Opinion ID: 516047
Heading Depth: 3
Heading Rank: 2

Heading: The Equities and the 1976 Act

Text: 59 The Rohauer decision and defendants' position ultimately rest on policy considerations. Rohauer found that the equities lie preponderantly in favor of the proprietor of the derivative copyright. Rohauer, 551 F.2d at 493. Rohauer correctly observes that [i]n contrast to the situation where an assignee or licensee has done nothing more than print, publicize and distribute a copyrighted story or novel, a person who with the consent of the author has created an opera or a motion picture film will often have made contributions literary, musical and economic, as great as or greater than the original author. Id. The court's own words, however, reveal the flaw in its analysis: the greater contribution theory can cut both ways. While the creators of the Rear Window movie clearly made substantial and costly contributions to the underlying work, other derivative works protected by the Rohauer rule might involve only minimal contributions to the underlying work. Consequently, this rationale alone cannot justify Rohauer's holding. 60 Rohauer's second equity consideration is the inability of the purchaser of the derivative copyright to protect himself against the eventuality of the author's death before the renewal period since the author's statutory successors could not be definitely ascertained until that date. 15 Id. Again, the Second Circuit raises a legitimate concern, but one the Supreme Court apparently rejected in Miller Music. That case put assignees of copyright renewal rights on notice that they were acquiring only a contingent interest, with the risk that the interest might not vest. Miller Music, 362 U.S. at 375, 80 S.Ct. at 794. 61 Moreover, Rohauer's exclusive focus on potential unfairness to makers of derivative works overlooks important policies behind section 24 that favor the author. Congress enacted section 24 for two specific purposes. First, Congress sought to provide authors with a second chance to reap the benefits of their work, particularly since authors must often negotiate from an unequal bargaining position. 16 Congress recognized that not infrequently ... the author sells his copyright outright to a publisher for a comparatively small sum. If the work proves to be a great success and lives beyond the term of twenty-eight years ... it should be the exclusive right of the author to take the renewal term.... Fred Fisher Music Co. v. M. Witmark & Sons, 318 U.S. 643, 654, 63 S.Ct. 773, 778, 87 L.Ed. 1055 (1943) (quoting H.Rep. 2222, 60th Cong., 2d Sess., pp. 14-15). 62 This concern is more compelling in the case before us. The infringement in Rohauer consisted of making one videotaped copy of a print of the film and broadcasting it over a public television station. This case, by contrast, involves a nationwide re-release of the film in theatres, in the video-cassette sales and rental markets, and on cable TV. Clearly, when Woolrich agreed to assign his renewal rights, he could not have foreseen the technological advances which have enabled the authors of the derivative work to expand tremendously their exploitation of the film. This development highlights the policy motivating section 24: Congress' desire to give authors a second chance to make a better deal. To the extent Rohauer depends on equitable considerations, its failure to consider the author's interests under section 24 makes the Rohauer result even more problematic. 63 Second, by enacting section 24, Congress intended to provide protection to the author's family and so extended the renewal right to include the author's surviving family or heirs, should the author die during the original term of the copyright. Section 24 in essence acts as a compulsory bequest of the copyright to the designated persons. De Sylva v. Ballentine, 351 U.S. 570, 584, 76 S.Ct. 974, 982, 100 L.Ed. 1415 (1956). In balancing the equities in favor of the derivative copyright owner, Rohauer never discusses either of these concerns underlying section 24. 64 Instead, Rohauer looked to the 1976 Copyright Act to support its balancing of the equities. The 1976 Act replaced the two-term scheme established under the 1909 Act with a single term of copyright protection that would last for the life of the author plus fifty years. 17 U.S.C. Sec. 302. This single term, however, applied only to works copyrighted after its effective date, January 1, 1978. For works in copyright prior to that date, the two-term renewal system remained in effect. 