<i>Online Extra</i>11th Circuit Ruling over Composer's Rights to 'Spank' Sets Precedent on Copyright Infringement

According to allegations in the complaint filed by Smith's estate recounted in the Eleventh Circuit opinion, Smith wrote “Spank” and, under a recording agreement he had with Casey's company, Sunshine Sound Enterprises, later produced a recording of the song for Horne, another artist signed to Casey's company. Sunshine Sound released the record in early 1979 and registered a copyright for the sound recording. The recording agreement between Smith and Sunshine Sound said Smith was to sign an attached songwriter's agreement for each composition recorded under the recording agreement, by which Smith would exchange his rights to the composition for royalties. No one ever signed a songwriter's agreement for “Spank.”

Around the same time, Harrick Music Inc., a publishing company affiliated with Sunshine Sound, registered a copyright for the “Spank” composition identifying Smith as composer. Harrick checked a box on the registration indicating the song was not a composition made for hire.

In 1980, Smith and Sunshine Sound agreed to terminate his recording contract and provided that sound recordings made under their previous recording agreement remained the property of Sunshine Sound, while Sunshine Sound remained obligated to pay Smith any royalties previously agreed to. The release signed by Smith at termination was silent, however, as to who owned the copyrights in the musical compositions embodied in the recordings.

The complaint filed by Smith's estate alleges that neither Sunshine Sound nor Harrick Music ever gave Smith any royalties for the song. On Nov. 28, 2011, shortly before his death, Smith's attorney, Lita Rosario of Washington, sent a cease-and-desist letter revoking Harrick's authority to use the “Spank” copyright.

Alleging they continued to make money off the song, Smith's estate filed suit against Casey, KC & the Sunshine Band, Sunshine Sound and Harrick Music, as well as Horne and his company, Joy Productions. The complaint alleged copyright infringement and breach of contract.

Rosario said this week she wouldn't know how much money was owed until obtaining discovery in the case. But she said each time a consumer downloads the song constitutes an act of infringement by the defendants. Horne's recording of the song was used in a 2012 movie, “Here Comes the Boom,” noted Horne's lawyer, F. Malcolm Cunningham Jr. of West Palm Beach, Fla. Rosario added the defendants had approved several samplings of the tune.

After some of the defendants filed a motion to dismiss, U.S. District Judge Ursula Ungaro of Miami ruled that the estate lacked standing to pursue a copyright claim because Harrick Music, not Smith or his estate, had registered the copyright. Since there were no federal claims left, Ungaro also dismissed the state law breach of contract claim, meaning the estate would have to re-file it in state court.

A three-judge panel of the Eleventh Circuit largely reversed Ungaro in an opinion written by Senior Judge Phyllis Kravitch on behalf of herself, Senior Judge Peter Fay and Judge Charles Wilson.

Noting that the federal copyright statute says that, subject to certain requirements, “[t]he legal or beneficial owner of an exclusive right under a copyright is entitled … to institute an action for any infringement,” the appeals court found that the estate's copyright infringement claim should not be dismissed for lack of standing. Kravitch wrote that the legislative history of the federal law explains that Congress intended “beneficial owner” to include an author who has traded legal title to the copyright for royalties. She wrote that every other circuit that has addressed the issue'the Second, Fifth, Seventh and Ninth Circuits ' has agreed that is the correct interpretation.

Kravitch acknowledged that an author who creates a work within the scope of his or her employment under a “work for hire” agreement lacks standing to maintain a copyright infringement suit and that some of the defendants had argued that “Spank” was a work created for hire. But Kravitch said language in the recording agreement between Smith and Sunshine Sound, as well as the copyright registration, made the issue at least so questionable that Smith shouldn't lose at the motion to dismiss stage.

The estate claims Smith never signed any agreement giving Harrick Music the right to make money from the “Spank” copyright, Kravitch noted. At most, she wrote, Smith agreed only to assign his rights to the musical composition in exchange for royalties. So, Kravitch concluded, he had least had a beneficial interest in the copyright that generally would allow him to sue.

One catch, Kravitch continued, is that the federal copyright law says that even a beneficial owner of a copyright must demonstrate compliance with the statute's formalities, which include registration of the copyright claim. The district judge had rejected the estate's argument that it could rely on the registration Harrick Music had filed to satisfy that requirement, but Kravitch called the district judge's interpretation of the law on that point “too narrow.”

