     06-3226-cv
     Penguin Group (USA), Inc. v. Steinbeck

1                         UNITED STATES COURT OF APPEALS

2                             FOR THE SECOND CIRCUIT

3                                August Term, 2007

4    (Argued: January 23, 2008                         Decided: August 13, 2008
5                                             Errata Filed: September 10, 2008)

6                      Docket Nos. 06-3226-cv, 06-3696-cv

7                    -------------------------------------

8                          PENGUIN GROUP (USA) INC.,

9                               Plaintiff-Appellant,

10   WAVERLY SCOTT KAFFAGA, individually as Executor of the Estate of
11    ELAINE ANDERSON STEINBECK, DAVID SCOTT FARBER, ANDERSON FARBER
12    RUNKLE, JEBEL KAFFAGA, BAHAR KAFFAGA and JEAN ANDERSON BOONE,

13              Defendants-Counterclaim-Plaintiffs-Appellants,

14                                      - v. -

15                     THOMAS STEINBECK and BLAKE SMYLE,

16               Plaintiffs-Counterclaim-Defendants-Appellees,

17                                NANCY STEINBECK,

18                             Intervenor-Plaintiff,

19   MCINTOSH & OTIS, INC., THE STEINBECK HERITAGE FOUNDATION, EUGENE
20            H. WINICK, SAMUEL PINKUS and STEVEN FRUSHTICK,

21                     Defendants-Counterclaim-Plaintiffs,

22                  FRANCIS ANDERSON ATKINSON and DOES 1-10,

23                                   Defendants.


24                   -------------------------------------

25   Before:     SACK, KATZMANN, and RAGGI, Circuit Judges.

26               Appeal from an order of the United States District

27   Court for the Southern District of New York (Richard Owen, Judge)
1    granting summary judgment to the appellees Thomas Steinbeck and

2    Blake Smyle on the grounds that a notice purporting to terminate,

3    pursuant to the Copyright Act, 17 U.S.C. §§ 304(c) and (d), a

4    1938 agreement granting licenses for publication of certain works

5    of the author John Steinbeck, was valid.   Because a subsequent

6    agreement entered into in 1994 terminated and superseded the 1938

7    agreement, sections 304(c) and (d) are inapplicable; the notice

8    of termination is therefore invalid, and the 1994 agreement

9    remains in effect.

10             Reversed and remanded.

11                            RICHARD DANNAY, Cowan, Liebowitz &
12                            Latman, P.C. (Thomas Kjellberg, of
13                            counsel), New York, NY, for Plaintiff-
14                            Appellant Penguin Group (USA) Inc.

15                            SUSAN J. KOHLMANN, Jenner & Block LLP
16                            (Carolina A. Fornos, of counsel), New
17                            York, NY, for Plaintiffs-Appellants
18                            Kaffaga et al.

19                            MARK S. LEE, Manatt Phelps & Phillips,
20                            LLP (Benjamin G. Shatz and Alon G.
21                            Markowitz, of counsel), Los Angeles, CA,
22                            for Defendants-Appellees.

23   SACK, Circuit Judge:

24             This is an appeal from an order of the United States

25   District Court for the Southern District of New York (Richard

26   Owen, Judge) granting summary judgment to the appellees Thomas

27   Steinbeck and Blake Smyle based on the court's conclusion that a

28   "notice of termination" given in 2004 that purported to

29   terminate, pursuant to the Copyright Act, 17 U.S.C. § 304(c) and

30   (d), the 1938 grant of copyright licenses by the author John


                                        2
1    Steinbeck, was valid.   We consider on appeal whether an agreement

2    entered into in 1994 between Steinbeck's widow and the publisher

3    terminated and superseded the 1938 agreement, and, if so, whether

4    the termination notice is therefore ineffective.   Because the

5    termination right provided by section 304(d) pursuant to which

6    the 2004 termination notice was issued applies only to pre-1978

7    grants of transfers or licenses of copyright, and because the

8    1994 agreement left intact no pre-1978 grant for the works in

9    question, we conclude that the 2004 notice of termination is

10   ineffective.   The 1994 agreement remains in effect.

