Here is SCO's Reply Memorandum in Support of Motion to Remand (here is the Motion to Remand), and the attached Exhibit, Novell's June 6 press release. You may wish to review Novell's Memorandum in Opposition to Motion to Remand.
SCO posits as true that "the Asset Purchase Agreement as amended clearly transferred the copyrights at issue to SCO, as Novell has previously and repeatedly admitted." Huh? When was that? All I have seen is letter after letter contesting any such idea. SCO asserts they admitted it when they put out a press release officially acknowledging the transfer. As proof, SCO tacks on as an Exhibit the Novell press release it put out back when SCO announced it had found Amendment 2. Remember the paralegal?
Of course, SCO needs that to be true in order to go forward with its other legal adventures, most particularly the AutoZone case. Not that it wants to go forward. But they really don't want to have to get into a discussion in federal court about whether or not they actually own the copyrights or Novell does. So they argue instead that the Asset Purchase Agreement as amended by Amendment 2 transferred the UNIX copyrights. Case closed on that, they hope, and they say the press release is proof that Novell back in June acknowledged that it made such a transfer. So now they'd like to stop any more discussions about whether Novell might actually still own the UNIX copyrights and skip to the part where they get to say Novell was very, very bad to claim otherwise.
SCO asks the Court not to let Novell "draw the Court into an analysis of the Asset Purchase Agreement as opposed to SCO's allegations of Novell's slanderous conduct." This sentence doesn't quite make sense to me, because if the judge only looks at SCO's allegations of slander, he can't actually get into it and will have to send it to state court. The real issue he has to decide, and can't avoid, is the analysis of the Asset Purchase Agreement as amended. Even if he were to eventually decide to send the case to state court, he can't do that without first going through the necessary analysis in order to reach a decision.
Novell has never withdrawn this June 6 press release, SCO says in a footnote, nor have they stated that the release is incorrect. This press release, SCO trumpets, is Novell "officially acknowledging that Amendment 2 to the Asset Purchase Agreement transferred UNIX copyrights to SCO in 1996."
That seems a bit of a stretch. When you look at the press release itself, it reflects considerable doubt and confusion, to my reading. Here are the exact words: "To Novell's knowledge, this amendment is not present in Novell's files. The amendment appears to support SCO's claim that ownership of certain copyrights for UNIX did transfer to SCO in 1996."
Does that sound like a ringing endorsement to you? "Appears to support"? "Certain copyrights"? We can't find our copy? Is that an official acknowledgement? And when you look at media reports about the paralegal finding the document, they didn't report it as a sure thing, even with the Novell press release. For example, here is what Stephen Shankland wrote on June 6, 2003:
"The company said it has uncovered a 1996 amendment to the contract under which Novell sold many of its Unix assets--which appears to give SCO claim to at least some Unix copyrights.
"The amendment seems to reverse a provision in the original 1995 asset transfer agreement under which Novell sold much of the Unix business to SCO's predecessor, the Santa Cruz Operation. That sale specifically excluded copyrights from the transfer. The amendment modifies this exclusion, so that SCO seems to receive at least some Unix copyrights.
"'Our interpretation of this is that we have the copyrights for Unix and UnixWare technologies,' said SCO spokesman Blake Stowell. The amendment, dated Oct. 16, 1996, was signed about a year after the original transfer agreement.
"Even SCO challenger Novell seems to concur, in part, with SCO's interpretation, though Novell said it doesn't have a copy of the amendment in its files and still takes issue with SCO's actions against Linux users."
