Mills Music, Inc. v. Snyder

PETITIONER:Mills Music, Inc.
RESPONDENT:Snyder
LOCATION:New Mexico State Police Headquarters

DOCKET NO.: 83-1153
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Second Circuit

CITATION: 469 US 153 (1985)
ARGUED: Oct 09, 1984
DECIDED: Jan 08, 1985

ADVOCATES:
Harold R. Tyler, Jr. – on behalf of Respondent
Marvin E. Frankel – on behalf of Petitioner
Preliminary Draft – for Revised U.S

Facts of the case

Question

Audio Transcription for Oral Argument – October 09, 1984 in Mills Music, Inc. v. Snyder

Warren E. Burger:

Mr. Frankel, I think you may proceed when you’re ready.

Marvin E. Frankel:

Mr. Chief Justice, and may it please the Court, this case has a similar superficial sound to the one preceding it.

This, too, is a case of statutory construction.

And here again, the petitioner, Mills Music, is arguing among other things, that the Court of Appeals reversing the district court violated the rule that it ought to read the statute and follow the plain meaning of what Congress wrote.

The statute here is determination of transfer provisions of the Copyright Act of 1976 and, more specifically, the one sentence exception to the results of termination.

The provisions that are in issue are set out at pages 14 and 15 petitioner’s blue brief, and I’ll be talking about them and focusing most particularly, as I say, on a single sentence, the Exception that both lower courts describe with a capital E to focus on its centrality in the case, which is subsection A of 304(c)(6) there on page 15 of our brief.

Very briefly, 1 time remind the Court of the relevant statutory background.

The Copyright Act of 1976, extending copyright terms in general to 75 years for old copyrights, that is, pre-Act copyrights, and to life of the author plus 50 years for new copyrights, also created a termination provision by which authors or their heirs could terminate grants of transfers or licenses of their copyrights.

There are two separate sections that embody this termination idea.

One, section 203, relates to new copyrights after the effective date of the new Act.

The other, section 304, relates to preexisting copyrights.

We deal with 304 here, but as the courts below indicated, and I think the parties agree, both sections are identical for our purposes.

Both contain the identical exception for derivative works set out at page 15 of our brief.

And it is that exception that the case is about, and I’ll be talking about that sentence, I think, in some little detail.

The undisputed facts that led to the summary judgment motions and decision in the district court are relatively simple.

In 1923, three authors, including Ted Snyder, wrote a song, a popular song called “Who’s Sorry Now”?

We’re concerned only with Ted Snyder’s interest and the interest of his heirs, Marie Snyder and Ted Snyder, Jr., and I’ll be referring to him, as we have throughout, as the author.

In 1940, Snyder assigned the renewal term of his copyright to the Mills Music Company, the petitioner here, in a form of assignment that, as both courts below said, is typical of the music business and typical of a number of others.

And it appears at the beginning of page 41 of the Joint Appendix.

The provisions of direct and central interest to us are the provisions for the licensing by Mills of recordings of the song.

Snyder, in a sense, did not transfer all his rights under the copyright, and I mean in the sense that be retained under the terms of his graft a 50 percent interest in the net royalties from licenses for recordings that Mills was authorized to issue.

Now, that, as both courts below said, is a standard or typical arrangement in the music business.

And its standardness and typicality is a point of some consequence, in our view, for the correct construction of the statute.

And I might add, as the Court of Appeals indicated, that multi-grant situations of the kind we have here are typical net only in the music business, but in other fields of artistic work and the business relationships that grow up around artistic works, and that is, among other reasons we take it, why this is a case warranting review on certiorari.

After the effective date of the new Act, the heirs of Ted Snyder, whose widow and his son, who is a conservator of the widow, exercised the power given under that statute 3O4(c) to terminate the graft, terminate the grant from Ted Snyder to Mills.

They exercised it by giving a notice to Mills referring to that grant and terminated it.

And there is no dispute that that’s the only grant they purported to terminate and, for our purposes, the only grant they could terminate.

Everyone agrees that as a result of the termination, they recapture 100 percent of all rights in the copyright going forward from the effective date of the termination.

They can license new recordings.

They can reap rewards from sheet music.

Marvin E. Frankel:

They can use it in movies and wherever else popular songs are exploited.

And this appears to be still a popular song that produces considerable royalties.

There is, as I’ve said, an exception to what reverts to them, and that’s what the case is about.

That exception, the exception for derivative works, relates to sound recordings, in our case, a form of derivative work licensed by Mills prior to the termination.

Prior to the termination, as I’ve said, the net royalties were shared equally, 50/50 under the standard practice in the industry.

Mills’s position is that under the plain words of that statute which Mills contends Congress knew what it was doing when it wrote it, under those plain words, Mills contends that Congress, for those old derivative works, issued under the authority of Mills, the old arrangement of equal sharing continues.

The position of the Snyders is that that’s not so, and that the Snyders now get 100 percent of those royalties.

Their position was rejected by Judge Weinfeld in the district court.

Judge Weinfeld said the position is one that requires a tortured reading of that exception.

But Judge Weinfeld characteristically did not stop with the language.

He went ahead and wrote what the Circuit properly called a characteristically comprehensive opinion, traced through the history, traced through the policies and the purposes of Congress in this enactment, and concluded that, if anything, that history buttressed what the plain language said, certainly did not warrant altering it or deviating from it.

The Circuit, as I say, reversed and reversed… and I’ll be returning to this… on the basic premise, as stated by the Circuit… that Congress did not realize what it was legislating about when it legislated for the exception, was not aware of or did not have in mind the standard or typical or common multiple grant situation.

