Ex©lusive Rights

Latin American Music Co. v. American Society Of Composers Authors And Publishers, 2010 WL 324526 (1st Cir. 2010)

The First Circuit (Torruella, Baldock, Howard writing) addressed what is to my knowledge a novel issue concerning the requirement that a transfer of ownership must be in writing. Caballo Viejo, which translates to “Old Horse,” is a popular folk song in Venezuela. In September 1981, the composer of Caballo Viejo granted exclusive rights in the song to a predecessor of a predecessor of ASCAP. A predecessor of ASCAP (which obtained the rights from the predecessor of the predecessor, got that?) transferred exclusive rights in the song to a predecessor of Latin American Music Company in 1982. The contract between the predecessor of ASCAP and the predecessor of Latin American Music Company, which was formed in New York, did not specify a termination date, the conditions under which the exclusive license could be terminated, or the manner in which the license could be terminated.

A dispute arose between ASCAP and Latin American Music Company over copyright ownership. ASCAP claimed that it was the actual owner of the song because its predecessor had terminated the 1982 contract granting exclusive rights to Latin American Music Company. The only testimony presented at trial on the issue was a deposition of the president of ASCAP’s predecessor, stating that he had terminated the 1982 agreement with Latin American Music Company’s predecessor during a conversation with the counterparty’s president.

The First Circuit stated that New York law provides that  an agreement of this type “remains in force for a reasonable time and is subject to termination upon reasonable notice. Italian & French Wine Co. of Buffalo, Inc. v. Negociants U.S.A., Inc., 842 F.Supp. 693, 699 (W.D.N.Y.1993) (“[W]ell-settled New York law [ ] provides that a contract with no stated duration is terminable only after a reasonable duration and after reasonable notice is given.”); see also Laugh Factory, Inc. v. Basciano, 608 F.Supp.2d 549, 556 (S.D.N.Y.2009); Rogers v. HSN Direct Joint Venture, 1999 U.S. Dist. LEXIS 12111, at * 3 (S.D .N.Y. Aug. 6, 1999).”

On appeal, Latin American Music Company argued that the Copyright Act preempted (conflict preemption) the New York State contract law default rule of termination; that the termination had to be in writing. Title 17 Section 204 of the Copyright Act provides:

(a) A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.

Latin American Music Company argued that since it had owned exclusive rights in the song, the termination of the agreement, without a writing, was an invalid transfer of ownership. Since there was no writing, according to Latin American Music Company, there was no transfer.

The Court found that Section 204 did not apply to terminations of copyright ownership under New York State Law:

Section 204, which requires a writing signed by the transferor, however, applies to the transfer or grant of copyright ownership, not to the termination of such a transfer or grant. [Latin American Music Company] cites no case suggesting otherwise, nor are we are aware of any such case. Moreover, extending-204 to the termination of copyright interests would lead to untenable results. A transferee of a copyright interest could effectively veto a lawful termination of that interest by refusing to reconvey that interest to the terminating party under-204. For example, in this case, [Latin American Music Company], the transferee, could have prevented [ASCAP's predecessor in interest] from terminating the exclusive license by simply choosing not to reconvey the license to West Side through either an instrument of conveyance, or a note or memorandum of transfer.