P.C. Films Corp. v. Turner Entertainment Co.

• Decision Date: 06 February 1997
• Docket Number: 91 Civ. 1594 (BSJ).
• Citation: 954 F.Supp. 711
• Parties: P.C. FILMS CORP., Plaintiff, v. TURNER ENTERTAINMENT CO., MGM/UA Home Video, Inc., MGM/UA Communications Co. and Warner Home Video, Inc., Defendants.
• Court: U.S. District Court — Southern District of New York

954 F.Supp. 711

P.C. FILMS CORP., Plaintiff, v. TURNER ENTERTAINMENT CO., MGM/UA Home Video, Inc., MGM/UA Communications Co. and Warner Home Video, Inc., Defendants.

91 Civ. 1594 (BSJ).

United States District Court, S.D. New York.

February 6, 1997.

Carl I. Kaminsky, Carl I. Kaminsky, New York City, for P.C. Films Corp.

Tom Ferber, Pryor Cashman Sherman & Flynn, New York City, for Turner Entertainment Co., MGM/UA Home Video, Inc., MGM/UA Communications Co., Warner Home Video, Inc., defendant.

OPINION

BARBARA S. JONES, District Judge:

INTRODUCTION

The parties come before this Court for a trial on stipulated facts, seeking resolution of one narrow issue: whether a license for "perpetual" distribution rights to a motion picture either (i) terminated upon expiration of the film's initial copyright term or (ii) continues in perpetuity. This Court finds that the perpetual distribution rights endure beyond the initial copyright term.

BACKGROUND

On August 4, 1960, Samuel Bronston Products, Inc. ("Bronston") and Metro-Goldwyn-Mayer Inc. ("MGM") executed a detailed agreement ("Basic Agreement") concerning the production, financing, and distribution of a film entitled "King of Kings" (the "Picture"). The 163-page document was the culmination of months of negotiations conducted by sophisticated and expert parties, each represented by counsel. (Deposition of Benjamin Melniker, January 9, 1992, J.Ex. 15 at R335-37) (hereinafter "Melniker Deposition").

Pursuant to the Basic Agreement, MGM paid approximately $5 million to obtain exclusive distribution rights to the Picture.¹ Specifically, the Basic Agreement provides that:

8. [MGM] shall retain in perpetuity the exclusive right to distribute the said motion picture throughout the world except in Spain, Portugal, Germany, France, Belgium, Holland, and Luxembourg....

11. Subject to the provisions of this agreement [MGM] shall be vested with the perpetual and exclusive right to distribute the said motion picture "KING OF KINGS" throughout the territories in which [MGM] acquires rights hereunder....

(J.Ex. 1 at R19, R28). Benjamin Melniker, MGM Vice President and General Counsel, testified that "King of Kings" was "a very high cost picture" for MGM (Melniker Deposition, J.Ex. 15 at R283); he recalled the Bronston-MGM deal because of the "amount of money and what we thought was a very extraordinary picture." (Melniker Deposition, J.Ex. 15 at R338).²

Melniker further stated that it was MGM's policy to contract for "perpetual," as opposed to limited, distribution rights, and that MGM would not have financed the Picture for less than a perpetual term. (Melniker Deposition, J.Ex. 15 at R339-40) When asked whether Bronston had expressed a desire to limit the distribution rights to less than a perpetual term, he answered:

Absolutely not. We would never have continued the negotiation if that happened.... There was no mention of any shorter term of distribution than perpetual. It was understood from the very—it was agreed to from the beginning, and the whole basis was on that term, perpetual term of distribution. Nobody brought up anything to the contrary.

(Melniker Deposition, J.Ex. 15 at R340).

The Picture was first exhibited on or about October 30, 1961. (Statement of Stipulated Facts and Documents for Trial on Stipulated Facts, August 17, 1994, ¶ A.13) (hereinafter "Stip."). On October 15, 1962 the Copyright Office approved an application to register the copyright of the Picture. (Pl.Ex. 23 at R569-70).

The parties before this Court are successors in interest to the rights and obligations of Bronston and MGM. As a result of a 1967 bankruptcy proceeding, Bronston assigned its interests in the Basic Agreement and the copyright of the Picture to plaintiff P.C. Films. (Stip. ¶ A.14, Pl.Ex. 30 at R592-97). Through a series of mergers and name changes, defendant Turner is the successor to MGM's distribution license, which it continues to exercise. (Stip. ¶ A.24). Defendant Warner Home Video is distributing the Picture in home video pursuant to licenses obtained from Turner. (Stip. ¶ A.15).

P.C. Film renewed the copyright effective December 18, 1989. (Pl.Ex. 36 at R658). In September, 1990 P.C. Films advised the defendants that, in its view, the distribution license had terminated December 31, 1989. (Complaint, Ex. I).

