COPYRIGHT HOLDER PROTECTION ACT WEDNESDAY, NOVEMBER 20, 1985 U.S. SENATE, SUBCOMMITTEE ON PATENTS, COPYRIGHTS AND TRADEMARKS, Washington, DC. The subcommittee met, pursuant to notice, at 10:04 a.m., in room SD-226, Dirksen Senate Office Building, Hon. Arlen Specter presiding. Staff present: Steven J. Metalitz, staff director and acting chief counsel; Kenneth E. Mannella, counsel; Pamela S. Batstone, chief clerk; and Neal S. Manne, chief counsel (Subcommittee on Juvenile Justice). OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM THE STATE OF PENNSYLVANIA Senator SPECTER. Good morning, ladies and gentlemen. The hearing will commence. With the authorization of the subcommittee chairman, Senator Mathias, the Subcommitee on Patents, Copyrights and Trademarks of the Committee on the Judiciary will proceed with this hearing on Senate bill 1384, which deals with the copyright issue and seeks to alter the 5-to-4 decision of the Supreme Court of the United States in the Mills Music case. This is a matter of great importance to those in the field. It is my preliminary thought that the Supreme Court decision was not sound and that, as a matter of legislative intent, it is appropriate to have Senate bill 1384 clarify the intent of the Congress, which would have the effect of reversing the Supreme Court decision. Before coming to a final judgment on the matter, it seems appropriate to me that we proceed with the hearing and an inquiry into all facets of the matter, and for that objective, we have scheduled this hearing this morning, and we shall proceed at this time. [A copy of S. 1384 follows:] (1) Η 99TH CONGRESS 18T SESSION S. 1384 To amend the Copyright Act of 1976 to clarify the operation of the derivative works exception. IN THE SENATE OF THE UNITED STATES JUNE 27 (legislative day, JUNE 26), 1985 Mr. SPECTER introduced the following bill; which was read twice and referred to the Committee on the Judiciary A BILL To amend the Copyright Act of 1976 to clarify the operation of the derivative works exception. 1 Be it enacted by the Senate and House of Representa 2 tives of the United States of America in Congress assembled, 3 That this Act may be cited as the "Copyright Holder Protec4 tion Act of 1985". 5 SEC. 2. Section 304(c)(6) of the Copyright Act of 1976 6 (17 U.S.C. 304(c)) is amended by adding at the end thereof 7 the following: "(7) Notwithstanding any other provision of law, where an author or his successor, as defined in subsec 8 9 10 tion (c)(2), has exercised a right of termination pursu 1 2 3 4 5 2 ant to this section and a derivative work continues to be utilized pursuant to subsection (c)(6)(A) of this section, any right to royalties from the utilization of the derivative work shall revert to the person exercising the termination right.". O S 1384 IS Senator SPECTER. I would like to recognize a distinguished Member of Congress, the Honorable Howard L. Berman, U.S. House of Representatives, from the 26th District of California. Congressman Berman, we welcome your leadership on this important issue and look forward to your testimony. STATEMENT OF HON. HOWARD L. BERMAN, A U.S. Mr. BERMAN. Thank you very much, Mr. Chairman. I want to say how much I appreciate Senator Mathias setting this hearing and your legislative effort in this area. I think it is an important issue for the community that is affected by the Mills Music case, and I commend you and the subcommittee for conducting these hearings. I am in support of the legislation to amend the Copyright Act of 1976 in order to clarify the intent of Congress when it adopted the "derivative works exception" to the termination provisions of sections 203 and 304 of the Copyright Act. I approach this matter with great seriousness. When Congress legislates in the area of copyright, we are exercising a responsibility explicitly charged to us by the Founding Fathers in the Constitution. Equally important, I well understand the years of painstaking effort and compromise that produced the landmark Copyright Act of 1976. It is for those very reasons that I introduced H.R. 3163. In January of this year, as you indicated in your opening statement, the Supreme Court, in a closely divided 5-4 decision, in my opinion misconstrued the intent of Congress with respect to a key provision of the act and thereby deprived songwriters, authors, and other artists of important benefits Congress meant them to have. Frankly, as the members of this subcommittee are well aware, it takes a fair degree of patience to master the intricacies of copyright law. But as you also well appreciate, the consequences of copyright legislation and its interpretation by the Supreme Court are serious indeed for the livelihoods of the tens of thousands of creative artists whose works are protected by copyright. I introduced H.R. 3163 to remedy an injustice effected by the Supreme Court. H.R. 3163 in the House has been referred to the House Subcommittee on Courts, Civil Liberties, and the Administration of Justice, on which I serve, and where I am working to ensure the bill's speedy consideration. In fact, I am hopeful that that_subcommittee will be holding hearings on this issue and on my legislation soon after we come back in late January or early February. Your bill, Mr. Chairman, takes a different approach to rectifying this judicial misconstruction, but both bills share the same objective. And I am delighted that two highly respected former Registers of Copyright, Barbara Ringer and David Ladd, support the position taken by you and me with regard to both congressional intent in the 1976 act and the appropriate copyright policy. I join with you in urging the subcommittee and the Congress to promptly pass legislation to restore to the creators who enrich our cultural life the benefits we meant for them to have under our copyright laws. In the Supreme Court decision, Mills Music, the Court interpreted the "derivative works exception" to the "termination of transfer and licenses" provision of section 304(C). Section 304 extended the duration of subsisting copyrights from 56 to 75 years, but 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. In so doing, Congress determined that authors who struck unremunerative bargains with their publishers when their works were in their infancy should have the opportunity to renegotiate their old contracts. However, Congress crafted the "derivative works exception" to carve out a right of continued utilization of derivative worksmotion pictures, sound recordings. The "derivative works exception" was designed, it is generally agreed, to protect the owners of such derivative works from having to renegotiate their rights and thereby to protect the public's interest, which is in having continued enjoyment of those derivative works. When an author or his or her heirs exercises this terminate right, the copyright reverts from the publisher to the persons filing the termination, but the privilege of utilizing the derivative works is retained by the producer, manufacturer, or distributor, as the case may be, of the derivative work. The question addressed by the Court in Mills Music was to whom the owners of the derivative work must pay royalties. The amount of royalties is not in question. That amount is provided for in their licenses. Five members of the Supreme Court held that the publisher was still entitled to its share of the royalties; four members strenuously dissented that such a conclusion would render meaningless the termination right granted by the 1976 act and that, instead, all royalties should go to the author or his heirs. Justice White's dissent deserves special consideration because of its clear explanation of the policy questions at stake, but I know that you have a number of witnesses who are far more expert on this issue than I, so I will not take the committee's time to quote from Justice White's dissent, but I do think it is worthy of particular focus. Shortly after the Mills Music decision, no less an authority than Barbara Ringer, Register of Copyrights at the time of the drafting and enactment of the Copyright Act of 1976, voiced her dismay at the Mills Music decision. Since Ms. Ringer is going to be a witness at this hearing today, I will not be so presumptuous as to quote from her earlier statements on the subject, but I think her position at that time and her respect in this field is entitled to considerable weight on the question of the original intent of Congress in making those changes. While the Mills Music decision addressed only section 304 of the Copyright Act, I think it is critically important to note that a second provision of that act, section 203, is also subject to the identical "derivative works exception" construed by the Court in Mills. Section 203 establishes that authors and their heirs may terminate grants made after January 1, 1978, at the end of a prescribed period of years, subject to the "derivative works exception." The |