U.S. Supreme Court Mills Music, Inc. v. Snyder, 469
U.S. 153 (1985) Mills Music, Inc. v.
Snyder No. 83-1153 Argued October 9,
1984 Decided January 8,
1985 469
U.S. 153 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND
CIRCUIT Syllabus This case involves a controversy between petitioner publisher
and respondent heirs of the author of the 1923 copyrighted song
"Who's Sorry Now" over the division of royalty income that the
sound recordings of the song have generated. In 1940, the author
assigned his entire interest in all renewals of the copyright to
petitioner in exchange for an advance royalty and petitioner's
commitment to pay a cash royalty on sheet music and 50 percent of
all net royalties that petitioner received for mechanical
reproductions. In 1951, petitioner registered a renewal copyright.
Thereafter, petitioner directly or through an agent issued over 400
licenses to record companies authorizing the use of the song in
phonograph records, and obligating the companies to pay royalties
to petitioner, who in turn was obligated to pay 50 percent of those
royalties to the author. Separate recordings were then prepared
that generated the disputed royalty income. After the author's
death, respondents succeeded to his interest in the arrangement
with petitioner. Pursuant to 304(c)(2) of the Copyright Act, as
revised in 1976, respondents terminated the author's grant to
petitioner of rights in the renewal copyright. Under § 304(c)(6),
this termination caused all rights "covered by the terminated
grant" to revert to respondents, except that under § 304 (c)(6)(A)
a

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

															The sound recordings in question come within the statutory
definition of a "derivative work." When respondents demanded of
petitioner's agent that the royalties on the recordings be remitted
to them, the agent placed the disputed funds in escrow and brought
an interpleader action in Federal District Court, which entered
judgment for petitioner. The court held that the recordings had
been "prepared under authority of the grant" from the author to
petitioner, that the statute made no distinction between grantees
who themselves make or own derivative works and those who license
others to do so, that therefore the terms of the agreement that had
been in effect prior to the termination governed the record
companies' obligation to pay royalties, and that under those
agreements petitioner and respondents were each entitled to a 50
percent share in the net royalty. The Court of Appeals reversed,
holding that the § 304(c)(6)(A) exception preserved only the Page 469 U. S. 154 grants from petitioner to the record companies; that the
reversion of the copyright to respondents carried with it
petitioner's right to collect the royalties payable under those
grants; that § 304 was enacted for the benefit of authors and that
the exception was designed to protect "utilizers" of derivative
works; that, because petitioner was neither an author nor a
"utilizer," it was not a member of either class that § 304 was
intended to benefit; and that the legislative history indicated
that Congress had not contemplated a situation in which the
authority to prepare derivative works was derived from two
successive grants rather than a single grant directly from an
author to a "utilizer." Held: Petitioner is entitled pursuant to § 304(c)(6)(A)
to a share of the royalty income in dispute under the terms of the
author's grant to petitioner in 1940. A consistent reading of the
word "grant" in the text of § 304 (c)(6)(A) encompasses that grant.
Nothing in the legislative history or the language of the statute
indicates that Congress intended to draw a distinction between
authorizations to prepare derivative works that are based on a
single direct grant and those that are based on successive grants.
Rather, the consequences of a termination that § 304 authorizes do
not apply to derivative works that are protected by the §
304(c)(6)(A) exception. The boundaries of that exception are
defined by reference to the scope of the privilege that had been
authorized under the terminated grant and by reference to the time
the derivative works were prepared. The record companies'
derivative works involved in this case are unquestionably within
those boundaries. Pp. 469 U. S.
164 -178.

															720 F.2d 733, reversed.

															STEVENS, J., delivered the opinion of the Court, in which BURGER
C.J., and POWELL, REHNQUIST, and O'CONNOR, JJ., joined. WHITE, J.,
filed a dissenting opinion, in which BRENNAN, MARSHALL, and
BLACKMUN, JJ., joined, post, p. 469 U. S.
178 .

															JUSTICE STEVENS delivered the opinion of the Court.

															This is a controversy between a publisher, Mills Music, Inc.
(Mills), and the heirs of an author, Ted Snyder (Snyder), over the
division of royalty income that the sound recordings Page 469 U. S. 155 of the copyrighted song "Who's Sorry Now" (the Song) have
generated. The controversy is a direct outgrowth of the general
revision of copyright law that Congress enacted in 1976. [ Footnote 1 ] The 1976 Act gave Snyder's
heirs a statutory right to reacquire the copyright [ Footnote 2 ] that Snyder had previously
granted to Mills; however, it also provided that 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. [ Footnote 3 ]"

															The sound recordings of the Song, which have generated the
royalty income in dispute, are derivative works of that kind.
[ Footnote 4 ] Thus, the dispute
raises the question Page 469 U. S. 156 whether an author's termination of a publisher's interest in a
copyright also terminates the publisher's contractual right to
share in the royalties on such derivative works.

															The key that will unlock this statutory puzzle is an
understanding of the phrase "under the terms of the grant" as it is
used in § 304(c)(6)(A) -- the so-called "derivative works
exception" (the Exception) to the "termination of transfer and
licenses" provisions found in § 304(c). [ Footnote 5 ] Before focusing on the meaning of the key
phrase, we shall describe the chain of title to the copyright, the
circumstances surrounding Congress' adoption of the 1976 Act, and
how the pertinent provisions of the 1976 Act affected the
relationship among the interested parties in 1978 when Snyder's
heirs terminated the grant to Mills. We begin with the early
factual history. I Snyder was one of three persons who collaborated in creating
"Who's Sorry Now." [ Footnote 6 ]
Although Snyder actually held only a one-third interest in the
Song, the parties agree that we should treat the case as if Snyder
were the sole author. The original copyright on the Song was
registered in 1923 in the name of Waterson, Berlin & Snyder
Co., a publishing company that Snyder partly owned. [ Footnote 7 ] That company Page 469 U. S. 157 went into bankruptcy in 1929, and in 1932 the trustee in
bankruptcy assigned the copyright to Mills. [ Footnote 8 ]

															Under the Copyright Act of 1909, 35 Stat. 1075, the copyright in
a musical composition lasted for 28 years from the date of its
first publication, and the author could renew the copyright for an
additional term of 28 years. [ Footnote 9 ] Although Mills had acquired ownership of the
original copyright from the trustee in bankruptcy, it needed the
cooperation of Snyder in order to acquire an interest in the
28-year renewal term. Accordingly, in 1940 Mills and Snyder entered
into a written agreement defining their respective rights in the
renewal of the copyright. In essence, Snyder assigned his entire
interest in all renewals of the copyright to Mills in exchange for
an advance royalty and Mills' commitment to pay a cash royalty on
sheet music and 50 percent of all net royalties that Mills received
for mechanical reproductions. [ Footnote 10 ] Page 469 U. S. 158 Mills obtained and registered the renewal copyright in 1951.
After filing the required statutory notice, [ Footnote 11 ] Mills directly, or through the
Harry Fox Agency, Inc., issued over 400 licenses to record
companies authorizing the use of the Song in specific reproductions
on phonograph records. Using a variety of different artists and
different musical arrangements, these record companies prepared
separate "derivative works," each of which was independently
copyrightable. [ Footnote 12 ]
Because each of these derivative works was a mechanical
reproduction of the Song that was prepared pursuant to a license
that Mills had issued, the record companies were contractually
obligated to pay royalties to Mills, and Mills, in turn, was
contractually obligated to pay 50 percent of those royalties to
Snyder. [ Footnote 13 ] Fox
acted as an agent for Mills, performing the service of collecting
royalties from the licensed record companies and, after deducting
its charges, remitting the net receipts to Mills, which in turn
remitted 50 percent of that income to Snyder. After Snyder's death,
his Page 469 U. S. 159 widow and his son succeeded to his interest in the arrangement
with Mills. II The massive work necessary for the general revision of the
copyright law began in 1955, perhaps stimulated in part by this
country's help in the development of, and subsequent membership in,
the Universal Copyright Convention. [ Footnote 14 ] In that year, Congress approved several
appropriations for the Copyright Office. The Copyright Office then
began building the foundation for the general revision by
authorizing a series of 34 studies on major issues of copyright
law; these studies were published and included in the legislative
history. [ Footnote 15 ] After
issuing a report in 1961, the Copyright Office conducted numerous
meetings with representatives of the many parties that the
copyright law affected. [ Footnote 16 ] In 1963, the Copyright Office issued a
preliminary draft revision bill, which contained the essence of the
Exception before the Court today. [ Footnote 17 ] Additional discussions with interested
parties Page 469 U. S. 160 followed. [ Footnote 18 ]
Two additional draft revision bills supervened, both containing the
Exception. [ Footnote 19 ]
Interested parties submitted commentary following the 1964 draft
revision bill. [ Footnote
20 ]

															Congress began its lengthy hearings after the Copyright Office
submitted the 1965 draft revision bill. [ Footnote 21 ] The hearings on the 1965 bill occupied
over three weeks during a 3-month period and involved well over 100
witnesses. Moreover, the Copyright Office prepared a supplementary
report to accompany the 1965 draft revision bill. [ Footnote 22 ] Although additional hearings
were held in subsequent sessions, [ Footnote 23 ] and revision bills were submitted to
Congress in each term for the next 10 years, [ Footnote 24 ] discussion over the termination
provisions, and the Exception, was essentially completed at this
time. Congress enacted the termination provisions and the
Exception Page 469 U. S. 161 in the 1976 Act in virtually the same form as they appeared in
the 1965 draft revision bill. [ Footnote 25 ] III Section 304 of the 1976 Act significantly affected the rights of
Mills and the Snyders in three ways. First, § 304(b) provided an
automatic extension of the life of the copyright; instead of
expiring in 1980 at the end of the second renewal period, the
copyright on the Song will endure until 1999. [ Footnote 26 ]

															Second, § 304(c) gave the widow and surviving son of Snyder a
right to terminate the grant to Mills of rights in the renewal
copyright. [ Footnote 27 ]
That termination could be effected at Page 469 U. S. 162 any time during the 5-year period after January 1, 1978, by
serving a written notice on Mills and recording a copy in the
Copyright Office before it became effective.

