Two Recent Cases Copyright Cases Examine the First Sale Doctrine

Two recent decisions have helped clarify U.S. copyright law and provided some common sense guidance.  In March the U.S. Supreme Court handed down its decision in Wiley v. Kirtsaeng applying the First Sale Doctrine to copyrighted works lawfully manufactured and sold abroad and later resold in the United States.

            The case involved a foreign graduate student (Kirtsaeng) who realized that he could purchase nearly identical copies of the textbooks he used in his U.S. classes in his native Thailand for much less.  Being entrepreneurial, he began having his family purchase numerous textbooks which he later resold for a profit.  Before Wiley sued him he had allegedly made over one million dollars.  Wiley sued Kirtsaeng for copyright infringement and both lower courts sided with the publisher.  However, the Supreme Court  realized that by definition the First Sale Doctrine has to apply to these facts.  The doctrine, codified in 17 U.S.C.A. § 109(a) states "The owner of a particular copy or phonorecord lawfully made under this title or any person authorized by such owner is entitled without the authority of the copyright owner to dispose of the possession of that copy or phonorecord."

            The court realized that despite the kneejerk fear that the publishers and perhaps all intellectual property owners would be damaged by its decision, to hold otherwise would lead to a fundamental restriction on people's rights to sell their own property (i.e. the backbone of many businesses large and small). It might seem like a controversial decision but it's the right one.

            As if to underscore the rationality of the Supreme Court's decision the Second Circuit just issued its opinion in Capitol Records v. Redigi.  In this case, Capitol sued a company whose stated purpose was to allow consumers to re‑sell lawfully purchased digital music files.  On the surface such a sale would seem to be authorized by the Kirtsaeng's court's reliance on the First Sale Doctrine.  However the subtle but important distinction here is  that Redigi was infringing on the exclusive right of reproduction.  One cannot distribute digital music files without reproducing them - it's not a physical object, like a textbook or a used record album.  Their reliance on the First Sale Doctrine failed in this case. They also had a bizarre defesne based upon Fair Use but it’s not worth rehashing here.  I don't know if Redigi will appeal the decision. 

            Both these cases illustrate how certain circumstances can inspire paranoia and fear of worse-case scenarios.  They also illustrate how copyright law is  flexible enough to handle the most complicated cases.

New Live Performance Income for Songwiters

Here’s some potentially good news for independent touring artists.  After operating somewhat under the radar, both BMI and ASCAP have made a big push in allowing songwriter artists to collect income from live performance of their work.  While income from live public performance is of course implicit in the rights that BMI, ASCAP and SESAC collect, as a practical matter the organizations historically only have only paid  this income to major artists performing at major venues.  According to an article in the Tennessean a week or so ago, technological innovations now allow the performing rights organizations to direct some of this income to smaller acts who report their performances correctly.  

            The BMI system is called BMI Live, ASCAP’s is called Onstage and SESAC has a program called Live Performance Notification System. 

            I don’t think there is any data  on how much a small or mid-range artist could generate from these programs, but it would be foolish not to investigate them.  One doesn’t want to leave money on the table.  It is great to see technology being used to assist songwriters and performers for once.

Ray Charles and the Problems of Estate Planning for Songwriters

Those practitioners who deal with estate planning issues for artists and songwriters are going to be paying attention to the decision of the California Federal District Court in the  Ray Charles Foundation v. Raenee Robinson, et al case which was decided in January.  In that case, the Court upheld the right of  seven of Ray Charles' twelve children to serve 39 notices of copyright termination on various entities including Warner/Chappell.  The heirs are exercising their statutory right to terminate assignments of copyright despite the fact that each of these children had agreed contractually that upon receipt of $500,000.00 each in an irrevocable trust that they “would  not inherit anything further under my father's estate plan and I am waiving my right to make a claim against his estate."

 

            Ray Charles entered into these agreements with his children and then apparently left his right to receive additional royalties from these compositions to his foundation – a charitable organization .   Clearly he intended to provide for his children but also to provide for those less fortunate.

            By attempting to terminate the copyright assignments, the children have the potential to redirect the income from these works to themselves, thereby thwarting their father’s charitable plans.

            In seeking declatory relief, the foundation argued that the children breached their agreement with their father by filing the termination notices.

