BY:Michael I. Rudell
(Originally published in the Entertainment Law column in the New York Law Journal, February 28, 2003.)
In a case involving two of the members of the recording group The Isley Brothers, the U.S. Court of Appeals for the Second Circuit considered the question of whether an addendum to a contract that purports to transfer copyright interests is a “writing” under section 204(a) of the Copyright Act. The Court decided that it is, and that the case is subject to federal court jurisdiction.
The original members of The Isley Brothers (the “Group”) were Rudolph, O’Kelley and Ronald Isley (the “Older Isleys”). In 1969 they formed T-Neck as their recording company which, four years later, entered into an agreement with CBS to distribute the Group’s recordings. Also in 1973 the Older Isleys formed Bovina Music, Inc. as its publishing company to administer the musical catalogue of the Group and collect song royalties. The Older Isleys were the sole shareholders, officers and directors of both corporations.
In 1973, two other brothers, Ernest and Marvin Isley, and a brother-in-law Christopher Jasper (the “Younger Isleys”) became members of the Group, and contributed to the writing of the Group’s songs for the next ten years.
In January 1980, Bovina entered into an agreement with April Music, Inc. (the “Bovina/April Agreement”) which provided that April would co-administer the Group’s compositions and collect royalties from their exploitation. Under that agreement, Bovina assigned to April an undivided interest in the said compositions, specifically including the copyrights therein and April agreed to pay Bovina royalties at various rates for particular types of exploitations. The last page of the agreement is an Addendum signed by all six members of the Group, including Marvin Isley and Christopher Jasper, in which each “assent[ed] to the execution of [the] agreement and agree[d] to be bound by the terms and conditions thereof.”
In 1980, the Younger Isleys signed the CBS agreement and agreed to be bound by its terms. Also in 1980, the members of the Group signed an agreement to form a partnership called Isley Brothers Enterprises which provided that each of the six members would receive one-sixth of all past and future monies generated by the Group.
Four years later, the Older Isleys filed individual Chapter 11 bankruptcy proceedings (subsequently converted to Chapter 7 liquidations). Marvin Isley and Christopher Jasper then filed proofs of claims seeking substantial sums for song royalties they allegedly had not received. To their surprise, the Trustee in bankruptcy, relying on the claimants’ contention that they were partners in all of the musical businesses of the Group and therefore entitled to one-sixteenth of the income and assets of the partnership, contended that the claimants each were liable for one-sixteenth of the debts of the partnership, which exceeded $4 million. That contention resulted in the execution of two separate settlement and release agreements signed by each of Christopher and Marvin which were approved by the Bankruptcy Court in 1991.
In a suit brought by Christopher and Marvin against Bovina seeking royalties for the use of copyrighted songs, the district court ruled that claimants had conveyed to April their one-sixteenth interest in an undivided fifty percent interest in the copyright for the Group’s songs, thereby defeating their claim against Bovina for song royalties April had paid to Bovina under the agreement with Bovina.
The Court notes that the parties appear to have assumed that, because federal courts have exclusive jurisdiction over actions arising under the Copyright Act, federal jurisdiction existed in the action simply because it involved a dispute as to the ownership of rights in copyrighted songs and records. However, Judge Friendly pointed out that the fact that a case concerns a copyright does not necessarily mean that it is within the jurisdiction of a federal district court. Quoting from T.B. Harms Co. v. Eliscu, the Court indicates that “…if the case concerns a dispute as to ownership of a copyright, and the issue of ownership turns on the interpretation of a contract, the case presents only a state law issue, and unless the complaint asserts a remedy expressly granted by the Copyright Act, federal jurisdiction is lacking in the absence of diversity jurisdiction.” If, however, interpretation of the Copyright Act is required, or if a remedy available under the Act, such as damages for infringement, is sought, then federal jurisdiction is available.
Noting that the line between contract interpretation and statutory interpretation is not always clear, the Court indicates that here, the uncertainty exists because of the interplay between section 204(a) of the Copyright Act, which provides that a valid assignment of a copyright requires a writing signed by the alleged assignor and the Bovina/April Agreement, which the claimants signed.
Unlike most cases in which there is no doubt that the contract is a section 204(a) writing and the only substantial issue is contractual interpretation, the instant action is the rare contract interpretation case that does present a substantial issue as to whether the contract qualifies as a section 204(a) writing. This is because claimants signed the Bovina/April Agreement after it was executed by Bovina. Once they had done so, the issue arose as to whether an Addendum agreeing to a contract that purports to transfer a copyright owner’s rights is a section 204(a) writing. If so, the case falls within federal court jurisdiction.
The Court engages in little discussion in concluding that the Addendum satisfies the written document requirement of section 204(a). It is signed by the claimants and commits them to an assignment to April of a fifty percent interest in their copyrights.
For the purposes of section 204(a), it does not matter whether the assignment is considered an assignment from claimants to Bovina and then to April or directly from claimants to April. The assignment is in writing, signed by the claimants, and there is no risk that an unsuspecting copyright owner has been induced to sign a document that does not clearly indicate an assignment of copyright interests. Accordingly, the assignment defeats the claims by Marvin and Jasper for copyright royalties.
The Court also determined that by signing their respective releases, claimants had released their claims for record royalties. The Court then affirmed the judgment of the district court.