															Third, § 304(c)(6) provided that the termination would cause all
rights "covered by the terminated grant" to revert to Snyder's
widow and son. That reversion was, however, subject to an exception
that permitted a previously prepared derivative work to continue to
be utilized after the termination "under the terms of the grant."
[ Footnote 28 ] IV On January 3, 1978, the Snyders delivered a written notice of
termination to Mills. The notice complied with § 304(c); it
identified the Song and stated that the termination applied to the
"[g]rant or transfer of copyright and the rights of copyright
proprietor, including publication and recording rights."
Additionally, the notice stated that it would become effective on
January 3, 1980. [ Footnote
29 ] On August 11, 1980, the Snyders advised Fox that Mills'
interest in the copyright had been terminated and demanded that the
royalties on the derivative works be remitted to them. Fox placed
the disputed funds in escrow and initiated an interpleader action
in the United States District Court for the Southern District of
New York. Mills and the Snyders appeared therein, agreed on the
relevant facts, and filed cross-motions for summary judgment. The
District Court entered judgment for Mills. Harry Fox Agency,
Inc. v. Mills Music, Inc., 543 F.
Supp. 844 (1982).

															In an exhaustive opinion, the District Court first held that the
record companies' derivative works had been "prepared under
authority of the grant" from Snyder to Mills. The Page 469 U. S. 163 court then noted that the statute did not make "any distinction
between grantees who themselves make or own derivative works and
those who license others to do so." Id. at 854.
Accordingly, the court concluded that the terms of the various
contracts that had been in effect prior to the termination governed
the record companies' obligation to pay royalties and that under
those arrangements Mills and the Snyders were each entitled to a 50
percent share in the net royalties. Id. at 867-869.

															Relying on three "propositions," the Court of Appeals for the
Second Circuit reversed. Harry Fox Agency, Inc. v. Mills Music,
Inc., 720 F.2d 733 (1983). First, it reasoned that Mills was
relying on two separate grants -- the 1940 grant from Snyder to
Mills and the later grants by Mills to the record companies -- but
that the Exception preserved only the second set of grants. Because
the Snyders' termination caused the ownership of the underlying
copyright to revert to them, the court viewed that reversion as
carrying with it Mills' right to collect the royalties payable
under the grants to the record companies. Id. at 738-740.
Second, the court determined that § 304 was enacted for the benefit
of authors and that the Exception was designed to protect
"utilizers" of derivative works; because Mills as a publisher was
neither an author nor a "utilizer," it was not a member of either
class that § 304 was intended to benefit. Id. at 739-740.
Third, the Court of Appeals read the legislative history as
indicating that Congress had not contemplated a situation in which
the authority to prepare derivative works was derived from two
successive grants rather than a single grant directly from an
author to a "utilizer." Id. at 740-741. The court felt
that, if Congress had confronted this situation, it would not have
wanted "publishers and other noncreative middlemen to share in
original derivative works royalties after termination." Id. at 743.

															Having granted Mills' petition for a writ of certiorari in order
to resolve this important question of copyright law, 466 U.S. 903
(1984), we now reverse. We are not persuaded Page 469 U. S. 164 that Congress intended to draw a distinction between
authorizations to prepare derivative works that are based on a
single direct grant and those that are based on successive grants.
Rather, we believe the consequences of a termination that § 304
authorizes simply do not apply to derivative works that are
protected by the Exception defined in § 304 (c)(6)(A). The
boundaries of that Exception are defined by reference to the scope
of the privilege that had been authorized under the terminated
grant and by reference to the time the derivative works were
prepared. The derivative works involved in this case are
unquestionably within those boundaries. V In construing a federal statute it is appropriate to assume that
the ordinary meaning of the language that Congress employed
"accurately expresses the legislative purpose." [ Footnote 30 ] We therefore start with an
examination of the statutory text.

															The critical subparagraph -- §304 (c)(6)(A) -- carves out an
exception from the reversion of rights that takes place when an
author exercises his right to termination. A single sentence that
uses the word "grant" three times defines the scope of the
Exception. It states:

															"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 the preparation after the
termination of other derivative works based upon the copyrighted
work covered by the terminated grant. "

															17 U.S.C. § 304(c)(6)(A) (emphasis supplied).

															The third reference is to "the terminated grant" which, in this
case, must refer to Snyder's grant to Mills in 1940. It is logical
to assume that the same word has the same meaning Page 469 U. S. 165 when it is twice used earlier in the same sentence. [ Footnote 31 ] The reference to a
derivative work at the beginning of the Exception is to one that
was prepared "under authority of the grant." Again, because Mills,
or Fox as its agent, authorized the preparation of each of the
400-odd sound recordings while Mills was the owner of the
copyright, each of those derivative works was unquestionably
prepared "under authority of the grant." The 1940 grant from Snyder
to Mills expressly gave Mills the authority to license others to
make derivative works. [ Footnote
32 ] Thus, whether the phrase "under authority of the grant" is
read to encompass both the original grant to Mills and the
subsequent licenses that Mills issued, or only the original grant,
it is inescapable that the word "grant" must refer to the 1940
grant from Snyder to Mills. [ Footnote 33 ]

															The second use of the word "grant" is in the critical phrase
that allows the record companies to continue to utilize previously
prepared derivative works "under the terms of the grant after its
termination." To give the word a consistent meaning, we must again
read it to encompass the original grant from Snyder to Mills, even
though it is evident that the Page 469 U. S. 166 relevant terms of the grant for a particular licensee must also
include the specific terms of its license.

															Although a consistent reading of the word "grant" in the text of
§ 304(c)(6)(A) encompasses the 1940 grant from Snyder to Mills, the
Court of Appeals concluded that the Exception preserved nothing
more than the grants from Mills to the record companies. As we have
briefly noted earlier, the Court of Appeals rested its conclusion
on three separate propositions, each of which merits
discussion. The Two Separate Grants The Court of Appeals based its conclusion that Mills could not
prevail largely on its view that the grant from Snyder to Mills was
entirely separate from subsequent "grants" by Mills to the record
companies. It reasoned:

															"Since the only grants which have terms that define the
circumstances under which derivative works are to be prepared and
utilized are the Mills-record company grants, it is the terms of
those grants that the Exception preserves, not the grant from the
Snyders giving Mills 50% of the mechanical royalties."

															720 F.2d at 739.

															It is undisputed that the 1940 grant did not itself specify the
terms that would apply to the use of any particular derivative
work. The licenses that Mills, or its agent Fox, executed contain
those terms. But if the underlying grant from Snyder to Mills in
1940 had not authorized those separate licenses, they would have
been nullities. Moreover, if the licenses are examined separately
from that earlier grant, they merely require that royalty payments
be made to Mills or to Fox as the collection agent for Mills.
[ Footnote 34 ] In terms, they
do not provide for any payments at all to the Snyders. The source
of the Snyders' entitlement to a 50 percent share in the royalty
income is the 1940 grant. Thus, a fair construction of Page 469 U. S. 167 the phrase "under the terms of the grant" as applied to any
particular licensee would necessarily encompass both the 1940 grant
and the individual license executed pursuant thereto.