If SCO couldn't persuade even the media that it was a slam dunk, what are the odds they can persuade a judge that this press release represents Novell officially acknowledging that the copyrights transferred to SCO? The problem SCO faces is that if there really is confusion about who actually holds the copyright, that confusion has to be resolved in some court, somewhere, and Novell has raised the issue by claiming that they hold the copyrights and they never transferred to SCO. And if you noticed, even the media characterized any transfer as being "at least some Unix copyrights", and "in part", meaning not all. Novell contests that anything transferred, calling it a mere promise to transfer upon a contingency that never happened. But the point is, "some" copyrights raises the question: which ones? If there is a question about it, according to Novell's argument, the writing fails to stand as sufficient to transfer the copyrights, because you are supposed to be specific. If it isn't all copyrights being transferred, then you are supposed to list which ones are being transferred. Here is the argument Novell made in their Memorandum in Opposition:
In its notice of removal, Novell contends that resolution of the ownership issue in this case (and thus the slander of title claim) raises a substantial issue of interpretation of the Copyright Act, namely, whether the APA as amended satisfies the requirements of "an instrument of conveyance" in writing necessary to transfer ownership of a copyright. . . .See, e.g., Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990) (in order to suffice as a written instrument of conveyance under section 204(a), assignment must state "precisely what rights are being transferred"). . . . The section 204(a) issue here arises because there is no instrument that, on its face, purports to convey copyrights, and the only instrument SCO contends is an instrument of conveyance is so indeterminate as to fail the requirements of section 204(a). . . .
An action "arises under" the federal Copyright Act not only (as SCO notes) if the complaint "is for a remedy expressly granted by the Act," but also (as SCO ignores) if the complaint "asserts a claim requiring construction of the Act" or "presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim." T.B. Harms Co. v. Eliscu, 339 F.2d 823, 828 (2d Cir. 1964). In arguing that an action arises under the Copyright Act only if it is for a remedy expressly granted by the Act, SCO selectively quotes from Harms. (See Remand Mot. at 3.) The omitted portion of Harms makes clear, however, that SCO's view is incorrect. Under Harms, federal jurisdiction is proper where the complaint asserts a claim requiring construction of the Copyright Act.  Because SCO's complaint asserts such a claim, "the federal courts have exclusive jurisdiction." Harms, 339 F.2d at 824. . . .
The instant case presents major section 204(a) issues. Here, like Jasper, there are two documents, the APA and Amendment No. 2, neither of which by itself satisfies the requirements of section 204(a). Unlike Jasper, however, the APA does not purport to effect an assignment, and contains no language of the form "Seller hereby conveys to Buyer ...." Rather, it merely represents a promise to assign, and it expressly excludes all copyrights from the assets to be transferred. (APA, Schedule 1.1(b).) Amendment No. 2, moreover, also contains no language purporting to effect a transfer of assets and merely modifies the Excluded Assets schedule of the APA. And it still provides that "all copyrights" are generally excluded, and then merely provides an exception for those that are "required" for certain reasons. (Amendment No. 2.) There is no listing of which copyrights continue to be excluded from the sale and which are "required."
At most, the documents add up to an agreement to assign certain copyright rights once SCO's alleged predecessor identified them and showed them to be "required." The agreements thus do not satisfy section 204(a). For purposes of this motion, however, the Court need not decide the issue of what, if any, copyrights were or should be transferred. Rather, the Court need only conclude that there is a substantial issue as to whether the documents satisfy section 204(a) in order to find that federal jurisdiction is proper.
While SCO makes a case that a mere contract dispute can be settled and is appropriately settled in state court, is this what this case is? The question Novell has raised is whether or not the Agreement as amended was sufficient under copyright law to transfer copyright to SCO. I don't see how the judge can agree to just shelve that question. SCO would like to skip that analysis, posit that this is a settled issue, and jump to the part about Novell "slandering" their business by saying they never transferred the copyright, but Novell has placed before the judge questions as to the sufficiency of the Agreement and the Amendment, separately and together, and that needs to be resolved one way or another. State courts don't seem the place to handle that particular question.
We brought this case, SCO argues, and we get to say what kind of a case it is, not the defendant, and we chose a state slander of title claim. We're after state law remedies, they say, and we didn't bring a federal copyright claim.
SCO cites one case I think it might have been better not to bring up, Imperial Residential Design, Inc. v. The Palms Development Group, Inc., which held that the chief purpose of section 204(a) is to "resolve disputes between copyright holders and transferees and protect copyright holders from persons mistakenly or fraudulently claiming oral licenses or copyright ownership."
Bingo. Novell says they are the copyright holder and that SCO is wrong in asserting copyright ownership. By the holding of this case, that would seem to place their dispute solidly in 204(a) territory, where SCO does not want to be.
