Opinion ID: 3035128
Heading Depth: 3
Heading Rank: 1

Heading: Right of Termination Under the CTEA

Text: Clare argues that she properly terminated SSI’s rights in the Pooh works. We hold that the district court’s contrary conclusion is correct. In a copyright case, as in most cases, the language of the statute provides the starting point for our analysis. Cmty. for MILNE v. STEPHEN SLESINGER, INC. 16017 Creative Non-Violence v. Reid, 490 U.S. 730, 739 (1989); Mills Music, Inc. v. Snyder, 469 U.S. 153, 164 (1985). The CTEA provides in relevant part: In the case of any copyright other than a work made for hire, subsisting in its renewal term on the effective date of the Sonny Bono Copyright Term Exten- sion Act [effective October 27, 1998] for which the termination right provided in subsection (c) [of this section] has expired by such date, where the author or owner of the termination right has not previously exercised such termination right, the exclusive or nonexclusive grant of a transfer or license of the renewal copyright or any right under it, executed before January 1, 1978, by any of the persons designated in subsection (a)(1)(C) of this section, other than by will, is subject to termination. . . . 17 U.S.C. § 304(d) (emphasis added). Although Clare’s termination notice purports to terminate the 1930 grant under the CTEA (section 304(d)), that statute provides a termination right to only those transfers or licences “executed before January 1, 1978[.]” Id. (emphasis added). The only pre-1978 grant of rights to SSI, and the only grant to SSI specified in the termination notice, was the 1930 grant made by the author to Slesinger. The 1930 grant, however, was terminated by the beneficiaries of the Pooh Properties Trust upon the execution of the 1983 agreement. Accordingly, there was no pre-1978 grant of rights to SSI in existence when Congress enacted the CTEA in 1998. The sole grant of rights to SSI, either at the time of the CTEA’s enactment or when Clare served her termination notice, was the grant of rights embodied in the 1983 agreement. As the district court correctly explained, however, this grant is not subject to termination under section 304(d) 16018 MILNE v. STEPHEN SLESINGER, INC. because it was not “executed before January 1, 1978,” as the statute expressly requires. 17 U.S.C. § 304(d).
[1] Faced with the reality that she is dealing with a post1978 agreement, Clare attempts to circumvent the 1983 agreement by claiming that another provision of the CTEA, 17 U.S.C. § 304(c)(5), requires this court to regard the 1983 agreement as an “agreement to the contrary” that does not prevent her from terminating SSI’s rights to the Pooh works. Section 304(c)(5) states that a “[t]ermination . . . may be effected notwithstanding any agreement to the contrary, including any agreement to make a will or to make any future grant.” 17 U.S.C. § 304(c)(5). [2] The statute does not define the phrase “agreement to the contrary,” although it does provide two examples of agreements that would constitute an “agreement to the contrary”: “an agreement to make a will” and an agreement “to make any future grant.” Id. The undisputed fact that the 1983 agreement does not fall into either category supports the district court’s finding that the 1983 agreement is not “an agreement to the contrary.” See Sutton v. Providence St. Joseph Med. Ctr., 192 F.3d 826, 834 (9th Cir. 1999) (“When a statute contains . . . specific items and a general item, we usually deem the general item to be of the same category or class as the more specifically enumerated items.”). To support her theory that the 1983 agreement falls under the category of “an agreement to the contrary,” Clare reads the Supreme Court’s decision in Stewart v. Abend, 495 U.S. 207 (1990), as holding that Congress intended to make the termination right inalienable for authors and their families. Stewart, however, did not interpret the “agreement to the contrary” language of section 304(c)(5) or its counterpart under section 203(a)(5).7 In fact, the only discussion in Stewart per- 7 Apart from other differences, the counterpart provision found under section 203 covers transfers effected on or after January 1, 1978, whereas MILNE v. STEPHEN SLESINGER, INC. 16019 taining to inalienability is the Court’s relatively brief portrayal of the evolution of copyright law, beginning with the Copyright Act of 1790 and ending with the 1976 Copyright Act. See 495 U.S. at 230 (noting only