															If the scope of the entire set of documents that created and
defined each licensee's right to prepare and distribute derivative
works is used to define the relevant "terms of the grant" for
purposes of the Exception, those terms include Mills' right to
obtain 100 percent of the net royalty income in the first instance
and Mills' obligation thereafter to remit 50 percent of those
revenues to the Snyders. If, as the Court of Appeals held, the
Exception limits the relevant "terms of the grant" to those
appearing in the individual licenses, two rather glaring
incongruities would result. First, the word "grant" would have
inconsistent meanings in the same sentence, and in fact, within the
entirety of both § 304(c) and the remainder of § 304. Second, and
of greater importance, there would be neither a contractual nor a
statutory basis for paying any part of the
derivative-works royalties to the Snyders. [ Footnote 35 ]

															The licenses issued to the record companies are the source of
their contractual obligation to pay royalties; viewed apart from
the 1940 grant, those licenses confer no rights on the Snyders.
Moreover, although the termination has caused the ownership of the
copyright to revert to the Snyders, nothing in the statute gives
them any right to acquire any contractual rights that the Exception
preserves. The Snyders' status as owner of the copyright gives them
no right to collect royalties by virtue of the Exception from users
of previously authorized derivative works. Stating the same
point Page 469 U. S. 168 from the perspective of the licensees, it is clear that they
have no direct contractual obligation to the new owner of the
copyright. The licensees are merely contractually obligated to make
payments of royalties under terms upon which they have agreed. The
statutory transfer of ownership of the copyright cannot fairly be
regarded as a statutory assignment of contractual rights. [ Footnote 36 ] The "Utilizer" of a Derivative Work The second of the Court of Appeals' propositions stated that
Mills is not the "utilizer" of a derivative work because "[a]ll
that Mills did was to utilize the underlying copyright when it
owned it by licensing others to create and utilize Page 469 U. S. 169 derivative works." 720 F.2d at 739. Building on its erroneous
first proposition, the court determined:

															"The language of the Exception supports such a conclusion. The
Exception provides that the derivative work must be prepared under
the authority of the grant, excluding, therefore, unauthorized
derivative works. It is only grants from Mills to the record
companies which authorize the preparation and creation of the
derivative works here involved. The Exception, then, protects
creators who utilize derivative works prepared under the authority
of the grant authorizing the creation of such derivative
works." Ibid. Although not expressly adopting the Court of
Appeals' first proposition regarding "two grants," respondents
expand on the court's second proposition, urging that the Exception
protects only the utilization of derivative works after the
underlying copyright has reverted to the author. Brief for
Respondents 3-8.

															The protection provided to those who utilize previously prepared
derivative works is not, however, unlimited. The word "utilized" as
written in the Exception cannot be separated from its context and
read in isolation. It is expressly confined by "the terms of the
grant." The contractual obligation to pay royalties survives the
termination and identifies the parties to whom the payment must be
made. If the Exception is narrowly read to exclude Mills from its
coverage, thus protecting only the class of "utilizers" as the
Snyders wish, the crucial link between the record companies and the
Snyders will be missing, and the record companies will have no
contractual obligation to pay royalties to the Snyders. If the
statute is read to preserve the total contractual relationship,
which entitled Mills to make duly authorized derivative works, the
record companies continue to be bound by the terms of their
licenses, including any terms requiring them to continue to pay
royalties to Mills. Page 469 U. S. 170 Legislative History The Court of Appeals' third, and last, proposition stated
that

															"Congress did not specifically address the situation where the
grantee from the author has himself subleased or subgranted or
licensed use of the copyright."

															720 F.2d at 740. It considered the statutory text ambiguous
because the statute "speaks in terms of one grant, while . . . we
are dealing with two distinct grants." Id. at 740, n. 12.
Because the Court of Appeals' review of the legislative history did
not disclose any specific consideration of the problem that this
case presents, it further concluded that Congress had simply
overlooked the possibility that a licensee's authority to prepare
derivative works might depend on two separate grants. The Court of
Appeals, therefore, predicated its construction of the Exception
largely on its evaluation of the legislative purpose: to "protect
owners of derivative works like film producers who own derivative
copyrights in books or plays." Id. at 741.

															Unlike the Court of Appeals, we are persuaded that Congress was
well aware of the prevalence of multiparty licensing arrangements
in the music-publishing industry, as well as in other industries
that the copyright law vitally affected, when it enacted the 1976
Act. There are many references in the legislative history to
multiparty arrangements in the music industry, and to the
importance of the role of music publishers in the marketing of
copyrighted songs. These references dissipate the force of the
argument that Congress did not expressly consider the precise
multiparty dispute before the Court today. [ Footnote 37 ] Indeed, there is reason to
believe Page 469 U. S. 171 that the 50 percent arrangement between Snyder and Mills that
was made in 1940 was a typical example of the form of copyright
grant that had been prevalent in this industry for Page 469 U. S. 172 many years. [ Footnote 38 ]
Rather than assuming that Congress was unaware of a common practice
in one of the industries that the general revision of the copyright
law, and the termination provisions, most significantly affected,
we think it more probable that Congress saw no reason to draw a
distinction between a direct grant by an author to a party that
produces derivative works itself and a situation in which a
middleman is given authority to make subsequent grants to such
producers. For whether the problem is analyzed from the author's
point of view or that of the producer of derivative works, the
statutory purposes are equally well served in either case.

															The principal purpose of the amendments in § 304 was to provide
added benefits to authors. The extension of the duration of
existing copyrights to 75 years, the provision of a longer term
(the author's life plus 50 years) for new copyrights, and the
concept of a termination right itself, were all obviously intended
to make the rewards for the creativity of authors more substantial.
More particularly, the termination right was expressly intended to
relieve authors of the consequences of ill-advised and
unremunerative grants that had been made before the author had a
fair opportunity to Page 469 U. S. 173 appreciate the true value of his work product. [ Footnote 39 ] That general purpose is
plainly defined in the legislative history and, indeed, is fairly
inferable from the text of § 304 itself.

															The Exception in § 304(c)(6)(A) was designed, however, to
exclude a specific category of grants even if they were manifestly
unfair to the author -- from that broad objective. The purpose of
the Exception was to "preserve the right of the owner of a
derivative work to exploit it, notwithstanding the reversion."
[ Footnote 40 ] Therefore,
even if a person acquired the right to exploit an already prepared
derivative work by means of an unfavorable bargain with an author,
that right was to be excluded from the bundle of rights that would
revert to the author when he exercised his termination right. The
critical point in determining whether the right to continue
utilizing a derivative work survives the termination of a transfer
of a copyright is whether it was "prepared" before the termination.
Pretermination derivative works -- those prepared under the
authority of the terminated grant -- may continue to be utilized
under the terms of the terminated grant. Derivative works prepared
after the termination of the grant are not extended this exemption
from the termination provisions. It is a matter of indifference as
far as the reason for Page 469 U. S. 174 giving protection to derivative works is concerned -- whether
the authority to prepare the work had been received in a direct
license from an author, or in a series of licenses and sublicenses.
The scope of the duly authorized grant and the time the derivative
work was prepared are what the statute makes relevant because these
are the factors that determine which of the statute's two
countervailing purposes should control. [ Footnote 41 ]

															The obligation of an owner of a derivative work to pay royalties
based on his use of the underlying copyright is not subject to
renegotiation because the Exception protects it. The "terms of the
grant" as existing at the time of termination govern the author's
right to receive royalties; those terms are therefore excluded from
the bundle of rights that the author may seek to resell unimpeded
by any ill-advised prior commitment. The statutory distinction
between the rights that revert to the author and those that do not
revert is based on the character of the right -- not on the form or
the number of written instruments that gave the owner of the
derivative work the authority to prepare it. Nothing in the
legislative history or the language of the statute indicates that
Congress intended the Exception to distinguish between two-party
transactions and those involving multiple parties.

															The example most frequently discussed in the legislative history
concerning the Exception involved the sale of a copyrighted story
to a motion picture producer. [ Footnote 42 ] The Court of Page 469 U. S. 175 Appeals explained the need for the Exception as the interest in
protecting the large investment that is required to produce a
motion picture, and recognized that record companies similarly must
also make a significant investment in compensating vocalists,
musicians, arrangers, and recording engineers. Therefore, the court
concluded that record companies are clearly within the class that
the Exception protects. The court felt, however, that music
publishers -- as middlemen -- were not similarly situated, but
rather merely had an ownership interest in the copyright that
reverted to the author upon termination. 720 F.2d at 742-743. As a
matter of fact -- or of judicial notice -- we are in no position to
evaluate the function that each music publisher actually performs
in the marketing of each copyrighted song. But based on our reading
of the statute and its legislative history, [ Footnote 43 ] in interpreting Page 469 U. S. 176 the Exception we find no reason to differentiate between a book
publisher's license to a motion-picture producer and a music
publisher's license to a record company. Neither publisher is the
author of the underlying work. If, as the legislative history
plainly discloses, the Exception limits the reversion right of an
author who granted his copyright on an original story to a book
publisher who in turn granted a license to a motion-picture
producer, we can see no reason why the Exception should not also
limit the right of a composer, like Snyder, who made such a grant
to a music publisher, like Mills, that preceded a series of
licenses to record companies. [ Footnote 44 ] VI Finally, respondents argue that the legislative history
demonstrates that the Exception was designed to accomplish a
well-identified purpose -- to enable derivative works to continue
to be accessible to the public after the exercise of an author's
termination rights. [ Footnote
45 ] Specifically, that history Page 469 U. S. 177 discloses a concern about the status of a number of
motion-picture films that had been prepared pursuant to grants by
book publishers. Without the Exception, the reversion that an
author's termination effected would have given the author the power
to prevent further utilization of the motion-picture films, or
possibly to demand royalties that the film producers were unwilling
to pay. Because the specific problem that the Exception addressed
involved a potential confrontation between derivative-works
utilizers and authors who had recaptured their copyrights,
respondents argue that Congress must have intended its response to
the problem to affect only those two interests.