17 U.S.C. Sec. 304. 65 The 1976 Act also provided for an additional 19-year extension for existing renewal copyrights, subject to the right of the author at the end of the 28th year of the original renewal term to terminate any grants or licenses. However, the 1976 Act included an exception for derivative works. The author's right to terminate prior grants or licences for the 19-year extension period does not apply to existing derivative works for which the author had granted 28-year renewal rights. 17 U.S.C. Sec. 304(c)(6)(A). 66 Rohauer viewed this exception as evidence of Congress' intent to give special protection to derivative works. Rohauer, 551 F.2d at 494. While Congress may, indeed, have intended section 304(c)(6)(A) to provide additional protection in 1976, Congress' intent regarding the 1976 Act does not shed any light on the meaning of the 1909 Act. By its terms, section 304 only applies to the additional 19-year period. Abend persuasively argues that Rohauer thus does what Congress declined to do--apply the termination exception retroactively to the 28-year renewal period. When Congress enacted the 1976 Act, the prevailing view was that the owners of the renewal copyright in the underlying story could veto the continued use of the derivative work. 17 Mills Music, 469 U.S. at 183, 105 S.Ct. at 655 (White, J., dissenting). We can reasonably presume that Congress knew of this prevailing view when it enacted the 1976 Act and chose not to alter the balance. Cf. Mills Music, 469 U.S. at 172, 105 S.Ct. at 649. 67 Neither the equities, precedent, nor Congressional intent justify us in changing the balance between owners of renewal copyrights in underlying works and owners of the copyright in derivative works when Congress has refrained from doing so. We therefore hold that defendants' continued exploitation of the Rear Window film without Abend's consent violates Abend's renewal copyright in the underlying story It Had to Be Murder, unless the defendants can establish any affirmative defenses. 18 68 Our holding does not mean, however, that the equities of this case have no bearing on its outcome. We are mindful that this case presents compelling equitable considerations which should be taken into account by the district court in fashioning an appropriate remedy in the event defendants fail to establish any equitable defenses. Defendants invested substantial money, effort, and talent in creating the Rear Window film. Clearly the tremendous success of that venture initially and upon re-release is attributable in significant measure to, inter alia, the outstanding performances of its stars--Grace Kelly and James Stewart--and the brilliant directing of Alfred Hitchcock. The district court must recognize this contribution in determining Abend's remedy. 69 The district court may choose from several available remedies for the infringement. Abend seeks first an injunction against the continued exploitation of the Rear Window film. 17 U.S.C. Sec. 502(a) provides that the court may ... grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain infringement of a copyright. 19 Defendants argue (in an attempt to persuade us to accept Rohauer ) that a finding of infringement presumptively entitles the plaintiff to an injunction, citing Professor Nimmer. See 3 M. Nimmer, Nimmer on Copyright Sec. 14.06[B] at 14-55 to 14-56.2 (1988). However, Professor Nimmer also states that where great public injury would be worked by an injunction, the courts might ... award damages or a continuing royalty instead of an injunction in such special circumstances. Id. at 14-56.2. 70 We believe such special circumstances exist here. The Rear Window film resulted from the collaborative efforts of many talented individuals other than Cornell Woolrich, the author of the underlying story. The success of the movie resulted in large part from factors completely unrelated to the underlying story, It Had To Be Murder. It would cause a great injustice for the owners of the film if the court enjoined them from further exhibition of the movie. An injunction would also effectively foreclose defendants from enjoying legitimate profits derived from exploitation of the new matter comprising the derivative work, which is given express copyright protection by section 7 of the 1909 Act. Since defendants could not possibly separate out the new matter from the underlying work, their right to enjoy the renewal copyright in the