that “[t]he 1976 Copyright Act provides a single, fixed term, but provides an inalienable termination right”) (citing 17 U.S.C. § 203). Accordingly, Stewart does not support the broad “plain meaning” that Clare attributes to section 304(c)(5). Clare also relies on the Second Circuit’s decision in Marvel Characters, Inc. v. Simon, 310 F.3d 280 (2d Cir. 2002), to support her claim that the 1983 agreement is an “agreement to the contrary” under section 304(c)(5). The contract at issue there was a settlement agreement between the parties, which ended a series of lawsuits filed in the 1960s by the creator of a copyrighted work. Id. at 283-84. The creator argued that the settlement agreement should not be given effect because it contractually changed the nature of the copyrighted work, labeling it as a “work made for hire” many years after its creation. Id. at 284-85. The effects of this after-the-fact label were to make the creator an “employee for hire” rather than the author of the copyrighted work, and to foreclose his right to terminate the grant he had made in the copyrighted work. Id. at 283-84. Thus, unlike the issue presented in the case at bar, the issue facing the Second Circuit was “whether § 304(c)(5)’s phrase ‘any agreement to the contrary’ includes a settlement agreement stating that a work was created for hire[.]” Id. at 290 (quoting 17 U.S.C. § 304(c)(5)). After examining the legislative history and considering the purpose of section 304(c), the court concluded “that an agreement made subsequent to a work’s creation which retroactively deems it a work for hire constitutes an agreement to the contrary under § 304(c)(5) of the 1976 Act.” Id. at 292 (intersection 304(c) covers transfers before that date. 17 U.S.C. §§ 203(a), 304(c). 16020 MILNE v. STEPHEN SLESINGER, INC. nal quotation marks omitted). The Second Circuit held that an employer cannot contractually transform a creator or author of a copyrighted work into an “employee for hire.” Id. The court expressed concern that if it held otherwise, works not satisfying the relationship-based “for hire” test could be coerced by post-facto agreements that designate such works to be something they are not: “works for hire.” Id. at 291-92. The facts, reasoning, and holding of Marvel have little relevance to this case because, here, there is no after-the-fact attempt to recharacterize the work or a prior agreement. Instead, the 1983 agreement involves contractual provisions that operated prospectively through the revocation of an existing grant and the making of a new one. As the district court recognized, “[t]he parties in the 1983 [a]greement did not attempt to change or modify the nature of their association with one another, or alter the character of their long-standing author/grantee relationship.” Reinforcing this reasoning are the undisputed facts that the 1930 grant was expressly revoked by the Pooh Properties Trust, which made a new grant of rights to SSI that, inter alia, was more lucrative for the author’s heirs. The fact that the 1983 agreement was meant to protect the continuing viability of the author’s grant of rights to SSI is evident from the agreement itself. In that vein, it is important to note that the parties describe their 1983 agreement as a “new agreement for the future which the parties believe would not be subject to any right of termination under 17 U.S.C. Secs. 203 or 304(c)” (emphasis added). Neither Marvel nor any other of Clare’s cited authority supplies a basis for us to question the district court’s decision or to undo the 1983 agreement, which was freely and intelligently entered into by the parties.8 The beneficiaries of the 8 Also not well taken is Clare’s citation of Rano v. Sipa Press, Inc., 987 F.2d 580 (9th Cir. 1993), to support her perspective that section 304(c) MILNE v. STEPHEN SLESINGER, INC. 16021 Pooh Properties Trust were able to obtain considerably more money as a result of the bargaining power wielded by the author’s son, Christopher, who was believed to own a statutory right to terminate the 1930 grant under section 304(c) of the 1976 Copyright Act. Although Christopher presumably could have served a termination notice, he elected instead to use his leverage to obtain a better deal for the Pooh Properties Trust. His daughter, Clare, was a beneficiary of this new arrangement, and her current dissatisfaction provides no reason to discredit the validity of the 1983 agreement and the rights conferred thereby.
