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IP Law Daily, COPYRIGHT—S.D. Fla.: Termination right is not extinguished in bankruptcy, (Oct 2, 2024)

Law Firms Mentioned:Easley Appellate Practice PLLC | Sriplaw, P.A.
Organizations Mentioned:Lil Joe Records, Inc. | SRIPLAW, PLLC

By Matthew Hersh, J.D.

The termination right is held to be a personal right, not a property right.

The right to terminate a written transfer agreement under the Copyright Act was not extinguished by a bankruptcy proceeding, the federal court for Miami has held. The court, i ...

By Matthew Hersh, J.D.

The termination right is held to be a personal right, not a property right.

The right to terminate a written transfer agreement under the Copyright Act was not extinguished by a bankruptcy proceeding, the federal court for Miami has held. The court, in adjudicating competing motions for summary judgment in a legal dispute involving a prominent 1980s-era rap group, found that the right to terminate was a personal right as opposed to a property right—and therefore did not become part of a debtor’s bankruptcy estate when the owner of that termination right declared bankruptcy (Lil Joe Records, Inc. v. Ross, No. 1:21-cv-23727-DPG (S.D. Fla. Sept. 30, 2024)).

This band at the center of this dispute is 2 Live Crew, a hip-hop group from Miami that was commercially successfully in the 1980s and 1990s. The band, which was famous in music circles for its sometimes over-the-top sexually explicit content—and which was famous in legal circles for its indelible contribution to fair use doctrine—was composed primarily of Luther Campbell, Mark Ross, Christopher Wong Won, and David Hobbs. But after their initial success, the band members were stalked by bankruptcies. Campbell went into bankruptcy proceedings in 1995, along with the band’s record label Luke Records. Ross went into bankruptcy five years later. Joseph Weinberger, the company’s former CFO and tax counsel, acquired the rights to the band’s recorded masters out of those bankruptcy proceedings and began distributing them under his own label, Lil’ Joe Records.

The events leading to this dispute began when Campbell, along with the heirs of the now-late Ross and Wong Won, served a notice of termination on Lil’ Joe Records. The notice purported to terminate the assignments of copyright interests that the three band members made to Luke Records in 1990. (The fourth member of the band, Hobbs, did not participate in the notice.) Lil’ Joe sued Campbell, as well as the heirs of Ross and Wong Won, seeking declaratory judgment as to the validity of the termination notice. It also filed a wide range of copyright and trademark claims, including federal trademark infringement, false designation of origin, and common law trademark infringement, against certain individual band members.

The band members and their heirs moved for summary judgment on the termination notice, leading to this decision.

Transfer to Luke Records. The court found that a jury would have to decide whether the band members transferred their interests in the master recordings in the first place. Lil’ Joe argued that the band members assigned their master recording rights to Luke Records through some combination of agreements, oral and written, between 1986 and 1991. But it was not possible to decide this now, the court found. “The record is replete with additional material factual disputes related to the agreements at issue, including the dates of pertinent events, conversations between the parties, actions taken by the parties, and responsibilities of the parties,” the court noted. With these facts in dispute, the could not decide the issue as a matter of law.

Work for hire. Nor could the court decide, at this stage of the case, whether Luke Records acquired the master recording rights as works for hire. To decide this issue, the court noted, it would have to wade through 13 factors set forth by the appellate courts—many including highly factual issues such as “whether Campbell “exercised complete control of Luke Records,” “whether there simply was no supervision of Campbell’s work other than his own,” and the like. A jury would have to sort this one out as well.

The effect of the bankruptcy. The court did give the band members one victory however, in ruling that the bankruptcy did not upend their termination rights. Two of the band members, Campbell and Ross, relinquished whatever rights they held in the master recordings when they entered into bankruptcy. Under the bankruptcy law, the court noted, property of the bankruptcy estate is defined as “all legal or equitable interests of the debtor in property as of the commencement of the case.” 11 U.S.C. § 541(a)(1). Did the creation of that bankruptcy estate extinguish the rights of the band members to terminate their assignments? Courts in the circuit had not considered before whether termination rights under the Copyright Act are a “debtor’s property” that becomes part of his bankruptcy estate. But the court, acting on this case of first impression, found that they did not.

The court reached this conclusion because it determined that Congress, in enacting the termination rights provision, would not have intended to make that termination right extinguishable in bankruptcy. The “manifest congressional intent” behind the termination provision, the court noted, was “the protection of authors.” Moreover, the purpose of the termination provision was “to help authors, not publishers or broadcasters or others who benefit from the work of authors.” Crucially, the court found, copyright termination rights “are personal to the author, as no other party may exercise them.” Therefore, the Court found, copyright termination rights “do not become a part of the bankruptcy estate because they are personal rights specifically created for the author, not property rights that can be transferred.”

Trademark and copyright claims. Finally, the court granted summary judgment to the band members on the trademark and copyright claims—for the simple reason that Lil’ Joe abandoned these claims in briefing.

The Case is No. 1:21-cv-23727-DPG.

Judge: Gayles, D.

Attorneys: Dorothy Frances Easley (Easley Appellate Practice PLLC) for Lil Joe Records, Inc. Joel Benjamin Rothman (Sriplaw, P.A.) for Raven Ross.

Companies: Lil Joe Records, Inc.

Cases: Copyright Trademark FloridaNews GCNNews