A number of notable songwriters have successfully reclaimed control over their copyrights from recording companies: Bruce Springstein, Loretta Lynn, Tom Petty, and an original “Village People” member, Victor Willis, for that perennial Karaoke favorite “YMCA”. They all lived long enough to see the copyright termination window open for their respective rights.
However, some authors are not so fortunate.
Case in point: The Ninth Circuit recently heard Ray Charles Foundation v. Robinson, 795 F.3d 1109 (9th Cir. 2015). That case presents facts analogous to the problem the proposed amendment seeks to resolve; that is, when a statutory heir asserts a termination interest clearly contrary to the decedent author’s wishes.
In that case, Charles named his private charitable foundation as sole heir of his rights and recipient of his royalties during his life and thereafter. In fact, the Foundation is totally funded by the royalties and is prohibited from receiving any other means of support. Separately, he negotiated with his children (all 12 of them) to waive any right to his estate in exchange for half million dollars into an irrevocable trust for each. He died before the termination window opened. The perfect storm.
After his death, seven children served dozens of termination notices on various transferees and the Foundation sued challenging the termination notices. The issue was whether the foundation had standing to sue and the Ninth Circuit held that it did. If the Foundation is successful here, the transferee (Warner Chappell) will remain in control of the copyrights and the Foundation will continue to be funded. Ray Charles’s wishes and intent will survive.
When an author dies before the window opens, a statutorily prescribed class of heirs (spouse, children, and grandchildren) inherit the termination right. And they, like the author, can terminate any transfer made during the author’s lifetime.
The problem is that this includes gratuitous transfers made by the author to a wholly controlled loan-out company commonly used in the entertainment industry or an irrevocable, self-settled trust, private foundation or similar will substitute used commonly by celebrities and, increasingly, by noncelebrities.
Will substitutes are used for various business, tax and estate planning reasons. And also for the privacy one does not enjoy when a will is probated and becomes public record. My concern, and the focus of my paper, is that if left unresolved, this disparate treatment between probate and nonprobate assets threatens to undermine an author’s testamentary intent to the extent will substitutes, which are used frequently in the entertainment industry in particular, are used for a range of business, financial, tax and privacy concerns.
The principle of testamentary freedom encompasses multiple property rights. Therefore, testamentary freedom to plan with wills and will substitutes, is clearly integral to one’s property rights.
The Solution & Rationale
In this article, I argue that Congress should treat certain gratuitous author transfers in the same way that wills are treated. Presumably, wills are excepted from the termination provisions to, among other things, honor the testator’s intent and freedom to dispose of their property as they see fit during life and at death.
Both corporate structures that shield personal liability and will substitutes that avoid probate and offer administrative and tax benefits, have and will continue to increase in popularity. Therefore, parity in the treatment of wills and will subs is necessary given the rise in importance and frequency of use of those author-controlled and author-benefitting vehicles in particular. This amendment will prevent statutory heirs, often disgruntled, from terminating those transfers and best protect the author’s testamentary intent and freedom.