															The argument is unpersuasive. It explains why the Exception
protects the utilizer of a derivative work from being required to
pay an increased royalty to the author. It provides no support,
however, for the proposition that Congress expected the author to
be able to collect an increased royalty for the use of a derivative
work. On the contrary, this history is entirely consistent with the
view that the terms of the grant that were applicable to the use of
derivative works at the time of termination should remain in
effect. The public interest in preserving the status quo with respect to derivative works is equally well served by either
petitioner's or respondents' reading of the Exception. Respondents'
argument thus sheds no light on the meaning of the phrase Page 469 U. S. 178 "the terms of the grant." Surely it does not justify the
replacement of contractual terms that unambiguously require payment
of royalties to a publisher with a new provision directing payment
to an author instead.

															Under the terms of the grant in effect at the time of
termination, Mills is entitled to a share of the royalty income in
dispute.

															The judgment of the Court of Appeals is reversed. It is so ordered. [ Footnote 1 ] See 17 U.S.C. §§ 101-810. The 1976 Act generally became
effective on January 1, 1978.

															[ Footnote 2 ]

															17 U.S.C. § 304(c)(2).

															[ Footnote 3 ]

															§ 304(c)(6)(A). The full text of this provision is quoted in n. 5 infra. [ Footnote 4 ]

															The 1976 Act defines a "derivative work" as follows:

															"'A derivative work' is a work based upon one or more
preexisting works, such as a translation, musical arrangement,
dramatization, fictionalization, motion picture version, sound
recording, art reproduction, abridgment, condensation, or any other
form in which a work may be recast, transformed, or adapted. A work
consisting of editorial revisions, annotations, elaborations, or
other modifications which, as a whole, represent an original work
of authorship, is a 'derivative work.'"

															17 U.S.C. § 101.

															A sound recording is generally fixed on a master, and then
embodied and distributed on phonorecords. The 1976 Act
distinguishes "sound recordings" from "phonorecords." The former
are defined as follows:

															"'Sound recordings' are works that result from the fixation of a
series of musical, spoken, or other sounds, but not including the
sounds accompanying a motion picture or other audiovisual work,
regardless of the nature of the material objects, such as disks,
tapes, or other phonorecords, in which they are embodied." Ibid. In contrast, the 1976 Act provides the following
definition of "phonorecords":

															"'Phonorecords' are material objects in which sounds, other than
those accompanying a motion picture or other audiovisual work, are
fixed by any method now known or later developed, and from which
the sounds can be perceived, reproduced, or otherwise communicated,
either directly or with the aid of a machine or device. The term
'phonorecords' includes the material object in which the sounds are
first fixed." Ibid. Moreover,

															"[a] work is 'fixed' in a tangible medium of expression when its
embodiment in a copy or phonorecord, by or under the authority of
the author, is sufficiently permanent or stable to permit it to be
perceived, reproduced, or otherwise communicated for a period of
more than transitory duration." Ibid. [ Footnote 5 ]

															The Exception reads as follows:

															"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
the preparation after the termination of other derivative works
based upon the copyrighted work covered by the terminated
grant."

															17 U.S.C. § 304(c)(6)(A).

															[ Footnote 6 ]

															Snyder composed the music, and Burt Kalmar and Harry Ruby wrote
the words. App. 52.

															[ Footnote 7 ] Id. at 49.

															[ Footnote 8 ] Id. at 38.

															[ Footnote 9 ]

															The renewal application had to be filed before the expiration of
the original term. If the author predeceased the last year of the
first 28-year term, certain statutory successors could accomplish
renewal. 17 U.S.C. § 24 (1976 ed.) (1909 Act); see also Fred
Fisher Music Co. v. M. Witmark & Sons, 318 U.
S. 643 , 318 U. S. 644 (1943).

															[ Footnote 10 ]

															The agreement, which Snyder and respondent Marie Snyder signed,
covered Snyder's entire catalog of songs. It provided, in part:

															"In part consideration hereof, I further covenant and agree
promptly to apply for renewal copyrights on all of my compositions
which from time to time may hereafter fall due and are now part of
your [Mills'] catalogue, whether I was the sole author thereof or
collaborated with others and which vest in me the right to make
copyright applications on all such compositions as provided by the
United States Copyright Act and in which I have any right, title
and interest or control whatsoever, in whole or in part, and I
further covenant and agree with you to stand seized and possessed
of all such renewal copyrights and of all applications therefor,
and of all rights in or to any such compositions for you and for
your sole and exclusive benefit. . . . I further agree that, when
such renewal copyrights are duly issued and obtained they shall
automatically become vested in you as the sole owner thereof, and
your successors and assigns."

															"After first deducting all advance royalties heretofore paid as
above provided for, and any other sums that may have been advanced
to me under the terms of this agreement, the following royalties
shall be payable to me during your customary semi-annual royalty
period each year, as follows: three (3�) cents per copy upon each
and every regular pianoforte copy, and two (2�) cents per copy for
each orchestration sold, paid for and not returned by virtue of the
rights herein acquired, and a sum equal to fifty (50%) per cent of
all net royalties actually received by you for the mechanical
reproduction of said musical compositions on player-piano rolls,
phonograph records, disks or any other form of mechanical
reproduction, for licenses issued under said renewal copyrights. .
. ."

															App. 41-42. This agreement, of course, predated this Court's
decision in Fred Fisher Music Co. v. M. Witmark & Sons,
supra, which held that the 1909 Act did not prevent an author
from assigning his interest in the renewal copyright before he had
secured it. Id. at 657.

															[ Footnote 11 ] See 17 U.S.C. § 1(e) (1976 ed.) (1909 Act). Mills filed
the required notice with the Copyright Office in 1958. App. 52.

															[ Footnote 12 ]

															17 U.S.C. § 103(b); 17 U.S.C. § 7 (1976 ed.) (1909 Act). The
record reveals separate licenses for renditions of the Song by
artists such as Judy Garland and Liza Minnelli, and Nat King Cole.
App. 22, 81.

															[ Footnote 13 ] See n. 10 supra. [ Footnote 14 ]

															House Judiciary Committee, Copyrights Act, H.R.Rep. No. 94-1476,
p. 47 (1976). Several earlier copyright law revisions had failed
"partly because of controversy among private interests over
differences between the Berne Convention and the U.S. law." Ibid. [ Footnote 15 ] See Studies Prepared for the Subcommittee on Patents,
Trademarks, and Copyrights of the Senate Committee on the
Judiciary, 86th Cong., 1st & 2d Sess., Copyright Law Revision
(H. Judiciary Comm. Prints 1960-1961).

															[ Footnote 16 ]

															H.R.Rep. No. 94-1476, supra, at 47. See Report
of the Register of Copyrights on the General Revision of the U.S.
Copyright Law, 87th Cong., 1st Sess., Copyright Law Revision (H.
Judiciary Comm. Print 1961); Discussion and Comments on Report of
the Register of Copyrights on the General Revision of U.S.
Copyright Law, 88th Cong., 1st Sess., Copyright Law Revision, Part
2 (H. Judiciary Comm. Print 1963).

															[ Footnote 17 ]

															Preliminary Draft for Revised U.S. Copyright Law and Discussions
and Comments on the Draft, 88th Cong., 2d Sess., Copyright Law
Revision, Part 3, pp. 16 (Alternative A), 21 (H. Judiciary Comm.
Print 1964). The twin citations here and elsewhere refer to the
derivative-works exception that is now codified at § 304(c)(6)(A)
and refer to a similar derivative-works exception that is now
codified at 17 U.S.C. § 203(b)(1). We have examined the development
of both sections for purposes of this opinion.

															[ Footnote 18 ] See Further Discussions and Comments on Preliminary
Draft for Revised U.S. Copyright Law, 88th Cong., 2d Sess.,
Copyright Law Revision, Part 4 (H. Judiciary Comm. Print 1964).

															[ Footnote 19 ] See H.R. 11947, 88th Cong., 2d Sess., §§ 16(b)(1),
22(c)(3)(A) (1964) (1964 draft revision bill); S. 3008, 88th Cong.,
2d Sess., §§ 16(b)(1), 22(c)(3)(A) (1964) (1964 draft revision
bill); H.R. 4347, 89th Cong., 1st & 2d Sess., §§ 203(b)(1),
304(c)(5)(A) (1965) (1965 draft revision bill); S. 1006, 89th
Cong., 1st Sess., §§ 203(b)(1), 304(c)(5)(A) (1965) (1965 draft
revision bill).

															[ Footnote 20 ] See 1964 Revision Bill with Discussions and Comments,
89th Cong., 1st Sess., Copyright Law Revision, Part 5 (H. Judiciary
Comm. Print 1965).

															[ Footnote 21 ]

															Hearings on H.R. 4347, 5680, 6831, 6835 before Subcommittee No.
3 of the House Committee on the Judiciary, 89th Cong., 1st Sess.
(1965); Hearings on S. 1006 before the Subcommittee on Patents,
Trademarks, and Copyrights of the Senate Committee on the
Judiciary, 89th Cong., 1st & 2d Sess. (1965-1966).

