The children of Ray Charles did not inherit the rights and interests to his musical compositions; rather, these intellectual property rights were given to The Ray Charles Foundation.  The Ray Charles Foundation, created in 1986, by the renowned singer-songwriter, is a non-profit organization that provides funding to education programs and institutions focused on the hearing impaired.  The organization relies on income it receives from its intellectual property rights, which include, for example, the right to receive royalty payments from songs written by Ray Charles.  To ensure the continued vitality of the foundation, in 2002, just 12 months before his death, Ray Charles created irrevocable trusts in the amount of $500,000 for each of his children in exchange for their express waiver of all intellectual property rights.  However, his children are now violating that agreement.  They seek to reclaim the copyrights to over 50 Ray Charles compositions through the termination of transfer provisions of the 1976 Copyright Act.

The termination of transfer provisions, 17 U.S.C. SS 203 and 304, allow authors or their surviving family members to terminate grants of copyright interests after 35 years.  The purpose of the provisions is to allow authors who initially were in poor bargaining positions the opportunity to recapature the increased value of their work.

This intent is exemplified by Superman.  Many decades ago, Jerome Siegel and Joseph Shuster, the creators of Superman, sold their rights to the comic-book hero for just $130.  They were teenagers at the time and did not know that the comic-book hero would become so popular.   The termination of transfer provisions allowed their family members to regain control of the copyright and then renegotiate the terms of the copyright transfer such that it better reflected the increased value of Superman.  Thus, the provisions provide artists an opportunity to benefit from the unforeseen popularity of their work.

In March 2010, the children of Ray Charles served notices of termination of transfer on over 50 publishers of Ray Charles compositions in the hopes of recapturing ownership of the copyrights.  However, The Ray Charles Foundation, in the complaint it filed, explains that these notices are invalid for the following reasons:  (1) Ray Charles already took advantage of the provisions–he re-negotiated  his contracts with his publishers in 1980 to better reflect the increased value of his music; (2) Some of the compositions addressed in the notices are works made for hire, and the termination of transfer provisions do not cover works made for hire.  Finally, even if the notices are valid, they constitute a breach of the agreement Ray Charles made with his children in exchange for the $500,000 trusts.

The 1976 Copyright Act went into effect in 1978, and because the termination of transfer provisions require artists to wait 35 years before reclaiming their copyrights, the first case will not be heard until 2013.  Many artists, including Tom Petty, Bryan Adams, Loretta Lynn, and Kris Kristofferson have already filed termination notices in the hopes of reclaiming their copyrights, but their recording studios will not relinquish these rights without a fight.  Many predict that the fate of the recording industry, which stands to lose millions, will be decided by these cases.  But the lawsuit filed by The Ray Charles Foundation shows us that it is not just the music industry that stands to lose a great deal.  Charitable organizations, like The Ray Charles Foundation, that rely on income from intellectual property rights, and the people and communities they support, will also be effected.

- Francie Kammeraad

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5 Responses to Reclaiming Ray Charles: Why The Ray Charles Foundation Sued the Singer’s Children

  1. Ian says:

    Great post Francie, illustrating the potential intersection of copyright law, contract law, and estate planning. I doubt even Ray Charles’ attorneys could foresee the legal action contemplated by Charles’ children when the late-singer/songwriter executed the irrevocable trusts in 2002. It truly is unfortunate, especially considering that, according to Ray Charles’ Wikipedia page, Ray Charles wrote checks to each of his children for $1 million shortly before his death.

    You raise an interesting point Andrew about the music industry devising insurance products or other instruments to get around the provision in the Copyright Act. Should such products be created I wonder if they, like many other business costs, will ultimately be borne by the consumer.

  2. Andrew Harline says:

    The children should give up, and save their attorney’s fees.

    I don’t think this law will have that big of an effect on the music industry. Most likely, in purchasing music rights, a music producer will just purchase some type of insurance against the possibility of one day losing the rights. Depending on the amount of the premium they have to pay for this insurance, it could have an effect on their business, but I doubt it would be so grave as to put the producers out of business. My guess is that the ability to renegotiate music rights would result in new financial products, similar to weather contracts or bulk mortgages.

    • Shane Valenzi says:

      Great Post!

      Actually, Andrew, the children should win. One interesting aspect of termination rights is that they supersede estate law; that is, as long as the author has living heirs, they may terminate a grant of rights and reclaim the copyright for themselves, notwithstanding whatever provisions the author left in his will.

      The point of the laws are to prevent authors from granting away their entire copyrights when they’re in an extremely poor bargaining position with publishers; unfortunately, such a paternalistic attitude prevents authors from a reasonable “workaround.” However, the laws haven’t changed since 1976 (that’s not entirely true, but the law at issue here (17 USC 304) has not), and to suggest that the Charles’ attorneys in 1980 didn’t foresee this possibility 35 years later suggests malpractice, as publishers presumably factor in possible termination into the price.

  3. Jeremy Gove says:

    I agree Tom. On its face at least appears to be the kids wanting access to more of their dad’s money for personal reasons, rather than rectifying a previous wrong that resulted from Mr. Charles’s inequitable bargaining power. If he believed that being deaf was a true handicap and wanted to help those individuals suffering from deafness I can’t help but think this lawsuit does a disservice to the legacy and act of generosity of the litigant’s father. While the fate of the recording industry’s business model may hang in the balance with the suits that are going to be filed in 2013, I hope that the fate of the Ray Charles Foundation does not face a similar demise.

  4. Tom says:

    Great post. The situation between The Ray Charles Foundation and his children is interesting also because the termination of transfer provisions were seemingly enacted to protect against the exploitation of recording artists. However, that is not the situation here at all. Ray Charles realized the value of his work, if not in 1986 when he created the Foundation, certainly in 2002 when he set up irrevocable trusts for his children. It is quite clear Ray Charles did not want the rights to go to his children, but rather, to the Ray Charles Foundation.

    It seems as though his children have potentially blown through the amount provided for them in the trusts, and are now looking for more money. I’m interested to see how this plays out. Hopefully the Foundation is successful in telling Ray’s children to “hit the road, Jack.”

    Also, for those interested in why Ray Charles set up a Foundation for the hearing impaired instead of the blind, it is because he did not feel that his blindness was a handicap, however, he believed that the inability to hear music would be a handicap (as noted on the Ray Charles Foundation’s Website at http://www.theraycharlesfoundation.org/AboutUs.html).