And our position on that, which I will enlarge upon is, that you’re dealing with a statute that was 20 years in the making, that the Circuit emphasizes correctly was initially produced after long study by the Copyright Office, and you have a decision of the Court of Appeals saying that, throughout the 20 years of that gestation, the Copyright Office which lives with copyrights and the business relationships every day in the week, didn’t realize that this exception would be treating that standard or typical arrangement, and that Congress… which was at this for ten years… didn’t realize it either.

We say with respect to the Circuit that that’s a drastically wrong way to view the work of Congress and to interpret a statute.

We say it is contrary to what the Court would presume if it had no evidence of anything about what Congress knew or didn’t know.

This Court has said more than once that if you have nothing else to go on, a judge ought to presume that the Congress knows what it’s dealing with when it legislates, knows what’s out there in the world that will affected by the statute.

Sandra Day O’Connor:

Mr. Frankel, the language of the statute itself appears to be addressed just to the single grant situation, author to the person who uses the work.

It doesn’t, on the face of it at least, seem to address the third party situation.

Marvin E. Frankel:

Your Honor, it doesn’t say anything about third parties, but it is dealing with a world where grants and subgrants are the order of that universe.

It covers that universe–

Sandra Day O’Connor:

Well, that’s our problem, of course, but how to apply this language which may not be all that clear as applied to the third party situation?

Marvin E. Frankel:

–Let me come to that directly, Your Honor.

If you look at that exception, it says

“A derivative work, prepared under authority of the grant before its termination, may continue to be utilized under the terms of the grant after its termination. “

“But this privilege does not extend to new derivative works. “

And we all agree on that.

Now, first, there’s a matter of–

Sandra Day O’Connor:

Is Mills Music a utilizer under that subsection?

Marvin E. Frankel:

–Is Mills Music a–

Sandra Day O’Connor:

A utilizer.

Marvin E. Frankel:

–No, it is not.

Sandra Day O’Connor:

Does Mills Music utilize the work?

Marvin E. Frankel:

It is not, Your Honor.

The statute doesn’t say anything about utilizers, and it doesn’t say anything about preparers.

What it is says is,

“the derivative work, prepared under authority of the grant before its termination. “

Let’s be clear.

The only grant that was terminated is the grant from Snyder to Mills.

That’s the only grant they could terminate.

Now, the only thing that the exception applies to or could apply to is a derivative work prepared under authority of that grant, because obviously the exception is referring to that.

If you’re dealing with a derivative work that was not prepared under the authority of that grant, but some other grant, it doesn’t get into the exception at all.

The exception only applies to that situation.

Now, our friends say obviously what Congress wanted to protect in this case are the 419 licensees authorized by Mills to make recordings.

If the concern is to protect them… and we agree it is… the only way they get protected is by virtue of this exception.

And while the exception does not say in so many words, this applies to the typical arrangement and the judges are to read it faithfully and understand what it means, and assume Congress knew what it was talking about, and see how it works… while it doesn’t say that, it fits with great comfort and intelligibility, as Judge Weinfeld held, if somebody’s looking at it with a purpose to serve the mandate of Congress, which we think is the judicial purpose.

One way to illustrate that, Your Honor, is to look at what the Court of Appeals said.

It said this exception is ambiguous.

“Ambiguous” means having more than one meaning.

If you read the exception, it’s not ambiguous.

It refers to just one grant… the terminated grant.

Sandra Day O’Connor:

Except that it appears, when you read it, to be addressed to the purpose of protecting the people who have recorded the works.

Marvin E. Frankel:

Sure.

There’s no dispute about that.

Sandra Day O’Connor:

And that it doesn’t appear to address the royalty question or who should receive what royalties.

Marvin E. Frankel:

On the latter half, with respect, Justice O’Connor, I think I would say it somewhat differently.

It does address that, because it would have been written differently if it didn’t.

It only had to say derivative works are protected and derivative works owners will not be infringers, period, if it only wanted to protect them.

Either way, we are absolutely agreed that they were the object of Congress’s concern and solicitude.

There’s no dispute about that.

And you will note that there isn’t any derivative work owner here.

Marvin E. Frankel:

They pay their royalties and have been paying them under this new statute, and they don’t have any question about that.

Byron R. White:

Could I ask you about that?

When Mills made their grant or their… he gave permission to create this derivative work… what did the user promise to do?

Pay royalties… to whom?

Marvin E. Frankel:

The user promised to pay royalties.

Byron R. White:

To whom.

Marvin E. Frankel:

To Mills.

Byron R. White:

And then Mills passed on half?

Marvin E. Frankel:

Mills passed on half of the net royalties to the Snyders.

Byron R. White:

Well, what excuses the user from paying royalties to Mills?

Marvin E. Frankel:

Well, actually, Your Honor, the mechanics, the user… I’m not sure this is at the heart of your question, but I want to be technically accurate.

As a matter of mechanics, the royalties are paid to this Harry Fox Agency, the licensee of a lot of publishers, that handles the mechanics of these licenses.

It deducts its administrative costs, and then the net royalties go 50/50 to Mills and the Snyders.

The record owners, if I may now try to reach the question, have not been excused.

They have not stopped paying.

They continue to pay.

Byron R. White:

The statute says that the derivative users can continue to use, but I suppose in accordance with the terms of their undertaking.

And the statute may contemplate that what would be continued for old uses are those very terms, which would include paying the royalty to Mills.