Kravitch said nothing in the statute indicates that a composer who has agreed to assign his legal interest in a composition, along with the right to register it, in exchange for royalties, may not rely on the registration his assignee files. Kravitch said that the Eleventh Circuit was “in good company” in concluding that a composer could rely on a registration filed by a publisher, noting that the only other circuit to address the issue, the Fifth Circuit, had reached the same conclusion.

Were the court to hold otherwise, she wrote, “redundant registrations would be necessary for statutory standing purposes every time legal and beneficial ownership of the same exclusive right rested with two distinct parties, even if they joined together in filing suit against an alleged infringer.”

Kravitch said the district judge was within her rights in dismissing a declaratory judgment claim. But because the district judge erred in dismissing the copyright claim, said Kravitch, the trial court also erred in declining to exercise jurisdiction over the estate's state law breach of contract claim.

Rosario, the lawyer for Smith's estate, said the court's copyright decision was significant for a range of artists, including authors of books. “This question of standing is relevant for any beneficial owner who wants to sue a third party ' when the publisher is not willing to bring the action and they want to bring the action themselves.”

Rosario said the Eleventh Circuit's ruling was “consistent with what copyright practitioners know to be the truth” but there had been little case law on the issue. “I think it's important for that reason,” she said.

The lead lawyer for Casey and related defendants, Franklin Zemel of Fort Lauderdale, was traveling this week and not available for comment, according to a colleague.

Cunningham, who represents Horne and his company, called the ruling on the copyright issue “incredibly groundbreaking,” adding that prior to last week's decision there was no Eleventh Circuit case law and little elsewhere to back up the estate's position.

Cunningham said that any technical violation by his clients was done at the request of Sunshine Sound and Harrick Music, so his clients would file a claim for indemnity from Sunshine Sound and the related defendants. Noting the recent use of his client's recording of “Spank” in a movie, Cunningham said his clients would file against the other defendants' claims similar to those raised by Smiths' estate. “It seems like … the Sunshine defendants must have made some money licensing that song,” said Cunningham.

The case is'Smith v. Casey, No. 13-12351.

Alyson M. Palmer writes for'Daily Report, an ALM sibling of Entertainment Law & Finance.

Litigation over a 1970s disco song has set new copyright precedent at the Atlanta-based federal appeals court.

At issue are the rights to “Spank,” written by Ronald Louis “Ronnie” Smith Sr. and recorded by Jimmy “Bo” Horne. The Jan. 22 decision by the U.S. Court of Appeals for the Eleventh Circuit says the estate of Smith, who died in 2012, can sue for copyright infringement even though Smith may have traded his rights to the song for royalties and hadn't personally registered a copyright for the composition.

A horn player, Smith was a member of KC & the Sunshine Band in the late 1970s. The group was named for its leader, Harry Wayne Casey.

According to allegations in the complaint filed by Smith's estate recounted in the Eleventh Circuit opinion, Smith wrote “Spank” and, under a recording agreement he had with Casey's company, Sunshine Sound Enterprises, later produced a recording of the song for Horne, another artist signed to Casey's company. Sunshine Sound released the record in early 1979 and registered a copyright for the sound recording. The recording agreement between Smith and Sunshine Sound said Smith was to sign an attached songwriter's agreement for each composition recorded under the recording agreement, by which Smith would exchange his rights to the composition for royalties. No one ever signed a songwriter's agreement for “Spank.”

Around the same time, Harrick Music Inc., a publishing company affiliated with Sunshine Sound, registered a copyright for the “Spank” composition identifying Smith as composer. Harrick checked a box on the registration indicating the song was not a composition made for hire.

In 1980, Smith and Sunshine Sound agreed to terminate his recording contract and provided that sound recordings made under their previous recording agreement remained the property of Sunshine Sound, while Sunshine Sound remained obligated to pay Smith any royalties previously agreed to. The release signed by Smith at termination was silent, however, as to who owned the copyrights in the musical compositions embodied in the recordings.

The complaint filed by Smith's estate alleges that neither Sunshine Sound nor Harrick Music ever gave Smith any royalties for the song. On Nov. 28, 2011, shortly before his death, Smith's attorney, Lita Rosario of Washington, sent a cease-and-desist letter revoking Harrick's authority to use the “Spank” copyright.

Alleging they continued to make money off the song, Smith's estate filed suit against Casey, KC & the Sunshine Band, Sunshine Sound and Harrick Music, as well as Horne and his company, Joy Productions. The complaint alleged copyright infringement and breach of contract.

