9th Cir.: Wash. Law Permits Receivership Of Master Tapes to Satisfy Debt Judgment

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By Anandashankar Mazumdar  

June 23 — A federal district court's order to give control of four Funkadelic master recordings to a receiver in order to satisfy a debt judgment in favor of George Clinton's former legal counsel was permitted by federal copyright law, the U.S. Court of Appeals for the Ninth Circuit ruled June 23.

Affirming rulings by a federal district court, the court applied Washington state law to determine that such action was permitted.

Musician Clinton in Dispute With Law Firm

George Clinton (born in 1941) is a musician who has been recording since 1955, both under his own name and with various groups, such as Parliament and Funkadelic. From 2005 to 2008, Clinton engaged Hendricks & Lewis of Seattle as his counsel for various legal matters.

Over that period, Hendricks billed Clinton $3.34 million in fees and Clinton paid $1 million. The firm wrote off $600,000 and sought payment of the remaining $1.78 million before an arbitration panel, which ruled in its favor.

Hendricks sought a judgment for the amount and Judge Robert S. Lasnik of the U.S. District Court for the Western District of Washington appointed a receiver to whom was assigned the copyright interests in four Funkadelic master sound recordings held by Clinton in order to satisfy the judgments favoring Hendricks & Lewis. Clinton appealed.

Situation Analogized to Patent Law

The court accepted an analogy to patent law, based on Ager v. Murray, 105 U.S 126 (1881), which permitted the transfer of control of a patent to a trustee in order to satisfy a judgment.

“Our court has said that where copyright case law is lacking, ‘it is appropriate to look for guidance to patent law “because of the historic kinship between patent law and copyright law.” ' ”

Similarly, Office Depot, Inc. v. Zuccarini, 596 F.3d 696, 2010 BL 41238 (9th Cir. 2010), permitted the seizure of control of an internet domain name under California state law.

In this case, the court determined that Washington state law permitted the lower court's action.

The court rejected the argument that Section 201(e) of the Copyright Act of 1976, 17 U.S.C. §201(e), prevented the handing over control of the copyrights to the receiver.

According to the court, Section 201(e) was enacted to prevent the government of the Soviet Union—or similarly situated governments—from seizing control of copyrights under their own law from dissident authors and then using such claims of copyright interest to interfere with the U.S. publication of such works.

The Section 201(e) right belongs to an individual original author who has been forced to involuntarily relinquish control of his or her copyright interest. However, in this case, the court concluded that Clinton had never been the original author of these works.

Rather, the court said, that under the business structure chosen by Clinton, Funkadelic and their business partners at the time, Clinton had created the relevant works as works made for hire in the name of Thang Inc.

The court also determined that the lower court had not abused its discretion in appointing the receiver and transferring to him control of the copyright interest in the recordings.

“The court's clear goal was to have a receiver manage these assets so that Clinton could satisfy the judgment and have control of the assets returned to him, if possible,” the court said. “The district court balanced the equities, and did not abuse its discretion in determining that appointing a receiver was ‘necessary to secure ample justice to the parties.' ”

The court's opinion was authored by Judge Morgan Christen and joined by Judge Raymond C. Fisher and Judge Ronald M. Gould. Hendricks & Lewis was represented by Davis Wright Tremaine LLP, Seattle. Clinton was represented by Fong Law, Port Orchard, Wash.

Text is available at http://pub.bna.com/ptcj/13350109thCir20140623.pdf.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com