Source: http://www.law.cornell.edu/supremecourt/text/469/153
Timestamp: 2014-03-09 18:12:07
Document Index: 763953697

Matched Legal Cases: ['§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', '§ 304', 'art 3', '§ 304', '§ 203', '§ 304', '§ 115', '§ 304', '§ 302', '§ 304']

MILLS MUSIC, INC., Petitioner, v. Marie SNYDER and Ted Snyder, Jr., etc. | LII / Legal Information Institute
Supreme Court aboutsearch liibulletin subscribe previews MILLS MUSIC, INC., Petitioner, v. Marie SNYDER and Ted Snyder, Jr., etc.
469 U.S. 153 (105 S.Ct. 638, 83 L.Ed.2d 556)
Argued: Oct. 9, 1984.
Decided: Jan. 8, 1985.
[HTML] See 470 U.S. 1065, 105 S.Ct. 1782.
Syllabus This case involves a controversy between petitioner publisher and respondent heirs of the author of the 1923 copyrighted song "Who's Sorry Now" over the division of royalty income that the sound recordings of the song have generated. In 1940, the author assigned his entire interest in all renewals of the copyright to petitioner in exchange for an advance royalty and petitioner's commitment to pay a cash royalty on sheet music and 50 percent of all net royalties that petitioner received for mechanical reproductions. In 1951, petitioner registered a renewal copyright. Thereafter, petitioner directly or through an agent issued over 400 licenses to record companies authorizing the use of the song in phonograph records, and obligating the companies to pay royalties to petitioner, who in turn was obligated to pay 50 percent of those royalties to the author. Separate recordings were then prepared that generated the disputed royalty income. After the author's death, respondents succeeded to his interest in the arrangement with petitioner. Pursuant to § 304(c)(2) of the Copyright Act, as revised in 1976, respondents terminated the author's grant to petitioner of rights in the renewal copyright. Under § 304(c)(6), this termination caused all rights "covered by the terminated grant" to revert to respondents, except that under § 304(c)(6)(A) 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." The sound recordings in question come within the statutory definition of a "derivative work." When respondents demanded of petitioner's agent that the royalties on the recordings be remitted to them, the agent placed the disputed funds in escrow and brought an interpleader action in Federal District Court, which entered judgment for petitioner. The court held that the recordings had been "prepared under the authority of the grant" from the author to petitioner, that the statute made no distinction between grantees who themselves make or own derivative works and those who license others to do so, that therefore the terms of the agreement that had been in effect prior to the termination governed the record companies' obligation to pay royalties, and that under those agreements petitioner and respondents were each entitled to a 50 percent share in the net royalty. The Court of Appeals reversed, holding that the § 304(c)(6)(A) exception preserved only the grants from petitioner to the record companies; that the reversion of the copyright to respondents carried with it petitioner's right to collect the royalties payable under those grants; that § 304 was enacted for the benefit of authors and that the exception was designed to protect "utilizers" of derivative works; that because petitioner was neither an author nor a "utilizer," it was not a member of either class that § 304 was intended to benefit; and that the legislative history indicated that Congress had not contemplated a situation in which the authority to prepare derivative works was derived from two successive grants rather than a single grant directly from an author to a "utilizer."
This is a controversy between a publisher, Mills Music, Inc. (Mills), and the heirs of an author, Ted Snyder (Snyder), over the division of royalty income that the sound recordings of the copyrighted song "Who's Sorry Now" (the Song) have generated. The controversy is a direct outgrowth of the general revision of copyright law that Congress enacted in 1976.
Thus, the dispute raises the question whether an author's termination of a publisher's interest in a copyright also terminates the publisher's contractual right to share in the royalties on such derivative works.
The key that will unlock this statutory puzzle is an understanding of the phrase "under the terms of the grant" as it is used in § 304(c)(6)(A)the so-called "derivative works exception" (the Exception) to the "termination of transfer and licenses" provisions found in § 304(c).
* Snyder was one of three persons who collaborated in creating "Who's Sorry Now."
That company went into bankruptcy in 1929, and in 1932 the trustee in bankruptcy assigned the copyright to Mills.
