USCA Ninth Circuit, July 11, 2008

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In a case involving the rights to the story Lassie Come Home, a 1976 and a 1978 grant of rights by the author’s heir during the renewal period, and the heir’s attempts to terminate the 1976 grant under the Copyright Act’s termination of transfer provision, the Ninth Circuit held that the 1978 grant did not extinguish the heir’s right to terminate the 1976 grant because the 1978 agreement did not revoke the 1976 agreement and the rights contained in the 1976 agreement did not include the heir’s termination rights.

The author’s daughter, Winifred Mewborn, granted her share of the motion picture, radio and television rights to Lassie Television, Inc. (LTI) in 1976, and subsequently granted ancillary rights to LTI in 1978. The 1978 agreement provided that Mewborn was granting the rights “to the extent such rights are owned by me” and the grant of rights was in addition to the rights granted in the 1976 agreement.

The Copyright Act of 1976 was enacted on October 19, 1976, and took effect on January 1, 1978. The Act extended the length of copyright protection for copyrights in existence on January 1, 1978, by 19 years (from 56 years to 75 years) and created a right of termination under § 304(c) which allows an author, if he or she is living, or his or her heirs if the author is not alive, to recapture the rights that had previously been transferred to third parties. The termination of transfer right as applied to the heirs is limited to transfers executed before January 1, 1978.

In 1996, Mewborn served a notice of termination under § 304(c) on Palladium Limited Partnership, the successor in interest to LTI, and Palladium rejected the notice and continued to exploit the work. In 2005, Classic Media, the successor in interest to Palladium, filed a declaratory suit against Mewborn, alleging that Mewborn had no interest in the Lassie works or any of the rights she had granted and that her termination notice was ineffective. Mewborn counterclaimed seeking a declaration that she had recaptured some of her previously assigned rights and requesting an accounting of profits from the effective date of her termination notice.

The district court granted summary judgment to Classic Media, finding that the parties intended that the 1978 assignment “give away” all of Mewborn’s additional rights not transferred in 1976, which included her newly acquired § 304(c) right to terminate the 1976 assignment. The district court held that Mewborn had relinquished her termination right, and the 1996 notice of termination was ineffective because Mewborn no longer had any interest in the rights transferred in 1976 and 1978.

The Ninth Circuit reversed and remanded. The court explained that the reason for enactment of § 304(c) was to allow an author, or his or her heirs, an opportunity to recapture the original rights and/or negotiate better deals because the monetary value of intellectual property is not known until the work is exploited. In addition, § 304(c) provides that “termination of the grant may be effected notwithstanding any agreement to the contrary . . . .” The Ninth Circuit rejected Classic Media’s argument that the 1978 assignment transferred the motion picture, television and radio rights subject to Mewborn’s termination rights. “[W]e cannot so hold because such an assignment would be void as an ‘agreement to the contrary’ pursuant to § 304(c)(5). Moreover, all that Mewborn had at the time of the 1978 Assignment was future rights that would revert upon termination of the grant and the 1978 Assignment does not purport to grant those rights.”

The court reasoned that the 1976 assignment transferred all of Mewborn’s motion picture, television and radio rights to the Lassie Works in exchange for $ 11,000 and, as the district court correctly concluded, was not substituted or revoked by the 1978 assignment but remained intact. Because LTI owned the motion picture, television and radio rights to the Lassie works in 1978, Mewborn had nothing to transfer by virtue of the 1978 assignment other than the additional ancillary rights she transferred for $ 3,000. The court held that “the language in the 1978 Assignment purporting to assign the motion picture, television and radio rights is a nullity.”

The court also explained in a footnote that the district court misapprehended the nature of the termination right when it characterized it as an additional motion picture, television and radio right newly acquired by Mewborn. “These rights are distinct. Copyright subsists in ‘original works of authorship,’ such as the literary works at issue here. The copyright proprietor may contract with third parties to exploit those rights in various media such as in motion pictures, television series or over radio. These agreements--whether they are called grants, assignments or licenses--are subject to the right of authors, widows and heirs to terminate under the 1976 Act.” Because Mewborn complied with the notice requirements under § 304(c), she successfully terminated the 1976 assignment.

The court distinguished this case from Milne v. Stephen Slesinger, Inc., 430 F.3d 1036 (9th Cir. 2005), in which a granddaughter of A.A. Milne sued the licensee of the Winnie the Pooh books, claiming that she could terminate a pre-1978 grant entered into by A.A. Milne’s son, Christopher. The Ninth Circuit noted that when Christopher Milne renegotiated the rights to the works, he already possessed the right to serve an advance notice of termination and he could have exercised it at any moment. “Thus when the Milne heir chose to use the leverage of imminent vesting to revoke the pre-1978 grant and enter into a highly remunerative new grant of the same rights, it was tantamount to following the statutory formalities, and achieved the exact policy objectives for which § 304(c) was enacted.” The court in Milne concluded that the renegotiated agreement was not an “agreement to the contrary” but instead was “an agreement consistent with, and which fully honored Christopher’s right of termination which could vest immediately if he served notice.”

In the case at hand, the Ninth Circuit reasoned that “Mewborn’s predicament is a far cry from Christopher Milne’s. Milne had--and knew that he had--the right to vest copyright in himself at the very time he revoked the prior grants and leveraged his termination rights to secure the benefits of the copyrighted works for A.A. Milne’s heirs. Mewborn, on the other hand, would not have the right to serve the advance notice that would vest her rights under § 304(c)(6)(B) until at the very earliest six years later. Thus, unlike Milne, Mewborn had nothing in hand with which to bargain.”