Tuesday, July 19, 2005

Winnie the Pooh and Copyright Too

Continuing yesterday's theme of works for children that have become fabulous money machines and, as a result, are the subject of long-running copyright feuds, I want to note a case on appeal to the Ninth Circuit involving the works of A.A. Milne, a favorite of my soon-to-be four year boy-girl twins. The state law side of this dispute has been vicious but with elements of farce. (Here is a link to a self-styled "politically incorrect" article from the London Times of 2003.) The federal component of it raises serious issues of copyright law.

The issue I will discuss is narrow, but dense. There are three termination of transfer rights. The first is for works published before January 1, 1978, and is in Section 304(c). The second, for transfers made on or after January 1, 1978 is in Section 203. The third, in Section 304(d)(which I take credit for) was added in CTEA, and gives to those who missed their 304(c) termination, the possibility to terminate the extra 20 years added in 1998. (See my June 9 posting for some background).

In the Pooh dispute, author A.A. Milne licensed certain rights in the Pooh stories to a literary agent, Stephen Slesinger. Slesinger then assigned the rights to his corporation, SSI. By will, Milne transferred his beneficial interests (which would include his recapture rights) to a trust. In 1956, Milne died. At Milne's death, this trust operated for the benefit of his wife, Daphne, who died in 1971. In 1972, the rights in the trust were transferred to another trust which operated for the benefit of the Milne's son, Christopher Robin.

In 1961, SSI licensed rights to Disney, as did Daphne and the estate's executors. In 1983, within the time for service of a 304(c) termination notice, Christopher Robin, joined by the trust, entered into a new contract with Disney. At this time, Christopher Robin had a daughter, Clare, who is disabled and whose affairs are managed by a court-appointed receiver. An opinion was obtained and paid for from Melville Nimmer that the new contract would not run afoul of the language in both Sections 203 and 304(c) which declare that the termination of transfer right may be exercised "notwithstanding any agreement to the contrary." Mel's belief may have been that while Congress did not want authors to be coerced into signing transfer agreements that also waived a termination right, Congress did not intend to prevent those possessing termination rights from entering into new contracts (legislative history supports this), and certainly not during the period when termination was possible.

The issue is important, because the 1983 deal included language expressly recognizing the intent of the parties to negate termination rights under both 304(c) and 203. Nimmer's son, David, is representing Clare Milne who filed a 304(d) termination notice arguing that the 1983 agreement was not effective (contrary to Melville's prior written opinion) and that since her father (who had earlier died) did not terminate under 304(c) she could under (d).

Leaving aside both Nimmers' extra-statutory "moment of freedom" argument, David also argues that the language "notwithstanding any agreement to the contrary" is plain and that resort to legislative history is inappropriate. That position is unusual for a treatise editor to make where that treatise cites legislative history constantly. Does, for example, "any agreement" include a waiver by one party years after the original assignment in return for loads more money? Does an "agreement" have to be in writing? Does it, as in the 1983 agreement, preclude the giving up of a termination of transfer when the copyright owner could have at that time terminated, but instead chose to enter into a new agreement? The theory here would be that the bar on waiving the termination right was solely to prevent in waivers in futuro, and that this wasn't the case for Christopher Robin. Should Clare (or more accuratley her lawyer) be able to undo what her father agreed to? And what is the purpose behind the provision, a key determination for any statute?

These are all difficult questions and hardly plain. Any bets on how well the 9th Circuit will handle them? Oral argument has not been set although the briefs have been submitted.

6 comments:

Timothy Phillips said...

I have to agree with David Nimmer that "notwithstanding any agreement" can't mean anything else. So when you ask, "does, for example, 'any agreement' include a waiver by one party years after the original assignment in return for loads more money?" the answer must be "yes". Obviously Disney should have paid still heavier loads of money in order to make subsequent termination not worth the trouble. Disney got a windfall from the CTEA. Maybe it will have to share more of it than it planned on.

William Patry said...

Timothy:

I agree that the word "any" agreement is important, but we still have to figure out what "agreement" is and what an agreement "to the contrary is." Not every agreement involving transfer of rights is swept into 304(c) and 203, after all.