The problem both sides face is that this is one of the most murky areas of the law. When is it contract law interpretation and when is it a copyright law 204(a) matter? Both sides have brought up the Jasper v. Bovina case, and so you can understand what the dispute is all about, and comprehend why it could happen that SCO might even prevail in this particular argument, although I seriously doubt it, here is the decision in that case. If you read it carefully, you will grasp what the argument between Novell and SCO is all about with respect to the 204(a) aspect, namely does this case belong in federal court as a copyright-related case or is it merely a question of interpreting a contract, which belongs in state court? You just can't help but notice that SCO doesn't seem very confident that they can win a copyright dispute with Novell. They are certainly fighting hard to avoid the opportunity to get that issue looked at and resolved once and for all.
My purpose is just to show you how cases are analyzed, the process, although only in the broadest sense. Keep in mind this is only one case out of many Novell and SCO raised, and the judge will be carefully reading and analyzing them all. When you are researching, each side looks for cases that match their situation as closely as possible, and ones that support their side of the argument. Then each side tries to demolish the cases the other side offered. This case supports Novell, but SCO quotes some snips from it that they use to try to buttress their side, as you will see.
I have color-coded the parts that seem most relevant, red for the parts you can't skip without losing the thread and purple for my remarks, which are interspersed throughout.
Remember the Isley Brothers or ever hear the record "Twist and Shout?" This case is about them, the Isley Brothers. After many successful records, they ended up bankrupt anyway and fighting over whether or not they had transferred their copyrights.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term 2002
Argued: September 9, 2002 Decided: December 20, 2002
Docket No. 01-7628(L), 01-7668(CON)
CHRISTOPHER H. JASPER,
BOVINA MUSIC, INC.,
T-NECK RECORDS, INC.,
Before: WALKER, Chief Judge, NEWMAN, and F.I. PARKER, Circuit Judges.
Appeal from the May 1, 2001, judgment of the United States District Court for the Southern District of New York (Barrington D. Parker, Jr., then-District Judge), dismissing, after a bench trial, a suit seeking royalties for use of copyrighted songs.
Robert W. Ottinger, Jersey City, N.J. (Joseph A. Turco, Jersey City, N.J., on the brief), for Plaintiff-Appellant Isley.
JON O. NEWMAN, Circuit Judge.
This appeal primarily presents issues as to whether federal court jurisdiction is available for a case involving a dispute as to ownership of song copyrights, and, if jurisdiction is available, whether copyright interests were validly assigned.
[This sentence tells us that we are looking at a case that decided the very issues in dispute in the SCO-Novell dispute -- which court, state or federal, should handle a case that involves a dispute over copyrights, and whether a transfer of copyrights occurred -- so that is why both sides are talking to the judge about this case.]
These issues arise on an appeal by Plaintiffs-Appellants Christopher H. Jasper and Marvin Isley from the May 1, 2001, judgment of the District Court for the Southern District of New York (Barrington D. Parker, Jr., then-District Judge) dismissing, after a bench trial, their claims against Appellees Bovina Music, Inc. ("Bovina") and T-Neck Records, Inc. ("T-Neck"). We conclude that, although the case largely concerns issues of contract interpretation that are insufficient for federal court jurisdiction, it also sufficiently requires interpretation of section 204(a) of the Copyright Act, 17 U.S.C. §204(a) (2000) to support such jurisdiction. We also conclude that the written document requirement of section 204(a) was satisfied and that the Plaintiffs' claims were properly rejected. We therefore affirm.
[Here you see why Novell likes this case and why SCO likes to stress that the court said it was only a rare case that would get to federal court. The decision here was that while normally you decide contract disputes in state court, in this particular case, there was a need for interpretation of Section 204(a) of the Copyright Act. Was the writing in this case sufficient to effectuate a transfer? In this case, they decided it was, but they also decided that the question justified federal jurisdiction. Judge Kimball is being asked by Novell to decide exactly the same question. And SCO is asking him not to get into all that.]
