The US Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a case involving a deceased religious leader who owned the copyrights to works reflecting his teachings. The Court found that the copyrighted works were not works for hire under copyright law, that the leader therefore had the right to license his copyrights, and that the subsequent owner of the copyrights (not a statutory heir) also had the right to terminate licenses. Aquarian Foundation, Inc. v. Bruce Kimberley Lowndes, Case No. 22-35704 (9th Cir. Feb. 3, 2025) (Hawkins, McKeown, de Alba, JJ.)
Aquarian Foundation is a nonprofit religious organization founded by Keith Milton Rhinehart. During his time as the leader of Aquarian, Rhinehart copyrighted his spiritual teachings. An Aquarian member, Bruce Lowndes, claimed that he obtained a license from Rhinehart in 1985. Upon Rinehart’s death in 1999, he left his estate, including interests in copyrights, to Aquarian. In 2014, Aquarian discovered that Lowndes was uploading Rhinehart’s teachings online and sent Lowndes takedown requests pursuant to the Digital Millennium Copyright Act (DMCA). In 2021, Aquarian sent Lowndes a letter terminating Lowndes’ license and sued Lowndes for copyright infringement, trademark infringement, and false designation of origin.
After a bench trial, the district court concluded that Rhinehart’s works were not works for hire under either the 1909 or the 1976 Copyright Act, so Rhinehart had the authority to grant Lowndes an unrestricted license. The district court also found that Aquarian did not have the authority to terminate the license as a nonstatutory heir and should have given Lowndes two years notice. The district court denied attorneys’ fees. Both parties appealed the district court’s ruling on ownership and attorneys’ fees, and Aquarian appealed the ruling on its lack of authority to terminate the license.
The Ninth Circuit, finding no clear error, affirmed the district court’s holding that Rhinehart’s works were not works for hire under either the 1909 or the 1976 Copyright Act. Under the 1909 Act’s “instance and expense” test, the Court found that “the creation and maintenance of the works was Rhinehart’s purview, and not the church’s domain.” Under the 1976 Act, which applies agency law, the Court similarly found that Rhinehart’s creation of the works was outside the scope of his employment as Aquarian’s president and secretary. Therefore, under either act, Rhinehart’s works were not works for hire, making Rhinehart the copyright owner. The Ninth Circuit affirmed the district court’s finding that as owner, Rhinehart had authority to grant the license to Lowndes. The Court also found that Lowndes’ license to “use copyrighted materials ‘without restriction’” referenced “a coming World Wide Network,” so Lowndes did not breach the license by posting the works online.
The Ninth Circuit also affirmed that the testamentary transfer of copyrights to Aquarian was permitted by both the 1909 and 1976 Copyright Acts: “Both the 1909 and 1976 Copyright Acts allow for the transfer of a copyright by will. 17 U.S.C. § 42 (repealed) (providing that copyrights ‘may be bequeathed by will’); 17 U.S.C. § 201(d)(1) (providing that that they ‘may be bequeathed by will or pass as personal property by the applicable laws of intestate succession’).”
The Ninth Circuit reversed in part and remanded for further proceedings the issue of whether Lowndes’ license was properly terminated. The Ninth Circuit found that the district court erred in applying 17 U.S.C. § 203 to Aquarian, a nonstatutory heir. Section 203 allows authors or statutory heirs to “terminate a license agreement of unspecified duration thirty-five years from the date of execution, subject to certain ‘Conditions of Termination.’” The Ninth Circuit found that the district court misconstrued § 203 as preempting nonstatutory heir beneficiaries from terminating licenses. Because the Copyright Act is silent on the termination rights of a nonstatutory heir, the Ninth Circuit referred to Washington and Colorado contract law. Both states permit at-will termination of contracts of unspecified duration. Therefore, the Court found that Aquarian properly terminated Lowndes’ license in May 2021. The Ninth Circuit affirmed the district court’s determination that no copyright infringement occurred prior to the termination but reversed and remanded for findings on whether Lowndes infringed the copyrights after May 2021.
Finally, the Ninth Circuit found that the district court did not abuse its discretion in denying admission of impeachment evidence: a recorded phone call to impeach Lowndes. The Ninth Circuit noted the district court did not even credit Lowndes’ testimony making impeachment “superfluous.” The Ninth Circuit also determined that the district court did not abuse its discretion in denying attorneys’ fees, explaining that the Lanham Act provides a district court discretion to award attorneys’ fees in exceptional cases. The Court found that Lowndes provided no evidence that Aquarian was unreasonable in pursuing its trademark claims.