The 1983 Pooh agreementis, to me, deeply suspect because of the brazen references to termination rights, but I don't think as a general matter (and I don't have a dog in the Pooh fight) that Congress meant to preclude parties from entering into new contracts after an initial one that transferred rights. And if an effect of such a new contract is to delay or eliminate termination rights, does that fact alone void the agreement? I don't think so, and that's where the 1983 agreement may cut somewhat the other way: clearly there could have been a termination and the parties who could terminate were able to do so. They weren't being deprived of the termination right by a previous agreement, which is all I think Congress was concerned about.

For whatever reasons, they chose not to go through with the termination mechanism and chose to enter into a new contract. By itself that doesn't seem offensive to Congress's intent, although I confess unease with some of the specific details in that particular matter.

But I am also uneasy with what I view as misuse of 304(d) by Clare: the 304(c) right could have been terminated by her father but he chose not to. Should his daughter be able to negate the 1983 deal which was entered into with eyes wide open as an alternative to termination?

None of these problems are "plain" to me.

notinthisfighteither said...

If Christopher Robin had actually terminated and then granted rights to Disney under the same document at the same moment, there would not be an issue. What he did, as I understand you and the facts, was to say: "I can give you notice of intent to terminate but the termination date itself hasn't come yet so in advance of that date I'm waiving those rights." He then died before either the effective date of termination or the without having terminated while he could have.

(Disney's lawyers, usually pretty good particulalrly in things copyright and especially in things Pooh, should have provided that Christopher Robin would terminate and re-transfer - - it would seem - - if Christopher Robin survived to a date where that was possible.)

If my restatement of the facts is right, I think it very hard to argue that Congress would have wanted Disney to prevail. Termination rights under any of the sections that provide for them are meaningful only if there is a bright line of vesting. Christopher Robin could make a contract to grant rights if they vested in him. But if the rights never vested in him, he had nothing to agree to give. One could argue that vesting occurs at the point that the notice can be served (because, among other reasons, the notice is ineffective unless signed by the person in whom the rights are to vest). But this very example seems to be a great reason not to adopt that rule. Termination rights should be for the benefit of those who survive to the date certain of their vesting and who in fact exercise them. Any other rule places the valuation of those rights, and the benefit of those rights, in the wrong hands at the wrong time. There is a long-held business practice among every type of distributor to require authors to grant all extentions and renewal rights under copyright. Termination rights were intended to be an exception to that rule and block those practices. Bright-line vesting accomplishes that goal. Agreeements of any kind in advance of the date of termination and termination itself undermine what would seem to be the oject of termination rights in the first instance.

Of course, at least under Sony Bono, you were there. So you should know more than most.

William Patry said...

Dear notinthisfighteither:

I will want to check my facts, but I believe Christopher Robin died in 1996, after the period for terminating. The original transfer I think was in 1930 and the second agreement in 1983, 53 years afterwards, but within the 10 year window to serve the 304(c) notice.

As a matter of good practice and leverage, I would recommend serving the notice and then negotiating. But if a notice could have been served, why should you make the person serve it rather than simply cut a new deal? What matters for me is that a party not be deprived of serving a notice by an in futuro waiver. Once you are within the period when you can serve it, but you choose another arrangement, that seems to stand on a different footing.

That said, in my ideal world, the termination right would automatically vest in the author or heir, and that is what I tried, with no success, to accomplish in the Sonny Bono Act, having to settle for 304(d) right instead. As the Rolling Stones said, "You Can't Always Get What You Want."

Anonymous said...

Prof. Patry--
That said, in my ideal world, the termination right would automatically vest in the author or heir, and that is what I tried, with no success, to accomplish in the Sonny Bono Act

This still mystifies me. This sort of termination is a huge departure from normal contract law, creates uncertainty, is paternalistic, seems to be geared to reward persons other than the author at the expense of publishers who are likely just as or more responsible for the commercial success of a work.

Frankly, I think it'd be best to abolish the idea altogether, and if we return to a system of short, multiple terms (which I would like to see), then renewal rights should be freely transferable, and vest in the party that holds them.

William Patry said...

Dear Anonymous:

Termination rights are undoubtedly paternalistic and a departure from ordinary contract law. Judge Leval has taken the view that the termination impedes authors from being able to sell their rights because buyers will pay less. The contrary argument, which I think has the weight of evidence and experience behind it, is that buyers don't pay a penny more for 95 years than for 28 years, and in Congress's view authors should be able to force buyers back to the table. But even under this view, authors have to navigate the equivalent of the Tour de France to bring buyers to the table, so perhaps Congress should either ditch the idea altogether or make it automatic. Like many compromises, the end solution satisfies no one.