The district court stated there was nothing wrong with the fact that “the 1983 [a]greement was created in order to protect SSI and Disney from a termination of the rights granted to them.” Relying on legislative history, the district court read the House Report for the 1976 Copyright Act as confirming the rule that “[n]othing in the Copyright Acts has altered the preempts any right Christopher had in contracting for the termination of the 1930 grant. Based on Rano, she argues that the 1983 agreement did not produce an effective termination because the Pooh Properties Trust did not utilize the statutory termination procedure in place under section 304(c) of the 1976 Copyright Act. This overlooks the fact that Rano did not address the effectiveness of a party’s purported exercise of a statutory termination right under section 304(c). The Rano court only held that the existence of such a statutory termination mechanism in section 203(a)(5) preempts a California common-law rule permitting the unilateral termination at will of an agreement that has a non-specified duration. 987 F.2d at 585-86. Whatever views one may have regarding the correctness of the narrow holding of Rano, it cannot be said that Rano suggests a ruling that would nullify a mutual decision to revoke a grant of rights. See Scholastic Entm’t, Inc. v. Fox Entm’t Group, Inc., 336 F.3d 982, 988 n.2 (9th Cir. 2003) (observing that “Rano has been called into serious question by courts as well as commentators”). Moreover, Rano’s narrow facts have no application here, where the 1930 grant expressly provided for its duration. See Rano, 987 F.2d at 583, 585 (emphasizing the fact that the subject agreement was one without a specified duration). 16022 MILNE v. STEPHEN SLESINGER, INC. power of private parties to contract.” H.R. REP. NO. 94-1476, 94th Cong., 2d Sess. (1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5743. Clare criticizes the district court’s approach to statutory construction, arguing that section 304(c)’s meaning is clear on its face and that there was no need for the district court to consider legislative history. She maintains that the district court used legislative history to override the statute itself. [3] We disagree. Section 304(c)(5) states that “[t]ermination . . . may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.” 17 U.S.C. § 304(c)(5). As we have noted, the phrase “agreement to the contrary” is unclear. Even Clare agrees that the phrase is not defined by the statute, and the Second Circuit has expressly found the phrase ambiguous and that an analysis of legislative history is required to glean its meaning. Marvel, 310 F.3d at 290; accord Walthal v. Rusk, 172 F.3d 481, 484 (7th Cir. 1999) (reviewing legislative history upon concluding that section 304(c)(5)’s counterpart termination provision under section 203 “is not perfectly clear”). This court has recognized that when a statute’s terminology is not clear on its face, it is appropriate to seek guidance in the legislative history. In re BCE West, L.P., 319 F.3d 1166, 1171 (9th Cir. 2003); see also United States v. Buckland, 289 F.3d 558, 565 (9th Cir. 2002) (“Where the language is not dispositive, we look to the congressional intent revealed in the history and purposes of the statutory scheme.” (internal quotation marks omitted)). [4] As Clare concedes, a review of the legislative history turns up nothing to support her contention that she may terminate SSI’s rights in the Pooh works on the theory that the 1983 agreement is an “agreement to the contrary.” On the contrary, Congress specifically stated that it did not intend for the statute to “prevent the parties to a transfer or license from voluntarily agreeing at any time to terminate an existing grant MILNE v. STEPHEN SLESINGER, INC. 16023 and negotiating a new one[.]” H.R. REP. NO. 94-1476 at 127; 1976 U.S.C.C.A.N. at 5743.9 Congress further stated that “nothing in this section or legislation is intended to change the existing state of the law of contracts concerning the circumstances in which an author may terminate a license, transfer or assignment.” H.R. REP. NO. 94-1476 at 142; 1976 U.S.C.C.A.N. at 5758. Congress therefore anticipated that parties may contract, as an alternative to