Statutory Heirs Apparent?: Reclaiming Copyright in the Age of Author-Controlled, Author-Benefiting Transfers

Abstract

What do musical artists Bob Dylan,1 Loretta Lynn,2 Bruce Springsteen, Kool and the Gang, 4 and original "Village People" member Victor Willis5 all have in common? During their lifetimes, these songwriters all successfully served notice of termination to transferees of their copyright interests in their musical compositions and reclaimed ownership of their copyrights. 6 In fact, Willis, author7 of the perennial karaoke hit YMCA, is the first living artist to successfully terminate the transfer of a post-1977 copyrighted musical composition under section 203 of the 1976 Copyright Act.8

Willis may have been the first, but since 2013 an increasing number of artists from all entertainment industry sectors have and will successfully serve notices and terminate transfers and licenses that were thought at the time of contract to be irrevocable and perpetual. 9 The list of successful artists includes the late Prince Rogers Nelson (aka Prince),' ° who, after an infamous and legendary 18-year rights battle, reclaimed his music catalog from Warner Brothers beginning with his debut album released in 1978.11 This Article focuses on what has transpired since the 2013 termination window opened as termination controversies move from the boardroom to the courtroom. Owners of copyrighted works created on or after January 1, 1978, were first empowered to begin terminating any transfers of those works on January 1, 2013. Because Willis (and the others) reclaimed control of their respective copyright interests during their lifetimes, they are free to dispose of their copyrights, as intangible personal property, during their lifetime in any way they choose or they can exercise their testamentary freedom to transfer property at death. 12

[. . .]

In this Article, I focus on what has actually transpired since that trigger date. Specifically, I argue that Congress should treat certain lifetime gratuitous author transfers to ACAB business and nonprobate entities in the same way that transfers by will are treated. I assert that parity in the treatment of wills and will substitutes is necessary given the rise in importance and frequency of use by celebrities of those ACAB vehicles. I propose a statutory amendment to prevent Statutory Heirs from terminating the decedent author's lifetime gratuitous transfers to best protect the author's testamentary intent and valuable copyright ACAB transfers in the same way testamentary transfers are protected. Finally, I discuss post-1977 termination cases, which are just starting to make their way through the court system, to highlight the unintended consequences of Statutory Heir termination.

In Part I, I explore the legislative history and purpose of the transfer termination right to highlight why Congress added it in 1976 and why transfers made by will are not subject to termination. Further, I compare and contrast briefly pre-1978 (section 304) and post-1977 (section 203) termination rights.

In Part II, I explore the history and importance of testamentary freedom as an organizing principle of succession law.19 Additionally, I highlight the trend led by the drafters of the Uniform Probate Code to interpret succession laws expansively in order to glean and to honor testamentary intent. In this part, I also discuss the traditional limitations on testamentary freedom in favor of certain favored familial relationships like that of spouse and child, namely the elective share in common law states and pretermitted heir statutes.

In Part III, I examine the historical development and emergence of will substitutes in succession law.20 First, I identify and discuss the common types of will substitutes. Next, I focus more specifically on the types of nonprobate transfer vehicles typically involved in the entertainment industry that an artist might use to hold copyright interests and other intellectual property during their lifetimes and to transfer those same assets at the artist's death. These types include self-settled trusts, private foundations, and asset protection trusts.

In Part IV, I examine the role and prevalence of celebrity loan-out companies and music publishing companies in the entertainment industry. Entertainers across entertainment sectors often set up loan out corporations as a way to protect their assets and secure certain tax benefits.21 Usually, the entertainer acts as an employee of the corporate entity and the entity enters into contracts with other businesses such as a production company. The company "loans out" the services of the actor to the production company and may also receive transfers of copyright interests and, after the entity is formed, acquire control of copyrights on a work-for-hire basis to insulate them from the termination right altogether. Music publishing companies are used to control and exploit songwriting copyrights. A songwriter's music publishing company may also receive transfers initially and then own future copyrights created by the songwriter on a work-for-hire basis. ACAB transfers to these business entities are vulnerable to Statutory Heir termination.

In Part V, I analyze several ACAB transfer termination cases where heirs, who inherited the unexercised termination right, challenged a decedent's copyright transfer into an author-created vehicle designed to pass copyright ownership (or the benefits that flow therefrom) to someone or some entity other than those heirs. To that end, I examine the facts and outcome of Ray Charles Foundation v. Robinson, the most prominent and recent case involving an analogous fact pattern. 22 Thereafter, I highlight several pre-1978 cases that interpret section 304. I use those cases to serve as a guidepost for how statutory heirs can effect termination in a way that is contrary to an author's testamentary intent and to highlight how common it was under section 304 for an heir to challenge an author's lifetime disposition of copyright assets and create an endrun around the author's estate plans.

Finally, in Part VI, I offer ways to effectively reconcile the copyright succession rules to best balance an author's lifetime and testamentary wishes with the policies underlying the government's interest in protecting the welfare of author's closest heirs if the author dies before having the opportunity to exercise his or her termination right.

For example, Congress could amend the Act to except from "any transfer" those that would qualify as author-benefiting transfers to author controlled vehicles or closely held corporate entities. This exception could be unlimited or limited to a certain time period from the date the author created the receiving ACAB entity.

Publication Date

1-1-2016

Journal Title

West Virginia Law Review

Document Type

Article

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