derivative work would be rendered meaningless by the grant of an injunction. We also note that an injunction could cause public injury by denying the public the opportunity to view a classic film for many years to come. 71 This is not the first time we have recognized that an injunction may be an inappropriate remedy for copyright infringement. In Universal City Studios v. Sony Corp. of Amer., 659 F.2d 963, 976 (9th Cir.1981), rev'd on other grounds, 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984), we stated that Professor Nimmer's suggestion of damages or a continuing royalty would constitute an acceptable resolution for infringement caused by in-home taping of television programs by VCR--time-shifting. See also Sony Corp. v. Universal City Studios, 464 U.S. 417, 499-500, 104 S.Ct. 774, 817-18, 78 L.Ed.2d 574 (1984) (Blackmun, J., dissenting). 72 As the district court pointed out in the Sony case, an injunction is a harsh and drastic discretionary remedy, never an absolute right. Universal City Studios v. Sony Corp. of Amer., 480 F.Supp. 429, 463, 464 (C.D.Cal.1979), rev'd on other grounds, 659 F.2d 963 (9th Cir.1981), reversed 464 U.S. 417, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984). Abend argues nonetheless that defendants' attempts to interfere with his production of new derivative works can only be remedied by an injunction. We disagree. Abend has not shown irreparable injury which would justify imposing the severe remedy of an injunction on defendants. Abend can be compensated adequately for the infringement by monetary compensation. 17 U.S.C. Sec. 504(b) provides that the copyright owner can recover actual damages and any profits of the infringement that are attributable to the infringement and are not taken into account in computing the actual damages. (Emphasis added.) 73 The district court is capable of calculating damages caused to the fair market value of plaintiff's story by the re-release of the film. Any impairment of Abend's ability to produce new derivative works based on the story would be reflected in the calculation of the damage to the fair market value of the story. In Cream Records, Inc. v. Jos. Schlitz Brewing Co., 754 F.2d 826, 827 (9th Cir.1985), for example, the plaintiff presented evidence that defendants' unauthorized use of part of plaintiff's song in a commercial had destroyed the value of the copyrighted work to other advertisers. We held that the plaintiff could recover this lost value as damages. Id. at 827-28. 74 In addition to actual damages suffered, Abend would be entitled to profits attributable to the infringement. 17 U.S.C. Sec. 504(b). Defendants' fear that Abend could receive 100% of their profits is unfounded. Abend can receive only the profits attributable to the infringement. Id.; Frank Music Corp. v. Metro-Goldwyn-Mayer, Inc., 772 F.2d 505, 518 (9th Cir.1985) (When an infringer's profits are attributable to factors in addition to use of [its] work, an apportionment of profits is proper.). Should the court find infringement because defendants have failed to establish any affirmative defenses, on remand it must apportion damages. 75 While apportioning profits is not always an easy task in these cases, neither is it a new or unusual one. In the landmark case of Sheldon v. Metro-Goldwyn-Mayer Pictures Corp., 106 F.2d 45 (2d Cir.1939), aff'd, 309 U.S. 390, 60 S.Ct. 681, 84 L.Ed. 825 (1940), Judge Learned Hand held that profits should be apportioned between the plaintiff and defendants, after finding that defendants' movie Letty Lynton infringed plaintiff's play Dishonored Lady. Sheldon, 309 U.S. at 396, 60 S.Ct. at 682. Judge Hand recognized that no real standard can govern this apportionment, but he resolved to avoid the one certainly unjust course of giving the plaintiffs everything, because the defendants cannot with certainty compute their own share. Sheldon, 106 F.2d at 51. The court then set plaintiffs' share of the profits at 20%, to favor the plaintiffs in every reasonable chance of error. Id. 76 We likewise recognize that courts cannot be expected to determine with mathematical exactness an apportionment of profits. We require only a reasonable and just apportionment. Frank Music Corp., 772 F.2d at 518. In Frank, the defendants infringed plaintiff's copyright in the play Kismet by including parts of songs and six minutes of music from the play, and by using similar characters and setting in Act IV of a musical review entitled Hallelujah Hollywood. Id. at 510. We remanded to the district court for apportionment of profits using a reasonable formula. 