Fox acted as an agent for Mills, performing the service of collecting royalties from the licensed record companies and, after deducting its charges, remitting the net receipts to Mills, which in turn remitted 50 percent of that income to Snyder. After Snyder's death, his widow and his son succeeded to his interest in the arrangement with Mills.
Additional discussions with interested parties followed.
discussion over the termination provisions, and the Exception, was essentially completed at this time. Congress enacted the termination provisions and the Exception in the 1976 Act in virtually the same form as they appeared in the 1965 draft revision bill.
Section 304 of the 1976 Act significantly affected the rights of Mills and the Snyders in three ways. First, § 304(b) provided an automatic extension of the life of the copyright; instead of expiring in 1980 at the end of the second renewal period, the copyright on the Song will endure until 1999.
Second, § 304(c) gave the widow and surviving son of Snyder a right to terminate the grant to Mills of rights in the renewal copyright.
That termination could be effected at any time during the 5-year period after January 1, 1978, by serving a written notice on Mills and recording a copy in the Copyright Office before it became effective.
Third, § 304(c)(6) provided that the termination would cause all rights "covered by the terminated grant" to revert to Snyder's widow and son. That reversion was, however, subject to an exception that permitted a previously prepared derivative work to continue to be utilized after the termination "under the terms of the grant."
On January 3, 1978, the Snyders delivered a written notice of termination to Mills. The notice complied with § 304(c); it identified the Song and stated that the termination applied to the "grant or transfer of copyright and the rights of copyright proprietor, including publication and recording rights." Additionally, the notice stated that it would become effective on January 3, 1980.
On August 11, 1980, the Snyders advised Fox that Mills' interest in the copyright had been terminated and demanded that the royalties on the derivative works be remitted to them. Fox placed the disputed funds in escrow and initiated an interpleader action in the United States District Court for the Southern District of New York. Mills and the Snyders appeared therein, agreed on the relevant facts, and filed cross-motions for summary judgment. The District Court entered judgment for Mills. Harry Fox Agency, Inc. v. Mills Music, Inc., 543 F.Supp. 844 (1982).
Relying on three "propositions," the Court of Appeals for the Second Circuit reversed. Harry Fox Agency, Inc. v. Mills Music, Inc., 720 F.2d 733 (1983). First, it reasoned that Mills was relying on two separate grantsthe 1940 grant from Snyder to Mills and the later grants by Mills to the record companiesbut that the Exception preserved only the second set of grants. Because the Snyders' termination caused the ownership of the underlying copyright to revert to them, the court viewed that reversion as carrying with it Mills' right to collect the royalties payable under the grants to the record companies. Id., at 738-740. Second, the court determined that § 304 was enacted for the benefit of authors and that the Exception was designed to protect "utilizers" of derivative works; because Mills as a publisher was neither an author nor a "utilizer," it was not a member of either class that § 304 was intended to benefit. Id., at 739-740. Third, the Court of Appeals read the legislative history as indicating that Congress had not contemplated a situation in which the authority to prepare derivative works was derived from two successive grants rather than a single grant directly from an author to a "utilizer." Id., at 740-741. The court felt that if Congress had confronted this situation, it would not have wanted "publishers and other noncreative middlemen to share in original derivative works royalties after termination." Id., at 743.
The critical subparagraph§ 304(c)(6)(A)carves out an exception from the reversion of rights that takes place when an author exercises his right to termination. A single sentence that uses the word "grant" three times defines the scope of the Exception. It states:
The third reference is to "the terminated grant" which, in this case, must refer to Snyder's grant to Mills in 1940. It is logical to assume that the same word has the same meaning when it is twice used earlier in the same sentence.
The Two Separate Grants The Court of Appeals based its conclusion that Mills could not prevail largely on its view that the grant from Snyder to Mills was entirely separate from subsequent "grants" by Mills to the record companies. It reasoned:
In terms, they do not provide for any payments at all to the Snyders. The source of the Snyders' entitlement to a 50 percent share in the royalty income is the 1940 grant. Thus, a fair construction of the phrase "under the terms of the grant" as applied to any particular licensee would necessarily encompass both the 1940 grant and the individual license executed pursuant thereto.