11                               BACKGROUND

12              Grants of Licenses of Copyright

13              On September 12, 1938, the author John Steinbeck

14   executed an agreement with The Viking Press (the "1938

15   Agreement") that established the terms for the latter's

16   publication of some of Steinbeck's best-known works, including

17   The Long Valley, Cup of Gold, The Pastures of Heaven, To A God

18   Unknown, Tortilla Flat, In Dubious Battle, and Of Mice and Men,

19   in all of which Steinbeck held the copyright.   In 1939, the

20   agreement was extended to apply to four later works, including

21   The Grapes of Wrath, through the operation of an option clause in

22   the agreement.   The rights granted by the 1938 Agreement were

23   later assigned by Viking to plaintiff-appellant Penguin Group

24   (USA) Inc. ("Penguin"), and the duties thereunder assumed by

25   Penguin.   The 1938 Agreement provided to the publisher, who

26   agreed to take out copyrights in the covered works in Steinbeck's

                                      3
1    name, the "sole and exclusive right" to publish the works in the

2    United States and Canada, with Steinbeck receiving royalties

3    based on net sales.    The agreement would terminate if any of the

4    covered works were not kept in print.    The agreement was "binding

5    upon [John Steinbeck's] heirs, executors, administrators or

6    assigns."

7                During his lifetime, Steinbeck renewed the copyrights

8    in the works covered by the 1938 Agreement so that they enjoyed

9    protection under both of the consecutive 28-year copyright terms

10   provided for by the version of the Copyright Act in effect at the

11   time.   When Steinbeck died in 1968, he bequeathed his interest in

12   these copyrights to his widow, Elaine Steinbeck.    His sons by a

13   previous marriage, Thomas and John IV, each received a bequest of

14   $50,000 in a trust arrangement.

15               On October 24, 1994, Elaine Steinbeck and Penguin

16   entered into a "new agreement for continued publication" (the

17   "1994 Agreement").    It addressed the publication by Penguin of

18   all works that were covered by the 1938 Agreement.    It added

19   several other early Steinbeck works, some of his posthumous

20   works, and some of Elaine Steinbeck's own works.    It also changed

21   the economic terms of the 1938 Agreement, mostly to Elaine

22   Steinbeck's benefit, by requiring Penguin to provide a far larger

23   annual guaranteed advance, and royalties of between ten and

24   fifteen percent of retail (rather than wholesale) sales.    The

25   1994 Agreement further stated that "when signed by Author and



                                       4
1    Publisher, [it] will cancel and supersede the previous

2    agreements, as amended, for the [works] covered hereunder."1

3                Elaine Steinbeck died in April 2003, bequeathing her

4    copyright interests in the Steinbeck works at issue, as well as

5    proceeds from the 1994 Agreement, to various testamentary heirs

6    including her children and grandchildren from a previous

7    marriage, but she specifically excluded Thomas Steinbeck, John

8    Steinbeck IV, and their heirs.     Her statutory termination rights

9    expired upon her death.

10               On June 13, 2004, John Steinbeck's surviving son

11   Thomas, and Blake Smyle, the sole surviving child of Steinbeck's

12   other son, the deceased John IV, (collectively the "Steinbeck

13   Descendants") served what purported to be a notice of termination

14   (the "Notice of Termination") on Penguin terminating the "grants"

15   made by the 1938 Agreement to Penguin's predecessor-in-interest

16   (Viking).

17               Statutory Background

18               The Copyright Act gives to authors and certain

19   enumerated family members the power to terminate prior grants of

20   transfers or licenses of copyright.    This power is based on

21   Congressional recognition that young authors frequently enter


          1
             A separate agreement was executed on the same day by
     Penguin and by Elaine Steinbeck, acting on her own behalf and on
     behalf of Thomas Steinbeck. Thomas Steinbeck ratified this
     agreement on December 22, 1994, on behalf of the other Steinbeck
     Descendants. This agreement, which itself is not at issue on
     this appeal and which governed works of John Steinbeck that are
     not at issue on this appeal, obligated Penguin to pay higher
     royalties for these works to Elaine Steinbeck and the Steinbeck
     Descendants.
                                     5
1    into long-term contracts with publishers when their bargaining

2    power is weak and their prospects for success uncertain, and

3    discover increased leverage only when they later achieve

4    commercial success.   Indeed, in an effort to balance the

5    interests of publishers and authors, Congress enacted provisions

6    in the Copyright Act that "attempted to give the author a second

7    chance to control and benefit from his work" and to "secure to

8    the author's family the opportunity to exploit the work if the

9    author died."   Stewart v. Abend, 495 U.S. 207, 218 (1990).

