Harry Fox Agency, Inc. v. Mills Music, Inc.

Decision Date18 October 1983
Docket NumberD,No. 1105,1105
Citation720 F.2d 733
Parties, 1983 Copr.L.Dec. P 25,589 HARRY FOX AGENCY, INC., Plaintiff, v. MILLS MUSIC, INC., Defendant-Appellee, and Marie Snyder and Ted Snyder, Jr. d/b/a Ted Snyder Music Publishing Co., Defendants-Appellants. ocket 83-7009.
CourtU.S. Court of Appeals — Second Circuit

Harold R. Tyler, Jr., New York City (Frederick T. Davis, Robert P. LoBue, Patterson, Belknap, Webb & Tyler, New York City, of counsel), for defendant-appellant Snyder.

Marvin E. Frankel, New York City (Michael S. Oberman, Steven E. Greenbaum, Kramer, Levin, Nessen, Kamin & Frankel, New York City, of counsel), for defendant-appellee Mills Music, Inc.

Melville B. Nimmer, Los Angeles, Cal. (Sidley & Austin, Los Angeles, Cal., of counsel), for amicus curiae National Music Publishers Ass'n.

Irwin Karp, Port Chester, N.Y., for amicus curiae Authors League of America, Inc.

Before OAKES, CARDAMONE and PIERCE, Circuit Judges.

OAKES, Circuit Judge:

This appeal presents a novel question of considerable importance concerning the meaning and application of the "derivative works exception" to the termination-of-transfers provision of the Copyright Act of 1976, 17 U.S.C. Sec. 304(c)(6) (1977). At stake is whether the heirs of the composer of a song, or instead a music publishing company, are entitled to mechanical royalties from certain derivative works, in this case phonograph records. The heirs, exercising their rights under the Act, had terminated a grant to a music publishing company of all rights in the extended renewal term of the copyright of the song. This appeal concerns the rights to the mechanical royalties from phonograph records prepared and licensed before the termination of the renewal term grant to the publisher, but sold after the termination.

The case involves no dispute in facts and was quite properly disposed of in its entirety upon cross-motions for summary judgment. Ruling on the motions, the United States District Court for the Southern District of New York, Edward Weinfeld, Judge, in a characteristically thorough opinion held that the "derivative works" exception to the 1976 Act's author/composer termination rights, 17 U.S.C. Sec. 304(c)(6)(A) (the "Exception"), operates to preserve the music publisher's rights to share song royalties from derivative works in the form of sound recordings licensed by it and prepared by sound recording companies before termination of the original grant by the author's heirs. Harry Fox Agency, Inc. v. Mills Music, Inc., 543 F.Supp. 844 (S.D.N.Y.1982). In a subsidiary holding the court held that under the Exception the music publisher could continue to license new releases of old derivative works that it first licensed prior to termination of the author's grant, with royalties to be shared as before, but that the publisher had no rights as to derivative works prepared after the termination or as to those prepared but not licensed prior to termination of the grant. Id.

Because we disagree with the basic premise of the opinion below, namely that Congress was addressing multiple-grant situations like that present in the instant case when it enacted the "derivative works" exception in the 1976 Act, we are required to reverse. Although the matter is one on which reasonable minds may well differ, we believe the scales tip in favor of the author's heirs, and that the music publisher/middleman, having already had the benefit of a renewal term, is without recourse upon termination.

The nature of the case and the course of proceedings below.

This interpleader action was brought by Harry Fox Agency, Inc. (Fox), to resolve a dispute between appellants Marie Snyder and Ted Snyder, Jr. (the Snyders), respectively the wife and son of the composer, Ted Snyder, and appellee Mills Music, Inc. (Mills or the publisher), concerning rights in the well-known song "Who's Sorry Now." Even though the amount in controversy in this case is relatively small, the overall issue involves substantial sums in future royalties in the music, literary, and movie worlds, among others.

"Who's Sorry Now" was written and composed in the early 1920s by Ted Snyder, Burt Kalmar, and Harry Ruby as equal one-third authors. Copyright for the initial twenty-eight year term was registered in the Copyright Office in 1923 and eventually assigned to Mills. Subsequently Snyder and his two co-authors by separate agreements assigned to Mills all their rights to the twenty-eight year renewal term of copyright under the Copyright Act of 1909, 35 Stat. 1075 as amended (repealed 1976), a procedure which the Supreme Court later held was permissible and enforceable. Fred Fisher Music Co. v. M. Witmark & Sons, 318 U.S. 643, 63 S.Ct. 773, 87 L.Ed. 1055 (1943). Under the terms of both the original agreement and the renewal agreement, 50% of mechanical royalties received by Mills are retained by it and the other 50% are paid to the authors, a standard practice in the music publishing industry. These mechanical royalties are sufficiently substantial so that between July, 1971, and June, 1980, alone, $142,633.53 accrued in respect to this one song.