If the scope of the entire set of documents that created and defined each licensee's right to prepare and distribute derivative works is used to define the relevant "terms of the grant" for purposes of the Exception, those terms include Mills' right to obtain 100 percent of the net royalty income in the first instance and Mills' obligation thereafter to remit 50 percent of those revenues to the Snyders. If, as the Court of Appeals held, the Exception limits the relevant "terms of the grant" to those appearing in the individual licenses, two rather glaring incongruities would result. First, the word "grant" would have inconsistent meanings in the same sentence, and in fact, within the entirety of both § 304(c) and the remainder of § 304. Second, and of greater importance, there would be neither a contractual nor a statutory basis for paying any part of the derivative-works royalties to the Snyders.
The licenses issued to the record companies are the source of their contractual obligation to pay royalties; viewed apart from the 1940 grant, those licenses confer no rights on the Snyders. Moreover, although the termination has caused the ownership of the copyright to revert to the Snyders, nothing in the statute gives them any right to acquire any contractual rights that the Exception preserves. The Snyders' status as owner of the copyright gives them no right to collect royalties by virtue of the Exception from users of previously authorized derivative works. Stating the same point from the perspective of the licensees, it is clear that they have no direct contractual obligation to the new owner of the copyright. The licensees are merely contractually obligated to make payments of royalties under terms upon which they have agreed. The statutory transfer of ownership of the copyright cannot fairly be regarded as a statutory assignment of contractual rights.
The second of the Court of Appeals' propositions stated that Mills is not the "utilizer" of a derivative work because "all that Mills did was to utilize the underlying copyright when it owned it by licensing others to create and utilize derivative works." 720 F.2d, at 739. Building on its erroneous first proposition, the court determined:
Unlike the Court of Appeals, we are persuaded that Congress was well aware of the prevalence of multiparty licensing arrangements in the music-publishing industry, as well as in other industries that the copyright law vitally affected, when it enacted the 1976 Act. There are many references in the legislative history to multiparty arrangements in the music industry, and to the importance of the role of music publishers in the marketing of copyrighted songs. These references dissipate the force of the argument that Congress did not expressly consider the precise multiparty dispute before the Court today.
Indeed, there is reason to believe that the 50 percent arrangement between Snyder and Mills that was made in 1940 was a typical example of the form of copyright grant that had been prevalent in this industry for many years.
Rather than assuming that Congress was unaware of a common practice in one of the industries that the general revision of the copyright law, and the termination provisions, most significantly affected, we think it more probable that Congress saw no reason to draw a distinction between a direct grant by an author to a party that produces derivative works itself and a situation in which a middleman is given authority to make subsequent grants to such producers. For whether the problem is analyzed from the author's point of view or that of the producer of derivative works, the statutory purposes are equally well served in either case.
The principal purpose of the amendments in § 304 was to provide added benefits to authors. The extension of the duration of existing copyrights to 75 years, the provision of a longer term (the author's life plus 50 years) for new copyrights, and the concept of a termination right itself, were all obviously intended to make the rewards for the creativity of authors more substantial. More particularly, the termination right was expressly intended to relieve authors of the consequences of ill-advised and unremunerative grants that had been made before the author had a fair opportunity to appreciate the true value of his work product.
That general purpose is plainly defined in the legislative history and, indeed, is fairly inferable from the text of § 304 itself.
The Exception in § 304(c)(6)(A) was designed, however, to exclude a specific category of grantseven if they were manifestly unfair to the authorfrom that broad objective. The purpose of the Exception was to "preserve the right of the owner of a derivative work to exploit it, notwithstanding the reversion."
Therefore, even if a person acquired the right to exploit an already prepared derivative work by means of an unfavorable bargain with an author, that right was to be excluded from the bundle of rights that would revert to the author when he exercised his termination right. The critical point in determining whether the right to continue utilizing a derivative work survives the termination of a transfer of a copyright is whether it was "prepared" before the termination. Pretermination derivative worksthose prepared under the authority of the terminated grant may continue to be utilized under the terms of the terminated grant. Derivative works prepared after the termination of the grant are not extended this exemption from the termination provisions. It is a matter of indifferenceas far as the reason for giving protection to derivative works is concernedwhether the authority to prepare the work had been received in a direct license from an author, or in a series of licenses and sublicenses. The scope of the duly authorized grant and the time the derivative work was prepared are what the statute makes relevant because these are the factors that determine which of the statute's two countervailing purposes should control.