10   Congress permitted a publisher the opportunity to reap the

11   initial rewards of an early investment in young talent, but it

12   allowed authors to revisit the terms of earlier grants of rights

13   once the long-term success of their works became apparent.    See

14   id.

15             When John Steinbeck entered into the 1938 Agreement

16   with Viking Press, the Copyright Act of 1909 was in effect.

17   Under that version of the Act, authors were entitled to a

18   copyright in their works for an initial twenty-eight year period

19   beginning on the date of a work's publication.   After this period

20   expired, the author had the right to renew the copyright for a

21   second twenty-eight year term.   The purpose of providing this

22   renewal term was to permit "the author, originally in a poor

23   bargaining position, to renegotiate the terms of the grant once

24   the value of the work ha[d] been tested."   Stewart, 495 U.S. at

25   218-19; accord Marvel Characters, Inc. v. Simon, 310 F.3d 280,

26   283 (2d Cir. 2002) (quoting Stewart).   Publishers could, and

                                      6
1    often did, thwart the purpose of this statutory scheme, however,

2    by requiring authors to assign both their initial and renewal

3    rights to the publisher at the same time and before the long-term

4    value of an author's work could be ascertained.   This practice

5    received the legal imprimatur of the Supreme Court in Fred Fisher

6    Music Co. v. M. Witmark & Sons, 318 U.S. 643 (1943), which held

7    that renewal rights could be assigned by an author during a

8    work's initial copyright term and before the vesting of the

9    renewal right.   Id. at 656-59; see also Marvel, 310 F.3d at 284.

10             The 1976 amendments to the Copyright Act, which took

11   effect in 1978, abandoned this framework.   In order to revitalize

12   the ability of authors to revisit the terms of earlier grants of

13   rights, the amended Act replaced the two consecutive twenty-eight

14   year terms with a single copyright term of increased duration,2

15   and it created for authors or their statutory heirs, with respect

16   to transfers or licenses of copyright effected prior to 1978, an

17   inalienable right to terminate the grant of a transfer or



          2
             The consecutive-term renewal structure was retained for
     pre-1978 works, however, because a "great many of the present
     expectancies in these cases are the subject of existing
     contracts, and it would [have been] unfair and immensely
     confusing to cut off or alter these interests." H.R. Rep. No.
     94-1476, at 139 (1976), reprinted in 1976 U.S.C.A.N. 5659, 5755.
     For works still in their renewal term on January 1, 1978, which
     include the Steinbeck works governed by the 1938 Agreement, the
     amendments extended the expiration date of the then-governing
     renewal term until "seventy-five years from the date the
     copyright was originally secured." 17 U.S.C. § 304(b) (1997).
     When the Copyright Act was amended in 1998, for works still
     within this seventy-five year term, the length of the term was
     extended again to provide those works with a total of ninety-five
     years of copyright protection. Pub. L. No. 105-298, 112 Stat.
     2827, 2828-29 (1998).
                                     7
1    license.    17 U.S.C. § 304(c).   The section provides, in pertinent

2    part:

 3               In the case of any copyright subsisting in
 4               either its first or renewal term on January
 5               1, 1978, . . . the exclusive or nonexclusive
 6               grant of a transfer or license of the renewal
 7               copyright or any right under it, executed
 8               before January 1, 1978, by [the author or the
 9               author's heirs as specified at
10               section 304(a)(1)(C)], otherwise than by
11               will, is subject to termination under the
12               following conditions:

13               (1) . . . In the case of a grant executed by
14               one or more of the authors of the work,
15               termination of the grant may be
16               effected . . . by the author who executed it
17               or, if such author is dead, by the person or
18               persons who, under clause (2) of this
19               subsection, own and are entitled to exercise
20               a total of more than one-half of that
21               author’s termination interest.

22               (2) Where an author is dead, his or her
23               termination interest is owned, and may be
24               exercised, as follows:

25               . . .

