PREPARED STATEMENT OF BARBARA RINGER FORMER REGISTER OF COPYRIGHTS In January of this year the U.S. Supreme Court handed down its decision in Mills Music, Inc. v. Snyder, 105 S. Ct. 638, a case involving the so-called "derivative works exception" to the termination provisions of section 304 of the Copyright Act. The court ruled that, even after termination of its contract with an author, a publisher can continue to share royalties from the distribution of sound recordings made by others. I believe that this decision runs counter to Congressional intent and is seriously prejudicial to the legitimate rights of authors and their heirs. My hope is that Congress can be convinced to reexamine this important problem and ultimately to redress the imbalance created by the Mills decision. The Background of the Decision The Mills case arose under section 304 of the 1976 Copyright Act, dealing with the duration of subsisting copyrights already in existence when the new law took effect. Section 304 extended the total duration of subsisting copyrights from 56 to 75 years; it also gave authors (or certain of their heirs) the right to terminate any of the author's grants of rights and to reclaim full copyright ownership during the 19-year extension of the term. However, this right of termination was made subject to an excep tion: A derivative work prepared under authority The work involved in the Mills case was the 1923 song "Who's Sorry In 1940 the author, Ted Snyder, assigned his rights under the Now?". copyright to the music publisher Mills Music, Inc., in exchange for a commitment to pay royalties, including half of all net royalties received by the publisher from its licenses with record companies. publisher in turn licensed various record companies to make sound recordings and to manufacture and distribute phonograph records of the song. The The sound recordings made under these licenses are "derivative works" which are owned and exploited by the various record companies licensed by the publisher. The publisher's role here is essentially that of a middleman, since it has nothing to do with the making of the derivative work or with the manufacture and distribution of the records reproduced from it. The publisher was entitled to collect record royalties which, under its agreement with the author, it was obliged to divide equally with the author or his successors. This fifty-fifty split of record royalties be tween author and publisher was standard in songwriter contracts of the time. The Effect of the 1976 Statute Under the new law, which came into effect on January 1, 1978, copyrights already in their second term were automatically extended by 19 years; the 1923 copyright in "Who's Sorry Now?" is thus scheduled to expire at the end of 1998. Taking advantage of the termination provisions of section 304, Ted Snyder's statutory heirs at the proper time filed the necessary notices of termination of his grant to Mills Music. What were the legal effects of this act of termination? There seems to be general agreement as to the following conclusions: First, the publisher ceases to be the copyright owner and the persons filing the termination (in this case the author's heirs) become the owners of the copyright. Second, the record companies can continue to manufacture and distribute records and tapes reproduced from sound recordings already made under their licenses with the publisher. A sound recording is a "derivative work" and, under the "derivative works exception," the record companies clearly have the privilege of continuing to utilize their recordings. Third, the record companies must continue to pay the same amount of royalties provided for in their licenses. They must pay these amounts to someone, but to whom? This was the question in the Mills case. The Decision in Mills v. Snyder The issue facing the Supreme Court in the Mills case was whether the publisher, who had nothing to do with the derivative work other than collecting royalties from it, was still entitled to its share of the royalties, or whether the termination of its grant means that all royalties should go to the author or his heirs. I believe that Congress meant the author to have the full benefit of the copyright in this situation. In a five-four decision, the Suprene Court decided otherwise, holding that under the derivative works exception the publisher may continue to share the royalties generated by utilization of derivative works by other licensees, even after the author or his heirs have recaptured the copyright. There was a strong dissent for the minority written by Justice White with which I agree. The decision in Mills Music, Inc. v. Snyder settled questions of statutory construction and is now the law of the land. While I disagree with the majority's interpretation of the wording of the statute, it would be pointless for me to sift over the complex technical arguments on which the decision turned. Technicalities aside, however, I believe that the result reached in the Mills case is not what Congress intended, and that it represents a windfall for publishers at the expense of authors and their families. Under this decision, authors and their heirs will be deprived of benefits that Congress meant them to have. If, as I believe, the decision runs counter to the legislative intent, then Congress should reexamine the question. And if, after this reexamination, it becomes clear that there is a wrong needing to be righted, then Congress should consider revising the law. The Scope and Importance of the Decision As obscure and esoteric as this question may appear, it is of in- mense importance to much of the copyright community. great deal of money, and its impact goes far beyond the facts in the Hills case. There are four points to be made here: First: The decision applies not only to music and sound recordings but also to every conceivable type of copyrightable work and to every conceivable type of derivative work that can be made from a copyrighted work. Second: In the Mills case the author's grant to the publisher provided for him to receive 50 percent of the record royalties, and his heirs will, under the decision, continue to receive this share. But, especially in fields other then music, the author's grant to the publisher or middleman-entrepreneur may not provide for any author's share of royalties from licensing particular kinds of derivative works. If the publisher or entrepreneur can continue to receive 100 percent of the royalties, the termination of the author's grant becomes a hollow mockery. Third: The Mills case dealt with section 304 and the 19-year extension of subsisting renewal copyrights. But the 1976 Act contained a parallel and potentially far more important provision in section 203. Under that section, authors and their heirs may terminate grants made after January 1, 1978 at the end of a prescribed period of years, but subject to the same "derivative works exception" as that construed in the Mills decision. Thus, unless the Supreme Court's ruling is changed by Congress, its impact will continue into the indefinite future. Fourth: Most important of all, the issue in the Mills case raises the fundamental question of whom Congress is seeking to benefit by means of the termination provisions in both sections 304 and 203. Does it really mean to benefit the holders of old contracts that go back for generations, or does it want to give real, rather than illusory, benefits to authors and their heirs? The Question of Legislative History Both the majority and minority opinions in the Mills case dwelt at length on the legislative history of the statutory provisions, a subject on which I have some personal knowledge. It is no secret that I was the author of the provision in question, in the sense that it was my pen that drafted the language. The content of the termination provisions had been hammered out following lengthy debates and discussions, although the compromises had been reached and the issues effectively settled before Congress took up the question of general revision of the copyright law in formal hearings. The Copyright Office was the initial drafter of the entire revision bill, including the termination provisions, and it is important to recognize thatthe Copyright of= fice, as part of the Library of Congress, is an arm of Congress in the legislative branch. Moreover, counsel from the committees charged with copyright responsibilities in both Houses played an active and continuing role in the whole process that led to the development and drafting of the revision bill. Legislative Intent: The Relation Between Longer Copyright Terms and Termination of Grants It is important to recognize that the right of termination given by Congress to authors and their heirs in the 1976 Act was not attached to anything already in existence. In the case of section 304, the termination applied only to the 19-year extension of subsisting renewal copyrights--an entirely new term of copyright carved out of what would otherwis e have been the public domain. In the case of section 203, the termination applied only to contracts written after the new law came into effecg, and that new law provided for a radically different and much longer term of protection.. In both cases Congress was granting a new right, and I believe it is fair to say that Congress would have been extremely reluctant to do this unless it had been assured that individual authors would at least have the opportunity of enjoying the benefits of these new rights. If the author's old and, in many cases, unfair contracts were to be pre |