In 1985 A transfers to B a non-exclusive right to use copyrighted works. B used the works, placing them online. In his will A conveys his copyrights to C. A dies in 1999. C doesn’t like A. In 2014, C discovers B had placed the materials online but doesn’t sue until 2019. C learns B had a license, which C purports to cancel in 2021, claiming infringement. In the litigation, B asserts that the license could not be terminated by C because C failed to comply with the provisions in 17 USC 203 dealing with terminations of transfer. The trial court agreed.
A was Keith Milton Rhinehart. C was the Aquarian Foundation. In 1955, in Seattle, Rhinehart founded the Aquarian Foundation. Encyclopedia.com explains that the foundation
existed for several decades as a single congregation in Seattle. Rhinehart articulated an eclectic occult perspective that combined elements of Theosophy and Eastern religion with more traditional Spiritualism. Rhinehart also claimed contact with the ascended masters identified with the Theosophical Society. Through the 1960s Rhinehart gained some fame as a "materialization" medium. In the 1970s his ideas began to spread across the United States and into Canada. Rhinehart claimed to possess the stigmata, the extraordinary appearance of the wounds of Christ, which appeared on his body and were seen by many.
His personal life may have not been entirely saintly as
this 1967 Supreme Court of Washington opinion discusses. The Foundation was physically limited to Seattle although people did come from other places, including Australia, and that’s how this case arose, because B is an Australian, Bruce Lowndes, a/k/a Sankacharya Sunkara. He and his wife are reported to have devoted 20 years of their lives to the Foundation, beginning when they were in their 60s.
As Mr. Rhinehart was dying from cancer, a power struggle is reported to have occurred, leading the Lowndes to move to Tasmania after Rhinehart’s death, where they remain to this day, apparently. That didn’t stop them from being sued in a federal court in Washington. Personal jurisdiction was based on the copyrighted materials being available online.
On appeal to the 9th Circuit, issues of ownership arose, with the court of appeals, in an opinion by one of my copyright heroes, Judge Margaret McKeown, affirming the trial court’s rulings that the works were not work for hire, and that Mr. Rhinehart had validly transferred the copyright in them to the Foundation. This left the license issue. And that issue faced a potential obstacle, the 9th Circuit’s 1993 panel opinion in Rano v. Sipa Press, Inc., 987 F.2d 580. In Rano, a photographer granted defendant a non-exclusive license. The license did not specify a durational limit. Rano claimed defendant had materially breached the agreement, entitling him to terminate the agreement under California state law and then sue for infringement in federal court. The court of appeals held that Rano had not proven there was a material breach. Rano also argued the contract was terminable at will under state law, and here is where Section 203 came into play, with the panel writing:
However, application of this principle of California contract law here would directly conflict with federal copyright law. Under Section 203 of the Copyright Act, licensing agreements are not terminable at will from the moment of creation; instead, they are terminable at the will of the author only during a five year period beginning at the end of thirty-five years from the date of execution of the license unless they explicitly specify an earlier termination date. 17 U.S.C. § 203(a). Since California law and federal law are in direct conflict, federal law must control.
987 F.2d at 586.
Strange, but all was not lost, though. First, had there been an earlier durational limit in the agreement, that date would have governed according to the panel. Moreover, if defendant did materially breach the agreement, Ranoc was told he could sue in state court under a contract theory. Rano was panned by other courts of appeal, with Judge Evans of the Seventh Circuit colorfully writing, “If the Rano decision were a Broadway show, bad reviews would have forced it to close after opening night.” Walthal v. Rusk, 172 F.2d 481, 483 (9th Cir. 1999).
Other panels in the 9th Circuit have noted criticism of Rano, notably in Scholastic Entertainment, Inc. v. Fox Entertainment Group, Inc., 336 F.3d 982 n.3 (9th Cir. 2003) and Milne v. Schlesinger, 430 F.3d 1036, n.8 (9th Cir. 2005). How did the legendary Judge McKeown handle Rano? By a careful reading of the statute which only allows the authors and statutory heirs to terminate: “Here, because the termination rights of non-statutory heirs like Aquarian are not addressed in the Copyright Act, “we rely on state law to fill the gaps Congress leaves in federal statutes.”
Brava. At some point hopefully the court of appeals will take up en banc the issues caused by Rano, and hopefully Judge McKeown will be the author of the opinion. By the way, the end result in Aquarian Foundation was a remand to determine factually whether there were infringing posts by defendant after the license was revoked.
Thise interested in listening to the oral argument before the 9th Circuit, can watch the video
here. (HT to Moon Hee Lee for the link).
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