Marvin E. Frankel:

Well, to Mills if–

Byron R. White:

Or Mills’s agent.

Marvin E. Frankel:

–Your Honor, if you look at the grant that has been terminated, you will see that there’s no way to know that RCA, for example, is a record company authorized to make derivative works.

You will also find no way to know from the grant what was the specific royalty rate that RCA has to pay under the license from Mills.

What the grant from Snyder to Mills says in that many words is, lock, follow the typical arrangement, licensed record companies… RCA, Columbia, whoever… and, of course, fill in the royalty rate.

But the grant is the overarching limiter–

Byron R. White:

What kind of a piece of paper passed between Mills and the user, the derivative… the record–

Marvin E. Frankel:

–Actually, again, I’m being pedantic, but I want to be accurate, the piece of paper passed from Harry Fox to–

Byron R. White:

–All right.

And where is that?

Is that piece of paper–

Marvin E. Frankel:

–Yes.

Marvin E. Frankel:

A couple of them begin at page 22 of the Joint Appendix.

And I mentioned RCA because it is the illustrative company.

And there, in this subgrant or sub-license, Mills, through its agent Harry Fox, fills in the blanks.

Byron R. White:

–Promises to pay royalties to us.

Marvin E. Frankel:

Yes.

Us being Harry Fox.

Byron R. White:

Right.

Marvin E. Frankel:

And Harry Fox being an agent of Mills.

Byron R. White:

Right.

Marvin E. Frankel:

And this being the typical industry arrangement.

And I emphasize, Your Honor, if–

Byron R. White:

This promise seems to me to be part of the conditions of the use that the statute says would be continued.

Marvin E. Frankel:

–Without a doubt.

Without a doubt, Your Honor.

But it will only be allowed to be continued if it was a use permitted by the terms of the terminated grant.

And that’s why we way what you have to look to to find out how that use is regulated and administered, what you have to look to is the terms of the terminated grant.

Now, that, we argue as a matter of English, logic, syntax.

Now, it is true, Justice O’Connor, that the words, if you have something less than a will to make them work, can be made not to work.

And if you look at the alternatives which were conveniently, from our view, laid out by the Court of Appeals, you can see a contrast between these possible approaches.

At page 23 of our brief, we have set out what the Circuit acknowledges is the way the words of that exception, subsection A, would have to be rewritten if Congress had expressly intended to reach the result that the Circuit thought it ought to reach.

And what you find there in the text at page 23 is a wonderfully, thoroughly, entirely rewritten statute full of italics, twice as much new language added by the Circuit in its drafting effort as the language Congress wrote.

If you go to the next page, in Footnote 10, you will see what the Circuit did in its evenhandedness.

It said well, the statute is ambiguous, and we would have to rewrite it in order for Mills to win as well.

And in that footnote, you’ll see the rewriting and you’ll see a few italicized words.

And I think Your Honors will see, with all respect to the distinguished Circuit, that it’s a bad drafting job; that these words are added, most of them, gratuitously.

They don’t make a better statute.

They aren’t necessary.

A court bent as the district court, we submit, in this case was, on reading faithfully the message Congress tried to convey, in the context of the world with respect to which Congress was legislating, would reach the district court’s result, we say, as a matter of the essentially adequately plain meaning of this statute in its setting.

We say that on the plain meaning rule, there just isn’t any way to reach the Circuit’s result.

And let me point out–

Sandra Day O’Connor:

Mr. Frankel, I guess at the time that Snyder made the agreement originally with Mills Music, it was contemplated that, at best, the right would extend for 28 years and a renewal term.

Is that right?

Marvin E. Frankel:

–Yes, Your–

Sandra Day O’Connor:

And we’re now in that extended 19… we’re talking about the extension of an additional 19 years within which the copyright can be put into effect beyond that contemplated by Snyder and Mills when it was originally made.

Marvin E. Frankel:

–That’s correct.

Sandra Day O’Connor:

And so I’m wondering whether, under those circumstances, the mechanical licenses issued by Mills would be expected to continue to require payment of royalties beyond the original expiration time.

Marvin E. Frankel:

Your Honor, the extension affected everybody.

Now, if it were not for the extension, the Snyder copyright would by now have expired.

And the record companies for whom our friends are solicitors and we are, too, would be able to sell their records without paying royalties to anyone.

It’s agreed that by virtue of the extension, they do have to continue paying royalties.

When the deal was made between Snyder and Mills, both of them expected a maximum of 56 years, Snyder as well as Mills.

Congress came along and extended the copyright, and then the question was what does Snyder or his heirs get, and what does everyone else get?

Now, Congress said we’re going to give the author, because we have special concern for authors, 100 percent of everything, with an exception.

Now, what’s the exception?

The exception says whatever were the terms on which old derivative works were launched into the world, we’re going to continue that.

Sandra Day O’Connor:

Well, if then Snyder had entered into the agreement with Mills for a fixed lump sum fee, not a continuing royalty of 50 percent, but just you pay me $5,000 now and you may have the right to license during the term of the copyright, would Snyder’s heirs now be in a position to share in any of the money?

Marvin E. Frankel:

Your Honor, with respect to old derivative works, the short answer is no.

And it was intended to be no.

They used the example of movies, for instance.

In many movie deals, an author sells the movie rights to his or her book outright, and people make movies based upon it.

Under this statute, those movies could continue to be exhibited, and the original author would get nothing.

There was a time when there was an effort to make a different result.

It failed.

