Source: https://www.mediainstitute.org/2010/02/26/the-sole-right-shall-return-to-the-authors-part-ii-implementing-authors-recapture-rights-under-the-1976-copyright-act/
Timestamp: 2019-04-26 07:47:39+00:00

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In our previous column (Dec. 8, 2009) we addressed the history and policy of authors’ reversion rights in U.S. copyright law, as well as the general outlines of the 1976 Act provisions on terminations of grants of copyright. In this column, we will review the caselaw construing those provisions.
The cases calling for interpretation of Section 304(c) have fallen into three general categories: adequacy of notice given to grantees; scope of the derivative-works right exception to termination; and evasion of the inalienability principle embodied in the “notwithstanding any agreement to the contrary” proviso. An article recently posted to ssrn, co-authored by another of The Media Institute’s IP Issues columnists, Peter S. Menell, extensively analyzes the last category of cases,2 so I will address them only cursorily here.
The notice provisions of Section 304(c) are not author-friendly. As the court in Siegel v. Warner Bros., concerning the recapture of rights in “Superman,” lamented, Section 304(c)’s “intricate provisions oftentimes create unexpected pitfalls that thwart or blunt the effort of the terminating party to reclaim the full measure of the copyright in a work of authorship.”3 The caselaw confirms this sobering assessment. In Burroughs v. MGM,4 Edgar Rice Burroughs’s heirs sought to recapture film rights in the “Tarzan” books. While the derivative-works exception insulated the grantees of rights in previously created motion pictures, the Burroughs heirs aimed to exercise control over future films incorporating the “Tarzan” characters.
The Second Circuit held that the termination notice’s “apparently inadvertent”5 failure to include five of 14 “Tarzan” titles rendered the termination ineffective even though the five omitted titles did not include the first appearances of the various Tarzan characters. In theory, any rights conveyed in the five remaining titles should have been limited to the new matter contributed by those titles, the basic character attributes and adventures having been set out in the earlier works covered by the notice of termination.6 As a result, the terminated grantee seeking to make a new film should not have been entitled to rely on its remaining rights in the later works because any new film would inevitably incorporate character traits and plot elements contained in the earlier works in which the grantee no longer had rights.
The Second Circuit, however, citing no authority, proclaimed “when an author grants rights to a work that contains material protected by the author’s copyright in an earlier work, the grant implicitly authorizes the use of all material contained in the licensed work, including material that may be covered by the author’s prior copyrights.”7 The decision is especially devastating for authors of works in which the same characters appear in multiple sequels. The court’s reasoning has the effect of nullifying the limitation on the derivative-works exception to already-created derivative works. Section 304(c)(6)(A) specifies that the “privilege [to continue to exploit previously prepared derivative works] does not extend to the preparation after the termination of other derivative works based upon the copyrighted work covered by the terminated grant.” But if derivative-works rights granted in later works in the series may continue to be exploited based on an “implicit” grant of rights in earlier works, then the character rights will not be retrieved until 56 years following the publication of the last pre-1978 sequel, or 35 years following a post-1978 grant of rights in the last sequel.
In Siegel v. Warner Bros., the termination notice served by the heirs of Jerome Siegel, one of the two creators of “Superman,” specified an effective date that failed, by a few days, to encompass the first published appearance of the Superman character in promotional announcements for the forthcoming first comic book featuring the character. Though the timing of the notice did encompass the comic book, Warner Bros. claimed that the subsistence of its rights in the earlier advertisements preserved its rights in the essential visual and story elements of the character.
The Siegel court correctly construed the relationship between the copyright in a work containing a character’s first appearance and the copyright in each subsequent work containing additional iterations of the character. “Superman” may be unusual in that the first published works (the promotional announcements) did not convey all the essential elements of the character’s appearance and story. The heirs’ recapture, while incomplete, was nonetheless sufficiently substantial to oblige Warner Bros. to account to the heirs for profits generated by at least some of the exploitations of the Superman copyright.
The 1976 Act termination right returns fewer rights to the author than did the renewal term reversion because “a derivative work prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination,” while the “new estate” of the renewal term freed the author (if she had not previously assigned her renewal term rights) or her statutory heirs from all prior grants.9 Without the continued use exception, derivative works grantees, principally motion picture producers, would have opposed, and likely defeated, an inalienable termination right. While the exception secured the investment made in the creation of derivative works, the Supreme Court interpreted the statute to benefit not only derivative works producers but also (and at the cost of authors) the intermediaries, generally publishers, who license them.
