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Copyright holder has trouble dealing with rejection: the Eleventh Circuit teaches a harsh lesson to a rap artist that failed to protect himself in his contract or in the Chapter 11 case of his recording company.(selected topic)

Business Credit

| October 01, 2007 | Larsen, Stuart | COPYRIGHT 2007 National Association of Credit Management. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan.  All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)Copyright

The Eleventh Circuit's recent decision in Thompkins v. Lil' Joe Records, Inc. provides a graphic illustration of how bad things can happen to copyright holders who do not factor in the potential bankruptcy of another contracting party. The facts presented a nightmare scenario for the recording artist Jeffrey Thompkins, who performed under the name "JT Money" as part of a group named "Poison Clan." Thompkins had transferred title in his copyrights to a recording company, Luke Records, without retaining control over the copyrights. He then compounded his woes by failing to protect his rights in Luke Records' Chapter 11 bankruptcy case. The Eleventh Circuit found that the district court properly dismissed Thompkins' copyright infringement claims against the purchaser of the copyrights in bankruptcy, Lil' Joe Records, Inc. The court reached its conclusion based on:

(1) the rejection of Thompkins' contracts by the debtor, Luke Records;

(2) Luke Records' sale of the copyrights to Lil' Joe free and clear of liens; and

(3) Thompkins' failure to object to the sale or prosecute his claims in bankruptcy court.

The Eleventh Circuit found that the terms of Thompkins' contracts did not support a copyright infringement claim against the asset purchaser, Lil' Joe, nor did Luke Records' subsequent rejection of the contracts support Thompkins' claim that title to the copyrights somehow reverted back to him. This article discusses the reasons for the Eleventh Circuit's holding and possible strategies for intellectual property owners seeking to avoid Thompkins' plight.

Thompkins' Contracts Convey His Copyrights to Luke Records

In 1989, Thompkins entered into an exclusive recording agreement with Luke Records. He agreed to make albums under the group name "Poison Clan." Among other things, his agreement transferred his copyrights in a number of songs to Luke Records. The agreement left Thompkins with the right to collect royalties on records released by Luke Records; however, it gave him no control over the copyrights. In another agreement, Thompkins granted Luke Records part ownership in his musical composition copyrights.

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