26                 (B) The author's surviving children, and
27                 the surviving children of any dead child
28                 of the author, own the author's entire
29                 termination interest unless there is a
30                 widow or widower, in which case the
31                 ownership of one-half of the author's
32                 interest is divided among them.[3]

33               (3) Termination of the grant may be effected
34               at any time during a period of five years
35               beginning at the end of fifty-six years from
36               the date copyright was originally secured, or
37               beginning on January 1, 1978, whichever is
38               later.
39

             3
             Prior to her death, Elaine Steinbeck held a one-half
     interest in the statutory termination rights under 17 U.S.C.
     § 304(c)(2)(A).
                                     8
1                . . .

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


6    17 U.S.C. § 304(c).

7                This termination right provides authors or their

8    statutory heirs with an opportunity to recapture some of the

9    additional value produced by the lengthened copyright term.    See

10   H.R. Rep. No. 94-1476, at 140 (1976).    It is worth noting that

11   section 304(c), by its terms, does not apply to grants of a

12   transfer or license of the renewal copyright made on or after

13   January 1, 1978.    Such grants are subject to the slightly

14   different termination right provided at 17 U.S.C. § 203, which,

15   among other distinctions, applies only to grants made by the

16   author rather than to grants made by either the author or other

17   parties.

18               Section 304(c) also provides only a limited five-year

19   window of time "beginning at the end of fifty-six years from the

20   date copyright was originally secured, or beginning on January 1,

21   1978, whichever is later," 17 U.S.C. § 304(c)(3), during which

22   termination rights may be exercised.    If the termination right is

23   not exercised during this window, the original grant remains in

24   effect.    So, for Cup of Gold, the earliest work included in the

25   1938 Agreement, the termination right under section 304(c)

26   expired on August 2, 1990, and for The Grapes of Wrath, the

27   latest work, the right expired on April 14, 2000.    It is
                                       9
1    undisputed, however, that no termination right under

2    section 304(c) was ever exercised with respect to the copyrights

3    covered by the 1938 Agreement.

4              When the length of the copyright term was extended in

5    1998, Congress provided an additional window of time

6    corresponding to this extension, during which the same

7    termination right could be, had it not already been, exercised.

8    See 17 U.S.C. § 304(d).   For pre-1978 grants whose section 304(c)

9    termination right, as of October 26, 1998, had expired without

10   being exercised, termination could "be effected at any time

11   during a period of 5 years beginning at the end of 75 years from

12   the date copyright was originally secured."   Id.   Section 304(d)

13   otherwise incorporated the conditions specified in section 304(c)

14   including the statutory heirs of an author's termination right.

15   See 17 U.S.C. § 304(d)(1).   The Notice of Termination issued in

16   2004 by the Steinbeck Descendants purported to terminate the 1938

17   grants of copyright licenses within each work's section 304(d)

18   termination period.

19             District Court Proceedings

20             Upon receiving the Termination Notice, Penguin filed a

21   complaint in the United States District Court for the Southern

22   District of New York seeking a declaratory judgment against

23   Thomas Steinbeck and Blake Smyle that the notice is invalid.

24   Penguin argued that the 1994 Agreement, to which Elaine Steinbeck

25   was a party, superseded and itself terminated the 1938 Agreement,

26   and that there was therefore no pre-1978 grant of a transfer or

                                      10
1    license of the renewal copyright to which section 304(d) could be

2    applied.

3               In a related action, initiated by the Steinbeck

4    Descendants, the estate and heirs of Elaine Steinbeck filed

5    counterclaims seeking an equivalent declaration.    The district

6    court consolidated the two actions for the purposes of the

7    summary judgment motions.

8               In an order issued June 8, 2006 and amended July 18,

9    2006, the district court disagreed, granting summary judgment

10   against Penguin and Elaine Steinbeck's heirs and, among other

11   things, upholding the validity of the Termination Notice served

12   by the Steinbeck Descendants in 2004.    Steinbeck v. McIntosh &

13   Otis, Inc., 433 F. Supp. 2d 395, 401 (S.D.N.Y. 2006).    The court

14   rejected Penguin's argument that the 1994 Agreement extinguished

15   the section 304(d) termination right, observing that the

16   agreement explicitly contemplated the future exercise of

17   termination rights and that it did not grant Penguin rights that

18   were any greater or lesser than those granted by the 1938

19   Agreement.   Id.   The court also concluded that "to the extent

20   that the 1994 Agreement would strip [the Steinbeck Descendants] .

