Background
The rap group 2 Live Crew recorded five albums between 1986 and 1989 and granted sound recording copyrights to Luke Records. Mark Ross, a group member, filed for Chapter 7 bankruptcy approximately twenty years before attempting to terminate the copyright grants. Ross and two other members later served a notice to terminate the grants, but the notice was challenged because Ross’s termination interests were never scheduled or addressed in his bankruptcy proceedings. The district court had previously ruled the termination valid, but the Eleventh Circuit reversed that decision.
The court’s reasoning
The court concluded that termination interests are contingent rights to regain intellectual property and thus constitute ‘interests in property’ under Section five hundred forty-one of the Bankruptcy Code. The court held that federal bankruptcy law sweeps these interests into the estate notwithstanding the Copyright Act’s restriction on alienation. Because the interests were never scheduled, administered, or abandoned, they remained property of the estate when Ross attempted to exercise them. Without Ross’s valid signature, the group lacked the necessary majority to terminate the grants.
What it means going forward
The copyright ownership of the five albums remains with Lil’ Joe Records, Inc. The decision clarifies that copyright termination rights are subject to bankruptcy estate inclusion even if they are personal and inalienable under nonbankruptcy law.