The obligation of an owner of a derivative work to pay royalties based on his use of the underlying copyright is not subject to renegotiation because the Exception protects it. The "terms of the grant" as existing at the time of termination govern the author's right to receive royalties; those terms are therefore excluded from the bundle of rights that the author may seek to resell unimpeded by any ill-advised prior commitment. The statutory distinction between the rights that revert to the author and those that do not revert is based on the character of the rightnot on the form or the number of written instruments that gave the owner of the derivative work the authority to prepare it. Nothing in the legislative history or the language of the statute indicates that Congress intended the Exception to distinguish between two-party transactions and those involving multiple parties.
The example most frequently discussed in the legislative history concerning the Exception involved the sale of a copyrighted story to a motion picture producer.
The Court of Appeals explained the need for the Exception as the interest in protecting the large investment that is required to produce a motion picture, and recognized that record companies similarly must also make a significant investment in compensating vocalists, musicians, arrangers, and recording engineers. Therefore, the court concluded that record companies are clearly within the class that the Exception protects. The court felt, however, that music publishersas middlemenwere not similarly situated, but rather merely had an ownership interest in the copyright that reverted to the author upon termination. 720 F.2d, at 742-743. As a matter of factor of judicial noticewe are in no position to evaluate the function that each music publisher actually performs in the marketing of each copyrighted song. But based on our reading of the statute and its legislative history,
in interpreting the Exception we find no reason to differentiate between a book publisher's license to a motion-picture producer and a music publisher's license to a record company. Neither publisher is the author of the underlying work. If, as the legislative history plainly discloses, the Exception limits the reversion right of an author who granted his copyright on an original story to a book publisher who in turn granted a license to a motion-picture producer, we can see no reason why the Exception should not also limit the right of a composer, like Snyder, who made such a grant to a music publisher, like Mills, that preceded a series of licenses to record companies.
Finally, respondents argue that the legislative history demonstrates that the Exception was designed to accomplish a well-identified purposeto enable derivative works to continue to be accessible to the public after the exercise of an author's termination rights.
Specifically, that history discloses a concern about the status of a number of motion-picture films that had been prepared pursuant to grants by book publishers. Without the Exception, the reversion that an author's termination effected would have given the author the power to prevent further utilization of the motion-picture films, or possibly to demand royalties that the film producers were unwilling to pay. Because the specific problem that the Exception addressed involved a potential confrontation between derivative-works utilizers and authors who had recaptured their copyrights, respondents argue that Congress must have intended its response to the problem to affect only those two interests.
The author's right to displace the grantee under § 304(c)(6) appears complete, subject only to the enumerated exceptions. One of these, Exception (A), accords the utilizer of a derivative work the privilege of continuing to utilize the work under the terms of the grant. In this case, only the recording companiesnot Mills can exercise the right to utilize the derivative works.
To protect that utilization, it is necessary only to insulate utilizers from the author's right to terminate the license of the underlying work and to renegotiate a higher royalty. The utilizers' sole interest is in maintaining the royalty rate that prevailed before the author's termination of the grant; the identity of the party who receives that royalty is a matter of indifference to them. In this case, the utilizers, Mills' licensees, were not parties to the agreement between Mills and Snyder. They were contractually obligated to pay royalties to Mills, but were not involved in any division of royalties beyond that point. It is strange, to say the least, to hold, as the Court does today, that the terms of utilization by the licensee include the agreement between Mills and Snyder to divide royalties, an agreement that is entirely irrelevant to protecting utilization of the derivative work.