Whatever the old deal was, having in mind that Congress didn’t know who did what to whom with respect to old derivative works, Congress knew… and it’s in the legislative record, as the courts below knew… that publishers are not mere middle men, that authors don’t just give their copyrights to publishers out of a feckless love for these companies so that they can collect money.

But they give those rights to publishers because publishers promote, plug, sell the work.

And Congress knew that, the Copyright Office knew that, and they legislated accordingly.

And Congress said the author gets everything, going forward.

But for what was done in the past, we’re going to leave the parties as they agreed to be.

If it was a lump sum, it’s finished.

If it’s shared, you go under those terms.

Marvin E. Frankel:

Now, look at what the Circuit said.

And then I’ll stop, if I may.

The Circuit said you have to read that subsection A to mean that the word 419 grants from Mills to the record companies, not the terminated grant.

So that, as a result of the Circuit’s reading, you somehow don’t get into this exception at all, and what that is is a way of… as we put in our brief, and I think correctly… I think it’s a legitimate lawyer’s argument.

What that’s saying is that in the same section of the same statute, when it used the word “grant”, Congress used it to have two different meanings.

It doesn’t work as a matter of grammar.

It doesn’t work as a matter of law.

And it is completely wrong as a matter of history and policy in our submission.

If I may, I’d like to reserve–

John Paul Stevens:

Can I just ask one question, Mr. Frankel?

Marvin E. Frankel:

–Yes, Your Honor.

John Paul Stevens:

What is the source, as you understand the statute, of the obligation of the 419 licenses to continue to pay anything to Mills or Fox?

Marvin E. Frankel:

They are obliged by the license that they accepted from Mills–

John Paul Stevens:

Which, at the time they accepted it, as Justice O’Connor has pointed out, anticipated there would be no payments after the 56th year.

Marvin E. Frankel:

–It did.

But all have thus far agreed… and it may be in part… it may be in part, Your Honor, because there’s no record company here.

John Paul Stevens:

That’s what’s running through my mind.

Marvin E. Frankel:

I know you’re aware of that.

We are agreed that the record companies, having construed all the pertinent documents, statutory and contractual, are right in their decision that they have to keep paying royalties.

John Paul Stevens:

And what is your understanding of the source of their obligation to continue to pay?

Marvin E. Frankel:

I think the source of their obligation is their acceptance of the license which would subsist as long as there was a valid copyright under Gerde.

John Paul Stevens:

But under your theory, there is no valid copyright insofar as it covers the exclusive right to use the derivative works.

Marvin E. Frankel:

Your Honor, the copyright, the grant which is the main document, has remained effective because Congress said it would remain effective, and that you look to the terms of that terminated grant, continued in force, as the conditions on which these record companies could continue to utilize.

It didn’t ask who is the utilizer.

It said whoever is utilizing does it under the terms of the terminated Grant.

Sandra Day O’Connor:

Well, Mr. Frankel, has any court had occasion yet to decide whether, under one of these Fox-type agreements, the licensees are required to continue to pay any royalty at all?

Marvin E. Frankel:

Not so far as I know, Your Honor.

And I think–

Sandra Day O’Connor:

And so that is really an open question.

And if they are not required to pay any royalties at all, I guess both you and the respondent are losers in that sense.

Marvin E. Frankel:

–It may be, Your Honor, and I’m sure that both Mr. Tyler and I would be grievously unhappy if the Court found a way to reach that question on this record.

Then you’re both sorry now.

Marvin E. Frankel:

But I don’t think there is any way to reach that question, Your Honor, because everybody has assumed, including the people who care… the record companies… that they have to pay.

Byron R. White:

If they want to use the work.

Marvin E. Frankel:

If they want to continue to sell records.

Byron R. White:

I mean, it may be they are not obligated to pay.

They could say, well, I don’t want to use it at all.

Marvin E. Frankel:

The terms of payment are only a royalty.

Byron R. White:

But the copyright is extended and gives the right to exclusive use, doesn’t it?

Marvin E. Frankel:

Well, that’s right, Your Honor.

But it’s only a royalty arrangement anyhow.

If they don’t sell any records, they don’t pay anything.

But it’s a royalty-based arrangement, and I think, though frankly I’m not prepared to argue all the details of this, knowing something about the copyright bar and entertainment lawyers, if that were wrong, Justice O’Connor, for the record companies to have decided they don’t have to pay, we’d have heard from them before now.

But so far, so far as I know, subject to what my friend knows, that contention has not been raised, certainly not in court.

Thank you.

Warren E. Burger:

Mr. Tyler.

Harold R. Tyler, Jr.:

Mr. Chief Justice, may it please the Court, the Snyders contend that this argument, both in the brief as well as orally, on behalf of Mills, really avoids and evades the principal issue in this case.

And that is the contention that the Snyders made successfully in the court below, that there is absolutely nothing in the statutory language, whether it’s in the basic reversion section or the exception thereto, or any of the purposes of Congress in passing this language, which can indicate that Mills, as a publisher, is a benefitted class under this legislation.

There is just no language in this statutory set of provisions which deals with anyone in the nature of Mills.

It is argued that the language is plain.

We agree with that.

We are accused, of course, of saying, as is the Second Circuit accused of saying, that the language is ambiguous.

As far as it goes, the language is very clear.

First of all, section 304(c)(6) says that all of a particular author’s rights that were covered by the termination, terminated grant, revert to the author or as, in this case where the author is deceased, to his heirs.

Second of all, the derivative works exception is very slain on its face.

It says a derivative work prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination.

Now, contrary to Mill’s argument, the Second Circuit did not miss the point here at all.

