Property, intangible

a blog about ownership of intellectual property rights and its licensing

You Need to Decide Your Legal Theories Before Trial

According to the Court of Appeals for the Fifth Circuit:

The popular song Whoomp! (There It Is) was released in 1993. For more
than half of the song’s existence—since 2002—the parties to this action have been litigating the question of who owns the composition copyright to the song.

And at least part of the reason is a “never say die” defendant.

The duo “Tag Team,” Cecil Glenn and Steven James, wrote and produced “Whoomp! (There It Is)”:

Plaintiff Alvertis Isbell, aka Al Bell, was the president of Bellmark Records, a division of Isbell Records, Inc. He also owned a music publishing company, Alvert Music. In 1993 Tag Team entered into a recording contract with Bellmark Records that gave ownership of the entire copyright in the sound recording to Bellmark Records and 50% ownership of the copyright in the composition to “Bellmark’s affiliated designee publisher”:

Isbell 4

In 1997 Bellmark Records, but not Alvert Music, filed for Chapter 11 bankruptcy, which was converted to a Chapter 7 bankruptcy and the company liquidated. Defendant DM Records, Inc. purchased “all property of the company” and thereafter exploited the composition rights of “Whoomp!” Isbell, dba Alvert Music, then filed a copyright infringement action against DM Records that went to trial.

After the close of evidence, both parties asked the district court to rule under Federal Rule of Civil Procedure 50(a) for judgment as a matter of law, in Alvert Music’s case that it was the owner of the 50% interest in the composition copyright, and in DM Records’ case that Isbell was not an intended third-party beneficiary of the agreement and therefore Bellmark, not Isbell dba Alvert Music, was the assignee. The court held that Alvert Music was the owner and the jury subsequently awarded over $2,000,000 in damages.

Not one to give up, DM Records filed a request for reconsideration under Rule 50(b) floating a new theory, that, while Alvert Music was indeed 50% owner because it was “Bellmark’s affiliated designee publisher,” the agreement also assigned the other 50% to Bellmark, rather than ownership remaining with Tag Team. DM Records cited the next paragraph in the same agreement as the basis for its theory:

Isbell 5

If you can’t read the image, it says:

and fifty percent (50%) of the right, title and interest of the undersigned Assignors, vested and contingent therein and thereto, subject to the terms and conditions of the Memorandum Agreement between Assignors and Assignee dated effective March 30, 1993 and for the term of the copyrights and all renewals and extensions thereof.

DM Records’ counsel previously told the court that these two references to “50%” in the contract were about the same 50%, so the trial court held that DM Records had waived the new theory because it was raised for the first time on a Rule 50(b) motion. The court also found the argument “illogical,” because it would leave Tag Team with no ownership at all.

Still not dissuaded, DM Records tried on more time, this time under Rule 60(b)(3) claiming that Isbell withheld a 2006 Security Agreement that assigned the copyright infringement claim to a company called Currency Corporation. By now the case was simultaneously before the Court of Appeals, so the appeals court inquired of the district court whether it was inclined to grant the motion. The district court was not, because the security agreement was not within the scope of DM Records’ discovery requests so Isbell had no obligation to provide it. DM Records appealed everything.

And DM Records doesn’t fare any better with the Court of Appeals. Even though the court considered extrinsic evidence because the agreement was ambiguous, and the evidence was conflicting, under California law the court did not have to submit the contact interpretation to the jury. No credibility determination is required: “if, as here, there are pieces of evidence which, while each undisputed, raise differing inferences, it is within the province of the court to draw inferences based on the evidence.” The appeals court also confirmed that DM Records couldn’t bring a new theory on what the assignment meant under Rule 50(b) and, as to the 2006 Security Agreement, even if the failure to produce it was wrongful, the case was filed in 2002 so a 2006 agreement didn’t affect standing (but it would affect damages – ed.). And finally, the fact that the jury awarded Isbell 100% of DM Records’ royalties, even though Isbell was only half-owner of the copyright, wasn’t an error; the jury could have concluded that Isbell was the administrator for Tag Team and would pay them their share of the award.

Isbell v. DM Records, Inc., No. 13-40878 (5th Cir. Dec. 18, 2014).

The text of this work is licensed under a Creative Commons Attribution-No Derivative Works 3.0 United States License.

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