Mills Music, Inc. v. Snyder
469 U.S. 153 (1985)

Annotate this Case

U.S. Supreme Court

Mills Music, Inc. v. Snyder, 469 U.S. 153 (1985)

Mills Music, Inc. v. Snyder

No. 83-1153

Argued October 9, 1984

Decided January 8, 1985

469 U.S. 153

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

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 the 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 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

Page 469 U. S. 154

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."

Held: Petitioner is entitled pursuant to § 304(c)(6)(A) to a share of the royalty income in dispute under the terms of the author's grant to petitioner in 1940. A consistent reading of the word "grant" in the text of § 304 (c)(6)(A) encompasses that grant. Nothing in the legislative history or the language of the statute indicates that Congress intended to draw a distinction between authorizations to prepare derivative works that are based on a single direct grant and those that are based on successive grants. Rather, the consequences of a termination that § 304 authorizes do not apply to derivative works that are protected by the § 304(c)(6)(A) exception. The boundaries of that exception are defined by reference to the scope of the privilege that had been authorized under the terminated grant and by reference to the time the derivative works were prepared. The record companies' derivative works involved in this case are unquestionably within those boundaries. Pp. 469 U. S. 164-178.

720 F.2d 733, reversed.

STEVENS, J., delivered the opinion of the Court, in which BURGER C.J., and POWELL, REHNQUIST, and O'CONNOR, JJ., joined. WHITE, J., filed a dissenting opinion, in which BRENNAN, MARSHALL, and BLACKMUN, JJ., joined, post, p. 469 U. S. 178.

JUSTICE STEVENS delivered the opinion of the Court.

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

Page 469 U. S. 155

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. [Footnote 1] The 1976 Act gave Snyder's heirs a statutory right to reacquire the copyright [Footnote 2] that Snyder had previously granted to Mills; however, it also provided that 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. [Footnote 3]"

The sound recordings of the Song, which have generated the royalty income in dispute, are derivative works of that kind. [Footnote 4] Thus, the dispute raises the question

Page 469 U. S. 156

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). [Footnote 5] Before focusing on the meaning of the key phrase, we shall describe the chain of title to the copyright, the circumstances surrounding Congress' adoption of the 1976 Act, and how the pertinent provisions of the 1976 Act affected the relationship among the interested parties in 1978 when Snyder's heirs terminated the grant to Mills. We begin with the early factual history.

I

Snyder was one of three persons who collaborated in creating "Who's Sorry Now." [Footnote 6] Although Snyder actually held only a one-third interest in the Song, the parties agree that we should treat the case as if Snyder were the sole author. The original copyright on the Song was registered in 1923 in the name of Waterson, Berlin & Snyder Co., a publishing company that Snyder partly owned. [Footnote 7] That company

Page 469 U. S. 157

went into bankruptcy in 1929, and in 1932 the trustee in bankruptcy assigned the copyright to Mills. [Footnote 8]

Under the Copyright Act of 1909, 35 Stat. 1075, the copyright in a musical composition lasted for 28 years from the date of its first publication, and the author could renew the copyright for an additional term of 28 years. [Footnote 9] Although Mills had acquired ownership of the original copyright from the trustee in bankruptcy, it needed the cooperation of Snyder in order to acquire an interest in the 28-year renewal term. Accordingly, in 1940 Mills and Snyder entered into a written agreement defining their respective rights in the renewal of the copyright. In essence, Snyder assigned his entire interest in all renewals of the copyright to Mills in exchange for an advance royalty and Mills' commitment to pay a cash royalty on sheet music and 50 percent of all net royalties that Mills received for mechanical reproductions. [Footnote 10]

Page 469 U. S. 158

Mills obtained and registered the renewal copyright in 1951. After filing the required statutory notice, [Footnote 11] Mills directly, or through the Harry Fox Agency, Inc., issued over 400 licenses to record companies authorizing the use of the Song in specific reproductions on phonograph records. Using a variety of different artists and different musical arrangements, these record companies prepared separate "derivative works," each of which was independently copyrightable. [Footnote 12] Because each of these derivative works was a mechanical reproduction of the Song that was prepared pursuant to a license that Mills had issued, the record companies were contractually obligated to pay royalties to Mills, and Mills, in turn, was contractually obligated to pay 50 percent of those royalties to Snyder. [Footnote 13] 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

Page 469 U. S. 159

widow and his son succeeded to his interest in the arrangement with Mills.