statutory termination, to revoke a prior grant by replacing it with a new one. Indeed, Congress explicitly endorsed the continued right of “parties to a transfer or license” to “voluntarily agree[ ] at any time to terminate an existing grant and negotiat[e] a new one.” H.R. REP. NO. 94-1476 at 127; 1976 U.S.C.C.A.N. at 5743. The rationale behind the legislation was to “safeguard[ ] authors against unremunerative transfers” and improve the “bargaining position of authors” by giving them a second chance to negotiate more advantageous grants in their works after the works had been sufficiently “exploited” to determine their “value.” H.R. REP. NO. 94-1476 at 124; 1976 U.S.C.C.A.N. at 5740. Congress sought to foster this purpose by permitting an author’s heirs to use the increased bargaining power conferred by the imminent threat of statutory termination to enter into new, more advantageous grants. This is exactly what Christopher and the other beneficiaries of the Pooh Properties Trust did in 1983. 9 To the extent that the legislative record references section 304(c)(5)’s counterpart provision under section 203(a)(5), we find that history instructive given Congress’s use of identical language in both provisions. See Gustafson v. Alloyd Co., 513 U.S. 561, 570 (1995) (recognizing that “ ‘identical words used in different parts of the same act are intended to have the same meaning’ ” under the “ ‘normal rule of statutory construction’ ” (quoting Dep’t of Revenue of Or. v. ACF Indus., Inc., 510 U.S. 332, 342 (1994))); see also Batjac Prods., Inc. v. Goodtimes Home Video Corp., 160 F.3d 1223, 1228 (9th Cir. 1998) (supporting the “ ‘basic canon of statutory construction that identical terms within an Act bear the same meaning’ ” (quoting Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469, 479 (1992))). 16024 MILNE v. STEPHEN SLESINGER, INC. [5] After more than 50 years of advancement of the Pooh works in the marketplace, their value was sufficiently demonstrated, and the 1976 Copyright Act provided Christopher a window for termination. The Pooh Properties Trust recognized the perceived right to terminate as a valuable bargaining chip, and used it to obtain an advantageous agreement that doubled its royalty share relative to SSI’s share. Thus, the 1983 agreement exemplifies the increased bargaining power that Congress intended to bestow on authors and their heirs by creating the termination right under the 1976 Copyright Act. As the 1983 agreement appears to be the type expressly contemplated and endorsed by Congress, we do not consider it to be a prohibited “agreement to the contrary” under section 304(c)(5). In addition, Clare attempts to conjure up a proverbial “parade of horrors” that she believes would result were we to uphold the parties’ exercise of free will to enter into the 1983 contract. She argues that judicial recognition of the 1983 agreement “ ‘would provide a blueprint by which publishers could effectively eliminate an author’s termination right’ ” (quoting Marvel, 310 F.3d at 291). The strength of a proposed parade of horrors, however, lies “in direct proportion to (1) the certitude that the provision in question was meant to exclude the very evil represented by the imagined parade, and (2) the probability that the parade will in fact materialize.” Harmelin v. Michigan, 501 U.S. 957, 986 n.11 (1991) (Scalia, J., concurring). The application of these factors here shows that Clare’s imagined parade will never march forward. Clare presents no authority suggesting that Congress designed the statutory termination provisions to prevent parties from agreeing to a simultaneous revocation and new grant of rights. Certainly with regard to the instant case, Clare’s concerns are unfounded. The 1983 agreement came about some seven years after the copyright owner felt empowered to exercise his right of termination under the 1976 Copyright Act, and after he was able to assess the works’ value over the course of more than five decades. Far from resulting in a termination of MILNE v. STEPHEN SLESINGER, INC. 16025 the grantee’s rights, the 1983 agreement resulted in an increased royalty stream to the author’s heirs — the very result envisioned by Congress when it enacted the termination provisions.