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exception became a part of the termination provisions in order to protect those assignees who had already prepared derivative works before the copyright
owner terminated a grant of rights under 17 U.S.C. $203(b)(1) or 5304(c). The
reversion of rights in both cases is subject to the following limitation:
A derivative work prepared under authority of the
17 U.S.C. $203(b)(1); $304(c)(6)(A).
In January of this year, the Supreme Court ruled
questioning the proper disbursement of royalties for derivative works that
termination." 3/ The exception itself does not say anything about the payment
of royalties, but the Court carefully examined the statutory language and the
legislative history before deciding that the petitioner, a music publisher,
was entitled to share in the royalties generated by the continued utilization
of derivative works, sound recordings, that the publishers had licensed before
the composer's heirs terminated the grant under 17 U.S.C. $304(c). Thirteen
judges looked at this case; six of them
five Supreme Court Justices and the
district court judge
felt that the disbursement of royalties should be
governed by the author's contract with the music publisher, and seven
Supreme Court Justices and three judges for the Court of Appeals for the
felt all of the royalties should revert to the author.
The decision has been criticized by authors and composers and by Barbara Ringer, former Register of Copyrights, in an appearance before this
Subcommittee on April 17, 1985. On June 27, 1985, Senator Specter introduced
S.1384, a bill that adds a new subsection to $304 which specifically provides
that "any right to royalties from the utilization of the derivative work shall
revert to the person exercising the termination right."
This question of how royalties should be divided under the derivative works exception is a technical one involving the balancing of
Mills Music Inc. V. Snyder, 105 S.Ct. 638 (1985)
equities between two types of copyright proprietors:
the composer or author
of the original work and the publisher or other disseminator who was granted
rights to that work and subsequently licensed derivative works.
appears in a provision which, since it involves statutory restraints on
transfer of property and
freedom of contract, required considerable
compromise in order to reconcile opposing views.
The compromise was reached,
moreover, as part of resolving the larger issues of:
duration of copyright;
recapture of the copyright by the author and his or her heirs, either through
a renewal provision or other reversion mechanism; and if so, under what terms,
concerning the derivative work exception occurred during this period.
backdrop for the discussion was the debate regarding one of the crucial issues
of any copyright law: how long should copyright protection endure? Under the
Act of 1909 then in effect, copyright endured for 28 years from publication or
registration as an unpublished work. The right ended at that point unless the
copyright was renewed timely (that is, a renewal registration made in the
Copyright Office within the 28th year of the first term).
One of the major
revision issues therefore was whether the 56-year maximum term should be
extended; subsidiary, but equally important issues were whether there should
be a single term of copyright, and, if so, would the author who sold his or
her copyright be able to recapture the copyright, notwithstanding any contract
to the contrary.
In the context of this debate, derivative work users argued
that their investments in new versions (e.g. motion pictures of novels)
prepared under license should not be jeopardized or perhaps destroyed by
reversion of all rights to the author or the author's heirs.
The Register of Copyrights' initial Report on the General Revision of
the United States Copyright law recommended a twenty year extension of the renewal term for subsisting copyrights and noted the need to balance the
We believe there would be little justification
If the assignee is obligated to continue paying royalties or a part of his revenue to the author or his heirs during the entire life of the copyright, we would allow the assignment to remain in effect during the added 20 years. On the other hand, if the author or his heirs would otherwise receive no benefit from the lengthened term, we would terminate the assignment at the end of the 28th year of the renewal term, even if it purported to convey ownership for the length of the copyright "and any extensions thereof"; the copyright for the remaining 20 years would then revert to the author or his
Although the 1961 Report did not refer to an exception from the author's
recommendations shows that a major controversy had arisen. The Motion Picture
Association of America was disturbed that the Register's proposal for a
reversionary provision provided for the termination of
an assignment of
renewal rights unless the assignee was obligated to pay royalties or a share
of the revenue from the work to the author during the proposed 20-year
extension. 5/ Another commentator felt the proposed extension period was too
short and argued that any extension should revert to the author and his family and should be inalienable. 61
The 1963 preliminary draft bill had two sections that contained an
Report of the Register of Copyrights on the General Revision of the United States Copyright Law, Copyright Law Revision, 87th Cong., 1st Sess. 57-58 (House Judiciary Comm. Print 1961) Thereinafter cited as 1961 Report). (emphasis added).