The Plaintiffs' lawsuit concerns claims for two broad categories of music royalties: (a) royalties from the sale of records, CDs, and other recordings of songs, and (b) royalties from various other uses of songs, such as public performances on radio or television, use of the songs in a movie, and sale of sheet music. Instead of the category labels used by the parties and the District Court,  we will call the first category "record royalties" and the second category "song royalties." The songs were written and recorded by the well known singing group "the Isley Brothers" ("the Group"). Three older brothers, Rudolph, O'Kelley (now deceased), and Ronald Isley (the "Older Isleys") were the original members of Group. The Older Isleys wrote and recorded a number of popular hit records, including "Shout" (1959) and "Twist and Shout" (1962). In 1969, the Older Isleys formed T-Neck as their recording company, and, in 1973, T-Neck and the Older Isleys contracted with CBS to distribute the Group's records and collect record royalties and pay them to T-Neck (the "CBS agreement"). Also in 1973, the Older Isleys formed Bovina as their publishing company to administer the Group's musical catalogue and collect song royalties. The Older Isleys were the sole shareholders, officers, and directors of both T-Neck and Bovina.
In 1973, two other brothers, Ernest and Marvin Isley, and a brother-in-law, Christopher H. Jasper, (the "Younger Isleys") became members of the Group, contributing to the writing of the group's songs between 1973 and 1983. On album covers and in copyright registrations during this period, all six Isley Brothers were listed as co-authors of the songs that the Group recorded and performed.
In January 1980, Bovina and April Music, Inc. ("April") made an agreement (the "Bovina/April Agreement") under which April would co-administer the Group's compositions and collect the song royalties. In the Bovina/April agreement, Bovina assigned to April an undivided 50 percent interest in the Group's songs, explicitly including "the copyrights therein," and April agreed to pay Bovina royalties at various rates for various uses of the songs. For example, April agreed to pay Bovina 50 percent of the net income from April's 50 percent share of public performance income collected from performing rights societies, i.e., 25 percent; 50 percent of April's income derived from April's license of the songs for use in records, for sound synchronization in movies or television, or for use in printed versions; and $.20 for each sale of a printed piano or vocal copy of the songs. The last page of the Bovina/April agreement is an addendum, signed by all six members of the Group, including Marvin Isley and Christopher Jasper, whereby each "assent[ed] to the execution of [the] agreement and agree[d] to be bound by the terms and conditions thereof."
In April 1980, the Younger Isleys signed the CBS agreement and agreed to be bound by its terms, thereby joining the Older Isleys in designating CBS to distribute the Group's records and collect record royalties to be paid to T-Neck.
In 1984, the Older Isleys filed individual Chapter 11 bankruptcy proceedings, which were subsequently converted to Chapter 7 liquidations and consolidated. Marvin Isley ("Marvin") and Christopher Jasper ("Christopher" or "Jasper"), the Appellants in the pending appeal, filed proofs of claims seeking substantial sums for song royalties they allegedly had not received. This step encountered an unanticipated response. The bankruptcy trustee ("Trustee"), relying on the two claimants' contention that they were partners in all of the Group's musical businesses and therefore each entitled to 1/6th of the partnership's income and assets, 2 contended that the claimants were each liable for 1/6th of the partnership's debts, which exceeded $4 million. That contention resulted in separate settlements between the Trustee and each of the two claimants, memorialized in agreements approved by the Bankruptcy Court in 1991. These agreements included releases by Christopher and Marvin, the construction of which are at issue in this litigation.
In the pending litigation, the District Court ruled that the Appellants had conveyed to April their 1/6th interests in an undivided 50 percent interest in the copyrights for the Group's songs, thereby defeating the Appellants' claim against Bovina for song royalties that April had paid to Bovina under the Bovina/April agreement. The Court also ruled that the releases executed in the bankruptcy proceedings conveyed to T-Neck rights of Christopher and Marvin in the recordings that had been recorded on the T-Neck label, thereby defeating the Appellants' claims against T-Neck for record royalties.
[Sad and familiar story, is it not? Musicians sign things that are not in their best interests on the way up and it bites them on the way down. So, that is the fact pattern. The issue before the court, then, was did the copyrights transfer or were the writings insufficient? Perhaps you are already noticing some things that are similar and some things that are different from the SCO-Novell case.]
