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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 legislative approach that I have initiated on the House side clarifies the "derivative works exception" in both sections 304 and 203. For Congress to address only section 304 would mean, as Ms. Ringer has noted, that the impact of the Supreme Court's errone ous decision could continue into the indefinite future a result which I think we should be trying to avoid.

One last point. Because of the complexity of the arrangements involved in creating and distributing a motion picture, I want to be perfectly clear in explaining what is and is not intended by this effort to overturn the result reached in Mills Music.

The consequences of H.R 3163 are as follows with regard to extant motion pictures. When an author of a novel terminates the grant of motion picture rights, the distributor is not required to pay to the authors moneys payable under the distribution agreement. Any and all agreements running between the producer and the distributor, screenplay writer, actors, and profit participants, and the numerous license agreements relating to television exhibition, theatrical exhibition, and other exploitation of the motion picture, pertain to the derivative work, not to the underlying copyright, and nothing in H.R. 3163 would disturb those arrangements. Because the motion picture is a derivative work, not subject to termination, there can be no termination of the agreements between the copyright proprietor of the motion picture and any other parties relating to the exploitation of that motion picture. The only

instrument which can be terminated is the license from the author to the motion picture producer of the underlying work. By exercising that right when he or she becomes eligible to do so under the terms of section 203(a)(3) or section 304(c)(3), the author would gain the ability to relicense another producer to make a motion picture of the same novel-bearing in mind that the author would acquire this ability only after the passage of the many years specified in sections 203 and 304.

In conclusion, I am delighted to support the legislation in the Senate to overturn the Mills Music decision. I think America's songwriters and authors have created a multitude of works that enrich our lives. In addressing ourselves to copyright legislation, it is important that we bear in mind that the consequences of our actions are just as important, if not more so, to the small, journeyman writers, the creators of the less-than-blockbuster hits, as they are for those relative few who have achieved great financial success and public acclaim.

In this case, we extended important benefits to creators in 1976 only to see those benefits snatched away by the Supreme Court's mistaken interpretation of our intent. In measuring the harm done and the urgency of remedial action, I hope that we will remember that the Mills Music issue dramatically affects the livelihoods of thousands of individuals who are the lifeblood of our creative community.

Thank you again for the privilege of testifying today. [Prepared statement follows:]

PREPARED STATEMENT OF HON. HOWARD L. BERMAN, A U.S. REPRESENTATIAVE FROM

THE STATE OF CALIFORNIA Mr. Chairman, I am here today to support 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, the Supreme Court in a closely divided 5-4 decision 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 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.

Senator Specter's bill, S. 1384, takes a different approach to rectifying this judicial misconstruction, but both bills share the same objective. I am delighted that two highly respected former Registers of Copyright, Barbara Ringer and David Ladd, support the position taken by Senator Specter and myself with regard to both congressional intent in the 1976 act and appropriate copyright policy. I join Senator Špecter in urging this 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.

THE MILLS MUSIC DECISION

In the Supreme Court decision to which I refer, Mills Music Inc. v. Snyder, 105 S.Ct. 638 (1985), the Court interpreted the "derivative works exception" to the "termination of transfer and licenses" provision in section 304(c). Section 304 extended the duration of subsisting copyrights from 56 to 75 years, but 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 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 works, such as motion pictures and sound recordings. The derivative works exception was designed, it is commonly agreed, to protect the owners of such derivative works from having to renegotiate their rights, and thereby to protect the public which, after all, has an interest in the continued enjoyment of the derivative works.

When an author or his heirs exercise this termination right, the copyright reverts from the publisher to the persons filing the termination, but the privilege of utilizing 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 bears quoting because of its clear explanation of the policy questions at stake:

"The derivative works clause reflects an accommodation between two competing concerns: that of providing compensation to authors, and that of promoting public access to derivative works. The majority apparently concludes that its interpretation of the Exception does justice to both of these concerns. But to promote public access to existing derivative works, it is necessary to go no further than to allow the owners of these works to continue to disseminate them. The rights of middlemen to receive royalties under terminated grants do not enter into the balance; regardless of who receives the royalties, the owner of the derivative work may continue to pay the same rate, and public access to the work will be unimpeded.