77 We also required apportionment in Cream Records, 754 F.2d at 828. In Cream, the plaintiff, owner of the copyright in The Theme From Shaft, sought to recover all profits earned from a commercial produced by the defendants which infringed plaintiff's copyright by using a ten note ostinato from the song. Id. We held that [i]n cases such as this where an infringer's profits are not entirely due to the infringement, and the evidence suggests some division which may rationally be used as a springboard, it is the duty of the court to make some apportionment. Id. at 828-29 (quoting Orgel v. Clark Boardman Co., 301 F.2d 119, 121 (2d Cir.), cert. denied, 371 U.S. 817, 83 S.Ct. 31, 9 L.Ed.2d 58 (1962). 78 Because factors other than Woolrich's story clearly contributed to Rear Window's success, should the district court find that the defendants have failed to establish any affirmative defense to the infringement, the district court should award Abend actual damages and apportion profits between Abend and the defendants. We turn now to the defenses raised by defendants. 79 III. Is the Defendants' Use of the Underlying Work a Fair Use? 80 Defendants argue that if we do not affirm the district court's grant of summary judgment based on Rohauer, we should do so on the alternative ground relied on by the district court--that use of the copyrighted story was a fair use. We conclude, however, that the district court erred in holding that the defendants' use was fair. 81 Under 17 U.S.C. Sec. 107, certain unauthorized uses of a copyrighted work are not infringing. These uses are termed fair uses. Section 107 does not set forth a clear test for determining when a use is a fair use. Rather, it identifies four nonexclusive factors that the court must consider: 82 (1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; 83 (2) the nature of the copyrighted work; 84 (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and 85 (4) the effect of the use upon the potential market for or value of the copyrighted work. 86 17 U.S.C. Sec. 107. 87 In applying the first factor, the Supreme Court has held that every [unauthorized] commercial use of copyrighted material is presumptively an unfair exploitation of the monopoly privilege that belongs to the owner of the copyright. Sony Corp. v. Universal Studios, Inc., 464 U.S. 417, 451, 104 S.Ct. 774, 793, 78 L.Ed.2d 574 (1984). The defendants argue that their distribution of the Rear Window film serves an educational purpose, rather than a commercial one. They offer no authority, however, for the bold proposition that a work's popularity may make its value educational rather than commercial. Clearly, the defendants' use is of a commercial nature. 17 U.S.C. Sec. 107(1). 88 The second factor that we must consider is the nature of the copyrighted work. A use is less likely to be deemed fair when the copyrighted work is a creative product. See, e.g., Brewer v. Hustler Magazine, Inc., 749 F.2d 527, 529 (9th Cir.1984) (citing Sony Corp., 464 U.S. at 455 n. 40, 104 S.Ct. at 795 n. 40); see also 3 Nimmer on Copyright Sec. 13.05[A] at 13-77 ([C]opyright protection is narrower, and the corresponding application of the fair use defense greater, in the case of factual works than in the case of works of fiction or fantasy.). Here, the copyrighted work is a fictional short story: a quintessentially creative product. This factor, therefore, militates against a finding of fair use. 89 The third factor is the amount of the portion used in proportion to the entire copyrighted work. It is undisputed that the Rear Window film was based on the underlying story, It Had To Be Murder. Although it is not entirely clear how much of the story was used in the film, Alfred Hitchcock testified in his deposition that the film was at least 20 percent Cornell Woolrich. 