It flatly observed that the real problem with the exception language is that it was designed to apply to a one-step grant only.

That is to say, a grant by the holder of the underlying copyright to someone who was a creator of what is known as a derivative work.

I recognize that Mill dances evasively on what is meant by a utilizer and, of course, points our correctly that there is not the exact word “utilizer” in the exception, but it’s perfectly clear that what we’re talking about here is preserving the right, which is a copyrightable right, to someone such as a record company who takes an assignment from someone in the position of either the original copyright owner or, as in this case, Mills and uses the idea of the underlying song to create what is clearly a separately copyrightable work.

Harold R. Tyler, Jr.:

That is what Congress wanted to protect, and all that is asked of this Court is to do what courts from time-honored beginnings have always done: to apply the clear intent of Congress to the facts of this particular case.

Now, it is to be noticed also that Mills does not like to talk about the precise grants which are shown in the Joint Appendix in this case.

First of all, what happened was, as the Court’s questions illustrated now, originally Snyder sold to Mills the rights to the second 28 years in the original old statutory setup of 56 years.

Mills has gotten its full 56 years, and it certainly was not the intention of Congress, we say, when they added 19 years in the new statute to benefit authors, that there is anything in the statutory language here that gives one scintilla of a suggestion, let alone evidence, that Mills in its position, having bargained for the 56 years… and believe me, members of this Court, they knew how to bargain to get their value… when way back in the 1940s they agreed to a price with Snyder.

Harry A. Blackmun:

Judge Tyler, why do you think Judge Weinfeld didn’t buy that argument?

Harold R. Tyler, Jr.:

I think the short answer, Justice Blackmum, is this.

If you will notice, in his 70-plus page opinion, nowhere did the district court start out or indeed anywhere along the line, focus on the principal objectives which Congress obviously intended here; first, to extend for authors a period of copyright protection, especially for those authors such as Snyder who, way back in the early 20s, long before this 50/50 split which my opponent says is the norm of the trade, was ever the norm of the trade, assigned away their copyright–

William H. Rehnquist:

Mr. Tyler… go ahead.

Harold R. Tyler, Jr.:

–Second, if you’ll bear with me, Justice Rehnquist, the clear purpose of the exception is not to benefit a publisher like Mills, but to benefit the public, to give the public access to clearly copyrightable derivative works.

Now, if you will notice in the opinion of Judge Weinfeld, he really never talks about those two purposes, and I maintain that what happened was, if you turn to the core of his holding, he misconstrued really what the interplay between these parts of the statutory language were all about.

William H. Rehnquist:

But surely, if an author had assigned away his rights, the statute intended to benefit the assignee as well as the author.

Harold R. Tyler, Jr.:

Well, no, not in this sense, Justice Rehnquist.

The whole purpose of this section 304(c)(6) initially was to enable some author such as Snyder, who long ago had bargained away the underlying copyright, to get it back.

William H. Rehnquist:

Yes.

But then subsection A is the exception to when they can get it back.

Harold R. Tyler, Jr.:

Well, that is correct.

In other words, the Snyders are well aware, as they have been in the court below and here, that subsection 304(c)(6) is subject to this privilege to derivative works utilizers.

To that extent the reversion is somewhat undercut, if you will, or made subject to a privilege.

But that privilege doesn’t go to somebody like Mills.

John Paul Stevens:

But, Mr. Tylcer–

Harold R. Tyler, Jr.:

Mills hasn’t created anything.

John Paul Stevens:

–Mr Tyler, isn’t it correct that it’s subject to an Exception for the derivative works?

That the people who make the derivative works may continue to make them.

Harold R. Tyler, Jr.:

That is correct.

John Paul Stevens:

So that the copyright owner has no exclusive right to prevent them from–

Harold R. Tyler, Jr.:

That is correct.

John Paul Stevens:

–So I don’t understand your… supposing the derivative works people had paid a lump sum for their rights, anticipating that they would run out in 56 years.

They wouldn’t have to pay anymore.

Harold R. Tyler, Jr.:

You’ve got to be a little careful here.

If your question means, instead of the facts in this case, if our client Snyder has assigned directly to a derivative works–

John Paul Stevens:

No.

My question is, your client did exactly what he did with Mills, and then Mills said well, I’ll give RCA the right to use this particular song for $5,000, and they paid it in cash on the table.

Then they could continue to use it after the expiration.

Harold R. Tyler, Jr.:

–Oh, there’s no doubt of that, but that’s not going to make it–

John Paul Stevens:

And the reason they could do it is because your client has no exclusive privilege with respect to the derivative work.

Harold R. Tyler, Jr.:

–We have to accept that, Justice Stevens.

John Paul Stevens:

Then what is the source of your right to royalties with respect to derivative works?

Harold R. Tyler, Jr.:

No, no, no.

That’s a little different.

What we’re saying is, we have to concede that to be consistent here under the exception, as you point out.

What we are arguing is quite a different case.

Mills is trying to position itself as a beneficiary of the privilege, that is, the privilege conferred in the exception, which language has nothing to do with Mills at all.

John Paul Stevens:

Well, my question is, what is the source of your right to get any money at all from RCA?

Harold R. Tyler, Jr.:

Let me go back to the two grants here.

First of all, you will notice in the record that the first grant by Snyder to Mills provided that Mills got the copyright and for the future of that 28-year second term, there was an obligation specifically set forth in that grant that Mills would have to remit to Snyder 50 percent of all income collected by Mills.

Now, once 304(c)(6) was enacted, Mills goes out of the picture.

It’s perfectly clear.

The reversion takes place.

