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doning renewals and creating a much longer copyright term (the 1970 the author plus 50 years, or even longer in some cases), Congress bei

to face this question: should an unremunerative or unfair contreci

made by the author at the beginning of a copyright be allowed to an

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 täis

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

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 zore

extended discussions a compromise was reached, and the period was ses

at 35 years, with some variations. It was in this way that the iriaresis

of the entrepreneurial copyright owner--the first grantee--were izzen

into account: by according it a substantial period of time in which

to realize its investment,

Legislative Intent:

2!!e Question of Derivative Works

With respect to terminations under both section 304 ani section

203, it was agreed after much discussion that the right of temizin

should be absolute and inalienable, Author's and their heirs conis LO

longer sign away their reversionary expectancy, as they had been

regularly induced to do under the renewal section of the 1909 hciEut

another question had also been lurking behind the old renewal provisions when a derivative work has been created and exploited during the first

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28-year term under license from the copyright ouner, what happens xben

the renewal copyright in the pre-existing work reverts to sozeone else?

The typical case, which also caused the most concern, involvzi

a motion picture derived from a copyrighted novel or play: if toe zuidor of the underlying work recaptured the renewal copyright, did täis 1923

that the potion picture had to be taken out of distribution uniess 2

new license were obtained? In some cases, of course, the derivative

work is a more important or valuable property than the pre-existirz vor's.

It was finally agreed that, infairness to the owner of the derive.

tive work, and to avoid depriving the public of access to derivative

works in this situation, a "derivative works exception" should be writien

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. The sole bene

ficiary of the exception was intended to be the owner of the derivative

work who wanted to continue utilizing it.

In the context of the Mills case, let us assume that Tec Snyies,

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 termina

tion, 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

gran

e. 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

"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 com

pletely 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 ter

minated 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 entified 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 confort to the terms and conditions of the instrument under which the derivative work was prepared;

(11) 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 vhom the reverted rights in the copyrighted work are vested pursuant 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.

Senator SPECTER. Ms. Ringer, thank you very much for your testimony. I would like you to stay at the table, and let us now hear from the panel which we have scheduled next, and I will defer questions until we have heard from the panel and have some opposing points of view.

I would like to now call Mr. Irwin Karp, counsel for the Authors League of America; Mr. George David Weiss, president of the Songwriters Guild of America; and Mr. Dean Kay, executive vice president and general manager of Welk Music Group. Mr. Kay is going to be accompanied by Michael Oberman, from the firm of Kramer, Levin, Nessen, Kamin & Frankel in New York, which successfully presented the Mills Music case.

Let us reverse the order of the panel, since we have already heard two witnesses testifying in favor of this legislation, and let us turn first of all to you, Mr. Kay, if we may, to get an opposing point of view.

Also, Mr. Oberman is welcome to pull up a chair and sit at the table.

My compliments to you, Mr. Oberman, on your victory.

Mr. OBERMAN. Thank you.
STATEMENT OF A PANEL, INCLUDING DEAN KAY, EXECUTIVE

VICE PRESIDENT AND GENERAL MANAGER, WELK MUSIC
GROUP, SANTA MONICA, CA, ACCOMPANIED BY MICHAEL S.
OBERMAN, COUNSEL, OF KRAMER, LEVIN, NESSEN, KAMIN &
FRANKEL, NEW YORK, NY; IRWIN KARP, COUNSEL, THE AU-
THORS LEAGUE OF AMERICA, INC., NEW YORK, NY; AND
GEORGE DAVID WEISS, PRESIDENT, SONGWRITERS GUILD OF
AMERICA, NEW YORK, NY
Mr. Kay. Thank you, Mr. Chairman.

I appreciate the opportunity to speak here today. My name is Dean Kay, and I am the executive vice president and general manager of the Welk Music Group, a music publishing company headquartered in Santa Monica, CA.

I am also a songwriter. My best known work is “That's Life,a song made popular by Frank Sinatra.

The Welk Music Group is probably among the 10 largest music publishing companies in the United States. As the head of the firm, I am in a unique position, I believe, of being a songwriter who truly understands the innermost day-to-day operations of a music publishing company. And as a consequence, I believe I can fairly describe the creative partnership between publishers and songwrit

I have submitted a written statement, and as you have stated

Senator SPECTER. All written statements will be made a part of the record, and we would appreciate your summaries within the 5 minutes.

Mr. Kay. Thank you, Mr. Chairman.

When I wrote “That's Life,” the song did not go directly from my lead sheet to public acceptance. I was entirely unknown at the time, but I was lucky to have had a publisher who believed in my song, kept it in mind and carried it around until it ultimately was

ers.

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