															[ Footnote 22 ]

															Supplementary Report of the Register of Copyrights on the
General Revision of the U.S. Copyright Law: 1965 Revision Bill,
89th Cong., 1st Sess., Copyright Law Revision, Part 6 (H. Judiciary
Comm. Print 1965).

															[ Footnote 23 ]

															H.R.Rep. No. 94-1476, supra, at 48-50.

															[ Footnote 24 ] Ibid. [ Footnote 25 ]

															Compare, H.R. 4347, 89th Cong., 1st & 2d Sess., §§ 203,
304(c) (1965), with 17 U.S.C. §§ 203, 304(c).

															[ Footnote 26 ]

															That section provides:

															"The duration of any copyright, the renewal term of which is
subsisting at any time between December 31, 1976, and December 31,
1977, inclusive, or for which renewal registration is made between
December 31, 1976, and December 31, 1977, inclusive, is extended to
endure for a term of seventy-five years from the date copyright was
originally secured."

															[ Footnote 27 ]

															Relevant portions of that section read as follows:

															"In the case of any copyright subsisting in either its first or
renewal term on January 1, 1978, other than a copyright in a work
made for hire, the exclusive or nonexclusive grant of a transfer or
license of the renewal copyright or any right under it, executed
before January 1, 1978, by any of the persons designated by the
second proviso of subsection (a) of this section, otherwise than by
will, is subject to termination under the following
conditions:"

															" * * * *" "(2) Where an author is dead, his or her termination interest is
owned, and may be exercised, by his widow or her widower and his or
her children or grandchildren . . ."

															" * * * *" "(3) Termination of the grant may be effected at any time during
a period of five years beginning at the end of fifty-six years from
the date copyright was originally secured, or beginning on January
1, 1978, whichever is later."

															"(4) The termination shall be effected by serving an advance
notice in writing upon the grantee or the grantee's successor in
title."

															" * * * *" "(5) Termination of the grant may be effected notwithstanding
any agreement to the contrary, including an agreement to make a
will or to make any future grant."

															[ Footnote 28 ]

															§ 304(c)(6)(A)

															[ Footnote 29 ]

															App. 54. The record identifies Belwin-Mills Publishing Corp. as
the grantee whose rights were to be terminated; the parties make no
distinction between this entity and "Mills." Ibid. [ Footnote 30 ] Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., post, at 469 U. S. 194 ; see also American Tobacco Co. v. Patterson, 456 U. S.
63 , 456 U. S. 68 (1982).

															[ Footnote 31 ] Erlenbaugh v. United States, 409 U.
S. 239 , 409 U. S. 243 (1972) ("[A] legislative body generally uses a particular word with
a consistent meaning in a given context").

															[ Footnote 32 ] See n. 10 supra. Of course, if a license that Mills issued to a
record company had authorized the preparation of several derivative
works, only one of which had been prepared at the time of the
Snyders' termination, the remaining, unexercised portion of the
licensee's authority would constitute a part of the "terminated
grant." In this case, however, each license that Mills issued
apparently authorized the preparation of only one derivative work.
Thus, at the very least, the "terminated grant" encompassed Mills'
authority to license the preparation of any additional derivative
works.

															[ Footnote 33 ]

															The word "grant" is also used repeatedly in the remainder of §
304. That section is too long to quote in full, but a reading of
the entire section discloses that the term is consistently used in
a way that must encompass the original grant by an author or his
heirs.

															[ Footnote 34 ]

															App.22-27.

															[ Footnote 35 ]

															It should be noted that JUSTICE WHITE's dissent does not adopt
the Court of Appeals' reading of the Exception. He reads the "terms
of the grant" to include only those terms defining the amount of
the royalty payments and to exclude the terms identifying the
parties to whom the royalty is payable. The statute itself,
however, refers to " the terms of the grant" -- not to some of the terms of the grant.

															[ Footnote 36 ]

															The District Court concluded that, absent the Mills' licenses to
the record companies, the record companies would be infringers. Harry Fox Agency, Inc. v. Mills Music,
Inc., 543 F.
Supp. 844 , 850-851 (SDNY 1982). The Court of Appeals accepted
this conclusion. 720 F.2d at 738, n. 8. Moreover, under the
copyright law, both before and after the 1976 Act, the record
companies had a statutory right to obtain self-executing compulsory
licenses from Mills. See 17 U.S.C. § 115; 17 U.S.C. §§
1(e), 101 (1976 ed.) (1909 Act). In the District Court, the Snyders
contended that the Exception was wholly inapplicable because the
record companies had statutory compulsory licenses and therefore
their sound recordings had not been prepared "under authority of
the grant" within the meaning of the 1976 Act. The District Court
rejected this contention, 543 F. Supp. at 851-852, finding that
either Mills or its agent, Fox, executed the licenses; therefore,
the licenses were not self-executing. This contention was not
renewed in either the Court of Appeals or in this Court. (The
comment on the compulsory-license mechanism in the dissent, post at 469 U. S. 185 ,
n. 12, is incorrect because it seems to assume that the case
involves self-executing compulsory licenses.) Additionally,
although the Snyders contended otherwise in the District Court, 543
F. Supp. at 850-851, they no longer challenge the proposition that
Mills issued the pretermination licenses "under authority of the
grant" within the meaning of the Act. It is the royalty income
generated by these 400-odd derivative works prepared before the
termination that is at issue in this case. Mills acknowledges that
it may not authorize the preparation of any additional works and
that its only claim to an interest in royalties is that preserved
by the Exception.

															[ Footnote 37 ] See, e.g., Report of the Register of Copyrights on the
General Revision of the U.S. Copyright Law, supra, n. 16 at 33 ("In practice the
authors of musical works generally assign their recording and other
rights to publishers, under an agreement for the division of
royalties. In most instances the record companies secure licenses
from the publishers, thereby avoiding some of the mechanics of
notice and accounting required by the statute for exercise of the
compulsory license"); H. Henn, The Compulsory License Provisions of
the U.S. Copyright Law, Copyright Law Revision, Studies Prepared
for the Subcommittee on Patents, Trademarks, and Copyrights of the
Senate Committee on the Judiciary, Study No. 5, 86th Cong., 1st
Sess., 47 (H. Judiciary Comm. Print 1960) ("[T]he general practice
is for the composer to assign his common law copyright to a music
publisher") (footnote omitted); A. Kaminstein, Divisibility of
Copyrights, Copyright Law Revision, Studies Prepared for the
Subcommittee on Patents, Trademarks, and Copyrights of the Senate
Committee on the Judiciary, Study No. 11, 86th Cong., 2d Sess., 23
(H. Judiciary Comm. Print 1960) ("[I]n the music industry, the
prevailing custom is that statutory copyright in sheet music is
secured in the name of the publisher"); Copyright Law Revision:
Hearings on H.R. 4347, H.R. 5680, H.R. 6831, H.R. 6835, supra, n. 21 at 680
("Copyrights almost invariably are owned by publishers, whose
contracts with songwriters customarily provide for an equal
division of royalties received from the exploitation of mechanical
reproduction rights. Attempts occasionally are made to create the
image of a large record company dealing with an innocent composer,
but this is pure myth; the composer turns his manuscript over to a
publisher and the latter is the copyright proprietor from which the
record company must get its rights") (footnote omitted) (statement
of Record Industry Association of America, Inc.); id. at
1743-1744 (statement of Robert R. Nathan, Music Publishers
Protective Association, Inc.); cf. Copyright Law Revision:
Hearings on H.R. 2223 before the Subcommittee on Courts, Civil
Liberties, and the Administration of Justice of the House Committee
on the Judiciary, 94th Cong., 1st Sess., 1369 (1975) ("There are
several distinct groups of people who are involved in bringing
about recorded music. There is the composer of the music, there is
the publisher, there is the artist who records the music, and there
is the record company that produces and distributes the record")
(testimony of Vincent T. Wasilewski, President, National
Association of Broadcasters); id. at 1651-1653 (letter of
Leonard Feist, National Music Publishers' Association, Inc.); id. at 1653 ("I feel that the argument is not with the
publisher because when I went into New York last year to compose
the music for 'A Chorus Line.' I did it with a new writer by the
name of Ed Kleban. He is not a proven writer yet. He has been
subsidized for the last few years, been given money by a publishing
company to actually be able to live and to be allowed to write. I
think that for every instance where a publisher, say, is a person
who does not help, I think that there are a vast amount of people
who can tell you that there are people getting paid without yet,
you know, giving material, just by having faith in an individual,
and obviously, Ed Kleban now has proved that he is good, and the
publisher has proved that it was worth the investment. I just want
to make sure that you understand that the plight of the composer is
not up against the publisher because we have had great success with
dealings with publishers. It is elsewhere where we seem to get into
trouble") (testimony of Marvin Hamlisch, composer).