Snyder steps in… excuse me… Snyder or his heirs steps into the shoes of Mills.

That leaves us to the second grant.

In that second grant, there is no way my opponents can get around it.

They have to rely, which they don’t like to do, obviously, on this second grant.

And what did the second grant provide?

And this, I’m looking to page 22 of the Joint Appendix.

My opponent sort of suggests that this is–

Sandra Day O’Connor:

What page, please?

What page again?

Harold R. Tyler, Jr.:

–JA-22, Justice O’Connor.

Sandra Day O’Connor:

Thank you.

Harold R. Tyler, Jr.:

Our opponents like to sort of slither around and say this isn’t very clear and it doesn’t really indicate an awful lot, but it indicates one thing.

Harold R. Tyler, Jr.:

Mills Music, under this second grant, that is, the grant to the derivative works utilizer or the record company, pays 100 percent to Mills.

So that the obligation flowing from the derivative works utilizer or the record companies should come now to pay Snyder, because Snyder stands in the shoes of Mills.

John Paul Stevens:

But your answer to my question, then… I asked you what is the source of Snyder’s right to receive royalties from RCA.

And as I understand your answer, it is the document on JA-22 which says in words, RCA must pay royalties to Mills.

That’s your argument.

Harold R. Tyler, Jr.:

Yes; because Snyder, under the reversion–

John Paul Stevens:

In other words, it’s a written undertaking by RCA to pay money to Mills, which is what you claim to be the source of Snyder’s right to receive money from RCA.

Harold R. Tyler, Jr.:

–So long as you understand… and I am sure you do… that this wouldn’t have ever come up if it weren’t for the statute change.

John Paul Stevens:

Well, of course not.

Harold R. Tyler, Jr.:

But otherwise, yes.

Now–

Harry A. Blackmun:

Judge Tyler, I think I should object that you and Judge Frankel speak of how long ago this took place, in 1923 I think.

That is long ago for both of you, but there are a lot of us up here who remember when Who’s Sorry Now came out, and thought it was a pretty good song.

[Laughter]

Harold R. Tyler, Jr.:

–Well, I agree, both counts.

It’s a long time for me.

Judge Frankel claims to be a little bit younger than I am, but I deny it.

Now, one of the points here which becomes very important in understanding what happened is to recognize, contrary to what we understand Mills, being prepared to argue not only here but in the court below, is the legislative history.

And as you know, there’s a great deal devoted in the Mills brief here and some significant part by us, the point being, as I understand Mills, that the legislative history, as they claim Judge Weinfeld found, is inclusive.

We dispute that, simply because if you analyze clearly what happened here, that beginning in the late ’50s, the Copyright Office began to analyze the existing law and prepared first an initial report which came about in 1961, indicating that one of the problems under existing case law, under the old Act was a continuing and indeed growing doubt as to the ability to protect the rights of derivative works utilizers, particularly where there was a possibility of a reversion of the underlying copyright on a novel, for example, to the author or his heirs.

It is true that right from that beginning, there was this concern.

But the concern didn’t really come to a point of issue until the 1963 draft was prepared in the Copyright Office, and there for the first time, Barbara Ringer, one of the principal… if not the principal… draftsmen of the statute, as a practical matter, did make it clear that the exception, pretty much as it’s now in the law, would be a suggested way of taking care of this problem, of seeing to it that derivative works utilizers were protected.

And this was not an insignificant point, because under the old law, there were periods of time where very famous movies, for example, such as Gone With the Wind, Rear Window, and such were put on the shelves simply because it was commonly then thought by copyright lawyers that in the event of a reversion, these movies, for example, in other words would lose their copyright protection as derivative works.

Now, it was this kind of thing that Congress certainly was aware of.

And it’s also, of course, true though that what happened was that most of the work, seriously in this whole area, was done in the Copyright Office, which not only is an arm of the Congress, but which was embodied in six booklets transferred to the Congress.

Mills argues that since there is no dialogue, no colloquy on the floor of the House or in any of the committee sessions dealing with the reversion section and the exception, this means that Congress never understood this, never did anything about it.

Well, the fact is that they didn’t do anything about it because the register of copyrights, when he submitted the volumes of the hearings which went on principally from ’61 through ’65, underscored the point that there was a compromise in respect to this business of the reversion and the exception thereto.

So we argue, in short, that if you think what the state of the law was, how the people who were professionals understood the state of the law… and, by the way, two very articulate lawyers representing the publisher, Messrs. Abililes and Wattenberg, were the first to understand and consistently understood just exactly that this exception did not benefit or help publishers or middle men at all.

Therefore, we believe that what happened here was that, contrary to the suggestion of the district court, was that such legislative history as there is firmly supports the reading of the statutes which the Snyders have consistently taken here and in the court below; and furthermore, that it is a consistent position as a matter of plain language in the statute.

Let me emphasize that the Snyders do not agree with Mills that this is an ambiguous statute.

Harold R. Tyler, Jr.:

First of all, it seems perfectly clear just exactly what Congress is attempting to achieve.

The only thing that is at issue is to take the exception, apply its clear intent… and there is no doubt, as we argue it, that if you take the exception language, it applies very easily to a one transaction or one-step transaction, so long as the grantee is a derivative works utilizer.

We also point out that this has nothing to do with the position that Mills finds itself in as an absolute free rider in terms of the objectives of the statutory language.

William H. Rehnquist:

You say then that Mills is not someone who may… who would continue to utilize a derivative work.

Harold R. Tyler, Jr.:

Mills certainly would not.

