, by then a successful recording artist, renegotiated the copyright grants with Progressive’s successor in interest, Warner/Chappell Music. The renegotiation pertained to songs Charles had previously conveyed to Progressive, as well as published and unpublished works that he had not yet assigned to any publisher. The 1980 grant entitled Charles to royalties and another advance payment.
Charles later founded a nonprofit organization, The Ray Charles Foundation, which he named in his will as the sole beneficiary of his estate and to which he gave all rights and related royalties to his musical works. Although Charles had 12 adult children at the time of his death, he did not give them the rights to his songs; instead, he set up irrevocable trusts of $500,000 for each of them in exchange for their agreeing to waive any claims against his estate. In 2010, six years after Charles’ death, seven of his children (the heirs) filed with the U.S. Copyright Office and served on Warner/Chappell notices of termination of the copyright grants, which pertained to 51 compositions. The notices purported to terminate the grants at various points in time from 2012 through 2019 and revert rights to those compositions to the heirs. The grants involved some of Charles’ greatest hits, including “I Got a Woman” and “A Fool for You.”
In March 2012, the Foundation filed suit against the heirs in California federal court seeking, among other things, declaratory judgment that the notices are invalid because they are “works for hire” pursuant to the Charles contracts and therefore excepted from 17 U.S.C. §§ 203 & 304(c), under which the notices were filed; an injunction preventing the heirs from claiming they are or will become rightful owners of copyrights for the works at issue; and a judicial determination as to which of several overlapping termination dates for various songs were effective. On the motion of the heirs, the lower court dismissed the action for lack of standing, holding, among other things, that the Foundation fell outside the “zone of interests” of the termination statutes, which only expressly references heirs and grantees. The Foundation appealed, and the Ninth Circuit reversed and remanded for further proceedings.
As a preliminary matter, the Ninth Circuit considered the issues of Article III standing and ripeness. The complaint, the court held, satisfied Article III’s standing requirements because it established that the Foundation relies on royalties from the copyright grants; the heirs’ notices of termination, if effective, would deprive the Foundation of its income stream; and the declaration sought would redress that deprivation. The appellate court also found that the suit was ripe for consideration because the notices of termination immediately clouded the Foundation’s ability to assess its future income stream and rely on the royalties—and the Foundation should not need to file suit each time one of the future termination dates arrived.
The Ninth Circuit also considered three arguments regarding the Foundation’s standing to challenge the termination notices, ultimately concluding that the Foundation fell within the “zone of interests” of the statutes at issue. First, the court rejected the Foundation’s argument that it had standing as a “beneficial owner” of the copyrights, as the sole beneficiary of Charles’ estate. While beneficial owners can bring suit for copyright infringement under 17 U.S.C. § 501, the court concluded that there is no statutory support for the theory that these parties have standing to challenge notices of termination. Second, the Ninth Circuit held that the Foundation was not, as the heirs argued, required to satisfy the requirements for third-party standing on behalf of Warner/Chappell. The fact that the Foundation is the sole recipient of royalties flowing from the grants was sufficient to confer standing independently. The court observed that Warner/Chappell would be prejudiced only if the heirs elected not to renegotiate the grants with the publisher (the interests of which, the heirs admitted on appeal, would largely be unaffected if the grants were renegotiated), and Warner/Chappell had diminished reason to litigate because challenging the heirs might endanger its interests.
Ultimately, the Ninth Circuit agreed with the Foundation that it had standing to challenge the termination notices because the Foundation fell within the “zone of interests” of 17 U.S.C. §§ 203 and 304(c), consistent with the analysis set forth in the U.S. Supreme Court’s 2014 decision in Lexmark v. Static Control Components. The Ninth Circuit concluded, based upon precedent inside and outside the Circuit, that the termination statutes created private rights of action. Although, as the lower court noted, the statutes referenced only grantees and heirs—and the Foundation is neither—the Ninth Circuit held that the Foundation adequately alleged injuries to the “sorts of interests” that the statutes protect. Specifically, the Foundation sufficiently alleged injury to its interest in continuing to receive the royalty stream generated by Charles’ works, which was the very same interest that the heirs themselves sought to affect by filing the termination notices. This, the court concluded, was an interest that Congress contemplated, regulated and protected in enacting the termination provisions and, therefore, the Foundation fell within the statutes’ “zone of interests.”
The Ninth Circuit alternatively held that, even assuming the Foundation did not satisfy the “zone of interests” test, the Foundation would at the very least be entitled to seek a judicial determination on which of the several overlapping termination dates noticed for certain songs was effective—so that it would know when or if its rights to collect royalties would cease to exist.