Furthermore, the copyright clause of the Constitution empowers Congress to secure to authors the exclusive right in their writings, Bearing in mind that Congress was creating entirely new rights with these longer terms, I believe there is a genuine question as to whether the new rights could be granted to entities other than authors, which for many older copyrights would have been the case.

The basic purpose of the termination was to make sure that authors or their heirs had the opportunity to renegotiate their old contacts, rather than merely letting the contracts run on through the longer copyright term, In a great many cases, I believe that the Supreae Court

decision will effectively defeat this purpose.

Legislative Intent: The Means Congress Chose to Protect the Investments of Publishers and Other Intermediate Entrepreneurs

As already noted, in the 1976 Act Congress enacted two different types of terminations: (1) the section 304 termination of gravis covering the 19-year extension of subsisting renewal copyrights; and (2) the section 203 termination of grants made after the effective date of the new law. While the two are closely related, they differ in certain important respects.

In cases involving the first type of termination, the publisher or other grantee had received everything it ever had any right to expect. There could be no question of allowing the grantee nore tine to recover its investment, since it had already had 56 years in Ń to do so, and had never expected anything more. The added 19-year term was a new right and Congress intended it to go to the author or the author's heirs.

With respect to the second type of termination--that is, temirations made under section 203 of grants executed after January 1, 1973the thinking was somewhat different. Congress had decided to phase out the old renewal provision, which included the possibility of reversion to the author or the author's heirs after 28 years. The renewal provision was far from satisfactory in practice, but in some cases it di allow authors or their heirs to recapture their copyri ghts. In abea

doning renewals and creating a much longer copyright term (the life of the author plus 50 years, or even longer in some cases), Congress hai to face this question: should an unremunerative or unfair contract

made by the author at the beginning of a copyright be allowed to ran on for upwards of 100 years without the author and his family having any further opportunity to benefit from it?

There were extremely long and difficult negotiations over this question, and they eventually produced a compromise agreement consisting of two main principles:

(1) Authors and theirfamilies should have the opportunity is terminate grants made after the new law comes into effect, but only at the end of a stated period of years.

(2) Starting when the grant is made, that period of years

2

should be long enough to allow the entrepreneur to recover what could reasonably be expected as a return on its investment, but not so long as to constitute a windfall at the expense of the author. After more

extended discussions a compromise was reached, and the period was set at 35 years, with some variations. It was in this way that the interests of the entrepreneurial copyright owner--the first grantee--were taken into account: by according it a substantial period of time in which

to realize its investment.

Legislative Intent: We Question of Derivative Works

Eut

With respect to terminations under both section 304 and section 203, it was agreed after much discussion that the right of temination should be absolute and inalienable. Authors and their heirs could no longer sign away their reversionary expectancy, as they had been regularly induced to do under the renewal section of the 1909 Act. another question had also been lurking behind the old renewal provision: when a derivative work has been created and exploited during the first 28-year term under license from the copyright owner, what happens when the renewal copyright in the pre-existing work reverts to someone else? The typical case, which also caused the most concern, involved

a motion picture derived from a copyrighted novel or play: if the author of the underlying work recaptured the renewal copyright, did this 2927 that the motion picture had to be taken out of distribution unless a new license were obtained? In some cases, of course, the derivative work is a more important or valuable property than the pre-existing work, It was finally agreed that, infairness to the owner of the derivative work, and to avoid depriving the public of access to derivative works in this situation, a "derivative works exception" should be written into both sections 304 and 203. The purpose of the exception was to keep the derivative work in circulation and not to deprive the owner of the derivative work of the use of its own property. ficiary of the exception was intended to be the owner of the derivative work who wanted to continue utilizing it.

The sole bene

In the context of the Mills case, let us assume that Tec Snyder, instead of granting rights to Mills Music, directly licensed the record companies to make and distribute recordings. Under the exception, the record companies would have the statutorily-sanctioned privilege of continuing to exploit the sound recordings already made before termination, provided the prescribed license fees continued to be paid to the author. The difference in the actual Mills case was that the record companies had taken licenses, not from the author, but from the author's grantee. Should this mean, as the Supreme Court held, that the terminated grant stays in effect as far as royalties from licenses given by the author's grantee are concerned, and that the author is thus deprived of the full share of royalties?

In my opinion, the intention of Congress was that termination should mean termination. In the Mills case situation the publisher had alrady received everything Congress ever intended to give it. The intended beneficiary of the exception was not the entrepreneur who had originally licensed the work, but the owner of the derivative work who was utilizing it. The middleman is not the owner of the derivative work and is not ütilizing anything. I believe that the Supreme

Court decision seriously undercuts what Congress intended and deprives

authors of benefits that are rightfully theirs.

tutory Amendments: Problems of Drafting

Attached to this statement is an addendum suggesting a drafting proach somewhat different from that of either the Spector or the Berman Bill. The following comments may be pertinent here:

(1) Since the language of the "derivative works exception" appears in both sections 203 and 304 of the present law, I believe that it is important to have parallel amendments to both sections. The Mills decision certainly construed both sections; leaving the language of section 203 untouched would seem inconsistent with the purpose of the legislation and would perpetuate the problems now being encountered under section 304.

(2) In reaching its result in the Mills case the Supreme Court construed the meaning of the specific language of the "derivative works exception" in a certain way, and that construction is now the law of the land. If Congress wishes to reverse the Mills result, it should repeal the language that has been misconstrued, and should write completely new language that clearly and unequivocally states its intention. To leave the present language as part of the amendment could raise new problems of construction and invite challenges on due process

grounds.

(3)With respect to terminated grants, the Hills decision established the legal right of publishers and other intermediate entrepreneurs to collect or share in royalties from the utilization of derivative works under pre-existing contracts. These are property rights, and to cut them off where terminations have already been effected would, at the least, raise constitutional questions of due process. I believe that the statutory amendment should be given a specific effective date, and that the legislation should make clear that rights under any grant terminated before that date are not affected.

ADDENDUM

Proposed alternative language for amendments to the "derivative works exception" in both sections 203 and 304

(Note: the introductory language and clause numbers
would differ in the two sections, butthe
basic provisions would be identical)

In all cases the reversion of rights is subject to the following

limitations:

(1) When a derivative work, hesed on the copyrighted work covered by the terminated grant, was prepared before the termination under lawful authority of the grantor or grantee, the person entitled to utilize the derivative work immediately before the effective date of termination shall, thereafter, have the privilege of continuing such utilization under the following conditions:

(i) Subject to the provisions of paragraphs (ii) and (iii) of this clause, the continued utilization shall conform to the terms and conditions of the instrument under which the derivative work was prepared;

(ii) Notwithstanding any provisions of the instrument
under which the derivative work was prepared, specifying
the recipient of royalties, shares or profits, or other
moneys payable under such instrument, any such royalties,
shares, or moneys shall be paid directly to, and shall be
the sole property of, the person or persons in whom the
reverted rights in the copyrighted work are vested pur-
suant to clause
of this subsection; and

(iii) 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.

Proposed section on effective date

SEC.

This Act shall come into effect on

and shall have no effect on the right to receive royalties, shares of profits, or other moneys under any grant terminated before that date.