Paul L. Walthal, Gibson J. Haynes, and Jeffrey S. Coffey are the Butthole Surfers. For the unenlightened, that’s a musical group.
One would ordinarily think that an agreement of the type we just described would be in writing, for as Yogi Berra observed, “A oral contract isn’t worth the paper it’s written on.” But, alas, the But-thole Surfers and Touch and Go never got around to writing up their deal. So what we have here is simply an oral licensing agreement between the parties that had no specified duration; it did not set out any circumstances giving rise to a right of termination. Under the agreement, until the dispute before us raised its head, the Butthole Surfers provided Touch and Go with six recorded performances and one video performance to manufacture and sell.
On December 4, 1995, the Butthole Surfers demanded that the agreed 50/50 split be changed to a more favorable (for them) 80/20 split and that the agreement terminate in 3 years. Touch and Go responded, in writing, that it considered the parties bound by the original agreement. On December 8 the Butthole Surfers sent a letter terminating the agreement effective immediately and demanding a return of inventory. Touch and Go, however, continued to copy and sell the performances— an action that fueled this suit claiming
The district court granted a summary judgment motion filed by the Butthole Surfers on the pivotal issue in the case— whether 17 U.S.C. § 203 prohibits the termination of the agreement. The court determined that the Butthole Surfers’ termination of the licensing agreement was effective and, accordingly, infringement by the defendants was found. The decision prompted a stipulation disposing of the remainder of the case, and this appeal followed.
Touch and Go presents two primary issues. The first is that the licensing agreement is irrevocable because consideration — the 50 percent share of the profits — was paid. This contention is without merit. The other issue, which is seriously pursued, is that termination of the agreement was prohibited by § 203 of the Copyright Act. The argument here is that the statute prohibits the termination of a copyright license — including one of unspecified duration arising out' of an oral agreement — prior to 35 years from the date the license was granted. It is to this issue we now turn.
Section 203 provides that “the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright ... is subject to termination” under certain conditions. As relevant here, subsection (3) provides:
Termination of the grant may be effected at any time during a period of five years beginning at the end of thirty-five years from the date of execution of the grant[.]
The disagreement before us is simply whether the statute establishes 35 years as a minimum or maximum term of a grant. That is, is the statute an attempt to ensure that regardless of the terms of the agreement — say an agreement for the life of the copyright — between the copyright owner and the licensee, the agreement can, nevertheless, be terminated after 35 years, or whether no agreement can be terminated until 35 years have passed, or something in between those extremes.
Despite the fact that § 203 was enacted over 20 years ago as part of the Copyright Act of 1976, there is very limited case law on its interpretation. The only case from a court of appeals is from the Ninth Circuit, Rano v. Sipa Press,
To put it mildly, this result is deplored by commentators. If the Rano decision were a Broadway show, bad reviews would have forced it to close after opening night. Nimmer, for instance, finds Rano a “remarkable result,” a “wayward result,” “stunning, both for its utter absence of support in law and for the breadth of its error.” Nimmer says that the 35-year period in § 203 is a maximum period that A contract can be enforced, not a minimum
We think it’s time to take a fresh look at § 203, putting the statute in context, and because its plain meaning is not perfectly clear, we will cast a glance at its legislative history for whatever guidance it might disclose. The term of a copyright is the life of the author plus 50 years. 17 U.S.C. § 302(a). The ownership of a copyright vests in the author, who, of course, may transfer his rights as he sees fit. 17 U.S.C. § 201(a). A “transfer of copyright ownership” is an “assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or of any of the exclusive rights comprised in a copyright, whether or not it is limited in time or place of effect, but not including a nonexclusive license.” 17 U.S.C. § 101. Transfers of ownership must be in writing. 17 U.S.C. § 204(a). Nonexclusive licenses are excluded from the definition of “transfer of copyright ownership.” Therefore, nonexclusive licenses such as the one we are considering here may be granted orally, but they do not transfer ownership of the copyright. I.A.E., Inc. v. Shaver,
The purpose of § 203 is to give authors and their heirs a second chance to market works even after a transfer of rights has been. made. Often, it is not clear, soon after the creation of a work, how valuable it will prove to be.
Nothing contained in this section or elsewhere in this legislation is intended to extend the duration of any license, transfer or assignment made for a period of less than thirty-five years. If, for example, an agreement provides an earlier termination date or lesser duration, or if it allows the author the right of canceling or terminating the agreement under certain circumstances, the duration is governed by the agreement. Likewise, nothing in this section or legislation is intended to change the existing state of the law of contracts concerning the circumstances in which an*485 author may cancel or terminate a license, transfer, or assignment.
H.R.Rep. No. 94-1476, at 128; S.Rep. No. 94-473, at 111, U.S.Code Cong.& Admin.News 1976, at 5743.
In this context it makes no sense that a 35-year period be considered a minimum under the statute. If the term of the license originally granted was less than 35 years, the statute simply does not compel that the license be effective for 35 years. And even the Rano court did not go so far. The Ninth Circuit said that § 203 means that agreements are terminable only after 35 years “unless they explicitly specify an earlier termination date.” At 585 (emphasis added). But the court nevertheless determined that if the agreement contained no termination date, it must continue for 35 years because § 203 preempted state contract law providing for termination at will of contracts of unspecified length. By this reasoning, a contract for a specific term of less than 35 years does not conflict with the 35-year period but a contract which is terminable at will by operation of law does.
We disagree with any such conclusion. In general, state contract laws pertain to the transfer of interests under the Copyright Act. Section 203(b)(5) itself specifically provides that termination of a grant under the statute “in no way affects rights arising under any other Federal, State, or foreign laws.” In our case it is undisputed that, unless it is preempted, Illinois law applies to the dispute and that under the law of Illinois a contract of unspecified length is terminable at will. Consolidated Labs., Inc. v. Shandon Scientific Co.,
Laws which subsist at the time and place of the making of a contract, and where it is to be performed, enter into and form a part of it, as fully as if they had been expressly referred to or ineor-porated in its terms.
Norfolk & Western Ry. v. American Train Dispatchers Ass’n,
However, as the Rano court correctly points out, state contract law cannot provide the basis of a decision if that law conflicts with federal law. Fidelity Fed. Sav. & Loan Ass’n v. de la Cuesta,
AFFIRMED.
Notes
. A sampling of the Butthole Surfers' recordings include: "Hurdy Gurdy Man”; "Lady Sniff”; "John E. Smoke”; "The Annoying Song”; “The Shah Sleeps in Lee Harvey’s Grave”; “Goofy’s Concern”; and "Chewin’ George Lucas' Chocolate.”
. Because our decision conflicts with the Ninth Circuit’s opinion in Rano, it has been circulated through all members of the court in active service. No judge has voted to hear this case en banc.
. For example, when Richard Berry, a small-time performer in the mid-1950's, sold the publication rights to his song "Louie, Louie" for $750, he had no idea it would reemerge in the early 1960's as a monster hit. "Louie, Louie” was recorded by the Kingsmen and, despite its slurred and almost incomprehensible lyrics, it soon became a raucous rock anthem. It has been sung by hundreds upon hundreds of artists from Bruce Springsteen and Otis Redding to Junior Cadillac and David Begel, all the time earning untold millions of dollars for producers and performers other than Berry. See Louie, Louie: The History and Mythology of the World's Most Famous Rock n Roll Song, by Dave Marsh.