In Mills Music v. Snyder,10 the heirs of the composer of the aptly named song “Who’s Sorry Now?” served a notice of termination on the music publisher. The music publisher had, pursuant to the now-terminated grant, licensed several record producers to make sound recordings of the song. Under the exception, it was clear that the record producers could continue to sell the recordings they had already made. At issue were the royalty payments: Would the record producers now pay 100 percent of the royalties to the composer’s heirs, or would they continue to pay 50 percent to the publisher, even though the publisher no longer held any rights in the song?
A 5-to-4 Supreme Court majority construed “the terms of the grant” to cover both the composer’s grant of rights to the music publisher, and the publisher’s grants of derivative-works rights to the record producers. As a result, the publisher would continue to receive its prior share of the royalties. While the derivative-works licenses in Mills Music split the royalties evenly, so that the author continued to be remunerated, the Court’s reasoning would seem to apply even when the licensing intermediary keeps most or all of the royalties.11 The decision has been widely criticized as inconsistent with legislative intent;12 subsequent decisions of lower courts appear to endeavor to limit the potential damage.
In Woods v. Bourne,13 the Second Circuit considered the post-termination distribution of royalties in arrangements of the song “When the Red Red Robin Comes Bob Bob Bobbin’ Along” as sold in sheet music and as publicly performed in sound recordings. The court rejected the terminated publisher’s reliance on Mills Music for two reasons. First, with respect to royalties earned from the radio broadcasts and other public performances of the recorded songs, the court held that the exception “protects only authorized uses made by derivative work copyright owners, or their licensees.”14 Because, at the time of the decision, there was no public performance right in a sound recording, the public performances whose royalties were at issue could not be authorized uses with respect to the sound recordings; rather, they implicated only rights in the underlying musical composition.
In that event, if all the commercially exploited versions of the song were derivative works, then none would be terminable, and under Mills Music, the publisher would keep its share of the royalties from the continued sale of the sheet music. Thus, as its second basis for distinguishing Mills Music, the court affirmed the district court’s ruling that the “work” was the piano-vocal version, and, moreover, that most of the arrangements derived from the piano-vocal version lacked sufficient originality to constitute derivative works.
In its endeavor to prevent the derivative-works exception from swallowing the songwriter’s termination right, the court may have applied an unduly high standard of creativity, a suspicion supported by the court’s favorable citation to Gracen v. Bradford Exchange.18 Gracen’s suggestion that a higher standard of originality is required for derivative works than for underlying works has since been discredited in its own circuit.19 On the other hand, the Woods court’s reference to “standard fare in the music trade” may be consistent with prior Second Circuit decisions that reject the originality of variations that are necessary to implement the adaptation of a work from one medium to another. For example, in Batlin v. Snyder, the Court disregarded the changes the copyright claimant introduced in producing a plastic version of a public-domain cast iron “Uncle Sam” bank on the ground that the variations were trivial or necessitated by the medium transformation.
In Fred Ahlert Music Corp. v. Warner-Chappell Music,22 the Second Circuit adapted Mills Music’s interpretation of “under the terms of the grant” in the author’s favor. Addressing whether the licensor of pre-termination derivative works could authorize different exploitations of the derivative work post termination, the court ruled that the grantor of a mechanical license to make a sound recording of the song “Bye-Bye Blackbird” was not later entitled to license that derivative work for the soundtrack and soundtrack album of the film “Sleepless in Seattle” once the songwriter had reclaimed his rights for the extended renewal term.
But it appears that not every agreement whose effect is to deprive the author or the statutory heir of the opportunity to terminate a grant is an “agreement to the contrary” within the meaning of Section 304(c)(5). The Second and Ninth circuits have issued conflicting decisions when the parties to an initial pre-1978 grant (or their successors) agreed post-1978 to rescind the grant and enter into a new agreement.31 Because the initial agreement would have been terminable under Section 304(c), but the new agreement would not (nor would it be under Section 203), the question arose whether the new agreement was “contrary” to Section 304(c).
Because Peter S. Menell and David Nimmer have recently and thoroughly critiqued the rescind-and-rollover decisions, I will offer only a few observations. The Ninth Circuit appears to distinguish a successful revocation and novation from one that violates the “any agreement to the contrary” proscription based on its evaluation of the extent to which the author benefits from the new arrangement and is aware that the conclusion of a new agreement will deprive her of a future termination opportunity. The Ninth Circuit thus may understand “agreement to the contrary” not to mean contrary to the exercise of the termination right, but contrary to the policy underlying the termination right.