21   . . of their inalienable termination rights in the pre-1978

22   grants, it is void as an 'agreement to the contrary' pursuant to

23   17 U.S.C. § 304(c)(5)."    Id. at 402 (footnote omitted).   In the

24   district court's view, "[a]ny interpretation of the 1994

25   Agreement having the effect of disinheriting the statutory heirs

26   to the termination interest -- [the Steinbeck Descendants] -- in

                                      11
1    favor of Elaine's heirs must be set aside as contrary to the very

2    purpose of the termination statute . . . ."     Id. at 402 n.23.

3               Penguin, and the estate and heirs of Elaine Steinbeck,

4    appeal from the portion of the district court's judgment

5    addressing the validity of the 2004 Termination Notice as to

6    those works covered by the 1938 Agreement.

7                                  DISCUSSION

8               I.    Standard of Review

9               "We review de novo a district court's ruling on

10   cross-motions for summary judgment, in each case construing the

11   evidence in the light most favorable to the non-moving party."

12   White River Amusement Pub, Inc. v. Town of Hartford, 481 F.3d

13   163, 167 (2d Cir. 2007).

14              II.    Whether the 1994 Agreement Terminated
15                     and Superseded the 1938 Agreement

16              The Copyright Act provides a termination right for the

17   grant of a transfer or license of copyright made by parties other

18   than the author only if the grant was made prior to January 1,

19   1978.   17 U.S.C. § 304(d).    Our first inquiry, then, is whether

20   the 1994 Agreement terminated and superseded the 1938 Agreement.

21   We conclude that it did, leaving in effect no pre-1978 grants to

22   which the termination rights provided by section 304(d) could be

23   applied.

24              The language of the 1994 Agreement makes clear that the

25   parties intended that the 1938 Agreement be terminated.     Under




                                       12
1    New York law,4 "parties to an agreement can mutually agree to

2    terminate it by expressly assenting to its rescission while

3    simultaneously entering into a new agreement dealing with the

4    same subject matter."   Jones v. Trice, 202 A.D.2d 394, 395, 608

5    N.Y.S.2d 688, 688 (2d Dep't 1994).   Once terminated and

6    superseded, the new contract provides all of the parties'

7    obligations and remedies for breach.   See Northville Indus. Corp.

8    v. Fort Neck Oil Terminals Corp., 100 A.D.2d 865, 867, 474

9    N.Y.S.2d 122, 125 (2d Dep't 1984) ("[W]here the parties have

10   clearly expressed or manifested their intention that a subsequent

11   agreement supersede or substitute for an old agreement, the

12   subsequent agreement extinguishes the old one and the remedy for

13   any breach thereof is to sue on the superseding agreement."

14   (internal quotation marks omitted)).   The 1994 Agreement states

15   that "[t]his agreement, when signed by Author and Publisher, will

16   cancel and supercede the previous agreements, as amended, for the

17   Works #1 - #19 [including those works governed by the 1938

18   Agreement] covered hereunder."   We see no valid reason to

19   disregard this language and to regard the 1938 Agreement as

20   surviving the 1994 Agreement.

21             Contrary to the district court's observation that "[a]t

22   no point did Penguin lose or gain any rights other than those

23   originally granted to it under the 1938 Agreement," Steinbeck,

24   433 F. Supp. 2d at 401-02, the 1994 Agreement obligated Penguin


          4
             The parties do not dispute that New York state law
     governs both the 1938 and 1994 Agreements.
                                     13
1    to pay larger guaranteed advance payments and royalties

2    calculated from the "invoiced retail price of every copy sold by

3    the Publisher," rather than "the amount which the Publishers

4    charge for all copies sold."    The 1994 Agreement also modifies

5    the geographic limits of the publication rights as to the covered

6    works and imposes a requirement on Penguin to keep a greater

7    number of Steinbeck works in print.