II

The massive work necessary for the general revision of the copyright law began in 1955, perhaps stimulated in part by this country's help in the development of, and subsequent membership in, the Universal Copyright Convention. [Footnote 14] In that year, Congress approved several appropriations for the Copyright Office. The Copyright Office then began building the foundation for the general revision by authorizing a series of 34 studies on major issues of copyright law; these studies were published and included in the legislative history. [Footnote 15] After issuing a report in 1961, the Copyright Office conducted numerous meetings with representatives of the many parties that the copyright law affected. [Footnote 16] In 1963, the Copyright Office issued a preliminary draft revision bill, which contained the essence of the Exception before the Court today. [Footnote 17] Additional discussions with interested parties

Page 469 U. S. 160

followed. [Footnote 18] Two additional draft revision bills supervened, both containing the Exception. [Footnote 19] Interested parties submitted commentary following the 1964 draft revision bill. [Footnote 20]

Congress began its lengthy hearings after the Copyright Office submitted the 1965 draft revision bill. [Footnote 21] The hearings on the 1965 bill occupied over three weeks during a 3-month period and involved well over 100 witnesses. Moreover, the Copyright Office prepared a supplementary report to accompany the 1965 draft revision bill. [Footnote 22] Although additional hearings were held in subsequent sessions, [Footnote 23] and revision bills were submitted to Congress in each term for the next 10 years, [Footnote 24] discussion over the termination provisions, and the Exception, was essentially completed at this time. Congress enacted the termination provisions and the Exception

Page 469 U. S. 161

in the 1976 Act in virtually the same form as they appeared in the 1965 draft revision bill. [Footnote 25]

III

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. [Footnote 26]

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. [Footnote 27] That termination could be effected at

Page 469 U. S. 162

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." [Footnote 28]

IV

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 "[g]rant 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. [Footnote 29] 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).

In an exhaustive opinion, the District Court first held that the record companies' derivative works had been "prepared under authority of the grant" from Snyder to Mills. The

Page 469 U. S. 163

court then noted that the statute did not make "any distinction between grantees who themselves make or own derivative works and those who license others to do so." Id. at 854. Accordingly, the court concluded that the terms of the various contracts that had been in effect prior to the termination governed the record companies' obligation to pay royalties and that under those arrangements Mills and the Snyders were each entitled to a 50 percent share in the net royalties. Id. at 867-869.

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.

Having granted Mills' petition for a writ of certiorari in order to resolve this important question of copyright law, 466 U.S. 903 (1984), we now reverse. We are not persuaded

Page 469 U. S. 164

that Congress intended to draw a distinction between authorizations to prepare derivative works that are based on a single direct grant and those that are based on successive grants. Rather, we believe the consequences of a termination that § 304 authorizes simply do not apply to derivative works that are protected by the Exception defined in § 304 (c)(6)(A). The boundaries of that Exception are defined by reference to the scope of the privilege that had been authorized under the terminated grant and by reference to the time the derivative works were prepared. The derivative works involved in this case are unquestionably within those boundaries.

V

In construing a federal statute it is appropriate to assume that the ordinary meaning of the language that Congress employed "accurately expresses the legislative purpose." [Footnote 30] We therefore start with an examination of the statutory text.

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:

"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) (emphasis supplied).

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

Page 469 U. S. 165

when it is twice used earlier in the same sentence. [Footnote 31] The reference to a derivative work at the beginning of the Exception is to one that was prepared "under authority of the grant." Again, because Mills, or Fox as its agent, authorized the preparation of each of the 400-odd sound recordings while Mills was the owner of the copyright, each of those derivative works was unquestionably prepared "under authority of the grant." The 1940 grant from Snyder to Mills expressly gave Mills the authority to license others to make derivative works. [Footnote 32] Thus, whether the phrase "under authority of the grant" is read to encompass both the original grant to Mills and the subsequent licenses that Mills issued, or only the original grant, it is inescapable that the word "grant" must refer to the 1940 grant from Snyder to Mills. [Footnote 33]

The second use of the word "grant" is in the critical phrase that allows the record companies to continue to utilize previously prepared derivative works "under the terms of the grant after its termination." To give the word a consistent meaning, we must again read it to encompass the original grant from Snyder to Mills, even though it is evident that the

Page 469 U. S. 166

relevant terms of the grant for a particular licensee must also include the specific terms of its license.

