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46/

1976. Now, however, the Supreme Court has interpreted the derivative works exception and held that publishers have a right to the royalties in accordance with the contract under which the derivative work is utilized. Should Congress now amend §304 to clarify that authors (and their statutory renewal successors) are to receive all of the royalties when derivative works continue to be utilized, the question arises whether retroactive application of the amended law interferes with or divests a vested right? 46/

The proposed amendment would be legislation passed to cure defects in prior legislation.

Generally, curative acts are made necessary by
inadvertence or error in the original enactment of a
statute or its administration
Because
curative legislation ... is concerned specifically
with past events and transactions, all constitutional
strictures on retroactive legisation are relevant.
But because the very reason for curative legislation
is to fulfill and secure expectations rather than to
frustrate and defeat them, the principles governing
decision as to the validity of retroactive legislation
do not work to render curative acts invalid. 47/

In the instant case, if passed, the curative statute will follow a judicial pronouncement; consequently, if the curative statute interferes with vested rights, the statute itself may be declared unconstitutional. 48/ This brings us back to the question of whether the music publishers have a vested interest in royalties paid for derivative works that continue to be utilized after termination under the Mills decision.

This is not an easy question since there is no clearcut definition of vested rights. One commentator has said that "settled expectations honestly arrived at with respect to substantial interests ought not to

See Stancil v. United States, 200 F. Supp 36 (E.D. Va. 1961).

47/
2 SUTHERLAND, STATUTORY CONSTRUCTION, Id. §§41.11; 41.12.
1973).

(4th ed.

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be defeated."

49/ Another commentator and several courts have described the term as "conclusory," and indicated that the real question

is one of reliance, "How the challenger's conduct or the conduct of others in his class, would have differed if the law in issue had applied from the start." 50/

Another court has said that the due process challenge to a retroactive statute is met by showing that the retroactive application of the legislation is itself "justified by a rational legislative purpose." If so, "[t]he fact that the statute's retroactive application imposes new duties and upsets otherwise settled expectations is not sufficient to invalidate it unless the changes it imposes are

...

'particularly harsh and oppressive. # 51/ This case concerns imposing new duties on mine operators to make them responsible for compensating families of injured employees. The consideration may be different in matters of private not public interest. 52/

involving a

Following an

An arguably analogous case is the litigation construction of the Fair Labor Standards Act (FLSA). expansive Supreme Court interpretation of "work-week" Congress enacted a new rule, whose purpose was retroactively to minimize employers from all the suits pending or that could be brought under the Supreme Court definition. If the Supreme Court view had been allowed to stand, the effect would be to give large numbers of employees sizable "windfalls" and impose on employers vast liabilities for which the market economy had made no provision. Both federal and state courts were unanimous in

49/ Sutherland, supra note 47, at §41.05.

50/ See Hockman, "The Supreme Court and the Constitutionality of Retroactive Legislation," 13 HARV. L. REV. 692, 697 (1960); Adams Nursing Home of Williamstown, Inc. v. Mathews, 548 F2d 1077, 1081 (1st Cir. 1977).

51/ North American Coal Corp. v. Campbell, 748 F2d 1124, 1128 (6th Cir. 1984) citations omitted).

52/ See Sutherland supra note 47 at §41.05. But see, Hockman, supra note 50, at 722-3.

upholding the new rule primarily on the reasoning that the Supreme Court decision "presupposed an opposite construction of the Act" and that, therefore, the new legislation validated agreements "fulfilling rather than defeating expectations which had attended formation of the employment relationships prior to the date of the unforeseen expansive Supreme Court interpretation," i.e., on the criterion which comprises the traditional justification for "curative" legislation "it fulfills rather than defeats reasonable expectations." 53/

In a similar situation where the Court interpreted a FLSA provision, Congress again enacted a subsequent act prescribing an interpretation which produced results "deemed by Congress to be compatible with what the expectations of the parties had been at the time when they negotiated the agreements." Again the retroactive application was upheld. 54/

As one commentator has noted, "a retroactive statute, by remedying an unexpected judicial decision, may actually effectuate the intentions of the parties." 55/ The same commentator has observed that the true test of constitutionality of a retroactive statute is whether a party has changed its position in reliance upon the existing law or whether the retroactive act gives effect to or defeats the reasonable expectations of the parties." 56/

In making this determination a court considers three major

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54/ Id. see Addison v. Huron Stevedoring Corp., 204 F2d 88 (2d Cir. 1953), cert. denied, 346 U.S. 877.

55/ Hockman, "The Supreme Court and the Constitutionality of Retroactive Legislation," 73 HARV. L. REV 692, 693 (1960).

56/ Id. at 696.

3.

The nature of the right which the statute
alters. 57/

In determining whether the proposed amendment to the derivative works provision is an unconstitutional interference with a vested right, we must first resolve whether Mills (or any other affected music publisher) has changed its position in reliance on the existing law. The answer to this may be "No" in Mills' case since the agreement under which Mills received rights to the underlying work was made before either the enactment of the derivative works exception or the Supreme Court's interpretation of that exception. In other words neither royalties nor an extended copyright term was foreseen by either party and were, therefore, not part of the original bargain. 58/

The question then becomes whether the proposed amendment gives effect to or defeats the reasonable expectation of the parties. Here the issue is much more complex. Following termination, some publishers apparently received royalties for the derivative works that continued to be utilized under the preexisting contracts. Also, the Mills decision reinforces the expectations that publishers were to be paid. Arguably, then the amendment does defeat a "reasonable" expectation.

On the other hand, it can also be argued that this expectation is not reasonable. A public interest is served in permitting Congress to cure inadvertent defects in statutes or their administration. In such a case the individual who claims that a vested right has arisen is seeking a windfall since if the provision had had the effect Congress intended, no user right would have arisen. Moreover the relative strengths of the equities underlying competing claims are often relevant in determining the validity of a particular application of a retroactive statute.

57/ Id.

58/

It seems possible, however, that some publishers may have assigned their royalty expectations to third parties since 1978, either before or after the Mills Music decision. Did those third parties change position in reliance on existing law?

In many instances the public interest in retroactive legislation is sufficient to permit the abridgement of rights arising from private contracts without there being a deprivation of due process. 59/ The instant situation is one where the subject matter lies within the control of Congress, and the contract between the publisher and the writer was made before Congress extended the copyright term. This issue could, however, warrant further study. The Copyright Office is not expert on constitutional law, and we have in any case had little time to examine the question.

If there is no constitutional impediment, I would suggest that the burden of showing that the proposals to reverse Mills Music are unfair and unwise rests with the publishers. Authors should presumptively be entitled to the full benefits of the recapture of their rights that Congress legislated in 1976.

59/

See Home Building and Loan Association v. Blaisdell, (1933); Block v. Hirsh, 256 U.S. 135 (1921).

290 U.S. 398

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