On March 7, 1991, P.C. Films filed this suit. While the Complaint sets forth six claims for relief, the parties have agreed to proceed by a trial on stipulated facts on the first claim only, which seeks a declaratory judgment that (i) the distribution license granted in the Basic Agreement terminated on December 31, 1989, and (ii) defendants have no further distribution rights with respect to the Picture.³

DISCUSSION

The gravamen of plaintiff's claim is that defendants' "perpetual" distribution rights given "in perpetuity" endure, in fact, for only 28 years—the Picture's initial federal statutory copyright term. Any other interpretation, according to plaintiff, would be violative of the U.S. Constitution, Art. I, § 8, the Copyright Act of 1909 ("the Copyright Act"),⁴ Supreme Court precedent, New York law, and public policy.

In support of its argument, plaintiff recites the principles that Congressional copyright protection is necessarily limited in nature, and that a copyright proprietor can only contract with respect to what it owns. As applied, plaintiff's argument misconstrues both the nature of licenses related to copyrights, and judicial treatment of such contractual arrangements.

The essence of plaintiff's argument lies in the contention that the Copyright Act should preempt basic contract principles in the interpretation of the Basic Agreement's distribution rights license. This Court finds, however, that the private agreement between two parties—which does not affect the movement of the Picture into the public domain once the initial and renewal terms have expired— does not "alter rights granted by the copyright statutes as to invade the scope of copyright law or violate its policies." Fantastic Fakes v. Pickwick International, Inc., 661 F.2d 479, 483 (5th Cir.1981) (citing Bartsch v. Metro-Goldwyn-Mayer, Inc., 391 F.2d 150, 153 (2d Cir.), cert. denied 393 U.S. 826, 89 S.Ct. 86, 21 L.Ed.2d 96 (1968) and Kingsrow Enterprises, Inc. v. Metromedia, Inc., 397 F.Supp. 879, 881 (S.D.N.Y.1975)). See also Bartsch, 391 F.2d at 153 ("The development of a `federal common law' of contracts is justified only when required by a distinctive national policy and ... the general interest that copyrights, like all other forms of property, should be enjoyed by their true owner is not enough to meet this test." (citations omitted)).

Plaintiff has not pointed to, and this Court has not found, any case holding that a contract expressly providing for a perpetual license incident to a copyright must be limited to the initial term of the copyright. Rather plaintiff cites precedent dictating only that where a contract is silent as to the duration of licensed rights, such rights continue until the expiration of the initial copyright term. In April Productions v. G. Schirmer, 308 N.Y. 366, 375, 126 N.E.2d 283 (1955), plaintiff's main authority, the original license at issue stated no specific duration. The court held that a contract to pay royalties could not, in the absence of express language, be construed to require payment after the expiration of the underlying copyrights.⁵

In strong contrast, there exists a stream of cases involving perpetual license rights in which courts interpreting such licenses have not even discussed whether any constitutional limitations inhere from the Copyright Clause of the Constitution. Speaking in terms of contractual intent, courts routinely recognize the right to enter into perpetual licenses incident to copyrighted material. See DIC Animation City, Inc. v. McNaught Syndicate, Inc., 1993 WL 77377, *1 (S.D.N.Y. March 15, 1993) (analyzing license for perpetual merchandising rights in cartoon); Brown v. Twentieth Century Fox Film Corp., 799 F.Supp. 166, 168 (D.D.C.1992) (perpetual license to reproduce entertainer's television performance), aff'd 15 F.3d 1159 (D.C.Cir.1994); Rooney v. Columbia Pictures Industries, Inc., 538 F.Supp. 211, 214 (S.D.N.Y.) (perpetual license to photograph and reproduce actor's appearances and likeness), aff'd 714 F.2d 117 (2d Cir.1982), cert. denied, 460 U.S. 1084, 103 S.Ct. 1774, 76 L.Ed.2d 346 (1983); General Mills, Inc. v. Filmtel International Corporation, 195 A.D.2d 251, 599 N.Y.S.2d 820, 821 (1993) (license for perpetual exhibition rights for an animated cartoon series); Tele-Pac, Inc. v. Grainger, 146 Misc.2d 1088, 552 N.Y.S.2d 550, 551 (Sup.Ct.1990) (license granting perpetual distribution rights of film) rev'd on other grounds, 168 A.D.2d 11, 570 N.Y.S.2d 521 (1991); Two Star Films, Inc. v. Movietonews, Inc., 71 A.D.2d 989, 420 N.Y.S.2d 30, 30 (1979) (license to distribute series of 39 films in perpetuity).⁶

Moreover, giving effect to perpetual license rights—beyond the initial copyright term—does no harm to copyright principles that seek to protect the public's interest in copyrighted material after the statutorily granted monopoly period. In Scott Paper Co. v. Marcalus Mfg. Co., 326 U.S. 249, 255-56, 66 S.Ct. 101, 104-05, 90 L.Ed. 47 (1945), the Supreme Court explained the rationale behind patent (and, analogously, copyright) grants:

By the patent laws Congress has given to the inventor opportunity to secure the material rewards for his invention for a limited time, on condition that he make full disclosure for the benefit of the public of the manner of making and using the invention, and that upon the expiration of the patent the public be left free to use the invention.... [T]he means adopted by Congress of promoting the progress of science and the arts is the limited grant of the patent monopoly in return for the full disclosure of the patented invention and its dedication to the public on the...