Although a consistent reading of the word "grant" in the text of § 304(c)(6)(A) encompasses the 1940 grant from Snyder to Mills, the Court of Appeals concluded that the Exception preserved nothing more than the grants from Mills to the record companies. As we have briefly noted earlier, the Court of Appeals rested its conclusion on three separate propositions, each of which merits discussion.

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:

"Since the only grants which have terms that define the circumstances under which derivative works are to be prepared and utilized are the Mills-record company grants, it is the terms of those grants that the Exception preserves, not the grant from the Snyders giving Mills 50% of the mechanical royalties."

720 F.2d at 739.

It is undisputed that the 1940 grant did not itself specify the terms that would apply to the use of any particular derivative work. The licenses that Mills, or its agent Fox, executed contain those terms. But if the underlying grant from Snyder to Mills in 1940 had not authorized those separate licenses, they would have been nullities. Moreover, if the licenses are examined separately from that earlier grant, they merely require that royalty payments be made to Mills or to Fox as the collection agent for Mills. [Footnote 34] 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

Page 469 U. S. 167

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. [Footnote 35]

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

Page 469 U. S. 168

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. [Footnote 36]

The "Utilizer" of a Derivative Work

The second of the Court of Appeals' propositions stated that Mills is not the "utilizer" of a derivative work because "[a]ll that Mills did was to utilize the underlying copyright when it owned it by licensing others to create and utilize

Page 469 U. S. 169

derivative works." 720 F.2d at 739. Building on its erroneous first proposition, the court determined:

"The language of the Exception supports such a conclusion. The Exception provides that the derivative work must be prepared under the authority of the grant, excluding, therefore, unauthorized derivative works. It is only grants from Mills to the record companies which authorize the preparation and creation of the derivative works here involved. The Exception, then, protects creators who utilize derivative works prepared under the authority of the grant authorizing the creation of such derivative works."

Ibid. Although not expressly adopting the Court of Appeals' first proposition regarding "two grants," respondents expand on the court's second proposition, urging that the Exception protects only the utilization of derivative works after the underlying copyright has reverted to the author. Brief for Respondents 3-8.

The protection provided to those who utilize previously prepared derivative works is not, however, unlimited. The word "utilized" as written in the Exception cannot be separated from its context and read in isolation. It is expressly confined by "the terms of the grant." The contractual obligation to pay royalties survives the termination and identifies the parties to whom the payment must be made. If the Exception is narrowly read to exclude Mills from its coverage, thus protecting only the class of "utilizers" as the Snyders wish, the crucial link between the record companies and the Snyders will be missing, and the record companies will have no contractual obligation to pay royalties to the Snyders. If the statute is read to preserve the total contractual relationship, which entitled Mills to make duly authorized derivative works, the record companies continue to be bound by the terms of their licenses, including any terms requiring them to continue to pay royalties to Mills.

Page 469 U. S. 170

Legislative History

The Court of Appeals' third, and last, proposition stated that

"Congress did not specifically address the situation where the grantee from the author has himself subleased or subgranted or licensed use of the copyright."

720 F.2d at 740. It considered the statutory text ambiguous because the statute "speaks in terms of one grant, while . . . we are dealing with two distinct grants." Id. at 740, n. 12. Because the Court of Appeals' review of the legislative history did not disclose any specific consideration of the problem that this case presents, it further concluded that Congress had simply overlooked the possibility that a licensee's authority to prepare derivative works might depend on two separate grants. The Court of Appeals, therefore, predicated its construction of the Exception largely on its evaluation of the legislative purpose: to "protect owners of derivative works like film producers who own derivative copyrights in books or plays." Id. at 741.