90 We have held that [o]ne cannot copy the substance of another's work without infringing his copyright. Benny v. Loew's Inc., 239 F.2d 532, 537 (9th Cir.1956) (television burlesque of copyrighted motion picture is not a fair use), aff'd by an equally divided court sub nom. Columbia Broadcasting System v. Loew's, 356 U.S. 43, 78 S.Ct. 667, 2 L.Ed.2d 583 (1958). Recently, we noted that the Supreme Court's decision in Sony casts doubt on [this court's] previous pronouncements concerning wholesale copying as an absolute preclusion to fair use. Hustler Magazine, Inc. v. Moral Majority, Inc., 796 F.2d 1148, 1155 (9th Cir.1986) (Pregerson, J.). In Sony, however, the Supreme Court merely held that time-shifting--making a video-tape copy of a television broadcast for viewing at a later time--was a fair use. Sony does not stand for the proposition that wholesale copying for a purely commercial purpose may ever be a fair use. Indeed, in Harper & Row the Supreme Court held that the unauthorized quotation of an insubstantial portion of an unpublished manuscript was not a fair use when the quotation took what was essentially the heart of the book. 105 S.Ct. at 2233 (citation omitted). 91 Here, a substantial portion of the underlying story, It Had To Be Murder, was used in the Rear Window film. Even if the film did not take what was essentially the heart of the [story], we conclude, based on our application of the other four statutory factors, that the defendants' use was not a fair use. 92 The fourth factor that we must consider is the effect of the use on the potential market for the copyrighted work. Nimmer terms this factor the most important, and indeed, central fair use factor. 3 Nimmer on Copyright Sec. 13.05[A] at 13-80. To illustrate the application of this factor, Nimmer posits a hypothetical in which an unauthorized motion picture is made based on a copyrighted novel. Although the motion picture will have no adverse effect on bookstore sales of the novel--and may in fact have a beneficial effect--it is clear that [the film's producer] may not invoke the defense of fair use. 3 Nimmer on Copyright Sec. 13.05[B] at 13-84. Nimmer explains that although the film will not prejudice the novel's sale in the book medium, it will prejudice its sale in the motion picture medium. Id. If the defendant's work adversely affects the value of any of the rights in the copyrighted work (in this case the adaptation right) the use is not fair even if the rights thus affected have not as yet been exercised by the plaintiff. Id at 13-84--13-85 (footnotes omitted). 93 Here, there is no question that the adaptation rights were adversely affected by the defendants' re-release and distribution of the Rear Window film. Abend stated in his declaration that he was interested in obtaining the rights to the underlying story, It Had To Be Murder, because he thought that it should be republished, and because he thought that it could be remade for United States television. Counsel for the defendants conceded at oral argument that Abend's plans for a remake were frustrated by the existence of the Rear Window film. Explaining why HBO abandoned a project to remake the story into a film, counsel for the defendants stated: It's not hard to figure out when you compare the underlying work with our movie. Under Nimmer's hypothetical, this adverse effect on the owner's adaptation rights makes the defendants' use of the underlying work unfair. It is irrelevant that the re-release of the Rear Window film may have promoted sales of the underlying story in the book medium. 94 This case presents a classic example of an unfair use: a commercial use of a fictional story that adversely affects the story owner's adaptation rights. The district court erred as a matter of law in concluding that the defendants' use was a fair use. 95 IV. Did the District Court Err in Denying Plaintiff's Motion For Summary Judgment? 96 When the district court granted defendants' motions for summary judgment based on Rohauer and fair use, it denied plaintiff's motion for summary judgment as to defendants' liability for copyright infringement. Abend appeals the denial of his motion for summary judgment. 20 He argues that there are no genuine issues of material fact regarding various affirmative defenses raised by the defendants and that he is therefore entitled to judgment as a matter of law. 97 Although we hold that the district court erred in granting summary judgment for defendants based on Rohauer and fair use, we cannot grant plaintiff's motion for summary judgment and decide whether defendants have infringed plaintiff's renewal copyright. Our review of the record indicates that the district court denied Abend's motion because it granted the defendants' motions based on Rohauer and fair use, and did not fully consider the merits of Abend's motion regarding the various affirmative defenses raised by the defendants. 21 Consequently, we remand to the district court for reconsideration of plaintiff's motion for summary judgment and the affirmative defenses raised by defendants.