Yellowcake, Inc. v. Hyphy Music, Inc. is a recent case where a musician initially made an oral agreement with a record company, and then a third party interfered.
Jesus Chavez, Sr. is a recording artist of considerable renown and commercial viability, leader of the Mexican band Los Originales De San Juan. At some point, Chavez was approached by Hyphy Music (“Hyphy”), which sought to acquire four albums from Chavez. Using only an oral agreement, Chavez transferred his rights to the music to Hyphy.
Some time later, Chavez was approached by another record company called Yellowcake. Yellowcake’s representative told him that his agreement with Hyphy was invalid, and that he could still legitimately transfer his copyrights to Yellowcake for a sum. In reality, Yellowcake had no basis to say the agreement with Hyphy wasn’t valid. The Yellowcake representatives added that Yellowcake would indemnify Chavez if Hyphy tried to sue.
After obtaining Chavez’s share of ownership in the albums, Yellowcake posted them on various sites — using the same album cover as Hyphy had used, but with Yellowcake’s logo instead of Hyphy’s.
As an initial matter, Hyphy failed to plead that it had a valid copyright ownership interest in the albums because the agreement between Hyphy and Chavez was an oral agreement. That’s insufficient to transfer copyright, which requires a written agreement. Here we see the axe is threatened, but not dropped, on the plaintiff’s ownership of the copyright registrations in the albums.
With that in mind, the court turned to the issue of co-authorship (or “works of joint authorship”, in the Copyright Act.). If Hyphy and Chavez were co-authors, then all Chavez did was transfer to Hyphy his joint authorship interests in the copyrights. By transferring his rights to Yellowcake, Yellowcake has stepped into the shoes of the artist — and the defendant is actually the joint author with the plaintiff. Joint authors can’t sue each other. They’re allowed to do whatever they want with their share, as long as they account for the other side’s pro-rata share — in this case, 50%.
Hyphy was allowed to amend its complaint and explain why Yellowcake is not its joint author. Hyphy claimed that Chavez did not have a share in co-ownership with Hyphy to begin with, because they had entered into a work-made-for-hire agreement. The court didn’t buy that, because there was no writing indicating that these were specially commissioned works, and Hyphy had already argued it had collaborated with Chavez. In so doing, Chavez was not an employee acting within the scope of his employment. Because of Hyphy’s initial argument that Hyphy and Chavez were joint authors, Hyphy’s claim that Chavez was an employee was dead on arrival.
This is a warning to those who assert copyright ownership based on work-made-for-hire-basis. In this case, the plaintiff brought a lawsuit trying to enforce an oral agreement of transfer of copyright. That’s a challenging place to start any argument, especially when the party against whom you seek to enforce the rights (here, Yellowcake) is the assignee of the content-provider’s rights. Chavez had a reason not to affirm the oral agreement: he had been paid by the new “record company” assignee, and wasn’t going to undermine that deal by defending any assignment he had purportedly made to his old record company, Hyphy. Once again, oral agreements aren’t worth the paper they’re written on — especially in a copyright context.