"By going further than necessary to effect the goal of promoting access to the arts, the majority frustrates the congressional purpose of compensating authors who, when their works were in their infancy, struck unremunerative bargains.”

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. In testimony before this Subcommittee, Ms. Ringer stated that “The Mills case is not what Congress intended, and ... it represents a windfall for publishers at the expense of authors and their families.” Pointing out that she drafted the provision in question, Ms. Ringer asserted that “The Supreme Court decision seriously undercuts what Congress intended and deprives authors of benefits that are rightfully theirs."

While the Mills Music decision addressed only section 304 of the Copyright Act, it is critically important to note that a second provision of the 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. My bill clarifies the “derivative works exception” in both sections 304 and 203. For Congress to address only section 304 would mean, as Ms. Ringer has noted, that the impact of the Supreme Court's erroneous decision will continue into the indefinite future, a result I assume we would wish to avoid.

CONSEQUENCES FOR THE MOTION PICTURE INDUSTRY Because of the complexity of the arrangements involved in creating and distributing a motion picture, I want to be perfectly clear in explaining what is and is not intended by this effort to overturn the result reached in Mills Music.

The consequences of H.R. 3163 are as follows with regard to extant motion pictures. When an author of a novel terminates the grant of motion picture rights, the distributor is not required to pay to the authors monies payable under the distribution agreement. Any and all agreements running between the producer and the distributor, director, screenplay writer, actors, and profit participants, and the numerous license agreements relating to television exhibition, theatrical exhibition and other exploitation of the motion picture, pertain to the derivative work, and nothing in H.R. 3163 would disturb those arrangements. Because the motion picture is a derivative work not subject to termination, there can be no termination of the agreements between the copyright proprietor of the motion picture and any other parties relating to the exploitation of that motion picture.

The only instrument which can be terminated is the license from the author to the motion picture producer of the underlying work. By exercising that right when he becomes eligible to do so under the terms of section 203(a) (3) or section 304(c) (3), the author would gain the ability to relicense another producer to make a motion picture of the same novel-bearing in mind that the author would acquire this ability only after the passage of the many years specified in sections 203 and 304.

CONCLUSION

I am delighted to support legislation to overturn the Mills Music decision. America's songwriters and authors have created a multitude of works that enrich our lives. In addressing ourselves to copyright legislation, it is important that we bear in mind that the consequences of our actions are just as important, if not more so, to the small, journeyman writers, the creators of the less-than-blockbuster hits, as they are for those relative few who have achieved great financial success and public acclaim. In this case, we extended important benefits to creators in 1976 only to see those benefits snatched away by the Supreme Court's faulty interpretation of our intent. In measuring the harm done, and the urgency of remedial action, I hope that we will remember that the Mills Music issue dramatically affects the livelihoods of the thousands of individuals who are the lifeblood of our creative community.

I want to thank Senator Mathias for the opportunity to address the subcommittee, and I urge the subcommittee to take action to remedy this clear and unfortunate injustice.

Senator SPECTER. Thank you very much, Congressman Berman. I believe that you would agree with me that the thrust of H.R. 3163 and Senate bill 1384 are the same, and we can work out the draftsmanship without any difficulty?

Mr. BERMAN. Very much so. I think they are both intended to do exactly the same thing. Sort of on separate tracks, we both decided to try-you, initially-and we, without actually knowing about your bill at the time-attempted to rectify what we felt was the misinterpretation. We have slightly different approaches, but I think they can be easily reconciled.

Senator SPECTER. Thank you very much, Congressman Berman. We very much appreciate your coming over to testify today.

Mr. BERMAN. Thank you, Mr. Chairman.
Senator SPECTER. Is Mr. Ralph Oman here at the moment?
[No response.]

Senator SPECTER. We had heard he might be a little late, so we will proceed at this time.

[Mr. Oman submitted the following statements:]

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