The majority claims that it is essential to read the Exception as preserving Mills' rights because the terms under which the derivative works are utilized identify Mills, or Fox, as Mills' agent, as the recipient of the royalties. It is surely true that the licenses say this, but that is a surprisingly weak reed on which to rest a judgment of this Court. It can mean only that, if the utilizer of the derivative work wishes to continue to pay royalties to Fox, he may do so. Fox, after collecting the royalties and deducting its fee, will be obligated to forward the royalties to the rightful owners of the copyright, the Snyders.
The majority's reading of the statute, as awkward and clumsy as it is, might conceivably be accepted if it were supported by the legislative history. But it plainly is not. The legislative history of the Exception is scanty, and it contains no express consideration of the multiple-grant situation that confronts us in this case. Rather, Congress confined its attention to the situation involving a grant from the copyright owner to the creator of an independently copyrightable derivative work. A 1967 House of Representatives Report, for example, discussing an earlier version of the 1976 Copyright Act, stated that "any grantee who has made a derivative work under his grant" might continue to use the work after termination of the grant.
The Committee apparently assumed that the grantee of the underlying copyright and the utilizer of the derivative work would be one and the same.
The majority places great emphasis on indications that Congress was aware of multiparty arrangements in the movie and music-publishing industries, positing from this awareness an intention to extend the benefits of the Exception to middlemen such as Mills. But the majority cites not one word to indicate that Congress did in fact contemplate such a result when it enacted the Exception. On the contrary, when the Exception was being drafted by the Copyright Office, the hypotheticals offered to illustrate its operation were cast in terms of the motion picture industry and assumed that the creator of the underlying work, a story or novel, would deal directly with the creator of the derivative work, a film.
If, as the majority asserts, Congress did consider the application of the Exception to the multiple-grant situation, it is indeed odd that it phrased the statutory language so ambiguously.
That middlemen such as music publishers were to be excluded from the benefits conferred by the Exception is strongly supported by statements to that effect by music publishers themselves, made in the discussions that took place before the Copyright Office. When a version of the Exception first appeared in the 1964 preliminary draft bill, representatives of the music publishing industry protested. A representative of the Music Publishers Association of the United States stated that under the proposed exception, "the royalties resulting from the license presumably revert entirely to the author."
A spokesman for the Music Publishers Protective Association construed the Exception as being "for the benefit of everyone acquiring rights under a copyright other than the publisher."
The legislative history thus lends no support for Mills' claimed right to share in the royalties from derivative works. Rather, it clearly evidences the underlying purpose of the Exception, which is, as the majority concedes, to protect the actual owners of derivative works, such as film producers, from having to renegotiate rights in underlying works, such as the novels or plays on which the films were based. When the Exception was formulated, and indeed when it was enacted, the prevailing understanding of the 1909 Act was that the owners of renewal rights in a copyrighted work might exercise a veto power over continued performance of a derivative work that had been created under a first-term grant.
Motion picture studios, fearing infringement actions by authors' statutory successors or their assignees, removed from circulation several highly successful films.
The Exception was drafted in response to protests from commentators and movie producers whose goal was to allow the continued distribution of movies despite termination of the grant in the underlying play or novel.
Barbara Ringer, then Assistant Register of Copyrights, described an early version of the Exception as being designed to "permit the owner of a derivative work, such as a motion picture, to continue using it."
The House Report on the 1976 Act also offered this explanation in elucidating the Exception: "In other words, a film made from a play could continue to be licensed for performance after the motion picture contract had been terminated but any remake rights covered by the contract would be cut off."
To carry out this purpose of protecting derivative users, it is unnecessary to protect middlemen as well, and there is no indication whatsoever that Congress intended to do so. The majority, however, unaccountably rejects the position that the Exception should be construed only so broadly as is necessary to effectuate this undisputed legislative intent.
It also ignores the accepted principle of statutory construction that an ambiguous statute should be construed in light of the statutory purpose.
As the majority acknowledges, the principal purpose of the extension of the term of copyright and the concomitant termination provisionsto which the derivative-works clause forms an exceptionwas to benefit authors. Under the 1909 Copyright Act, copyright subsisted in two 28-year terms, with renewal available to the author at the end of the first term. This right of renewal was intended to allow an author who had underestimated the value of his creation at the outset to reap some of the rewards of its eventual success.