But the statute says: “termination of the grant may be effected notwithstanding any agreement to the contrary….” (emphasis supplied); it does not add “unless the agreement confers the kind of benefits as the author or her heirs would have received had they effected the termination.” The rescission-and-rollover technique, if valid, not only postpones exercise of the termination right by another 35 years, but may prevent effecting the termination altogether. This is because, as to post-1977 grants, only those made by the author are terminable; heirs who regrant rights in lieu of termination thereby lose their statutory termination rights.
1. The last works under the aegis of the 1909 Act were published in 1977; the second extended renewal term will vest 75 years later, 2052. The author (or heir) has five years in which to effect termination (2057), but must give at least two years advance notice, hence 2055.
2. Peter S. Menell and David Nimmer, Pooh-Poohing Copyright Law’s ‘Inalienable’ Termination Rights, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1525516, (2009).
3. 542 F. Supp. 2d 1098, 1117 (C.D. Cal. 2008).
4. 683 F.2d 610 (2d Cir. 1982).
6. Cf. 17 U.S.C. §103(b) (copyright in a derivative work “extends only to the material contributed by the author of such work, as distinguished from the preexisting material employed in the work, and does not imply any exclusive right in the preexisting material. The copyright in such work is independent of, and does not affect or enlarge the scope, duration, ownership, or subsistence of, any copyright protection in the preexisting material.”).
7>. Burroughs, 683 F.2d at 622.
8. Siegel, 542 F. Supp. 2d at 1126.
9. Stewart v. Abend, 495 U.S. 207 (1990) (renewal terminates right to exploit derivative works).
10>. 469 U.S. 153 (1985).
11. See 469 U.S. at 177 (derivative-works exception provides “no support … for the proposition that Congress expected the author to be able to collect an increased royalty for the use of the derivative work”).
12. See, e.g., Paul Goldstein, Copyright 5:132-34; Howard B. Abrams, Who’s Sorry Now? Termination Rights and the Derivative Works Exception, 62 U. Det. L. Rev. 181, 224-32, 238-39 (1985); Jessica D. Litman, Copyright, Compromise, and Legislative History, 72 Cornell L. Rev. 857, 901-02 (1987).
13. 60 F.3d 978 (2d Cir. 1995).
16. See Batlin v. Snyder, 536 F.2d 486 (2d Cir. 1976).
17. Woods, 60 F.3d at 991.
18. 698 F.2d 300 (7th Cir. 1983).
19. See Schrock v. Learning Curve, 586 F.3d 513 (7th Cir. 2009).
20. See Christine Perkins, Courtrooms and Dramas: Richard Owen ’50 Has a Noteworthy Career in Both, Harvard Law School Bulletin, Summer 2006, available at http://www.law.harvard.edu/news/bulletin/2006/summer/cn_01.php.
21. The works the court deemed were not “derivative works” were various sheet music arrangements. The sound recordings, even if based on unoriginal arrangements, would nonetheless be derivative works by virtue of the originality of the recorded performances and of the contributions of the recording engineer.
22. 155 F.3d 17 (2d Cir. 1998).
23. Id. at 22 (emphasis and brackets in 2d Cir.’s opinion).
25. See 17 U.S.C. §304(c)(4)(A).
26. Woods, 60 F.3d at 987.
27. Section 304(c)(6)(B) provides that the “future rights that will revert upon termination of the grant become vested on the date the notice of termination has been served,” but it seems doubtful that the vesting cuts off the grantee’s present rights during the notice period.
28. Cf. Nimmer on Copyright §11.02[C] n.65 (suggesting that as much of derivative work as had been created by date of termination may continue to be exploited, and if remainder of derivative work is not based upon the underlying work – e.g., a soundtrack for a film based on a terminated novel – then the whole derivative work may continue to be exploited. By the same token, one may infer from this suggestion that the termination would preclude further additions to the derivative work-in-progress if those additions derive from the underlying terminated work.).
30. Marvel Characters v. Simon, 310 F.3d 280 (2d Cir. 2002).
31. See Milne ex. rel. Coyne v. Stephen Slesinger, Inc., 430 F.3d 1036 (9th Cir. 2005); Classic Media, Inc. v. Mewborn, 532 F.3d 978 (9th Cir. 2008); Penguin Group (USA) Inc. v. Steinbeck, 537 F.3d 193 (2d Cir. 2008).
32. Penguin Group, 537 F.3d at 204.
33. Fred Fisher Music Co. v. M. Witmark & Sons, 318 U.S. 643, 656 (1943).

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