Opposition Brief — Steinbeck v. Penguin Group Group (USA), Inc. (No. 08-1039)

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Supreme Court, U.S

FILED

\j0 { 4 APR 1 7 2009

OFFICE OF THE CLERK

No. 08-1039

IN THE

Supreme Cort of the Anited States

THOMAS STEINBECK AND BLAKE SMYLE,

Petitioners,

¥.

PENGUIN GROUP (USA) INC. ET AL.,

Respondents.

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Second Circuit

—_— ——

BRIEF IN OPPOSITON

WILLIAM M. HOHENGARTEN SUSAN J. KOHLMANN

JENNER & BLOCK LLP Counsel of Record

1099 New York Ave. NW JOSHUA A. BLOCK

Suite 900 JENNER & BLOCK LLP

Washington, DC 20001 919 Third Avenue

(202) 639-6000 Floor 37

New York, NY 10022

(212) 891-1600

Attornevs for Estate Respondents

QUESTION PRESENTED

Whether the Second Circuit correctly held, in

agreement with the Ninth Circuit, that the power to

terminate pre-1978 copyright assignments under 17

U.S.C. § 304 does not bar an author or his heirs from

revoking a pre-1978 assignment and negotiating a

new post-1978 assignment that provides the author

and his heirs with greater rights but is not subject to

termination under § 304.

TABLE OF CONTENTS

QUESTION Pape atrissriccceescccescss scr scsces ccs eesee 1

TABLE OF AU Riis pete te icici cesccenssncccccnccsesscoeses. 111

PW inp eee 1

REASONS FOR DENYING THE PETITION.......... 16

I. There fe Iie Cir Gtie Bee se cscckcssoseveccsccesccccecssccceess 16

il. The Test Employed By the Second and Ninth

Circuits Does Not “Turn Back the Clock” to

Fred Fie ee eicenvis seats ssc cccces 24

Ill.At Most, the Petition Raises a Fact-Bound

Question Concerning a Particular Contract. ...... 27

1V.This Dispute Between Two Factions of the

Steinbeck Family Is a Poor Vehicle for

Interpreting § 304’s ‘Termination Provisions......30

CO NCL ce ee yee icinescssivccesss.cece 31

111

TABLE OF AUTHORITIES

CASES

Automation By Design, Inc. v. Raybestos

Products Co., 463 F.3d 749 (7th Cir.

2006)

SEHR HEE EHEHEEEHEEEREHETE SD E HT HEHEHEHHHH SESH HS ESET HEHEHE HHH HEE EME

Broadcast Music, Inc. v. Roger Miller Music,

Inc., 396 F.3d 762 (6th Cir. 2005)

