Never Trust Your Client
by Pamela Chestek • October 30, 2017 • copyright • 0 Comments
If you are registering for or filing something in your client’s name, never take their word on the details of the legal entity. First off, many times your client won’t know the state of incorporation, thinking it’s the state in which they are doing business rather than Delware, or vice versa. Or, as was the case in Nichols v. Club for Growth Action, the company doesn’t exist at all.
Roger Nichols and “Three Eagles Music, a division of Roger Nichols Music, Inc.,” sued Club for Growth Action, a conservative Super PAC, for copyright infringement for the unlicensed use of the song “Times of Your Life” first performed in 1975 (not mentioned in the case, as a jingle for Kodak film). Cue Paul Anka:
The complaint stated that Three Eagles Music (“TEM”) was an Oregon corporation, but it never was. Club for Growth Action therefore moved for summary judgment on the basis that TEM lacks standing. In response, Nichols updated the State of Oregon corporation information for Roger Nichols Music, Inc. to state that TEM is an assumed business name for RNMI. Nichols then filed a motion for leave to amend the complaint to correct the error.
Leave to amend the complaint should be freely given where justice so requires, so the court allowed the motion. But TEM has a lot of possible hurdles still to overcome:
Although the allegations in the complaint are sufficient to withstand a motion to dismiss and permit a motion to amend, a number of legal questions remain to be addressed at summary judgment. These questions include, but are not limited to: (1) whether the transfer of the copyrights to TEM [in 1978] was legally sound because TEM was not an incorporated division of RNMI; (2) whether TEM has always been the assumed business name of RNMI; (3) how an assumed business name is determined; and (4) whether a corporation can sue under an assumed business name.
Club for Growth Action also had a motion for summary judgment pending because the undisputed facts were that TEM was an unincorporated division of RNMI which cannot own property. But the court wasn’t willing to go there … yet:
To grant summary judgment, the Court must find that there is no dispute of material fact. While Club for Growth may ultimately succeed at summary judgment if TEM is not the legal owner of either relevant copyright, the record is not clear or complete at this stage. Both parties attempt to make complicated arguments about the legal status of Roger Nichols’ corporation, but at this early stage in discovery, factual gaps still exist and it is not possible to decide. The undisputed record indicates that TEM was never a separate incorporated division of RNMI. It also contains signed certificates of assignment indicating that the copyrights for the lyrics and musical composition of Times of Your Life were transferred to TEM. Plaintiffs argue that the undisputed facts also show that TEM is the assumed business name of RNMI and official notice of that fact was filed in July 2017. Club for Growth argues that the undisputed facts show that TEM is, and was at the time the copyrights were assigned, an unincorporated division of RNMI and, therefore, the assignments were not proper, TEM does not own the copyrights, and TEM lacks capacity to sue for infringement. More than the current record is needed.
Courts are hesitant to allow an outside infringer to challenge the timing or technicalities of the copyright transfer, when an adequate writing cures an earlier insufficient transfer. Such might be the case here if the original transfer to TEM were insufficient because it was an unincorporated division of RNMI and could not hold its own assets, but a later writing, such as the notice of assumed business name, could cure an insufficient transfer. Because the record is insufficient to reach or decide this combined factual and legal question, Club for Growth’s motion for summary judgment will be denied without prejudice.
Some very interesting questions: how an assumed business name is determined, whether a corporation can sue under an assumed business name, and whether the later-filed notice of assumed business name will correct the problem. I have no idea what will happen here, but I am curious to find out.
A Kodak commercial made a few years after the original, unfortunately without Paul Anka.
Nichols v. Club for Growth Action, No. 16-220 (RMC) (D.D.C. Oct. 25, 2017).
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