Discussion and Comments on Report of the Register of Copyrights on the General Revision of the U.S. Copyright law. Copyright Law Revision, Part 2, 88th Cong., 1st sess. 360-1, (House Judiciary Comm. Print 1963) Thereinafter cited as Copyright Law Revision, Part 2].
6/ Id. at 392 (John Schulman, Chairman of the American Patent Law Association Committee on Copyright).
exception for derivative works. ! The exception was found in 822 "Duration
of Copyright: Subsisting Copyrights," and in alternative to $16 "Limitation on Transfer of Copyright Ownership." 8/ The exception found in
derivative work prepared under the authority of a terminated transfer may, despite such termination, continue to be utilized under the terms of said transfer; however, this privilege shall not extend to the making of other derivative works employing the work covered by the terminated transfer.
The $16 exception was almost identical. 10/
Barbara Ringer, then the Assistant Register of Copyrights for Examining,
explained the background to the two alternatives for
found in $16. She observed that this termination provision was based on the Register's proposal, and that it had proved to be "one of the two or three
most controversial recommendations in the entire Report." Ms. Ringer summed
up the three primary arguments against such a proposal, other than the nature
of copyright as property and the inviolability of contracts: (1) authors are
not in a weak bargaining position and need no special protection; (2) users,
such as motion picture producers and book publishers, contribute a great deal
to the success of a work, assume economic losses, should not lose their
property, and can't recoup their investment in twenty years; (3) the proposal
would cloud the title of a number of copyrights and make them less valuable.
Preliminary Draft for Revised U.S. Copyright Law and Discussions and Comments on the Draft, Copyright Law Revision, Part 3. (House Judiciary Comm. Print 1964) (hereinafter cited as Copyright Law Revision, Part 3].
87 Alternative A which provided for automatic termination after 25 years contained the exemption. Alternative B permitted an author or his legal representative or heirs to bring an action to terminate the transfer if the assignee's profits are "strikingly disproportionate" to the share received by the author or his successors. Id. at 15-16.
"As an exception to the provisions of subsection (a), a derivative work prepared under the authority of a terminated transfer may, despite the reversion of rights, continue to be utilized under the terms of said transfer; however, this privilege shall not extend to the making of other derivative works employing the work covered by the terminated transfer." Ideat 16.
She also noted that authors' groups had urged that limiting reversion to
cases where the authors did not continue to receive royalties was illusory
since royalties could be a nominal payment made merely to avoid termination.
In order to meet these criticisms, Alternative A eliminated the lump sum
distribution criterion, extended the period before termination to twenty-five
years, and added an exception that would permit the owner of a derivative work
to continue to use it. 11/
These changes did not appease either side, but most of the criticism
focused on the termination provision(s) rather than the derivative Works exception. Alternative B was censured as a provision that would encourage litigation 12/ or was too indefinite. 13/ On the other hand, Alternative A was described as paternalistic 14/ and as giving authors special treatment at the expense of publishers who fared better under the existing law. 15/
Several publishing representatives urged that Alternative A was unfair to publishers:
The fruits of the publisher's successful
an article that was being
11/ Id. at 277-8. Alternative B was based on considered by the Federal Republic of Germany.
12/ Id. at 279-80 (Colby for Motion Picture Association of America (MPAA)), 281-3 TManges, American Book Publishers Council); 292 (Wasserstrom, Magazine Publishers Association).
See, e.g., id. at 281-3 (Manges); 283 (Abeles, Music Publishers Protective Association, Inc.); 284-5 (Wattenberg); 319 (Abeles). Written comments were also filed in which various publishers' groups and the MPAA opposed both alternatives. See 341-2, 388. See also, Further Discussions and Comments on Preliminary Draft for Revised U.S. Copyright Law, Copyright Law Revision, Part 4, 88th Cong. 2d Sess. 249-250; 363-364, (House Judiciary Comm. Print 1964) (hereinafter Copyright Law Revision, Part 4].
Copyright Law Revision, Part 3, at 285; See also Abeles at 319.