Classic Media, Inc. v. Mewhorn, 532 F.3d

978 (9th Cir. 2008).............0.0... 16, 20, 21,

Fred Fisher Music Co. v. M. Witmark &

22, 20

SION, BU UE Be. ES URGE iv vincvs vccvciccevscoceesccsapsaces 5

Marvel Characters, Inc. v. Stmon, 310 F.3d

PI Te Ge De oa inc ok stv eee ~%3

Mills Music, Inc. v. Snyder, 469 U.S. 153

eesti he eae ae 5-6, 25

Milne v. Stephen Slesinger, Inc., 430 F.3d

1036 (Sth Cir. 2006) .............00000se0s.: 15, 16, 17, 18

Venegas-Hernandez vv. Asociacion De

Compositores, Kditores De Musica

Latinoamericana (ACEMLA) 424 F.3d

50 (let Cr. ZOOS) .......<..cccsoces. 4

Wharf (Holdings) Ltd. V. United

International Holdings, Inec., 532 U.S

NSS (ZOO 1). ER

STATUTES

BE Sy. ie Pe whence eee 2

17 U.S.C. § 304........ Pe ea re ee 31

ee Rae” > nee 2, 5, 6, 12, 30

PF Re. BS ikiccenvinssacsave ctor eeciccands 6, 7

OF UF Ba, oi oaks feeeccacsecitcncnssbicscacemtecacn 6

DT UG, Braces ve sco eesvascssactdasnscescensss 11

RF Re. © reesei i benicar 4

Fe ae ee oi oiins ss okosts cdeceuscacinern 7

BF RB, Be Seca chests svca coco epssencctens 6, 15,17

EF TSEC. BI osc vnckceiivevseecscnseaccivsiamtba sss 6

PT Boise vk ccepeenvisesrverdectowes 2, 10, 12, 30

ee fae tS: anne etka rere 11

61 Stat. G2 ............00 eR Ree Ree Wate teen Ma

Sonny Bono Copyright ‘erm Extension Act,

Pub. L. No. 105-298, 112 Stat. 2827

Sat eoee ganda rons er nee eens 10

OTHER AUTHORITIES

WE Re OS Sg NID ogics iv suv ckavidadebaentadadey cidcaocsccveees 13

H.R. Rep. No. 94-1476 (1976), as reprinted

In ISTG U.S.U.C.ALN. BBOB ..0..cscessecssese. 1d, 29, 30

Allison M. Scott. OA Bother: Milne,

Steinbeck. and an Emerging Circuit Split

Over the Alenabilitvy§ of Copyright

Termination Rights, 14 J. of Intell. Prop.

L.. 357 (2007) ....

Sup. Ct. R. 10

STATEMENT

1. This is primarily a dispute between two

branches of the Steinbeck family, not a dispute

between a publisher on the one hand and an author’s

family on the other. Respondents are the estate of

John Steinbeck’s widow, Elaine Anderson Steinbeck,

and members of John Steinbeck’s step-family (the

“Estate Respondents”).! Petitioners are John

Steinbeck’s son from a previous marriage, Thom

Steinbeck, and a previously unknown

granddaughter, Blake Smyle.

John Steinbeck (“Steinbeck”) married Elaine

Anderson in 1950, and the couple lived together for

eighteen years until Steinbeck’s death in 1968. In

his will, Steinbeck bequeathed all his intellectual

property rights, including his copyrights, to his

widow Elaine. Pet. App. 3a. Steinbeck’s will also

named Elaine executor of his estate and empowered

her “with the fullest power and authority to deal in

and with rights in liferary properties, realizing the

complexity and difficulty of exploiting the same

advantageously and desiring that they shall be

unhampered in any respect in turning to account the

rights therein and making or amending contracts

with respect thereto.” 2d Cir. J.A. 571.

Steinbeck also had two sons from a_ previous

marriage: Thom and John IV. In his will, Steinbeck

left Thom and John IV a sum certain of $50,000 each

! Penguin Group (USA), Inc. (“Penguin”) is also a respondent

and 1s separately represented. The Estate Respondents include

all respondents other than Penguin.

but excluded them from any other beneficial

ownership in his estate or his copyrights or other

intellectual property. Jd. at 566-68.

John IV died in 1991. Pet. App. 29a. Although

John IV had no acknowledged children at the time of

his death, Blake Smyle subsequently filed a claim in

probate court asserting that she was John IV’s

previously unknown and unacknowledged daughter

(and, by extension, Steinbeck’s granddaughter). 2d

Cir. J.A. 242. Thom and Blake are the Petitioners in

this action.

Elaine Steinbeck died in 2003. Pet. App. 4a. In

her will, Elaine passed all of her copyright interests

in both her own works and those authored by

Steinbeck to the Estate Respondents: her daughter

(Steinbeck’s step-daughter) and executor Waverly

Scott Kaffaga; her sister (Steinbeck’s sister-in-law)

Jean Anderson Boone; and her’ grandchildren

(Steinheck’s step-grandchildren) David Scott Farber,

Anderson Farber Runkle, Jebel Kaffaga, and Bahar

Kaffaga.

2. The Copyright Act generally allows authors to

transfer their copyrights by will to whomever the

author chooses. Sce 17 U.S.C. § 201(d) “ownership

of a copyright ... may be bequeathed by will”); 7d.