8                The district court correctly observed that the 1938

9    Agreement, by its terms, "was to continue for as long as the

10   publishers keep the works 'in print and for sale,'" Steinbeck,

11   433 F. Supp. 2d at 402 n.22, but this has little relevance to our

12   analysis.    A contract that remains in force may still be

13   terminated and renegotiated in exchange for, among other things,

14   one party's forbearance of her legal right, such as a statutory

15   right to terminate a previous grant of a copyright transfer or

16   license.    See, e.g., Trans-Orient Marine Corp. v. Star Trading &

17   Marine, Inc., 925 F.2d 566, 573 (2d Cir. 1991) ("[F]orbearance to

18   assert a valid claim, if bargained for, is sufficient

19   consideration to support a contract.").

20               It is of similarly little relevance that the 1994

21   Agreement might have intended that earlier created termination

22   rights survive it, for our central inquiry is not the parties'

23   intent to preserve these rights -- which are granted by statute,

24   not contract -- but rather their intent to terminate the 1938

25   Agreement.    The availability of termination rights under the

26   Copyright Act is not dependent on the intent of the parties but
                                      14
1    on, among other things, the date that a grant of rights was

2    executed and the relationship to the author of those seeking to

3    exercise the termination right.    So, even if we accept that the

4    1994 Agreement "explicitly carries forward possible future

5    termination," Steinbeck, 433 F. Supp. 2d at 401, it does not

6    matter inasmuch as the pre-1978 grant of rights no longer

7    existed.   To the extent that the 1994 Agreement might also have

8    contemplated the potential preservation of termination rights, it

9    does not abrogate the 1994 Agreement's clear expression of intent

10   to terminate all prior grants of a transfer or license in the

11   subject copyrights.

12              We also reject the suggestion that, notwithstanding the

13   plain language of the 1994 Agreement, there was no effective

14   termination of the 1938 Agreement because the 1994 Agreement

15   provided no opportunity -- no "moment of freedom" -- for those

16   holding the termination right to renegotiate the terms of the

17   grant.   Appellees draw support for this theory primarily from

18   Nimmer on Copyright § 11.07 (6th ed. 1978), referring to 17

19   U.S.C. § 304(c)(6)(D).   That statutory provision reads:

20              A further grant, or agreement to make a
21              further grant, of any right covered by a
22              terminated grant is valid only if it is made
23              after the effective date of the termination.
24              As an exception, however, an agreement for
25              such a further grant may be made between the
26              author or any of the persons provided by the
27              first sentence of clause (6) of this
28              subsection, or between the persons provided
29              by subclause (C) of this clause, and the
30              original grantee or such grantee's successor
31              in title, after the notice of termination has

                                       15
1                been served as provided by clause (4) of this
2                subsection.

3    Id. (emphasis added).    The appellees read the phrase "only if it

4    is made after the effective date of the termination" to require a

5    period of time during which holders of a termination right "know

6    they will be free of extant agreements and can negotiate for the

7    terminated rights."    Appellees' Br. at 80; see also Nimmer on

8    Copyright § 11.07.    But the next sentence in the statute provides

9    an exception for the original grantee, who may execute a new

10   grant any time after the notice of termination has been served --

11   no "moment of freedom" is required.

12               In any event, nothing in section 304(c)(6)(D) prevents

13   renegotiation of a prior grant where a notice of termination has

14   not been served.    Such a succeeding grant of rights would

15   presumably take place with the parties' knowledge that the holder

16   of a termination right could exercise that right if they failed

17   to reach a new agreement.    It is undisputed that no termination

18   right was exercised prior to the 1994 Agreement, but Elaine

19   Steinbeck did renegotiate and cancel the 1938 Agreement while

20   wielding the threat of termination.    Indeed, this kind of

21   renegotiation appears to be exactly what was intended by

22   Congress.    See Section III, supra.

23               Because we conclude that the 1994 Agreement terminated

24   and superseded the 1938 Agreement, it also eliminated the right

25   to terminate the grants contained in the 1938 Agreement under

26   sections 304(c) and (d).
                                      16
1              III.   Whether the 1994 Agreement is an "Agreement to
2                     the Contrary" under 17 U.S.C. § 304(c)(5)

3              The Copyright Act provides that "[t]ermination of the

4    grant [of transfer or license rights] may be effected

5    notwithstanding any agreement to the contrary."   17 U.S.C.