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. [Footnote 37] Indeed, there is reason to believe

Page 469 U. S. 171

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

Page 469 U. S. 172

many years. [Footnote 38] 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

Page 469 U. S. 173

appreciate the true value of his work product. [Footnote 39] 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." [Footnote 40] 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

Page 469 U. S. 174

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. [Footnote 41]

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. [Footnote 42] The Court of

Page 469 U. S. 175

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, [Footnote 43] in interpreting

Page 469 U. S. 176

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. [Footnote 44]

VI

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. [Footnote 45] Specifically, that history

Page 469 U. S. 177

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 argument is unpersuasive. It explains why the Exception protects the utilizer of a derivative work from being required to pay an increased royalty to the author. It provides no support, however, for the proposition that Congress expected the author to be able to collect an increased royalty for the use of a derivative work. On the contrary, this history is entirely consistent with the view that the terms of the grant that were applicable to the use of derivative works at the time of termination should remain in effect. The public interest in preserving the status quo with respect to derivative works is equally well served by either petitioner's or respondents' reading of the Exception. Respondents' argument thus sheds no light on the meaning of the phrase

Page 469 U. S. 178

"the terms of the grant." Surely it does not justify the replacement of contractual terms that unambiguously require payment of royalties to a publisher with a new provision directing payment to an author instead.

Under the terms of the grant in effect at the time of termination, Mills is entitled to a share of the royalty income in dispute.

The judgment of the Court of Appeals is reversed.

It is so ordered.

[Footnote 1]

See 17 U.S.C. §§ 101-810. The 1976 Act generally became effective on January 1, 1978.

[Footnote 2]

17 U.S.C. § 304(c)(2).

[Footnote 3]

§ 304(c)(6)(A). The full text of this provision is quoted in n. 5infra.

[Footnote 4]

The 1976 Act defines a "derivative work" as follows:

"'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 sound recording is generally fixed on a master, and then embodied and distributed on phonorecords. The 1976 Act distinguishes "sound recordings" from "phonorecords." The former are defined as follows:

"'Sound recordings' are works that result from the fixation of a series of musical, spoken, or other sounds, but not including the sounds accompanying a motion picture or other audiovisual work, regardless of the nature of the material objects, such as disks, tapes, or other phonorecords, in which they are embodied."

Ibid. In contrast, the 1976 Act provides the following definition of "phonorecords":

"'Phonorecords' are material objects in which sounds, other than those accompanying a motion picture or other audiovisual work, are fixed by any method now known or later developed, and from which the sounds can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. The term 'phonorecords' includes the material object in which the sounds are first fixed."

Ibid. Moreover,

"[a] work is 'fixed' in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration."

Ibid.

[Footnote 5]

The Exception reads as follows:

"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).

[Footnote 6]

Snyder composed the music, and Burt Kalmar and Harry Ruby wrote the words. App. 52.

[Footnote 7]

Id. at 49.

[Footnote 8]

Id. at 38.

[Footnote 9]

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, 318 U. S. 644 (1943).

[Footnote 10]

The agreement, which Snyder and respondent Marie Snyder signed, covered Snyder's entire catalog of songs. It provided, in part:

"In part consideration hereof, I further covenant and agree promptly to apply for renewal copyrights on all of my compositions which from time to time may hereafter fall due and are now part of your [Mills'] catalogue, whether I was the sole author thereof or collaborated with others and which vest in me the right to make copyright applications on all such compositions as provided by the United States Copyright Act and in which I have any right, title and interest or control whatsoever, in whole or in part, and I further covenant and agree with you to stand seized and possessed of all such renewal copyrights and of all applications therefor, and of all rights in or to any such compositions for you and for your sole and exclusive benefit. . . . I further agree that, when such renewal copyrights are duly issued and obtained they shall automatically become vested in you as the sole owner thereof, and your successors and assigns."

"After first deducting all advance royalties heretofore paid as above provided for, and any other sums that may have been advanced to me under the terms of this agreement, the following royalties shall be payable to me during your customary semi-annual royalty period each year, as follows: three (3

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