§ 304(c), (d) (sta. atory heirs’ power to terminate pre”

1978 copyright assignments does not apply to

transfers “by will”). Notwithstanding this general

policy of testamentary freedom, however, the

interests in so-called “statutory heirs,’ or persons

named in the statute, regardless of the author’s

testamentary intent. Steinbeck’s statutory heirs

included not only his widow Elaine, but also his two

sons, Thom and John IV (or, if either son were

deceased, the son’s own offspring).

As statutory heirs, Thom and John IV each

obtained a contingent interest in the “renewal terms”

for Steinbeck’s copyrights. The Copyright Act of

1947, Pub. L. No. 80-281, 61 Stat. 652, which was in

effect at the time of Steinbeck’s death, provided an

initial copyright term of 28 years and a renewal term

of an additional 28 years. If an author died before

the initial copyright term expired, then the renewal

term automatically vested in the author’s “widow,

widower, or children”’—here, Elaine, Thom, and John

IV. /d. § 24, 61 Stat. at 659.

At the time of his death in 1968, Steinbeck had

already renewed the copyrights for thirteen of his

earlier works (the “Early Works”). Pet. App. 27a

n.12. Thus, full ownership over these thirteen Early

Works passed directly to Elaine in accordance with

Steinbeck’s will. /d. at 27a-28a. But fifteen of

Steinbeck’s other works that were first published in

or after 1942 were still in their initial copyright term

when Steinbeck died and had not yet been renewed

(the “Late Works”). Jd. at 28a & n.13. The

renewal terms of those fifteen Late Works jointly in

Elaine, Thom, and John [V. Elaine, Thom, and John

IV agreed in 1974 that the royalty proceeds from the

fifteen Late Works would be distributed with a 50°

share to Elaine and a 25% share each to Thom and

John IV. 2d Cir. J.A. 461.?

The renewal terms for the Late Works

represented a substantial windfall for Thom and

John IV. Had Steinbeck lived a few years longer, he

would have renewed all the copyright terms himself,

and 100% of the ownership rights of all of his works

would have passed to Elaine through his will. But

because Steinbeck died before he could renew the

IV became co-owners of those works, including

several of Steinbeck’s best-known works such as Hast

of Edenand The Pearl. Pet. App. 28a & n.13.

Unsatisfied with this substantial override of

Steinbeck’s will, Thom and John IV sued Elaine in

1981 to repudiate their 1974 agreement and seek an

even greater percentage of the royalties from the

Late Works they co-owned with her. 2d Cir. J.A.

461. The district court in that suit granted summary

judgment to Elaine and upheld the validity of the

1974 distribution agreement. /d. Despite prevailing,

2 The 1947 Act did not specify how shares of renewal rights

should be allocated among statutory heirs, but more recent

appellate decisions confirmed that, when a renewal term is

automatically vested jointly in an author’s surviving spouse and

childrer the spouse receives a 50% share of ownership and the

remainin; ‘tion is divided among the children on a per

stirpes | See Venegas-Hernandez v. Asociacion De

Composiieres, Kditores De Musica Latinoamericana

(ACEMLAY. 424 F.3d 50, 54-55 (st Cir. 2005): Broad. Music,

Inc. v. Roger Miller Music, I[nc., 396 F.3d 762, 781-82 (6th Cir

2005).

} 4

Elaine entered into a 1983 settlement agreement

with Thom and John IV in which she agreed to

reduce her royalty share to one-third; in exchange,

Thom and John IV agreed to execute irrevocable

powers of attorney in her favor vesting Elaine with

“complete power and authority to negotiate,

authorize and take action with respect to the

exploitation and/or termination of rights in the

works of John Steinbeck in which John Steinbeck IV

and Thom Steinbeck have or will have renewal or

termination rights.” /d. at 466-68. To this day,

Thom and John TY (or their heirs) continue to receive

enhanced royalty payments pursuant to the 1983

settlement agreement. Pet. App. 29a n.15.