															[ Footnote 38 ] See, e.g., W. Blaisdell, Size of the Copyright
Industries, Copyright Law Revision, Studies Prepared for the
Subcommittee on Patents, Trademarks, and Copyrights of the Senate
Committee on the Judiciary, Study No. 2, 86th Cong., 1st Sess., 49
(H. Judiciary Comm. Print 1960) ("Music composers and lyricists
usually assign all rights in their works, including the right to
claim copyright, to a music publisher, subject to the provisions of
the contract of assignment. In general the contract provides that
the composer-lyricists are to receive not less than 50 percent of
the gross returns from the sales of the work in whatever form");
Copyright Law Revision: Hearings on H.R. 4347, H.R. 5680, H.R.
6831, H.R. 6835, supra, n. 21 at 781, 844 ("[E]qual split of copyright license fees
between publishers and songwriters is based upon industry
practice") (statement of John Desmond Glover).

															[ Footnote 39 ]

															In explaining the comparable termination provision in § 203, the
House Report states:

															"A provision of this sort is needed because of the unequal
bargaining position of authors, resulting in part from the
impossibility of determining a work's value until it has been
exploited. Section 203 reflects a practical compromise that will
further the objectives of the copyright law while recognizing the
problems and legitimate needs of all interests involved."

															H.R.Rep. No. 94-1476, at 124.

															[ Footnote 40 ]

															Further Discussions and Comments on Preliminary Draft for
Revised U.S. Copyright Law, supra, n. 18 at 39 (statement of Barbara Ringer). The
House Report that accompanied the 1976 Act, certainly persuasive
legislative history, affirmatively supports this view. Regarding §
203(b), § 304(c)'s counterpart, it stated:

															"This clause provides that, notwithstanding a termination, a
derivative work prepared earlier may 'continue to be utilized'
under the conditions of the terminated grant."

															H.R.Rep. No. 94-1476, at 127.

															[ Footnote 41 ]

															The legislative history also indicates that Congress intended
the termination provisions to produce an accommodation and a
balancing among various interests. See id. at 124, 140;
Senate Committee on the Judiciary, Copyright Law Revision, S.Rep.
No. 94-473, p. 108 (1975) (accompanying S. 22, 94th Cong., 1st
Sess.).

															[ Footnote 42 ]

															Regarding § 203(b), the House Report stated:

															"[N]otwithstanding a termination, a derivative work prepared
earlier may 'continue to be utilized' under the conditions of the
terminated grant; the clause adds, however, that this privilege is
not broad enough to permit the preparation of other derivative
works. In other words, a film made from a play could continue to be
licensed for performance after the motion picture contract had been
terminated but any remake rights covered by the contract would be
cut off. For this purpose, a motion picture would be considered as
a 'derivative work' with respect to every 'preexisting work'
incorporated in it, whether the preexisting work was created
independently or was prepared expressly for the motion
picture."

															H.R.Rep. No. 94-1476, at 127. See also Preliminary
Draft for Revised U.S. Copyright Law and Discussions and Comments
on the Draft, supra, n. 17 at 278 (statement of Barbara Ringer, Register of
Copyrights).

															[ Footnote 43 ]

															The legislative history indicates the usual practice:

															"Book authors usually contract with book publishers for the
publication of their works, the publisher taking title to all
rights in the work subject to the provisions of the contract. The
author usually receives a royalty computed as a percentage of the
price at which each book is sold or as a percentage of the total
volume of sales."

															W. Blaisdell, Size of Copyright Industries, supra, n. 38 at 48. Later, the same
study indicates:

															"In motion picture production creative material from both
storywriters and composers is used. Motion picture producers employ
creative talent on an employee-for-hire basis and on a freelance
basis. However, the business contracts for the writing and
adaptation of story material between the Association of Motion
Picture Producers and the Writers Guild of America provide almost
exclusively for employees for hire and it is only in unusual cases
that freelance contracts are used. Of course, motion picture
producers purchase rights to story material from book publishers
who hold copyrights to novels, stories, etc. In most of these
cases, a large portion of the purchase price goes to the original
author; generally a book publisher retains only the equivalent of
an agent's 10 percent fee." Id. at 54-55 (emphasis added).

															[ Footnote 44 ]

															Although the Court of Appeals apparently would differentiate
"creative" middlemen like book publishers and noncreative middlemen
like music publishers, JUSTICE WHITE does not appear to adopt any
such distinction. Under his reading of the Exception, presumably
any royalties payable by a motion-picture company to a book
publisher would revert to the author upon termination.

															[ Footnote 45 ]

															They point out that even without the creation of the termination
right in the 1976 Act, there had been concern about the status of
certain derivative works. Moreover, they assert that under the 1909
Act, if an author alienated his renewal-term copyright, but died
before his renewal term vested, the author's transfer of his
renewal rights was a nullity because the right in the renewal term
was exercisable only by the author's statutory successors. Thus,
according to respondents, the original-term transferee who had made
a derivative work could be enjoined from continuing to use the
derivative work because it might infringe the underlying copyright
in the renewal term. Some observers apparently believed that the
Court of Appeals for the Second Circuit acknowledged support for
this view in G. Ricordi & Co. v. Paramount Pictures,
Inc., 189 F.2d 469, 471, cert. denied, 342 U.S. 849
(1951), when it wrote that

															"[a] copyright renewal creates a new estate, and the few cases
which have dealt with the subject assert that the new estate is
clear of all rights, interests or licenses granted under the
original copyright."

															Therefore, respondents reason that there was confusion after
Ricordi regarding whether the law allowed a derivative-work owner
to utilize the work after the expiration of the underlying
copyright or whether the law prohibited all utilization of the
derivative work.

															JUSTICE WHITE, with whom JUSTICE BRENNAN, JUSTICE MARSHALL, and
JUSTICE BLACKMUN join, dissenting.

															I can accept the assertion that the "terminated grant" referred
to in § 304(c)(6)(A) is the original grant from Snyder to Mills. I
also have no trouble with the notion that the derivative works at
issue in this case were prepared "under authority of the grant," in
that the Snyder-Mills grant endowed Mills, as owner of the
copyright, with the authority to license the preparation of sound
recordings of the Song. And it is merely an obvious rephrasing of
the statutory language to say that users of these derivative works
may continue to utilize them under the specific terms of the
licenses issued by Mills. But these observations provide no basis
for construing the statute so as to extend the benefits of the
Exception to Mills, as well as to users of derivative works, after
the Snyders have terminated the original grant and reclaimed
ownership of the copyright. I The right to terminate defined in § 304(c) encompasses not only
termination of the grant of copyright itself, but also termination
of the grant of "any right under" that copyright. Subsection (6) of
this provision reiterates this point, stating that "all of a
particular author's rights under this title that were covered by
the terminated grant revert, upon the effective date of
termination," to the author or his heirs. A Page 469 U. S. 179 straightforward reading of this language is that it allows the
author or his heirs to reclaim the copyright he formerly bargained
away, as well as any other right granted under the copyright.
Surely this termination right extends to recapturing the right
previously given to the grantee, in this case Mills, to share in
royalties paid by licensees.

															The author's right to displace the grantee under § 304(c)(6)
appears complete, subject only to the enumerated exceptions. One of
these, Exception (A), accords the utilizer of a derivative work the
privilege of continuing to utilize the work under the terms of the
grant. In this case, only the recording companies -- not Mills --
can exercise the right to utilize the derivative works. [ Footnote 2/1 ] To protect that utilization,
it is necessary only to insulate utilizers from the author's right
to terminate the license of the underlying work and to renegotiate
a higher royalty. The utilizers' sole interest is in maintaining
the royalty rate that prevailed before the author's termination of
the grant; the identity of the party who receives that royalty is a
matter of indifference to them. In this case, the utilizers, Mills'
licensees, were not parties to the agreement between Mills and
Snyder. They were contractually obligated to pay royalties to
Mills, but were not involved in any division of royalties beyond
that point. It is strange, to say the least, to hold, as the Court
does today, that the terms of utilization by the licensee include
the agreement between Mills and Snyder to divide royalties, an
agreement that is entirely irrelevant to protecting utilization of
the derivative work.

															The majority attempts to resolve the tension between the three
uses of the word "grant" in § 304(c)(6)(A) by reading the word to
encompass both the Snyder-Mills grant and Mills' Page 469 U. S. 180 subsequent licenses to the record companies. But while this
interpretation may stretch the language of the Exception to fit the
situation at hand, it does not explain why the Exception should
preserve the royalty-division agreement between Mills and Snyder.
Even assuming that there is only one grant, and that it includes
the licenses issued by Mills, the only terms of the grant preserved
by the Exception are those terms under which the derivative grant
is utilized. The relevant terms, therefore, are those governing the
licensees' obligation to pay a certain royalty rate, not those
governing the division of royalties between Mills and the
Snyders.

