Do the Prior "New Technology" Cases Apply to the New "New Technology" Cases?

by Stanley Rothenberg

Many new technology productions call for the use of existing copyrighted works. However, frequently, there is more than one potential owner of new technology rights in existing works. How sure can one be that one owns the specific rights for use by the particular new technology? Or, how does one determine with whom to deal? New technology lawsuits involving contracts covering use of a copyright, are not a new species of litigation.

The Copyright Act of 1909 was not amended until 1912 to include motion pictures as copyrightable subject matter. Yet this did not prevent the Third Circuit in 1903 from finding that Edison had copyright in a motion picture, and that his copyright had been infringed by defendant’s unauthorized use of a portion thereof. The court held the copyrightability of photographs was broad enough to include motion pictures.

Somewhat similarly, the Supreme Court, in 1911, held that an unauthorized film version of a novel was an infringement of the dramatization right under copyright. Thus, prior to the expansion of the Copyright Act to include motion pictures as copyrightable subject matter, the owner’s dramatic rights in a novel included the new use–motion pictures. But what about a dispute between the owner and the owner’s exclusive licensee of dramatic rights?

In 1916, in such a dispute, the grant was jointly made in 1899, by the author and his publisher to a theatrical producer, of the exclusive right to produce a dramatic stage version of the aforesaid novel. After 14 years, it occurred to grantors and grantee that the public may be growing tired of the play, and that a photoplay might reach a new audience; thus each claimed possession of the photoplay rights. A federal district court analyzed the agreement, stating that the contract prohibited, inter alia, any changes in the text and contained provisions as to royalties not suitable to producing photoplays. Thus, defendant-grantees were enjoined.

Furthermore, plaintiffs asserted that since defendants cannot make a movie out of the novel, such right must belong to them. However, it doesn’t always follow that because one owns something, one may use it to the detriment of another if the owner is under contractual obligations to such other. In the court’s opinion there was an implied negative covenant on the part of the grantors not to use the ungranted portion of the copyright to the detriment of the licensees’ rights. This resulted in the plaintiffs taking an injunction against the defendants, and the defendants receiving the same relief against the plaintiffs. Thus, as long as the contract of 1899 existed, neither party to the contract could produce a photoplay of the novel except by an agreement with the other. Four years later the Supreme Court decided a similar case the same way. In a brief majority opinion, Justice Holmes cited but a single authority, the 1916 district court opinion.

Then, in 1936, a plaintiff, which had acquired "exclusive moving picture rights" to a novel from its author in 1923, sued a subsequent assignee of motion picture rights for infringement. "Talkies" were not commercially known in 1923, but inventors had been experimenting with the idea for some years. The Second Circuit said that although it did not appear that "Talkies" were within the author’s contemplation when she executed the 1923 agreement, nevertheless, the words used, "exclusive moving picture rights," were sufficient to embrace not only motion pictures of the sort then known but also such technical improvements in motion pictures as might be developed during the term of the license. The court said "Talkies" are but a species of motion pictures; they are employed by the same theaters, enjoyed by the same audiences, and nothing more than a forward step in the same art. As noted above, in 1911 the Supreme Court held that the words, "exclusive right to dramatize," in the copyright statute, though used when motion pictures were unknown, included the right to produce motion pictures when that mechanism was later developed. Hence, according to the Second Circuit, the analogy was perfect, and the fact that in the earlier case the words of a statute were being construed, and here the words of a contract were involved, was irrelevant.

Thirty-two years later the Second Circuit dealt with a 1930 contract in which copyright owners of a German play transferred motion picture rights to Hans Bartsch, who transferred the rights which were exercised in the motion picture Maytime. The controversy stems from M-G-M’s licensing its motion picture to television exhibition, beginning in 1958. A unanimous court stated, "we have found no case holding that an experienced businessman like Bartsch is not bound by the natural implications of the language he accepted when he had reason to know of the new medium’s potential," the decision must turn on a choice between a narrow reading of the grant and a more expansive one. "If the words are broad enough to cover the new use, it seems fairer that the burden of framing and negotiating an exception should fall on the grantor."

For the next two decades, Bartsch stood as the benchmark. Then, in 1988, in the Ninth Circuit, we had a major sign of turbulence on the subject. The plaintiff, in 1969 had licensed synchronization of a musical composition in a motion picture and performance of the composition as part of the motion picture in theaters and on television. In the 1980’s licensee made and sold videocassettes. Plaintiff sued, alleging copyright infringement. The Ninth Circuit reversed the district court’s decision in favor of defendant, primarily because the parties had stipulated that VCRs for home use were not known in 1969. Moreover, the Ninth Circuit ignored Bartsch.

On the other hand, where the granting language in related rights cases included use "by any means now or hereafter known or devised," the courts have found such language to be broad and unambiguous and thus precluding any need in the agreement for an exhaustive list of specific potential uses.

In sum, there may be not only an issue of ownership of rights to the "new uses", but there may also be an issue of the owner using such rights if such use may diminish values in the licensed "old uses" and, of course, the scope of the grant may depend upon the court in which the issue will be litigated.

This article is reprinted with permission from the June 1996 edition of Corporate Counsel Magazine. © 1996 NLP IP Company