6    § 304(c)(5).   The 1994 Agreement is not invalid as an "agreement

7    to the contrary" -- and the Steinbeck Descendants' termination

8    right under section 304(d) is therefore no longer effective --

9    even if the agreement had the effect of eliminating a termination

10   right that Congress did not provide until 1998.

11             We do not read the phrase "agreement to the contrary"

12   so broadly that it would include any agreement that has the

13   effect of eliminating a termination right.   To do so would negate

14   the effect of other provisions of the Copyright Act that

15   explicitly contemplate the loss of termination rights.    For

16   example, sections 304(c) and (d) require only the consent of a

17   simple majority in interest for the exercise of a termination

18   right.   Once the termination right is extinguished, it is

19   extinguished with respect to all parties holding a termination

20   interest, whether or not they agreed to its exercise.    See 17

21   U.S.C. § 304(d) (providing a new termination right but only

22   "where the author or owner of the termination right has not

23   previously exercised such termination right").    Similarly, if a

24   termination right expires without being exercised, the original

25   grant is no longer subject to termination, and the Copyright Act

26   specifically provides that in such a case a grant would


                                     17
1    "continue[] in effect for the remainder of the extended renewal

2    term."   17 U.S.C. § 304(c)(6)(F).   If the holders of a majority

3    of an author's termination interest were to agree that they would

4    not exercise their termination rights, this would have the effect

5    of eliminating a termination right as to the minority termination

6    interests.   Yet such an agreement could not be held ineffective

7    as an "agreement to the contrary" inasmuch as section 304 itself

8    contemplates elimination of termination rights in that manner.

9               Moreover, the 1994 Agreement did not divest the

10   Steinbeck Descendants of any termination right under section

11   304(d) when the parties entered into that agreement.   In 1994,

12   only 17 U.S.C. § 304(c) provided a termination right -- section

13   304(d) would not become effective for another four years.    It is

14   undisputed that the Steinbeck Descendants could not have

15   exercised their termination rights in 1994 because they lacked

16   more than one-half of the author's termination interest.     As of

17   1994, then, the agreement entered into by Elaine Steinbeck did

18   not deprive the Steinbeck Descendants of any rights they could

19   have realized at that time.   None of the parties could have

20   contemplated that Congress would create a second termination

21   right four years later.   Had Elaine Steinbeck not entered into

22   the 1994 Agreement, the section 304(c) termination right would

23   have expired,5 and Penguin would have been bound only by the 1938

          5
             There is some question as to why Penguin agreed to
     terminate and renegotiate the 1938 Agreement, for without a
     majority termination interest, it appears that Elaine Steinbeck
     would have been unable to terminate the 1938 Agreement on her
     own. Although she possessed a power of attorney to exercise the
                                     18
1    Agreement for the duration of the copyright terms absent (as

2    ultimately happened) Congressional action.    We cannot see how the

3    1994 Agreement could be an "agreement to the contrary" solely

4    because it had the effect of eliminating termination rights that

5    did not yet exist.

6               Appellees' reliance on Marvel Characters, Inc. v.

7    Simon, 310 F.3d 280 (2d Cir. 2002), is misplaced.    There, the

8    parties entered into a settlement agreement that contractually

9    recharacterized an already created work as a "work made for

10   hire."   Works for hire are exempt from section 304(c) and (d).

11   We agreed with the author that the grantee could not use such

12   after-the-fact relabeling of the nature of the work to eliminate

13   a future exercise of the author's termination right under section

14   304(c), because the contract constituted an "agreement to the

15   contrary" that left termination rights unaffected under section

16   304(c)(5).   Id. at 290.   We were concerned that if such an

17   agreement was not held to be an ineffective "agreement to the

18   contrary," authors could be coerced into recharacterizing works

19   already created as works for hire so as to avoid subsequent

20   application of a section 304 termination right.    Marvel concludes

21   only that backward-looking attempts to recharacterize existing

22   grants of copyright so as to eliminate the right to terminate




     Steinbeck Descendants' termination rights as a result of a 1983
     settlement, it is unclear that her exercise of those rights would
     have been valid. But the resolution of these speculations is
     immaterial to the resolution of this appeal.
                                     19
1    under section 304(c) are forbidden by section 304(c)(5).    There

2    was no such attempt at recharacterization here.