            The Court concluded (1) that there could be  no claim against the estate because the estate had in fact been through probate and was closed and (2) because Section 304(c) of the Copyright Act provides that the termination right is inalienable and may be exercised "notwithstanding any agreement to the contrary" that the foundation did not have standing to stop the heirs from filing these notices of termination.  Note that Warner/Chappell did not contest the notices.

            The rationale in this case is pretty straightforward and it is difficult to know if the 9th Circuit will do anything different on appeal.

            As an important footnote, the Court goes to great lengths to explain that the holdings in the Milne case and the Steinbeck case were not relevant here.  In those cases, the original statutory heirs somehow terminated the original grants themselves and abrogated the whole "inalienable" concept.  The Court also noted the important lesson from the Larry Spier, Inc. v. Bourne Co. case that the intent of an author in executing a will is irrelevant under Section 304(c) because "if the author's intent were the paramount concern of the statute, then no termination of any kind would be allowed because most authors presumably intend to make the assignment that is the very object of Section 304(c)'s termination provisions".

            Therein lies the problem.  While the termination provisions of the Copyright Act serve an important purpose  they can subvert an author's original intent, no matter how beneficial and noble that intent might have been.  Artists and songwriters  contemplating long-term estate plans should be keenly aware of the potential impact of these provisions and plan accordingly,  to the extent possible.

Howlin' Books and Grimey's Too

I am a sucker for book stores and used record stores; combine the two and I can become disoriented.  That happened this weekend when I attended the grand opening of Grimey's Too, the new expansion of Mike Grimes and Doyle Davis’ Grimey's Records operation.  This was a natural expansion, Grimey's needed more room for its “gently used” records.  The real surprise was the inclusion of Howlin’ Books in the mix.  This store is the new joint venture from my long-time friends Jessica Kimbrough and Gwil Owen and it is a wonder.  In addition to being a genuinely gifted song writer, Gwil has been a book scout for years and his collection is mind boggling.  The music book section alone is staggering. On Saturday, I kept bouncing like a pinball between books and records.  As in all great book/record store experiences, I found several things I didn’t know I needed. 

            The store also has a nice selection of new books, magazines and a coffee shop.  I am really excited about this addition to the landscape.  With Rhino Books, Book Man/Book Woman, Elders, Joel Tomlin’s place in Franklin and new ventures like Parnassus and the fascinating minimalist East Side Story,  Nashville is really becoming an interesting place for book lovers and it continues to be a great place for record geeks like myself.  Please support Howlin’ Books and Grimey's Too. 

The Other Side of Nashville

I lost a whole weekend a few weeks ago, absorbed in Rev. Keith A. Gordon's new book "The Other Side of Nashville:  An Incomplete History and  Discography of the Nashville Rock Underground 1976-2006".  I bought the book almost out of a sense of obligation and with a bit of nostalgic dread – I assumed that many of the Nashville bands I worked with in the 1980s and 1990s would be represented.  The book is so much more – a 609 page collection of all the artists who contributed in one way or another to the creation of Nashville's rock music scene.  It is a fascinating read – from the early DIY recordings of R. Stevie Moore (which I used to buy via mail order from New Jersey with no idea that Moore was a Nashville native raised in the music business) to the Scorchers and Praxis era onto the Kings of Leon – this is a hell of a 30 year ride. 

            But while it's great to read about the bands we all know and love (or hate) it's even more interesting to read about and remember the bands that have been lost to the ages.  There are plenty of them and I am going to resist the urge to catalog them here.  It is fitting that Keith gives each of these artists their proper place in the continuum.  He also touches on a lot of important people who operated behind the scenes.

            While this is fun and interesting reading in 2013, I have a feeling that this book is going to be an important historical document in the years to come.  Keith clearly has the heart and soul of a researcher and he is able to put all the issues of magazines like The Metro and Nashville Intelligence Report to good use, providing lots of historical context along the way. 

            My only problem with the book is that the layout is a little confusing but that is probably to be expected with such a massive undertaking.  For anyone with a passing interest in Nashville music (or independent music scenes in general) over the past four  decades, I highly recommend Keith's book.  Read more about it here:

http://www.othersideofnashville.com.