3. Thom and John TV received a second windfall

when Congress created a new interest called

“termination rights” as part of the Copyright Act of

1976. 17 U.S.C. § 304(c). Congress designed these

termination rights to respond to a specific problem

that had developed in the wake of this Court’s

decision in Fred Fisher Music Co. v. M. Witmark &

Sons, 318 U.S. 643 (1943), which held that authors

and family members could sell their contingent

interests in a copyright’s renewal term in advance,

before the renewal term even began Publishers

exploited Fred Fisher to demand that authors

immediately assign both the first and = second

initially published. Pet. App. 6a. “Thus, assignees

were able to demand the assignment of both terms at

the time when the value of the copyrighted work was

most uncertain.” Afi//s Music, Inc. v. Snyder, 469

U.S. 153, 186 (1985) (White, J., dissenting). The

termination provisions added in the Copyright Act of

1976 “were designed to correct this situation,” /d., by

allowing authors and family members to repudiate

these “ill-advised and unremunerative grants that

had been made before the author had a fair

opportunity to appreciate the true value of his work

product,” sd. at 172-73 (majority opinion).

The termination rights in 17 U.S.C. § 304(c)

enable authors and their families to cancel licenses

and assignments made before 1978. When an author

has died, the Copyright Act allocates the termination

rights among the author’s spouse, children, and

grandchildren. J/d. § 304(c)(2)(A). If the holders of a

majority percentage of the termination rights agree

to serve a termination notice, they can recapture

rights granted in licenses and assignments made

before 1978. Jd. § 304(c)(1). Termination rights may

be exercised “notwithstanding any agreement to the

contrary.” Jd. § 304(c)(5). Those recaptured rights

are then automatically distributed in proportion to

the percentage of termination rights held by each

statutory heir. Jd. § 304(c)(6)(C).

There is no guarantee that statutory heirs will be

able to exercise this termination right, because

Congress placed four critical restrictions on its use:

First, the termination right applies only to lceenses

and assignments executed before 1978. Jd. § 304(c).*

* A separate provision, 17 U.S.C. § 203, creates different

termination rights for agreements entered into after 1978.

Petitioners do not contend that § 203 termination rights apply

here

Second, the termination right does not apply to any

transfers “made by will.” /d. Third, the termination

right may be exercised only in specific time periods:

during a “window” of time between 56 and 61 years

after the work was originally published, with service

of the notice of termination between two and ten

years before the termination will take effect. /d.

§ 304(c)(3), (4)(A). Fourth, the termination rights

may be exercised only by agreement among holders

of more than 50% of the rights. /d. § 304(c)(1).

As with renewal rights, if Steinbeck had lived

long enough to exercise the termipation rights

himself, he would have been able to transfer all of

the recaptured rights to Elaine. But because

Steinbeck died before any of his termination rights

were created, the Copyright Act allocated 50% of the

termination rights to Elaine, 25% to Thom, and 25%

to John 1V. Pet. App. 28a. These new termination

provisions applied to all of Steinbeck’s works,

including the thirteen Early Works owned entirely

by Elaine. Even though Elaine owned 100% of the

25% of the termination rights to Thom and John IV.

As long as Elaine was alive, however, she held the

other 50% of the termination rights and could

prevent notices of termination from being served

without her consent. Pet. App. 28a° 29a.

4. In 1938, Steinbeck executed an agreement

transferring publication rights in all of his works to

The Viking Press. /d. at 2a. Viking subsequently

assigned its rnghts under the 1938 Agreement to

Respondent Penguin. /d. at 3a: see supra note 1.

In 1994, Elaine negotiated two new agreements

with Penguin that cancelled and superseded all

previous licenses and secured significantly greater

returns in exchange for the right to publish the

Steinbeck works. Pet. App. 3a. At the time Elaine

negotiated the two 1994 Agreements, the windows

had already closed for serving termination notices for

termination notices were then open for all of

Steinbeck’s works created between 1935 and 1948,

including the remaining ten Early Works and seven

of the Late Works. Pet. App. 27a n.12, 28a n.13.

Armed with the possibility that she would join

Steinbeck’s sons or their offspring in exercising their

§ 304(c) termination rights as leverage in bargaining

with Penguin—and with knowledge of the immense

popularity and commercial success of many of

Steinbeck’s works--Elaine negotiated two new

publishing agreements that greatly enhanced the

returns to family members for all of Steinbeck’s

works. /d@. at 3a-4a & n.1. One agreement covered

the thirteen Early Works owned exclusively by

Elaine: the other agreement covered the fifteen Late

Works jointly owned by Elaine, Thom, and John IV's

heirs. 2d Cir. J.A. 482, 498.

