It appears from an opinion issued by the Ninth Circuit on Wednesday, Welles v. Turner Entertainment Company, 2007 WL 1544576 (9th Cir. May 30, 2007), that Orson Welles made only $30,000 from the exploitation of his famous movie “Citizen Kane.” His daughter, Beatrice, unhappy about this, sued Turner stating various copyright and state claims. The district court granted summary judgment to Turner and Beatrice appealed. The court of appeals affirmed in part and remanded in part. The case goes back for a determination of whether an agreement between Welles’ production company (Mercury) and RKO (Turner’s predecessor) could be construed to include home video rights. If so, Beatrice is out of luck; if not, she may see some money.
The issue of whether a given contract conveys rights to future means of exploitation is hardly new: the issue arose, for example, in the switch from silent movies to talkies. The issue arose again with the introduction of television, and then home video. Unlike some European countries (most notably Germany and to a lesser extent France), which do not permit authors to convey rights to exploit works by technologies not in existence at the time of the contract), in the U.S., a copyright owner can convey away future exploitation rights, say by language such as “by all means now known or hereafter developed.” But few contracts in the early part of the 20th century had such broad language and instead used more specific language, leading to interpretive questions decades later, usually in suits involving heirs or successors of the original author, and technologies not in existence at the time of the original grant.
There are some basic flashpoints in such disputes. One is whether to apply federal law or state law. Outside of the formalities of conveyance in chapter 2 of title 17, there is no federal contract law on conveyances of copyright interests, although in the case of conveyance of renewal rights, federal courts read in a requirement that the renewal right be expressly conveyed in order to protect a perceived federal policy of protecting authors from assigning away that right. A similar policy belief motivated some courts and commentators in the early home video cases, where it was argued that a federal objective of protecting authors required that ambiguities in contracts be interpreted in authors’ favor. Where the contract was drafted by the transferee, the old saw that contracts will be construed against the party who drafted the agreement also came into play.
In Boosey & Hawkes Music Publishers, Ltd. v. Walt Disney Co., 145 F.3d 481, 487 (2d Cir. 1998), Judge Leval, relying on “neutral principles of contract interpretation rather than solicitude for either party,” parted from company with the Ninth and Third Circuits, which had held that “[s]uch doubt as there is should be resolved in favor of the composer.” While Judge Leval’s approach is fair enough, it does not address the difficult situations, those where the contract is ambiguous, evenly balanced between the parties' interpretation, or simply silent on the issue. In such situations, courts will—consciously or not—avail themselves of either a policy preference or—what may be the same thing—a canon of contract construction that places the burden on one of the parties.
In Random House, Inc. v. Rosetta Books LLC, 283 F.3d 490 (2d Cir. 2002), involving the question of whether an eBook was a “book” within the meaning of a contract, said that New York applied to such disputes. In the same year, the New York Court of Appeals, in Greenfield v. Phillies Records, Inc. N.Y.2d 562, 750 N.Y.S.2d 565, 780 N.E.2d 166 (2002), reversed a lower appellate court which, while noting Judge Leval's “neutral” approach in Boosey & Hawkes, nevertheless followed the First and Ninth Circuit's pro-author approaches. Greenfield also overruled another lower appellate court's holding in Caldwell v. ABKCO Music Records that limited rights granted to “core” rights, reserving to the grantor rights not specifically granted.
Returning to the Citizen Kane dispute, the Ninth Circuit found that New York law applied under a choice of law agreement and that the contract was ambiguous, leading to vacation of the summary judgment grant to Turner, and a battle in the new York courts abut the meaning of "television" in 1939 when the grant was made.