No, sir.

And it never did.

Mills cannot bring itself within the exception.

They try to avoid that.

They simply put all their heavy baggage on the phrase

“under the terms of the grant. “

They say that has to mean the first grant, and the statute makes it very clear that grant has keen terminated, at least so far as everybody is concerned, except those persons who, under the exception… that is, creators or derivative works utilizers.

William H. Rehnquist:

So then it would be a grant from Mills to the record company that would be–

Harold R. Tyler, Jr.:

Well, no.

Well, in a sense.

What we say, Justice Rehnquist, to that is, once you read 304(c)(6), you understand that Mills stands out.

Snyder stands in its shoes vis a vis the record company.

Warren E. Burger:

You may resume there at one o’clock, Mr. Tyler.

Mr. Tyler, you have eleven minutes remaining.

Harold R. Tyler, Jr.:

Mr. Chief Justice, may it please the Court, the luxury of the lunch hour recess and the reflection it afforded me makes me wish to readdress the point which in part was made at least by Justice Stevens.

You, sir, asked what was the source of our claim.

And I said, among other things, that the Snyders stand now in the shoes of Mills.

Permit me to elucidate a bit and point out that is simply because of the reversion provision which we’re talking about.

The Snyders now own the copyright; Mills does not.

That’s why in our brief, we go into the analogies to real estate transactions, patent law transactions, and other commercial transactions.

As I put it this morning, the history of this thing is that the Snyders start out… when Snyder wrote the song in ’23, he assigned the copyright to an old line firm in New York which went bankrupt.

That meant that Mills picked up the rights to the copyright first term in 1940.

As Mr. Frankel pointed cut this morning, that meant thereafter that Mills owned the copyright.

Here, we’re talking about the underlying copyright.

We’re not talking about a derivative use copyright, as I’m sure you understand.

Harold R. Tyler, Jr.:

So it came to pass that when Congress passed the ’76 Act and provided that there would be an extension of 19 years, bringing the total copyright period more in line with European countries and so on, and would give authors more protection that 75 years, the reversion provision necessarily followed, and hence it is that Snyder is once again the owner of the contract… of the copyright… excuse me.

Now, that means that if you look at that source and then you look to the terms of the second grant, that is, the grants made by Mills to the music company, that is why we say those are still important because we do not agree with Mr. Frankel that there is some sort of dichotomy in the law.

There isn’t.

Under the new copyright reversion section, all that has happened is that now Snyder is back, owning the underlying copyright, in the place of Mills, and should receive the 100 percent royalties provided for in the second grants to the derivative works utilizers.

John Paul Stevens:

May I just ask, does that mean you still rely on the grants from Mills to RCA as the source of RCA’s obligation to pay money to–

Harold R. Tyler, Jr.:

Well, those grants, whether it’s RCA, which is only an exempt–

John Paul Stevens:

–I understand.

Harold R. Tyler, Jr.:

–Those grant terms are important.

And they still have to be given effect.

That’s why, as I repeat again, we say that what has happened here, not by agreement as sometimes in commercial transactions–

John Paul Stevens:

Well, let me just kind of simplify.

It seems to me you can rely on either the statute or the written grant or a combination of the two.

Harold R. Tyler, Jr.:

–We’re relying on both.

They obviously can’t be there if there wasn’t the reversion.

John Paul Stevens:

But is it correct that having terminated, that the statute does not give your client any right to exclude RCA from further making the derivative work that was–

Harold R. Tyler, Jr.:

That is correct.

John Paul Stevens:

–What is the source of your right to get money from RCA?

Harold R. Tyler, Jr.:

The source is the fact that we now stand in Mills’s shoes, plus the fact that–

John Paul Stevens:

With respect to everything except that derivative grant.

Harold R. Tyler, Jr.:

–No.

Under the facts in this case, we should get the 100 percent royalties which those grants from Mills to the derivative use people, that is, the record companies, provide.

The issue here is that Mills says that even though they have been removed as owner of the underlying copyright, by some mysterious incantation, using the language under the terms of the grant, they should continue to get part of these royalties.

That isn’t what Congress intended by any stretch of the imagination because under the reversion, Snyder now owns the underlying copyright which is the source of Mills’s authority in the first instance to make grants to record companies.

Byron R. White:

The statute itself says that the derivative work can only continue to be utilized under the terms of the grant.

Harold R. Tyler, Jr.:

That is correct.

Byron R. White:

Now, what grant is that?

Harold R. Tyler, Jr.:

That is a grant, assumed by Congress to mean the straight one-step grant which we didn’t have in this case.

Tyler grants to Tyler… the copyright owner grants to White, a well-known record company, a derivative works grant.

Byron R. White:

And the terms of the grant are that the grantee can license, and he does license.

Harold R. Tyler, Jr.:

No.

Harold R. Tyler, Jr.:

In the one-step transaction, under the hypothetical, White has the right to produce a record.

He does.

Under the exception, plainly, that grant… Tyler to White… has to continue.

Byron R. White:

It has to continue, but only on the terms of the grant.

Harold R. Tyler, Jr.:

That grant.

Exactly.

Byron R. White:

That’s right.

And that means that the user has to pay.

Harold R. Tyler, Jr.:

That is correct.

But we don’t have that case.

That’s why we’re arguing, contrary to Mills, that the only problem with this case is that Congress didn’t write out the language which would cover exactly this transaction.

Mills says this is an argument of ambiguity.

We say no; all this is is a classic situation where an appellate court is asked to construe a statute, the clear intent of which is there for all to see.