By their terms, the 1994 Agreements cancelled

the 1988 Agreement, Pet. App. 4a, and transferred to

Penguin the publishing rights tor the Early Works

and the Late Works, respectively, with significantly

improved financial terms for the benefit of Elaine,

Thom, and the heirs of John IV (who died in 1991).

Pet. App. 3a-4a.4- For example, where the 1938

Agreement provided for an annual royalty calculated

as a percentage of sales, the 1994 Agreements

guarantee minimum yearly payments of hundreds of

thousands of dollars, plus additional royalties above

that amount based on yearly sales. J/d.; 2d Cir. J.A.

483-84, 499-500.

The two 1994 Agreements are inextricably related

and cross-reference each other. They each require

Penguin to keep a// of Steinbeck’s works in print,

thereby enhancing the family’s opportunity to earn

royalties from less popular works that might

otherwise be taken out of print. The agreement for

the thirteen Eariy Works owned exclusively by

Elaine thus provides that Penguin must keep in

print not only those thirteen works, but also the

fifteen Later Works “which are the subject of a

separate agreement with Elaine Steinbeck and

Thomas Steinbeck.” 2d Cir. J.A. 493. Likewise, the

agreement for the fifteen Later Works requires

Penguin to keep in print not only those works, but

also the Early Works “which are the subject of a

separate agreement with Elaine Steinbeck.” /d. at

509.

Elaine executed both agreements simultaneously

on October 24, 1994. Pet. App. 3a-4a & n.1. She

executed the first agreement for the thirteen Early

4 The 1994 Agreement for Steinbeck’s Early Works also covers a

work authored by Elaine (Stenbeck: A Life in Letters), and

both Agreements include cellections of certain Steinbeck works

as well

Works 1n her capacity as the 100% owner of those

works. She executed the second agreement for the

fifteen Late Works both in her capacity as co-owner

of those works and using the irrevocable power of

attorney that Thom and John IV had transferred to

her as part of the 1983 settlement agreement. /d. at

4an.1. Thom then signed an acknowledgement, both

on his own behalf and on behalf cf the executor of the

estate of then-deceased John IV, ratifying the 1994

Agreement for the Late Works, including the

provision explicitly referencing the companion

agreement for the thirteen Early Works owned

separately by Elaine. /d.; 2d Cir. J.A. 509, 514.

Thus, Elaine’s cancellation of the 19388 Agreement

and renegotiation of improved terms from Penguin

under the 1994 Agreement covering the Early Works

was part of a single, interrelated transaction that

significantly benefited Petitioners through their

partial interests in the Late Works. Thom has

received enhanced royalties for the past fifteen years

for Penguin’s continued publication of Steinbeck’s

Late Works. J/d. Blake also receives royalties from

the 1994 Agreement for the Late Works under a

confidential settlement she entered into with other

heirs of John IV. See sd. at 29a n.15.

5. Four years after Elaine cancelled the 1938

Agreement and executed the 1994 Agreements with

Penguin, Congress enacted the Sonny’ Bono

112 Stat. 2827 (1998). As part of that enactment,

Congress created new § 304(d), which opened a

second window for termination during the period

between 75 and 80 years after a work was originally

published. Because John IV died before § 304(d) was

enacted, the new termination rights were distributed

50% to Elaine, 25% to Thom, and 25% to Blake. 17

U.S.C. § 304(c)(2)B), (d)Q1). Like the termination

rights in § 304(c), the termination rights in § 304(d)

apply only to agreements made before 1978.

6. This litigation began shortly after Elaine died

in 2003. In her will, Elaine passed all her copyright

interests to her daughter, sister, and

grandchildren—the Estate Respondents in this

action. Pet. App. 4a. But Elaine’s 50% share in the

termination rights could not be transferred by will

and expired on her death. ‘Thus, for the first time,

Thom and Biake held a majority of the termination

rights. Jd.