In the District Court, all parties appear to have assumed that federal jurisdiction existed simply because the case involved a dispute as to ownership of rights in copyrighted songs and records. See 28 U.S.C. §1338 (2000) (federal courts have exclusive jurisdiction over actions arising under the Copyright Act). However, as Judge Friendly pointed out, the fact that a case concerns a copyright does not necessarily mean that it is within the jurisdiction of a federal district court. See T.B. Harms Co. v. Eliscu, 339 F.2d 823, 825-28 (2d Cir. 1964); see also Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343, 347-56 (2d Cir. 2000); Merchant v. Levy, 92 F.3d 51, 55-56 (2d Cir. 1996). Specifically, if the case concerns a dispute as to ownership of a copyright, and the issue of ownership turns on the interpretation of a contract, the case presents only a state law issue, and, unless the complaint asserts a remedy expressly granted by the Copyright Act, federal jurisdiction is lacking, in the absence of diversity jurisdiction. T.B. Harms, 339 F.2d at 826 ("[T]he federal grant of ... a copyright has not been thought to infuse with any national interest a dispute as to ownership or contractual enforcement turning on the facts or on ordinary principles of contract law."). On the other hand, if interpretation of the Copyright Act is required (or if a remedy available under the Act, such as damages for infringement, is sought), then federal jurisdiction is available. Id. at 828. As this appeal illustrates, the line between contract interpretation and statutory interpretation is not always clear.
[Their Honors said a mouthful there, did they not? "Not always clear" is why both SCO and Novell can make an argument that they are right, and it takes a judge to decide.]
The uncertainty arises in this case because of the interplay between section 204(a) of the Copyright Act, which provides that a valid assignment of a copyright requires a writing signed by the alleged assignor, and the Bovina/April Agreement, which the Appellants signed. As the Appellants see the case, the issue is whether the Bovina/April Agreement constitutes a "writing" within the meaning of section 204(a).
[This is where the case is exactly the same as SCO-Novell. Novell is raising exactly the same question: does the Asset Purchase Agreement with Amendment 2 constitute a writing within the meaning of section 204(a)?]
As the Appellees see the case, the issue is whether the Bovina/April Agreement should be interpreted to convey a 50 percent interest in the Appellants' copyrights.
[This is like SCO. They are arguing that it's really just a matter of interpreting a contract. But is it? What needs interpreting here? Is it a matter of figuring out who gets how much in royalties or some other simple contract question? Hardly. That is where SCO's argument gets particularly weak, in my opinion. What else is there to interpret here but the question of whether the Agreement as amended was sufficient to transfer the copyright?
In some sense, both sides have identified an issue that requires decision. The difficulty is that almost every case involving contract interpretation, appropriate for state court determination, could be recharacterized as a case appropriate for a federal court simply by framing the issue to be whether the disputed contract qualified as a writing within the meaning of section 204(a). However, the line drawn in T.B. Harms cannot be obliterated by such verbal gymnastics. The need for interpretation of a contract does not necessarily mean that there is a bona fide issue as to whether the contract is a writing for purposes of section 204(a). In most cases, there will be no doubt that the contract is a section 204(a) writing, and the only substantial issue will be contract interpretation.
[This is the part SCO likes in this case, and they quote from the "cannot be obliterated by such verbal gymnastics" part. However, they don't quote the rest, where it says, "In most cases, there will be no doubt that the contract is a section 204(a) writing, and the only substantial issue will be contract interpretation." They don't quote that part, because it doesn't help them. This is the pivot: is the Asset Purchase Agreement and Amendment 2 clearly a writing for purposes of section 204(a)? If there is any doubt, SCO can't win on this. If the judge thinks it's clear as a bell, or clear enough, he'll rule for SCO and then he doesn't have to be bothered with the thing. He just sends it to Utah state court. While he is free to do that, assuming he can justify it, I wonder if it is likely. With so much riding on who actually has the copyright rights -- and he now knows about all the cases, if he didn't before, because of SCO's most recent filing asking for a stay in the IBM case until a decision is reached in the AutoZone case -- how likely is it he will let this issue get away from him? I don't know Judge Kimball well enough to be sure, but does it seem useful or efficient to have this important piece decided elsewhere, given a choice?]
