Second Circuit holds that, on motion to dismiss, defendants’ arguments relating to repudiation and/or abandonment of copyright in initial 28 year term did not apply to bar band members from attempting to enforce their rights in renewal term.
John Wilson, Charles Still and Terrance Stubbs, members of 1970s rhythm-and-blues band Sly, Slick & Wicked, sued defendants Dynatone Publishing Co., UMG Recordings Inc. and Unichappell Music Inc., asserting claims for declaratory judgment that they owned the copyrights in the composition and sound recording to their 1973 song “Sho’ Nuff (You Really Love Him),” which was sampled twice in 2013, in Justin Timberlake’s hit song “Suit & Tie” and in J. Cole’s “Chaining Day.” With respect to the recording, plaintiffs claimed ownership on the basis that it was not a work made for hire, among other things, because it had been created before the band had met with the original record label, and also because there had been no work-for-hire agreement. With respect to the composition, plaintiffs, who were the authors of the song, contended that they never transferred their renewal rights to the publishers. In addition to their declaratory judgment claims, plaintiffs also sought an accounting of defendants’ profits from their use of the song within the three years preceding the commencement of the lawsuit.
The district court held that plaintiffs’ claims were barred by the three-year statute of limitations in the Copyright Act, finding that plaintiffs were on notice that, during the 1970s, defendants had repudiated plaintiffs’ ownership of the original term copyrights. The district court based its holding on the fact that the record label for the 1973 commercial release credited defendants as publisher of the musical composition; defendants registered copyrights in the sound recording and musical composition in 1973 and 1974, identifying defendant UMG’s predecessor as the “Employer for Hire” as to the sound recording; and plaintiffs received neither royalties nor an accounting of royalties from defendants. (Read our summary of the district court’s decision here.)
On appeal, the Second Circuit held that, while defendants’ registrations may have repudiated plaintiffs’ claim to the initial copyright terms, they did not repudiate plaintiffs’ ownership of the renewal terms. Furthermore, the appeals court held that a failure to pay royalties during the original term of the copyright is irrelevant to the renewal term. The court explained that a copyright owner who is still alive when a copyright term expires has a right to renewal for a further term and that the renewal term is intended to be a new estate, clear of all rights or interest granted under the original term of the copyright. Because plaintiff songwriters alleged that they were authors of the “Sho’ Nuff” composition and sound recording, they were entitled to the renewal terms regardless of whether they abandoned their rights to the initial terms. The court reasoned that UMG’s registration of the renewal term did not trigger plaintiffs’ obligations to sue, reasoning that if copyright owners could trigger the accrual of an ownership claim through registration, then owners would have to constantly watch for new registrations.
The Second Circuit acknowledged that asserting ownership as a work for hire would effectively repudiate plaintiffs’ claim for the renewal term, as well as for the initial term. The court also suggested that defendants might prevail on a motion for partial summary judgment because “a reasonably diligent plaintiff” would have been on notice to check the copyright registration after seeing UMG’s predecessor-in-interest listed on the record label as the copyright owner. At the motion to dismiss stage, however, based on the complaint’s allegations, the court held plaintiffs were not on reasonable notice that defendants filed a copyright registration for the sound recording in the capacity of a “work for hire.” Plaintiffs’ claims were therefore timely because the sampling of “Sho’ Nuff” did not begin until Jan. 15, 2013, and plaintiffs initiated action on Jan. 6, 2016 — within the three-year statute of limitations.
The court vacated the dismissal of plaintiffs’ claims to the renewal term copyright in the “Sho’ Nuff” musical composition and sound recording, and remanded for further proceedings. The court also found that the complaint failed to allege defendants owed the songwriters a fiduciary duty — a prerequisite to a claim for an accounting — and therefore affirmed the dismissal of the accounting claims.
Summary prepared by David Grossman and Camron Dowlatshahi