With Elaine out of the picture, Thom and Blake

quickly tried to recapture for themselves the

publishing rights for the Early Works owned

exclusively by Elaine’s heirs. Even though

termination rights apply only to agreements made

before 1978, Thom and Blake served would-be

termination notices purporting to terminate and

recapture the publishing rights for several of the

Early Works that Elaine reassigned to Penguin in

1994, including Of Mice and Men and The Grapes of

Wrath. Id. at 4a, 29a-32a. Thom and Blake

apparently believe that if they are successful in

terminating Penguin’s publishing rights for the

Karly Works, those rights will revert to Thom and

Blake, not te the members of Steinbeck’s step-family

who have inherited the underlying copyrights. Thus,

Thom and Blake are not seeking to use the

termination rights simply to recapture rights from

Penguin. Rather, their primary motivation is to use

the termination rights to override Steinbeck’s will

and seize ownership over rights that passed to

Steinbeck’s step-family by will. But see 17 U.S.C.

§ 304(c), (d) (providing that termination rights may

not be used to terminate assignments “by will”). In

short, Thom and Blake seek to _ substantively

reallocate ownership of rights in the Early Works

within the Steinbeck family.®

Thom and Blake then filed this lawsuit asserting

an assortment of claims against the Estate

Respondents and others. 2d Cir. J.A. 12-53. The

Estate Respondents asserted counterclaims seeking

a declaratory judgment that the termination notices

served by Thom and Blake were invalid because they

5 Whether the Copyright Act would actually permit one family

member to seize another family member’s publishing rights in

contravention of the author’s will is far from clear. As noted,

the termination provisions do not apply to transfers made “by

will.” 17 U.S.C. § 304(c), (d). It is therefore uncertain whether

the termination rights may be used by Thom and Blake to

effectively nullify Steinbeck’s will and appropriate for

themselves the copyright interests that Steinbeck bequeathed

to Elaine. Because the Second Circuit held that Petitioners’

attempt to exercise the termination rights failed tn any event,

the intrafamily-ownership issue has never been htigate tn this

case.

The Petition in this case concerns only claims related to

termination rights. In a recent decision dated March 31, 2009,

the district court dismissed Thom and Blake's remaining

claims

purported to terminate an agreement made after

1978. Pet. App. 10a.

Penguin also filed a separate action against Thom

and Blake for a declaratory judgment holding the

termination notices invalid. Jd. The district court

consolidated the two actions for purposes of ruling on

summary judgment motions related to the validity of

the attempted terminations. /d.

1. Ruling on cross motions for summary

judgment, the district court upheld the validity of the

termination notices. In a one-paragraph discussion

that cited no legal precedent, the district court

concluded that Steinbeck’s original 1938 Agreement

with Viking remained in effect and could therefore be

terminated by Thom and Blake. J/d at 32a-33a.

Based on the incorrect premise that under the 1994

Agreement for the Early Works Penguin did not “lose

or gain any rights other than those originally

granted to it under the 1938 Agreement,” rd. at 33a,

the district court held that the 1994 Agreement for

the Early Works did not replace the original 1938

Agreement, which still remained in effect. Thus, the

district court held, Thom and Blake could use their

termination rights to cancel assignments under that

pre 1978 agreement. /d.’

The Second Circuit reversed. Construing the

1994 Agreement for the Early Works under New

York contract law, the Second Circuit concluded that

the intent of that agreement was to cancel and

’ The district court entered judgment on the termination claims

under Fed. R. Civ. P. 54(b). 2d Cir. JA. 942-44.

revoke the 1938 Agreement with Viking. The court

explained that “parties to an agreement can

mutually agree to terminate it by expressly

assenting to its rescission while simultaneously

entering into a new agreement dealing with the

same subject matter.” Pet. App. 12a (citing Jones v.

Trice, 202 A.D.2d 394, 395, 608 N.Y.S.2d 688, 688

(2d Dep’t 1994)). Because the 1994 Agreement had

cancelled and replaced the 1938 Agreement, there

was no pre-1978 agreement left to be terminated.