This case, however, is the rare contract interpretation case that does present a substantial issue as to whether the contract qualifies as a section 204(a) writing. The reason stems from the fact that the Appellants signed the Bovina/April Agreement after it was executed by Bovina. Prior to signing by the Appellants, it would have been clear that the Bovina/April Agreement was not a section 204(a) writing, as far as the Appellants are concerned, because they (the alleged assignors) had not signed it. Once the Appellants signed the addendum and agreed to the terms of the contract, the issue arose as to whether an addendum agreeing to a contract that purports to transfer a copyright owner's rights is a section 204(a) writing. Although this is not an especially difficult issue, it suffices to render this case within federal court jurisdiction.
[So the issue that made it not a contract case but a section 204(a) case was the question: is an addendum to a contract that transfers copyright a section 204(a) writing? That question, because it needed to be answered and involved an interpretation of copyright law, made it a 204(a) matter, these judges ruled. That is why SCO quotes the part about this being rare that a contract interpretation case so qualifies. They are hoping that Judge Kimball will decide that Novell's questions, and they actually have raised more than one, don't qualify this as one of those rare cases.]
II. The Section 204(a) Issue
On the merits of the section 204(a) issue, we have no doubt that the addendum satisfies the written document requirement of section 204(a). It is signed by the Appellants, and it commits them to the assignment to April of a 50 percent interest in their copyrights. Whether the assignment is conceptualized as an assignment of interests from the Appellants to Bovina and then to April, or directly from the Appellants to April, the purposes of section 204(a) are achieved. The assignment is in writing, the Appellants have signed it, and there is no risk whatever that an unsuspecting copyright owner has been induced to sign a document that does not clearly indicate an assignment of copyright interests. The assignment defeats the Appellants' claims for song royalties.
[As you can see, their analysis as to whether the writing did transfer the copyrights involved looking at whether the requirements of section 204(a) were met. They felt they were in this case. But you'll notice one requirement is that the writing be specific. In the Isley Brothers' case, the writing said 50%. But in Amendment 2, as Novell points out, where is the list of exactly what transferred? Where is the required specificity? Remember the media reports: some copyrights may have transferred? But which? There is more than one version of Unix. For that reason, Novell argues, there needed to be a list, so everyone is clear what transferred, if anything, and what didn't.
This is where their case, and this Jasper v. Bovina case, diverge. The lack of specifics is the part that I think must sink SCO's boat, even if nothing else did. If Novell claims authority to ask SCO to waive any issues in the UNIX licenses and still gets paid royalties by SCO, could they have transferred everything? And if it was something but it wasn't 100%, what exactly was it that transferred? That's if anything transferred at all. Amendment 2's silence on this point about exactly what, if anything, transferred, is what makes SCO's case vulnerable, I believe, and their hope is that the judge will view the press release as such solid proof that there is simply no further analysis necessary. I think it's fair to describe that hope as a long shot.]
III. The Release Issues
Both Appellants dispute that the releases they signed in the bankruptcy proceeding sufficed to relinquish their claims for record royalties.
A. Jasper's Releases
Jasper's settlement with the Older Isleys' estate was set forth in two releases, one dated June 1991 and the other September 1991 (the "Jasper Releases"). Both Jasper Releases were signed by Jasper and his wife, and the first release was also signed by Jasper's counsel and the Bankruptcy Judge. The District Court found that the Jasper Releases followed "aggressive arms length negotiation" during which Jasper was represented by counsel.
The June 1991 release included the following provisions:
2. ... Jasper acknowledges and agrees: (1) that T-Neck Records, Inc. shall continue to have all rights in and to recordings made by Jasper that have heretofore been recorded for release on the T-Neck Records, Inc. label and to receive all royalties relating thereto, without in anyway limiting Jasper's rights to songwriters royalties retained herein ....
In the September 1991 release, Jasper agreed to "release and give up any and all claims and rights," known or unknown, against the Older Isleys, Bovina, and T-Neck Records. In return, as the District Court found, Jasper "received $175,000, but avoided responsibility for the millions of dollars in liabilities of the Older Isley's bankruptcy estate, including liabilities for which the Trustee contended Jasper was jointly liable."
In view of the unambiguous language of Jasper's releases, the District Court properly ruled that Jasper's claims against T-Neck for record royalties had been validly released.