Fox, the interpleader plaintiff, as agent for Mills, issued licenses to record companies for mechanical recordings of the song, collecting from some 419 licensee record producers during the renewal period from 1951 to 1980. During the renewal term, after many, many years of consideration first by the Copyright Office and then by Congress, Congress adopted the 1976 Act which, inter alia, extended existing copyrights, including that in "Who's Sorry Now," by nineteen years, to a total of seventy-five years. 17 U.S.C. Sec. 304(b). The Act provided that the author or specified successors may "terminate" previous grants and recapture all rights in the copyright for this nineteen year extension. Id. Sec. 304(c). It expressly protected the authors and their heirs by providing that "termination of the grant may be effected notwithstanding any agreement to the contrary...." Id. Sec. 304(c)(5). A proviso to the section, set out in the margin, 1 limits termination rights as regards the utilization of derivative works prepared under authority of the grant before its termination. Id. Sec. 304(c)(6)(A).

On January 3, 1978, the appellants exercised their right to terminate at the beginning of the nineteen-year extension, i.e., effective January 3, 1980. As the district court held, the notice of termination was in proper form and operated to terminate Ted Snyder's grant to Mills of his one-third interest in the renewal copyright in the song, subject to applicability of the Exception. 543 F.Supp. at 848. Since the effective date of termination, Fox has collected mechanical royalties from the record producers and deposited an amount equal to Snyder's share in court, for resolution as to whether Mills continues to have the right to receive 50% of the benefits or instead whether all the benefits now accrue to the song's authors, who have regained their copyright in the song.

The statutory background.

Since the original enactment in 1709 of the statute of 8 Anne, c. 19, which gave authors and their assigns an exclusive copyright for fourteen years from publication, and a renewal term for fourteen years conditional upon the authors' surviving the original term, the question of assignability of renewal rights has been a cause for litigation in the Anglo-American courts. The history of the litigation and the development of the relevant copyright law is fully set forth by Justice Frankfurter in Fred Fisher Music Co. v. M. Witmark & Sons, 318 U.S. at 647-56, 63 S.Ct. at 774-79. That history culminated in the decision in Fisher that under the Copyright Act of 1909, as amended, authors' rights to obtain renewal and extension of their copyrights are assignable by them through an agreement made before the expiration of the original copyright term. There, by a 5-3 majority, the Court upheld the 2-1 decision in this circuit, 125 F.2d 949 (2d Cir.1942), rejecting the view that the congressional purpose had been to reserve the renewal privilege for the personal benefit of authors and their families.

The Copyright Act of 1976, which took effect on January 1, 1978, made a number of significant changes relevant here. In general the 1976 Act increased authors' rights to profit from their own work by, inter alia, extending the length of copyright protection and by overruling Fred Fisher Music Co., giving authors a chance to terminate grants of their renewal term rights. The Act was drafted and redrafted several times by the Copyright Office of the Library of Congress, which is a part of the legislative branch itself, 2 U.S.C. Secs. 131-170 (Cum.Supp.1977). The draft went through a number of stages commencing with the Register's Report of July 1961 2 and including numerous revisions as set forth in Copyright Law Revision Parts 1-6, as to which panel discussions with industry representatives were held and objections and suggested amendments made. 3 Ultimately the relevant provisions were presented to and enacted unchanged by Congress. Thus the principal expression of the drafter's intent is found in the twenty years of history before the bill came to Congress, although H.R.Rep. No. 1476 4 and S.Rep. No. 473 5 are useful, of course, as is the Conference Report on the Copyright Act of 1976. 6

The district court decision.

Judge Weinfeld first noted that it is not disputed that the sound recordings of the song made by licensed record companies are "derivative works" covered by the "derivative works" exception. 543 F.Supp. at 849. This follows from the fact that the "sound recording" 7 constitutes a performance of a song first "fixed" on a master, id., 17 U.S.C. Sec. 101, and that the term "fixed" is synonymous with "prepared" in the statutory language of the Exception, "prepared under authority of the grant before termination."

The Snyders argued that the...

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