A panel of three judges for the U.S. District Court of Central California has decided to allow the Ray Charles Foundation -- the sole heir to Charles' estate following his death in 2004 -- to challenge a series of "terminations" served to Warner/Chappell Music.
Let's back up.
In 1978, an amendment was made to U.S. copyright law by Congress which allowed authors and their heirs to terminate copyright grants to publishers, the companies responsible for overseeing the exploitation of works under their control, as long as it was 35 years after the creation of the work and they followed an established procedure to the letter. The caveat to the amendment was that the work created wasn't "made-for-hire," meaning the work was created for a company and the artist responsible for its creation abdicated any claim to it. Using arithmetic as our guide, this process, then, began in earnest two-and-a-half years ago, on Jan. 1, 2013.
Fast forward several decades, to when Ray Charles sat down his heirs (minus the two in jail at that time) to explain he would give each of them an irrevocable trust containing half a million dollars, as long as they waived any further claim to his estate. Following that, Charles named the Foundation as his sole heir.
(This is important to the case's new development: the Foundation relies on royalties from the copyrights Charles granted it in order to continue its operations, "to administer funds for scientific, educational and charitable purposes; to encourage, promote and educate, through grants to institutions and organizations, as to the causes and cures for diseases and disabilities of the hearing impaired and to assist organizations and institutions in their social educational and academic advancement of programs for the youth.")
Regardless of this, seven of Charles' 12 children moved forward with serving 39 termination notices on 51 songs, including some of Charles' most successful works like "I Got a Woman," to various rights holders, including Warner/Chappell. If the termination notices were successful, rights to those 51 works would revert back to Charles' children in evenly distributed shares.
Unsurprisingly, the Ray Charles Foundation took issue with the seven heirs' case, suing them in 2012 for breach of contract and breach of faith. After a complicated series of arguments, the District Court of California ruled that the Foundation had no standing to question the termination notices, preventing the Foundation from challenging them.
The ruling filed today (Jul. 31) reverses that decision, allowing the Foundation to proceed with its attempt at challenging the heirs' termination notices. If the Foundation wins, the copyrights remain with Warner/Chappell and it will continue to receive royalties on the works it retains rights to, as well as setting a precedential piece of termination law that would allow "beneficial owners" to challenge termination notices. This would mean that people such as record producers, who often receive a portion of song royalties, could challenge terminations that could end their royalty receipts. If the heirs win, copyright will revert back to them, which would essentially bankrupt the organization, and set that precedent in the opposite.