Byron R. White:

I suppose you could argue that the terms of the license are, by implication, made part of the terms of the original grant, because Mills was authorized to issue these licenses.

Harold R. Tyler, Jr.:

That’s the error that the district court fell in to.

Byron R. White:

Well, I know, but I would think it would be… I don’t know why it would hurt you.

Harold R. Tyler, Jr.:

It hurts us in this way.

It misconstrues the statute, both in terms of the reversion and in terms of the exception.

What we’re saying is that the reversion puts Snyder back as the underlying copyright owner.

Mills gets knocked out.

But I quite agree with Your Honor’s thrust of your question that we are relying, of course, on that second grant, if you will–

Byron R. White:

In order to get any money.

Harold R. Tyler, Jr.:

–That’s right.

We say that’s fine, but it isn’t fine for Mills.

So to sum up, what we’re really contending here is, once again, that if you look at… well, take the reply brief of Mills.

They frankly exposed this to all who will read or listen.

They still continue to argue that there’s only one grant, the terminated grant, which is the subject not only of the termination or reversion provision, but as well of the exception.

And that language in the exception just can’t bury that low.

So, ironically, what we come down to is this: Mills accuses the Snyders of obfuscating, distorting, in particular, distorting the language.

We argue that, as the Court of Appeals below held, the only way you’re going to distort the language of the exception in particular is to follow the theory of the Snyders.

Byron R. White:

You’d demur to the accusation.

Harold R. Tyler, Jr.:

Exactly.

So, to conclude, it’s perfectly clear, if you look at the language and you look at the legislative history, that the real question in this case is answered by simply saying that Mills doesn’t fit in the class designed to be a part of the exception.

Thank you very much.

Sandra Day O’Connor:

Mr. Tyler, may I inquire, before you sit down, the Snyders in any event, even if your opponent’s view is the correct one, could issue new licenses after the termination and derive income from new licenses.

Harold R. Tyler, Jr.:

Yes.

I think, as Mr. Frankel said this morning, we would agree on that.

Sandra Day O’Connor:

At least that I guess you are in agreement on.

Now, what percent of the income that you would expect someone like the Snyders to get over the 19-year period of extension would you reasonably expect to come from the 400-and-some preexisting derivative works, as opposed to new licenses that the Snyders would issue?

Harold R. Tyler, Jr.:

Well, are you–

Sandra Day O’Connor:

How great is the problem?

I mean, do the Snyders really think that all the income is going to come from these preexisting derivative works for which Mills issued the mechanical licenses?

Harold R. Tyler, Jr.:

–Yes.

We argue that–

Sandra Day O’Connor:

You don’t anticipate, then, that you’ll be issuing… the Snyders would be issuing any new licenses as a practical matter?

Harold R. Tyler, Jr.:

–Well, I think, theoretically, the Snyders could very well issue new grants to derivative works users.

But–

Sandra Day O’Connor:

But your realistic expectation is what?

That most of the income would probably be from the preexisting–

Harold R. Tyler, Jr.:

–No.

I don’t think there’s any… as I understand it, the old song, Who’s Sorry Now, still has a fair amount of popularity.

But we don’t know exactly what might happen.

But the argument, of course, really… as I think both sides agree again… focuses only on the old derivative works grants.

Sandra Day O’Connor:

–Well, I know that, but I think that the practical expectations might shed some light on what Congress had in mind.

Harold R. Tyler, Jr.:

Well, I think it’s clear that Congress had in mind that the Snyders, by getting back in the shoes of a copyright owner, should have the right in the 19-year term, as you put it, to realize as much income as the author or his heirs could.

I think there’s no doubt of that.

My only problem is, I don’t know how to be precise in anticipating exactly what might happen.

But Congress surely hoped, as your question implies, that they would… that is, the author or his heirs would be in a position to get that type of income negotiated, of course, with new users.

Thank you very much.

Warren E. Burger:

Mr. Frankel.

Marvin E. Frankel:

If the Court please, starting at the end of Mr. Tyler’s presentation, of course we argue that the termination provision and the exception in the statute refers to only one grant, the terminated grant.

Of course, we recognize that there is a subgrant or license contemplated in the world that these people lived in by the grant from Snyder to Mills.

In addition, we not only acknowledge but insist that in the world Congress addressed in this statute, multiple grants are the typical standard arrangement; not just two, but three, four, five, six, to financiers from creative people to financiers, to distributors, to exhibitors, et cetera.

And when Congress wrote this exception to provide that the derivative works may be utilized under the terms of the grant, the terminated grant, what it was saying is, we can’t visualize all the arrangements out there.

What we are doing for former derivative works is simply maintaining the status quo.

That’s the fairest arrangement we can make.

If the artist gave up the derivative work right for a lump sum in the past, the artist gets nothing.

The status quo holds.

If the artist gave it up on the basis of 50/50 or 90/10, that holds under the terms of the terminated grant.

I think that’s what we mean.

Now, I want to answer a question that I think came from both Justice O’Connor and Justice Stevens.

Are we fighting about an academic subject?

If we weren’t here, and if the copyright had been extended as it had, derivative work owners would be infringing that copyright by surveying their derivative works unless they had authorization.

So I’m quite sure that although my answer was inadequate before lunch, the reason they’re happy to go along is that they need the license in order to be selling their records.

Byron R. White:

And if they had to renegotiate it, the price might be higher.

Marvin E. Frankel:

It might indeed.

I understand the song was on television this morning.

[Laughter]

Warren E. Burger:

Thank you, gentlemen.

The case is submitted.