															The majority claims that it is essential to read the Exception
as preserving Mills' rights because the terms under which the
derivative works are utilized identify Mills, or Fox, as Mills'
agent, as the recipient of the royalties. It is surely true that
the licenses say this, but that is a surprisingly weak reed on
which to rest a judgment of this Court. It can mean only that, if
the utilizer of the derivative work wishes to continue to pay
royalties to Fox, he may do so. Fox, after collecting the royalties
and deducting its fee, will be obligated to forward the royalties
to the rightful owners of the copyright, the Snyders. [ Footnote 2/2 ] II The majority's reading of the statute, as awkward and clumsy as
it is, might conceivably be accepted if it were supported by the
legislative history. But it plainly is not. The legislative history
of the Exception is scanty, and it contains Page 469 U. S. 181 no express consideration of the multiple-grant situation that
confronts us in this case. Rather, Congress confined its attention
to the situation involving a grant from the copyright owner to the
creator of an independently copyrightable derivative work. A 1967
House of Representatives Report, for example, discussing an earlier
version of the 1976 Copyright Act, stated that "any grantee who has
made a derivative work under his grant" might continue to
use the work after termination of the grant. [ Footnote 2/3 ] The Committee apparently assumed that the
grantee of the underlying copyright and the utilizer of the
derivative work would be one and the same.

															The majority places great emphasis on indications that Congress
was aware of multiparty arrangements in the movie and
music-publishing industries, positing from this awareness an
intention to extend the benefits of the Exception to middlemen such
as Mills. But the majority cites not one word to indicate that
Congress did in fact contemplate such a result when it enacted the
Exception. On the contrary, when the Exception was being drafted by
the Copyright Office, the hypotheticals offered to illustrate its
operation were cast in terms of the motion picture industry and
assumed that the creator of the underlying work, a story or novel,
would deal directly with the creator of the derivative work, a
film. [ Footnote 2/4 ] If, as the
majority asserts, Congress did consider the application of the
Exception to the multiple-grant situation, it is indeed odd that it
phrased the statutory language so ambiguously. Page 469 U. S. 182 That middlemen such as music publishers were to be excluded from
the benefits conferred by the Exception is strongly supported by
statements to that effect by music publishers themselves, made in
the discussions that took place before the Copyright Office. When a
version of the Exception first appeared in the 1964 preliminary
draft bill, representatives of the music publishing industry
protested. A representative of the Music Publishers Association of
the United States stated that under the proposed exception, "the
royalties resulting from the license presumably rever[t] entirely
to the author." [ Footnote 2/5 ] A
spokesman for the Music Publishers Protective Association construed
the Exception as being "for the benefit of everyone acquiring
rights under a copyright other than the publisher." [ Footnote 2/6 ] Page 469 U. S. 183 The legislative history thus lends no support for Mills' claimed
right to share in the royalties from derivative works. Rather, it
clearly evidences the underlying purpose of the Exception, which
is, as the majority concedes, to protect the actual owners of
derivative works, such as film producers, from having to
renegotiate rights in underlying works, such as the novels or plays
on which the films were based. When the Exception was formulated,
and indeed when it was enacted, the prevailing understanding of the
1909 Act was that the owners of renewal rights in a copyrighted
work might exercise a veto power over continued performance of a
derivative work that had been created under a first-term grant.
[ Footnote 2/7 ] Motion picture
studios, fearing infringement actions by authors' statutory
successors or their assignees, removed from circulation several
highly successful films. [ Footnote
2/8 ] The Exception Page 469 U. S. 184 was drafted in response to protests from commentators and movie
producers whose goal was to allow the continued distribution of
movies despite termination of the grant in the underlying play or
novel. [ Footnote 2/9 ] Barbara
Ringer, then Assistant Register of Copyrights, described an early
version of the Exception as being designed to "permit the owner of
a derivative work, such as a motion picture, to continue using it."
[ Footnote 2/10 ] The House Report
on the 1976 Act also offered this explanation in elucidating the
Exception:

															"In other words, a film made from a play could continue to be
licensed for performance after the motion picture contract had been
terminated but any remake rights covered by the contract would be
cut off. [ Footnote 2/11 ]"

															To carry out this purpose of protecting derivative users, it is
unnecessary to protect middlemen as well, and there is no
indication whatsoever that Congress intended to do so. The
majority, however, unaccountably rejects the position that Page 469 U. S. 185 the Exception should be construed only so broadly as is
necessary to effectuate this undisputed legislative intent.
[ Footnote 2/12 ] It also ignores
the accepted principle of statutory construction that an ambiguous
statute should be construed in light of the statutory purpose.
[ Footnote 2/13 ] As the majority
acknowledges, the principal purpose of the extension of the term of
copyright and the concomitant termination provisions -- to which
the derivative-works clause forms an exception -- was to benefit
authors. Under the 1909 Copyright Act, copyright subsisted in two
28-year terms, with renewal available to the author at the end of
the first term. This right of renewal was intended to allow an
author who had underestimated the value of his creation at the
outset to reap some of the rewards of its eventual success.
[ Footnote 2/14 ] That purpose,
however, was substantially thwarted by this Court's decision in Fred Fisher Music Co. v. M. Witmark & Sons, 318 U. S. 643 (1943). As a result of that decision, an author might assign, not
only the initial term of the copyright in his work, but also the
renewal Page 469 U. S. 186 term. Thus, assignees were able to demand the assignment of both
terms at the time when the value of the copyrighted work was most
uncertain.

															The termination provisions of the 1976 Act were designed to
correct this situation. They guarantee to an author or his heirs
the right to terminate a grant and any right under it
"notwithstanding any agreement to the contrary." [ Footnote 2/15 ] The House Report accompanying the
Act explained that

															"[a] provision of this sort is needed because of the unequal
bargaining position of authors, resulting in part from the
impossibility of determining a work's value until it has been
exploited. [ Footnote 2/16 ]"

															The termination provisions, therefore, clearly favor authors'
interests over those of grantees such as music publishers.
[ Footnote 2/17 ]

															The derivative-works clause reflects an accommodation between
two competing concerns: that of providing compensation to authors,
and that of promoting public access to derivative works. The
majority apparently concludes that its interpretation of the
Exception does justice to both of these concerns. But to promote
public access to existing derivative works, it is necessary to go
no further than to allow the owners of these works to continue to
disseminate them. The rights of middlemen to receive royalties
under terminated grants do not enter into the balance; regardless
of Page 469 U. S. 187 who receives the royalties, the owner of the derivative work may
continue to pay the same rate, and public access to the work will
be unimpeded.

															By going further than necessary to effect the goal of promoting
access to the arts, the majority frustrates the congressional
purpose of compensating authors who, when their works were in their
infancy, struck unremunerative bargains. That such frustration will
result is clearest in the situation, not uncommon in the music
industry, where an author has assigned his rights for a one-time,
lump-sum payment. [ Footnote 2/18 ]
Under the majority's interpretation of the Exception, the
publisher-middleman would be free to continue to collect all
royalties accruing during the extended 19-year copyright term, and
the author would receive nothing. While my interpretation of the
Exception results in the author's receiving more than he would have
received under the terminated grant, such a result is the very
objective of the termination provisions.

															To allow authors to recover the full amount of derivative-works
royalties under the Exception is not to slight the role of
middlemen such as music publishers in promoting public access to
the arts. Achieving that fundamental objective of the copyright
laws requires providing incentives both to the creation of works of
art and to their dissemination. [ Footnote 2/19 ] But the need to provide incentives is
inapposite to the circumstances of this case, because the rights at
issue are attached to a term of copyright that extends beyond what
was contemplated by the parties at the time of the initial grant.
In 1940, when Ted Snyder and Mills entered into their
royalty-divisionagreement, neither party could have acted in
reliance on the royalties to be derived from the additional 19-year
term created by the 1976 Act. In this situation, the author and the
grantee have each already reaped the benefit of their bargain, and
the only question is which one should receive the windfall
conferred by Congress. The considerations that should govern the
allocation of a windfall are not those of providing incentives but
those of providing compensation. And the legislative history of the
renewal and termination provisions indicates a congressional
purpose to compensate authors, not their grantees. In attempting to
claim for itself the benefits of the derivative-works exception,
Mills bears the burden of proof. [ Footnote 2/20 ] In my view, it has fallen far short of
carrying that burden.

															[ Footnote 2/1 ]

															As the Court of Appeals observed, if Mills did attempt to
utilize any of the derivative works, for example by selling copies
of the phonorecords of the copyrighted work to the public, it would
be infringing on the derivative copyrights. Harry Fox Agency,
Inc. v. Mills Music, Inc., 720 F.2d 733, 739 (CA2 1983).

															[ Footnote 2/2 ]

															The majority finds perpetuation of the royalty-division
agreement essential to the Snyders' right to collect
derivative-works royalties, because, according to the majority,
absent that agreement the Snyders have no contractual or statutory
right to receive them. This argument assumes that the Exception
deprives the Snyders of the right to receive royalties, a right
that they would otherwise reclaim by virtue of the termination
provisions of § 304(c). But the Exception deprives the Snyders only
of the right to change the rate of royalties, not of the right to
receive them. See supra at 179 and this page.

															[ Footnote 2/3 ]

															H.R.Rep. No. 83, 90th Cong., 1st Sess., 9 (1967) (discussing
right of first negotiation granted to current holder of derivative
rights under then-current proposal) (emphasis added).

