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District Court Denies Summary Judgment Motions in Dispute over Ownership of ''Whoomp! (There It Is)'' and ''Dazzey Duks'' Copyrights

Thursday, February 16, 2012
Jessica McKinney | Bloomberg Law Isbell v. DM Records, Inc., No. 07-CV-00146, 2012 BL 35098 (E.D. Tex. Feb. 3, 2012) In a long-running dispute over who owns the musical composition copyrights in the 1990s songs "Dazzey Duks" and "Whoomp! (There It Is)" (the "Songs"), the U.S. District Court for the Eastern District of Texas denied various summary judgment motions filed by the parties. Among other things, the court found genuine issues of fact with respect to which entity owned the compositions at the time they were purportedly sold to the defendant as part of a bankruptcy sale in 1999, as well as factual issues regarding defendant's equitable estoppel and implied nonexclusive license affirmative defenses.

Alleged Transfer of the Musical Composition Copyrights and Ensuing Bankruptcy Proceeding

Plaintiff Alvertis Isbell d/b/a Alvert Music ("Isbell") operated two companies: Alvert Music, which owned musical compositions, and Bellmark Records, which owned sound recordings. In the early 1990s, Bellmark entered into writers agreements to obtain composition rights in the Songs for Alvert Music. The agreements assigned composition interests to "'Bellmark's affiliated publishing company' and 'Bellmark's affiliated designee publisher,' without mentioning Alvertis Isbell or Alvert Music by name." Isbell at 7. In 1997, defendant DM Records, Inc. obtained licenses for both the musical compositions and sound recordings from Alvert Music and Bellmark, respectively. Bellmark filed for bankruptcy later that year, and in October 1999, DM purchased assets from the bankruptcy estate, including all of Bellmark's rights in the Songs. Isbell filed a copyright infringement lawsuit against DM in 2002. The case was referred to the bankruptcy court in 2004, but in 2007, the referral was withdrawn and the action transferred back to the instant court. Both parties later filed motions for summary judgment on various issues, including ownership of the composition copyrights and DM's equitable estoppel and implied nonexclusive license affirmative defenses.

Issues of Fact Regarding Ownership

To validly transfer an interest in a copyright, the transfer must be accompanied by "an instrument of conveyance, or a note or memorandum of the transfer [that] is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent." 17 U.S.C. § 204. The parties disputed the meaning of "Bellmark's affiliated publishing company" and "Bellmark's affiliated designee publisher" in the writers agreements. DM argued that the language assigned copyrights "to an entity owned by Bellmark, especially because neither Alvertis Isbell [nor] Alvert Music is mentioned in the Writers Agreements." Isbell at 7. Isbell countered that the language "demonstrates the parties' intent to transfer the copyrights to a company separate and apart from Bellmark, especially because other parts of the agreements simply use the name 'Bellmark' when intending to convey rights to Bellmark itself." Id. While the court determined that the contractual language was ambiguous, and thus that extrinsic evidence could be used to discern the parties' intent, both Isbell and DM "produced copious amounts of conflicting material evidence of the parties' actions and intent surrounding and following the Writers Agreements" that precluded summary judgment in favor of either party. Id. DM also argued that Bellmark was an alter ego of Isbell, and consequently, that any commingled assets (including rights in the compositions) were transferred by Bellmark to DM. Isbell countered that the bankruptcy court had rejected this theory. The instant court noted, however, that the bankruptcy court orders cited by Isbell highlighted a "significant factual dispute regarding an alleged alter ego relationship, which should be resolved at trial." Id. at 8. The court therefore denied the parties' summary judgment motions on the issue of ownership, as well as Isbell's motion for summary judgment as to copyright infringement.

Issues of Fact Regarding Equitable Estoppel and Implied Nonexclusive License Defenses

To establish the affirmative defense of equitable estoppel, a copyright defendant must prove the following four elements: "(1) the plaintiff must know the facts of the defendant's infringing conduct; (2) the plaintiff must intend that its conduct shall be acted on or must so act that the defendant has a right to believe that it is so intended; (3) the defendant must be ignorant of the true facts; and (4) the defendant must rely on the plaintiff's conduct to its injury." Carson v. Dynegy, Inc., 344 F.3d 446, 453 (5th Cir. 2003). The court found that Isbell's intent at the time of the bankruptcy sale and the years following the sale was ambiguous, and that factual issues existed with respect to when Isbell knew or should have known that the composition copyrights were being exploited. Accordingly, the court denied DM's summary judgment motion as to the equitable estoppel defense. An implied nonexclusive license arises when: "(a) a person (the licensee) requests the creation of a work, (b) the creator (the licensor) makes the particular work and delivers it to the licensee who requested it, and (c) the licensor intends that the licensee-requestor copy and distribute his work." Lulirama Ltd. v. Axcess Broadcast Services, Inc., 128 F.3d 872, 879 (5th Cir. 1997). Courts have held that a license, whether express or implied, is a valid defense to a copyright infringement claim. DM argued that Bellmark had an implied nonexclusive license to use the compositions at issue, which was transferred to DM in the bankruptcy sale, because Isbell did not object to Bellmark's use of the compositions over a number of years. The court noted, however, that DM "produced no evidence alleging that Isbell was the 'creator' of the work and 'intend[ed] that the licensee-requestor copy and distribute his work.'" Isbell at 12-13. As such, the court denied DM's summary judgment motion as to the implied nonexclusive license defense as well. DisclaimerThis document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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