That purpose, however, was substantially thwarted by this Court's decision in Fred Fisher Music Co. v. M. Witmark & Sons, 318 U.S. 643, 63 S.Ct. 773, 87 L.Ed. 1055 (1943). As a result of that decision, an author might assign, not only the initial term of the copyright in his work, but also the renewal term. Thus, assignees were able to demand the assignment of both terms at the time when the value of the copyrighted work was most uncertain.
The termination provisions of the 1976 Act were designed to correct this situation. They guarantee to an author or his heirs the right to terminate a grant and any right under it "notwithstanding any agreement to the contrary."
The House Report accompanying the Act explained that "a provision of this sort is needed because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work's value until it has been exploited."
The termination provisions, therefore, clearly favor authors' interests over those of grantees such as music publishers.
By going further than necessary to effect the goal of promoting access to the arts, the majority frustrates the congressional purpose of compensating authors who, when their works were in their infancy, struck unremunerative bargains. That such frustration will result is clearest in the situation, not uncommon in the music industry, where an author has assigned his rights for a one-time, lump-sum payment.
Under the majority's interpretation of the Exception, the publisher-middleman would be free to continue to collect all royalties accruing during the extended 19-year copyright term, and the author would receive nothing. While my interpretation of the Exception results in the author's receiving more than he would have received under the terminated grant, such a result is the very objective of the termination provisions.
To allow authors to recover the full amount of derivative-works royalties under the Exception is not to slight the role of middlemen such as music publishers in promoting public access to the arts. Achieving that fundamental objective of the copyright laws requires providing incentives both to the creation of works of art and to their dissemination.
But the need to provide incentives is inapposite to the circumstances of this case, because the rights at issue are attached to a term of copyright that extends beyond what was contemplated by the parties at the time of the initial grant. In 1940, when Ted Snyder and Mills entered into their royalty-division agreement, neither party could have acted in reliance on the royalties to be derived from the additional 19-year term created by the 1976 Act. In this situation, the author and the grantee have each already reaped the benefit of their bargain, and the only question is which one should receive the windfall conferred by Congress. The considerations that should govern the allocation of a windfall are not those of providing incentives but those of providing compensation. And the legislative history of the renewal and termination provisions indicates a congressional purpose to compensate authors, not their grantees. In attempting to claim for itself the benefits of the derivative-works exception, Mills bears the burden of proof.
In my view, it has fallen far short of carrying that burden.
See 17 U.S.C. 101-810. The 1976 Act generally became effective on January 1, 1978.
17 U.S.C. 304(c)(2).
"A 'derivative work' is a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a 'derivative work.' " 17 U.S.C. 101.
"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, but this privilege does not extend to the preparation after the termination of other derivative works based upon the copyrighted work covered by the terminated grant." 17 U.S.C. 304(c)(6)(A).
The renewal application had to be filed before the expiration of the original term. If the author predeceased the last year of the first 28-year term, certain statutory successors could accomplish renewal. 17 U.S.C. 24 (1976 ed.) (1909 Act); see also Fred Fisher Music Co. v. M. Witmark & Sons, 318 U.S. 643, 644, 63 S.Ct. 773, 87 L.Ed. 1055 (1943).
See 17 U.S.C. 1(e) (1976 ed.) (1909 Act). Mills filed the required notice with the Copyright Office in 1958. App. 52.
17 U.S.C. 103(b); 17 U.S.C. 7 (1976 ed.) (1909 Act). The record reveals separate licenses for renditions of the Song by artists such as Judy Garland and Liza Minelli, and Nat King Cole. App. 22, 81.
Preliminary Draft for Revised U.S. Copyright Law and Discussions and Comments on the Draft, 88th Cong., 2d Sess., Copyright Law Revision, Part 3, pp. 16 (Alternative A), 21 (H. Judiciary Comm. Print 1964). The twin citations here and elsewhere refer to the derivative-works exception that is now codified at § 304(c)(6)(A) and refer to a similar derivative-works exception that is now codified at 17 U.S.C. 203(b)(1). We have examined the development of both sections for purposes of this opinion.
