Quest For US Termination Of Copyright Made Uncertain By UK Duran Duran Judgment

Efforts to reclaim rights under the US Copyright Act have increased recently as the window of opportunity for works created in the mid-20th century opens. In comparative cases, Paul McCartney’s decision to take back copyright assignments of his music in the United States appears to have been the right choice but may hang on a questionable UK ruling denying the same request by members of rock group Duran Duran, several intellectual property lawyers said.

Both cases grow out of two provisions of the Copyright Act of 1976 allowing authors to terminate grants of copyrights after a period of time, said Hogan Lovells (New York) media and copyright attorney Dori Ann Hanswirth. 17 U.S.C Section 203 applies to works created after January 1, 1978; Section 304 to works made before 1978 but still subject to copyright as of 1978, she said.

In the 1960s and early 1970s, McCartney assigned copyrights on his music to several companies, and Sony/ATV eventually obtained these rights, said Hanswirth. The former Beatle also has been exercising his US termination rights under Section 304 by sending termination notices at the appropriate times, she said.

From 1980 to 1993, Simon Le Bon and other Duran Duran members signed various music publishing agreements with Gloucester Place Music Ltd, Blackstone Chambers (UK) attorneys wrote in a 5 December 2016 case analysis. The contracts granted, on a worldwide basis, the entire copyright in the group’s compositions for the full term, and were expressly subject to English law and the exclusive jurisdiction of English courts, they wrote.

In 2014, the band served notice under Section 203 of the US Copyright Act with respect to 37 of their songs to terminate their copyright grants and allow copyright to revert to them, the case analysis said. Under Section 203(A)(5), “Termination of the grant may be effected notwithstanding any agreement to the contrary.”

In response, Gloucester Place Music sued Duran Duran in the English High Court, claiming the US termination notices breached the band’s contracts.  The music publisher acknowledged that the notice were valid and effective under US law, but argued that the defendants had, under English law, promised not to exercise their “reversionary rights” under US law, the Blackstone analysis said. Duran Duran countered that the agreements should not be read to contain such promises, and that, even if they were, it would be against public policy to enforce them.

The court sided with Gloucester, ruling that band members could not exercise the Section 203 revision right as a matter of English contract law. The standard under English law, the court said, was the interpretation by “a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.” The decision in Gloucester Place Music Limited v. Simon Le Bon and others is here.

UK Ruling Reversal Likely?

Attorneys we spoke with panned the High Court decision.

Duran Duran’s counsel failed to introduce evidence that the terminations would have been valid under US law, said Hanswirth. If the attorney had done so, the court might have agreed with the band that the US Copyright Act pre-empts any law to the contrary, making the termination notices valid, she emailed.

Thompson Coburn (Washington, DC) intellectual property lawyer Jim Burger agreed, saying the band’s lawyers “did not do a good job of presenting” the case. The judge rejected an interpretation of US law offered by defendants’ lawyer in place of offering an expert on US law, he told Intellectual Property Watch.

“A reasonable person would have understood that at the time of contract, at least under the US Copyright Act, the defendants could not contract away their right to claw back the copyrights during the statutory period,” he emailed. High Court Judge Arnold listed five reasons why he didn’t accept defendants’ interpretation of the effect of US law, but the points were almost all procedure, he said. The court also refused to consider Duran Duran’s public policy argument because their lawyer didn’t advance it during the proceeding, he added.

Nevertheless, said Burger, Judge Arnold said that the other arguments were “finely balanced” and “not without hesitation” did he find for the music publishers. “There is a fair chance this decision could be reversed upon appeal,” Burger said.

The decision “is likely to have significant implications for the recorded music industry given that the contractual provisions that were in issue are frequently encountered in materially similar terms in other music publishing agreements from the time,” Blackstone lawyers said.

McCartney US Filing “Good Strategy”

Enter Paul McCartney, who on 18 January asked a federal court in New York to declare that Section 304 termination notices he served on Sony/ATV starting in 2008, with effective dates from October 5, 2018, are valid and will revert copyright ownership in various Beatles hits to him. McCartney also asked the court to rule that the notices don’t give rise to any valid breach of contract claims against him, saying music publishers are apparently refusing to confirm that they won’t challenge the exercise of his termination rights until they see how the Duran Duran appeal plays out.

The complaint in James Paul McCartney v. Sony/ATV Music Publishing LLC is here.

It appears in McCartney that Sony is acknowledging that the author’s termination notices are valid under US law, but is arguing that the termination right itself is limited, Hanswirth said. Based on an email from Sony attached to the complaint, Sony appears likely to argue that the US termination does not cover any rights outside the US, meaning the music publisher would still own all worldwide rights to the compositions except for the US, she said.

Sony may also contend that the termination notices only apply to the original works, not to any derivative works made from them, Hanswirth said. “I’m not sure what Sony would consider to be a ‘derivative work,’ but if this case does not settle quickly, I can imagine Sony taking an aggressive stance here,” she said.

In light of the UK ruling, McCartney’s decision to bring his case in the US was a “good strategy,” Hanswirth said.

Why Are These Cases Happening Now?

Under Section 304, certain pre-1978 copyright transfers may be terminated during a five-year window that opens 56 years after the date copyright was originally secured or January 1, 1978, whichever is later, said O’Melveny IP litigator Cassandra Seto.

For copyrighted works created in the mid-20^th century, that window is now open, or about to open, which helps explain the recent increase in termination efforts, she told us. For example, if a copyrighted work was published in 1960, the window to terminate under Section 304 opened in 2016, and will close in 2018, Seto noted.

 

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