Rosario said this week she wouldn't know how much money was owed until obtaining discovery in the case. But she said each time a consumer downloads the song constitutes an act of infringement by the defendants. Horne's recording of the song was used in a 2012 movie, “Here Comes the Boom,” noted Horne's lawyer, F. Malcolm Cunningham Jr. of West Palm Beach, Fla. Rosario added the defendants had approved several samplings of the tune.

After some of the defendants filed a motion to dismiss, U.S. District Judge Ursula Ungaro of Miami ruled that the estate lacked standing to pursue a copyright claim because Harrick Music, not Smith or his estate, had registered the copyright. Since there were no federal claims left, Ungaro also dismissed the state law breach of contract claim, meaning the estate would have to re-file it in state court.

A three-judge panel of the Eleventh Circuit largely reversed Ungaro in an opinion written by Senior Judge Phyllis Kravitch on behalf of herself, Senior Judge Peter Fay and Judge Charles Wilson.

Noting that the federal copyright statute says that, subject to certain requirements, “[t]he legal or beneficial owner of an exclusive right under a copyright is entitled … to institute an action for any infringement,” the appeals court found that the estate's copyright infringement claim should not be dismissed for lack of standing. Kravitch wrote that the legislative history of the federal law explains that Congress intended “beneficial owner” to include an author who has traded legal title to the copyright for royalties. She wrote that every other circuit that has addressed the issue'the Second, Fifth, Seventh and Ninth Circuits ' has agreed that is the correct interpretation.

Kravitch acknowledged that an author who creates a work within the scope of his or her employment under a “work for hire” agreement lacks standing to maintain a copyright infringement suit and that some of the defendants had argued that “Spank” was a work created for hire. But Kravitch said language in the recording agreement between Smith and Sunshine Sound, as well as the copyright registration, made the issue at least so questionable that Smith shouldn't lose at the motion to dismiss stage.

The estate claims Smith never signed any agreement giving Harrick Music the right to make money from the “Spank” copyright, Kravitch noted. At most, she wrote, Smith agreed only to assign his rights to the musical composition in exchange for royalties. So, Kravitch concluded, he had least had a beneficial interest in the copyright that generally would allow him to sue.

One catch, Kravitch continued, is that the federal copyright law says that even a beneficial owner of a copyright must demonstrate compliance with the statute's formalities, which include registration of the copyright claim. The district judge had rejected the estate's argument that it could rely on the registration Harrick Music had filed to satisfy that requirement, but Kravitch called the district judge's interpretation of the law on that point “too narrow.”

Kravitch said nothing in the statute indicates that a composer who has agreed to assign his legal interest in a composition, along with the right to register it, in exchange for royalties, may not rely on the registration his assignee files. Kravitch said that the Eleventh Circuit was “in good company” in concluding that a composer could rely on a registration filed by a publisher, noting that the only other circuit to address the issue, the Fifth Circuit, had reached the same conclusion.

Were the court to hold otherwise, she wrote, “redundant registrations would be necessary for statutory standing purposes every time legal and beneficial ownership of the same exclusive right rested with two distinct parties, even if they joined together in filing suit against an alleged infringer.”

Kravitch said the district judge was within her rights in dismissing a declaratory judgment claim. But because the district judge erred in dismissing the copyright claim, said Kravitch, the trial court also erred in declining to exercise jurisdiction over the estate's state law breach of contract claim.

Rosario, the lawyer for Smith's estate, said the court's copyright decision was significant for a range of artists, including authors of books. “This question of standing is relevant for any beneficial owner who wants to sue a third party ' when the publisher is not willing to bring the action and they want to bring the action themselves.”

Rosario said the Eleventh Circuit's ruling was “consistent with what copyright practitioners know to be the truth” but there had been little case law on the issue. “I think it's important for that reason,” she said.

The lead lawyer for Casey and related defendants, Franklin Zemel of Fort Lauderdale, was traveling this week and not available for comment, according to a colleague.

Cunningham, who represents Horne and his company, called the ruling on the copyright issue “incredibly groundbreaking,” adding that prior to last week's decision there was no Eleventh Circuit case law and little elsewhere to back up the estate's position.

Cunningham said that any technical violation by his clients was done at the request of Sunshine Sound and Harrick Music, so his clients would file a claim for indemnity from Sunshine Sound and the related defendants. Noting the recent use of his client's recording of “Spank” in a movie, Cunningham said his clients would file against the other defendants' claims similar to those raised by Smiths' estate. “It seems like … the Sunshine defendants must have made some money licensing that song,” said Cunningham.

The case is'Smith v. Casey, No. 13-12351.

Alyson M. Palmer writes for'Daily Report, an ALM sibling of Entertainment Law & Finance.