Compare, H.R. 4347, 89th Cong., 1st & 2d Sess., §§ 203, 304(c) (1965), with 17 U.S.C. 203, 304(c).
It should be noted that Justice WHITE's dissent does not adopt the Court of Appeals' reading of the Exception. He reads the "terms of the grant" to include only those terms defining the amount of the royalty payments and to exclude the terms identifying the parties to whom the royalty is payable. The statute itself, however, refers to "the terms of the grant"not to some of the terms of the grant.
The District Court concluded that, absent the Mills' licenses to the record companies, the record companies would be infringers. Harry Fox Agency, Inc. v. Mills Music, Inc., 543 F.Supp. 844, 850-851 (SDNY 1982). The Court of Appeals accepted this conclusion. 720 F.2d, at 738, n. 8. Moreover, under the copyright law, both before and after the 1976 Act, the record companies had a statutory right to obtain self-executing compulsory licenses from Mills. See 17 U.S.C. 115; 17 U.S.C. 1(e), 101 (1976 ed.) (1909 Act). In the District Court, the Snyders contended that the Exception was wholly inapplicable because the record companies had statutory compulsory licenses and therefore their sound recordings had not been prepared "under authority of the grant" within the meaning of the 1976 Act. The District Court rejected this contention, 543 F.Supp., at 851-852, finding that either Mills or its agent, Fox, executed the licenses; therefore, the licenses were not self-executing. This contention was not renewed in either the Court of Appeals or in this Court. (The comment on the compulsory-license mechanism in the dissent, post, at 185, n. 12, is incorrect because it seems to assume that the case involves self-executing compulsory licenses.) Additionally, although the Snyders contended otherwise in the District Court, 543 F.Supp., at 850-851, they no longer challenge the proposition that Mills issued the pretermination licenses "under authority of the grant" within the meaning of the Act. It is the royalty income generated by these 400-odd derivative works prepared before the termination that is at issue in this case. Mills acknowledges that it may not authorize the preparation of any additional works and that its only claim to an interest in royalties is that preserved by the Exception.
These included "Thanks for the Memory," "You Can't Take It With You," and "The Man Who Came to Dinner." Others, like "Gone With the Wind," remained in circulation only because producers were willing to pay substantial sums to holders of copyrights in the underlying works. See Jaszi, When Works Collide: Derivative Motion Pictures, Underlying Rights, and the Public Interest, 28 UCLA L.Rev. 715, 740 (1981). If an author had assigned his rights in the renewal term at the time that he assigned rights in the initial term, a grantee might safely release a derivative work prepared under authority of the first-term grant. But if the author had died before his renewal rights vested, his statutory successors acquired those rights, and any previous assignment was rendered null. See Miller Music Corp. v. Charles N. Daniels, Inc., 362 U.S. 373, 80 S.Ct. 792, 4 L.Ed.2d 804 (1960). Movies based on plays or novels were therefore taken out of circulation when authors had died before their renewal rights had vested, and statutory successors or their assignees had renewed the copyright in the underlying work. Note, Derivative Copyright and the 1909 ActNew Clarity or Confusion?, 44 Brooklyn L.Rev. 905, 928, n. 125 (1978).
H.R.Rep. No. 94-1476, p. 127 (1976) (discussing 17 U.S.C. 203(b), the analogue to § 304 for new copyrights).
As construed by the majority, the derivative-works Exception also creates a statutory inconsistency with the compulsory license mechanism established under 17 U.S.C. 115. Section 115 allows record producers to make and sell sound recordings without permission from the copyright owner, provided that they pay a statutory royalty. This royalty is payable to the current owner of the copyright. § 115(c)(1). In this case, as all agree, the current owners of the copyright are the Snyders.
17 U.S.C. 203(a)(5) (grants executed on or after effective date of Act); § 304(c)(5) (grants executed before effective date of Act). In place of the renewal-term system of the 1909 Act, the 1976 Act substitutes a single term enduring for the life of the author plus 50 years. § 302(a). In the case of subsisting copyrights, the Act extended the term of copyright from 56 years to 75. §§ 304(a), (b).