															[ Footnote 2/4 ] See Discussion and Comments on Report of the Register
of Copyrights on the General Revision of the U.S. Copyright Law,
88th Cong., 1st Sess., Copyright Law Revision, Part 2, p. 361 (H.
Judiciary Comm. Print 1963) (Statement of Motion Picture
Association of America); Supplementary Report of the Register of
Copyrights on the General Revision of the U.S. Copyright Law: 1965
Revision Bill, 89th Cong., 1st Sess., Copyright Law Revision, Part
6, p. 76 (H. Judiciary Comm. Print 1965).

															[ Footnote 2/5 ]

															Preliminary Draft for Revised U.S. Copyright Law and Discussions
and Comments on the Draft, 88th Cong., 2d Sess., Copyright Law
Revision, Part 3, pp. 284-285 (H. Judiciary Comm. Print 1964)
(statement of Phillip Wattenberg). See also id. at 296-297
(termination clause, including exception, would give author 100% of
royalties) (statement of Mr. Kaminstein).

															[ Footnote 2/6 ] Id. at 318-319 (written submission of Julian Abeles).
These statements were, of course, made by interested parties. But
this Court has recognized that, where, as here, legislation is the
result of compromise between competing interests, see H.R.Rep. No. 83, supra, at 90, statements by interested
parties carry some weight. See Dawson Chemical Co. v. Rohm
& Haas Co., 448 U. S. 176 , 448 U. S.
202 -212 (1980); Chicago & N.W. R. Co. v.
Transportation Union, 402 U. S. 570 , 402 U. S. 576 (1971). In those cases, the testimony was given before Congress
itself, whereas the music publishers' statements were made to the
Copyright Office. But the Copyright Act is unusual in that much of
it, including the derivative-works Exception, was drafted by the
Copyright Office, which is itself an arm of Congress. The House and
Senate Committees were clearly aware of the history of the
termination provisions in the Copyright Office. See H.R.Rep. No. 83, supra, at 90; Hearings on S. 1006 before
the Subcommittee on Patents, Trademarks, and Copyrights of the
Senate Committee on the Judiciary, 89th Cong., 1st Sess., 64
(1965). Especially in the absence of any other legislative history
directly relevant to the treatment of music publishers under the
Exception, the statements before the Copyright Office cannot be
ignored.

															[ Footnote 2/7 ]

															This was the "broad interpretation" of G. Ricordi & Co.
v. Paramount Pictures, Inc., 189 F.2d 469 (CA2), cert.
denied, 342 U.S. 849 (1951). Ricordi merely held that
the licensee of a copyright holder may not prepare a new derivative
work based upon the copyrighted work after termination of the
grant. Some courts and commentators, however, extracted from Ricordi a rule that even continued utilization of a
previously created derivative work must cease after termination of
the grant in the underlying work. See Bricker, Renewal and
Extension of Copyright, 29 S. Cal.L.Rev. 23, 43 (1955); Melniker
& Melniker, Termination of Transfers and Licenses Under the New
Copyright Law, 22 N.Y.L.S.L.Rev. 589, 612, n. 117 (1977). Barbara
Ringer, former Register of Copyrights, endorsed this view in a
study prepared for Congress in connection with the drafting of the
1976 Act. B. Ringer, Renewal of Copyright, 86th Cong., 2d Sess.,
Copyright Law Revision, Studies Prepared for the Subcommittee on
Patents, Trademarks, and Copyrights of the Senate Committee on the
Judiciary, Study No. 31, p. 169 (Comm. Print 1961). A narrower
interpretation eventually prevailed, but not until after passage of
the 1976 Act. See Rohauer v. Killiam Shows, Inc., 551 F.2d
484 (CA2), cert. denied, 431 U.S. 949 (1977).

															[ Footnote 2/8 ]

															These included "Thanks for the Memory," "You Can't Take It With
You," and "The Man Who Came to Dinner." Others, like "Gone With the
Wind," remained in circulation only because producers were willing
to pay substantial sums to holders of copyrights in the underlying
works. See Jaszi, When Works Collide: Derivative Motion
Pictures, Underlying Rights, and the Public Interest, 28 UCLA
L.Rev. 715, 740 (1981). If an author had assigned his rights in the
renewal term at the time that he assigned rights in the initial
term, a grantee might safely release a derivative work prepared
under authority of the first-term grant. But if the author had died
before his renewal rights vested, his statutory successors acquired
those rights, and any previous assignment was rendered null. See Miller Music Corp. v. Charles N. Daniels, Inc., 362 U. S. 373 (1960). Movies based on plays or novels were therefore taken out of
circulation when authors had died before their renewal rights had
vested, and statutory successors or their assignees had renewed the
copyright in the underlying work. Note, Derivative Copyright and
the 1909 Act -- New Clarity or Confusion?, 44 BrooklynL.Rev. 905,
928, n. 125 (1978).

															[ Footnote 2/9 ] See Discussion and Comments on Report of the Register
of Copyrights on the General Revision of the U.S. Copyright Law, supra, n. 469
U.S. 153 fn2/4|>4, at 361 (submission of Motion Picture
Association of America); id. at 265 (statement of Seymour
Bricker); Preliminary Draft for Revised U.S. Copyright Law and
Discussions and Comments on the Draft, supra, n. 469
U.S. 153 fn2/5|>5, at 16, § 16(b) Alternative A; id. at 21, § 22(c)(3) (insertion of derivative-works exception for new
and existing copyrights in 1964 Preliminary Draft).

															[ Footnote 2/10 ] Id. at 278.

															[ Footnote 2/11 ]

															H.R.Rep. No. 94-1476, p. 127 (1976) (discussing 17 U.S.C. §
203(b), the analogue to § 304 for new copyrights).

															[ Footnote 2/12 ]

															The majority's thesis ignores the principle that

															"where there is doubt about how inclusively a statute should be
construed to apply, if the mischief that it was enacted to remedy
can be perceived it will be construed to apply only so far as is
needed in order to effectuate the remedy."

															2A C. Sands, Sutherland on Statutory Construction § 54.04, p.
358 (4th ed.1973).

															As construed by the majority, the derivative-works Exception
also creates a statutory inconsistency with the compulsory license
mechanism established under 17 U.S.C. § 115. Section 115 allows
record producers to make and sell sound recordings without
permission from the copyright owner, provided that they pay a
statutory royalty. This royalty is payable to the current owner of
the copyright. § 115(c)(1). In this case, as all agree, the current
owners of the copyright are the Snyders.

															[ Footnote 2/13 ] See Sony Corp. v. Universal City Studios, Inc., 464 U. S. 417 , 464 U. S.
431 -432 (1984); see also United States v.
Bacto-Unidisk, 394 U. S. 784 , 394 U. S. 799 (1969) ("[W]here the statute's language seem[s] insufficiently
precise, the natural way' to draw the line `is in light of the
statutory purpose'") ( quoting SEC v. Ralston Purina Co., 346 U. S. 119 , 346 U. S.
124 -125 (1953)).

															[ Footnote 2/14 ] See Report of the Register of Copyrights on the General
Revision of the U.S. Copyright Law, 87th Cong., 1st Sess.,
Copyright Law Revision, 53 (H. Judiciary Comm. Print 1961).

															[ Footnote 2/15 ]

															17 U.S.C. § 203(a)(5) (grants executed on or after effective
date of Act); § 304(c)(5) (grants executed before effective date of
Act). In place of the renewal-term system of the 1909 Act, the 1976
Act substitutes a single term enduring for the life of the author
plus 50 years. § 302(a). In the case of subsisting copyrights, the
Act extended the term of copyright from 56 years to 75. §§ 304
(a),(b).

															[ Footnote 2/16 ]

															H.R.Rep. No. 94-1476, at 124.

															[ Footnote 2/17 ]

															Barbara Ringer, former Register of Copyrights and the person who
was most instrumental in the drafting of the 1976 Act, see 1 M. Nimmer, The Law of Copyright, Preface to the 1978
Comprehensive Treatise Revision vi, has written that the Act as a
whole, including the termination provisions, "mark[s] a break with
a two-hundred-year-old tradition that has identified copyright more
closely with the publisher than with the author." Ringer, First
Thoughts on the Copyright Act of 1976, 22 N.Y. L. S.L.Rev. 477,
490-493 (1977).

															[ Footnote 2/18 ]

															These lump-sum transfers were a major target of the Act's
termination provisions. See Report of the Register of
Copyrights on the General Revision of the U.S. Copyright Law, 87th
Cong., 1st Sess., Copyright Law Revision, 58 (H. Judiciary Comm.
Print 1961) (proposing that rights revert to author only when
author "would otherwise receive no benefit from the lengthened
term," as a result of lump-sum transfer).

															[ Footnote 2/19 ] See Twentieth Century Music Corp. v. Aiken, 422 U. S. 151 , 422 U. S. 156 (1975).

															[ Footnote 2/20 ]

															Under general principles of statutory construction,

															"[o]ne who claims the benefit of an exception from the
prohibition of a statute has the burden of proving that his claim
comes within the exception."

															2A C. Sands, Sutherland on Statutory Construction § 47.11, p. 90
(4th ed.1973), see United States v. First City National Bank of
Houston, 386 U. S. 361 , 386 U. S. 366 (1967).