3               There is also no indication in the statutory text or

4    the legislative history of the Copyright Act that elimination of

5    a termination right through termination of a pre-1978 contractual

6    grant was precluded or undesirable.    The House Report for the

7    1976 amendments noted, for example, that "nothing in [the

8    Copyright Act] is intended to change the existing state of the

9    law of contracts concerning the circumstances in which an author

10   may cancel or terminate a license, transfer, or assignment."

11   H.R. Rep. No. 94-1476, at 128 (1976).    The report also noted more

12   specifically that "parties to a transfer or license" would retain

13   under the amendments the continued right to "voluntarily agree[]

14   at any time to terminate an existing grant and negotiat[e] a new

15   one."   Id. at 127.   So, provided that a post-1978 agreement

16   effectively terminates a pre-1978 grant, Congress did not

17   manifest any intent for the earlier agreement to survive simply

18   for purposes of exercising a termination right in the future.

19   See Milne v. Stephen Slesinger, Inc., 430 F.3d 1036, 1046 n.9

20   (9th Cir. 2005) (post-1978 agreement superseding pre-1978

21   agreement was of "the type expressly contemplated and endorsed by

22   Congress" because it enabled an author's statutory heirs to

23   renegotiate the terms of an original grant with full knowledge of




                                      20
1    the market value of the works at issue), cert. denied, 548 U.S.

2    904 (2006).6

3               It should be noted that under our view, authors or

4    their statutory heirs holding termination rights are still left

5    with an opportunity to threaten (or to make good on a threat) to

6    exercise termination rights and extract more favorable terms from

7    early grants of an author's copyright.   But nothing in the

8    statute suggests that an author or an author's statutory heirs

9    are entitled to more than one opportunity, between them, to use

10   termination rights to enhance their bargaining power or to

11   exercise them.   See 17 U.S.C. § 304(d) (permitting exercise of

12   termination right only "where the author or owner of the

13   termination right has not previously exercised such termination

14   right").   In this case, Elaine Steinbeck had the opportunity in

15   1994 to renegotiate the terms of the 1938 Agreement to her

16   benefit, for at least some of the works covered by the agreement

17   were eligible, or about to be eligible, for termination.   By

18   taking advantage of this opportunity, she exhausted the single


          6
            We note that the passages quoted above concern the
     termination provision that applies to post-1978 grants, rather
     than the termination provisions here at issue. The Supreme Court
     has described the two provisions, however, as "comparable," Mills
     Music, Inc. v. Snyder, 469 U.S. 153, 173 n.39 (1985), and indeed
     they both contain the "agreement to the contrary" clause. "The
     normal rule of statutory construction [is] that identical words
     used in different parts of the same Act are intended to have the
     same meaning." Gustafson v. Alloyd Co., Inc., 513 U.S. 561, 562
     (1995); see also Milne v. Stephen Slesinger, Inc., 430 F.3d 1036,
     1046 (9th Cir. 2005) ("To the extent that the legislative record
     references section 304(c)(5)'s counterpart provision under
     section 203(a)(5), we find that history instructive given
     Congress's use of identical language in both provisions.").
                                     21
1    opportunity provided by statute to Steinbeck's statutory heirs to

2    revisit the terms of her late husband's original grants of

3    licenses to his copyrights.    It is no violation of the Copyright

4    Act to execute a renegotiated contract where the Act gives the

5    original copyright owner's statutory heirs the opportunity and

6    incentive to do so.   See Milne, 430 F.3d at 1046; cf. Classic

7    Media, Inc. v. Mewborn, 532 F.3d 978, 989 (9th Cir. 2008)

8    (termination right preserved, notwithstanding a March 1978--i.e.

9    post-1978--grant of rights, where termination right could not

10   have been exercised until 1984 at the earliest, and where

11   "[n]either party intended to revoke and replace (or even modify)"

12   a 1976 grant of rights).

13             The 1994 Agreement was not an "agreement to the

14   contrary" rendered ineffective by section 304(c)(5).

15                                 CONCLUSION

16             For the foregoing reasons, the judgment of the district

17   court is reversed and the case remanded for entry of judgment in

18   favor of Penguin.




                                      22