B. Marvin's Release
Marvin's release is contained in the May 17, 1991, consent order entered by the Bankruptcy Judge in the Older Isleys' consolidated Chapter 7 proceedings. That order, signed by Marvin and Ernest Isley, states that he and Ernest "hereby release and discharge the Debtors and all corporations owned or controlled by the Debtors [i.e., including Bovina and T-Neck] ... from any and all claims that they have or may have against the Debtors and all corporations owned or controlled by the Debtors ... ." Like Jasper, Marvin was faced with the prospect of being liable for 1/6th of the debts of the Older Isleys' bankruptcy estates. He avoided that possibility by surrendering his claim for past record royalties and releasing any future claim for record royalties. He also received nearly $47,000 for songwriter royalties.
The record fully supports the District Court's conclusion that Marvin released his claim for record royalties.
We have considered all of the Appellants' remaining claims and conclude, for substantially the reasons stated by the District Court, that they lack merit. The judgment of the District Court is affirmed.
1 The parties and the District Court called the first category "Performance Royalties" and the second category "Publishing Royalties." The Court's opinion defined "Performance Royalties" as "monies directly generated by record sales and other sound recordings" and "Publishing Royalties" as "monies generated by the exploitation of the musical compositions themselves - that is, the words and the music of the songs." The Court explained that "[i]n the music industry, Publishing Royalties are typically created through the efforts of a musical publishing company or administrator who licenses use of the work to third parties. Such licenses include: (a) mechanical licenses that allow other record companies to use the work ('cover' songs), (b) public performance fees when a song is played on the radio or in a concert, (c) sampling rights that permit other artists to use pieces of the song, and (d) synchronization rights when a musical work is used in a movie, commercial or television show." We do not think clarity is promoted by using the phrase "Performance Royalties" to mean income from record sales and at the same time using the phrase "Publishing Royalties" to include "public performance fees."
We note that although the terms "performance royalties" and "publishing royalties" have been used in a few reported appellate opinions, these terms are not terms of art with precise meanings. Indeed, they have not been given consistent meanings. We have said that "performance royalties" are "paid by the performer to performing rights societies such as [ASCAP], of which the songwriter and publisher are members. . . . ASCAP's practice is to distribute half of the performance royalties to the songwriter ('writer distributions'), and the remaining half to the publisher ('publisher distributions'). . . . [T]he songwriter and publisher may by contract alter the allocation of performance royalties." Larry Spier, Inc. v. Bourne Co., 953 F.2d 774, 776 (2d Cir. 1992). See Folkways Music Publishers, Inc. v. Weiss, 989 F.2d 108, 109 (2d Cir. 1993) ("performance royalties" used to mean payments distributed by performing rights society). By "performer" we refer not only to the person who sings the song but also to "radio stations, television stations, restaurants, stores and other entities that 'perform' music publicly." Woods v. Bourne Co., 60 F.3d 978, 984 (2d Cir. 1995). The Ninth Circuit has used "performance royalties" to refer to the income due a song composer for licensing the synchronization right that permits a song to be recorded on the soundtrack of a movie. See Fosson v. Palace (Waterland), Ltd., 78 F.3d 1448, 1450-51 (9th Cir. 1996).
Appellate courts have used the phrase "publishing royalties" in the context of music to have various meanings. See Ahern v. Scholz, 85 F.3d 774, 779, 795 (1st Cir. 1996) (royalties owed by manager of music group to composer of two record albums); Daily v. Gusto Records, Inc., 14 Fed. Appx. 579, 582 (6th Cir. 2001) (unpublished opinion) ("Publishing royalties . . . arise by statute [17 U.S.C. § 115] and compensate the owner of a musical composition for use of the copyrighted material at a set statutory rate."); see also Calhoun v. Lillenas Publishing, 298 F.3d 1228, 1234 (11th Cir. 2002) (intended meaning unclear).
The Nimmer treatise categorizes the primary sources of revenue for the owner of a copyright in a musical composition as "public performance income, mechanical licenses, synchronization licenses, . . . and print publishing revenues." 6 Nimmer on Copyright § 30.02[F], at 30-102 (2002).
2 In June 1980, the Group members signed an agreement to form a partnership called "Isley Brothers Enterprises," which provided that each of the six members would receive one sixth of all past and future monies generated by the Group.