The Second Circuit explained that the district

court erred both factually and legally in concluding

that the 1994 Agreement did not revoke the 1938

one. As a factual matter, the district court erred in

asserting that the 1994 Agreement did not

materially alter the 1938 Agreement with Viking.

The 1994 Agreement obligated Penguin to pay larger

guaranteed advanced payments, modified’ the

geographic limits of the publication rights, and

required Penguin to keep all the Steinbeck works in

print. /d. at 12a 13a. Asa legal matter, the Second

Circuit held that the district court erred in

concluding that, because the 1938 Agreement had

not yet expired in 1994, it could not be revoked and

renegotiated. The Second Circuit explained that “lal

contract that remains in force may _ still be

terminated and renegotiated in exchange for, among

other things, one party’s forbearance of her legal

right, such as a statutory right to terminate a

previous grant of a copyright transfer or license.” /d.

at ldéa (eiting Vrans-Orient Mar. Corp. v. Star

Trading & Mar. Ind., 925 F.2d 566, 573 (2d Cir.

1991)).

The Second Circuit also rejected Thom and

Blake’s argument that, if the 1994 Agreement

indirectly prevented them from exercising their

termination rights, it should be voided under the

U.S.C. § 304(c)(5). The court noted that Congress

specifically intended that “parties to a transfer or

license’ would retain under [§ 304(c) and (d)] the

continued right to ‘voluntarily agrcel] at any time to

terminate an existing grant and negotiatle] a new

one.” Pet. App. 18a-19a (quoting H.R. Rep. No. 94-

1476, at 127 (1976), as reprinted in 1976

U.S.C.C.A.N. 5659, 5743). Otherwise, Congress’s

creation of the termination right would have

substantially restricted the ability of an author or his

heirs to renegotiate an assignment for better terms,

except during the narrow window and under the

rigid conditions required for termination under

§ 304. Jd at 18a-19a. Accordingly, the Second

Circuit explained, “provided that a_ post-1978

agreement effectively terminates a pre-1978 grant,

Congress did not manifest any intent for the earlier

agreement to survive simply for purposes of

exercising a termination right in the future.” Jd. at

19a (citing approvingly to Milne v. Stephen

Slesinger, Inc., 430 F.3d 1036 (9th Cir. 2005)). The

Second Circuit concluded that, far from entering into

an “agreement to the contrary,” Elaine had engaged

in a renegotiation process that “appears to be exactly

what was intended by Congress.” /d. at 15a.

REASONS FOR DENYING THE PETITION

I. There Is No Circuit Split.

In holding that the 1994 Agreements negotiated

by Elaine superseded Steinbeck’s pre-1978 license

grant and thus prevented exercise of § 304

termination rights with respect to such grant, the

Second Circuit adhered to precisely the same rule of

law that the Ninth Circuit applied in Milne v.

Stephen Slesinger, Inc., 430 F.3d 10386 (9th Cir.

2005), and Classic Media, Inc. v. Mewborn, 532 F.3d

978 (9th Cir. 2008). In all three cases, the courts

asked whether a pre-1978 agreement was still in

effect. Where the pre-1978 agreement was still in

place, the courts held that termination rights could

still be exercised. But when the pre-1978 agreement

had already been revoked and renegotiated, the

courts held that no pre-1978 agreement remained to

be terminated. All three decisions reflect a

consistent avplication of the same legal rule to

different factual circumstances.

Far from creating a split with the Ninth Circuit,

the Second Circuit’s decision closely parallels the

Ninth Circuit’s decision in Mi/ne, which involved the

merchandising rights for the “Winnie the Pooh”

character created by Alexander Milne. Milne

transferred the merchandising rights in 1930 and

those rights were subsequently retransferred to the

Walt Disney Company. Mr/ne, 430 F.3d at 1039-40.

When Congress enacted the Copyright Act of 1976,

Milne had already died, and his son, Christopher

Robin Milne, received 100°. of the newly created

termination rights. J/d at 1040. Rather than

directly exercise the termination rights, however, in

1983 Christopher Milne negotiated a new agreement

with Disney for the merchandising rights, which

revoked the original 1930 assignment = and

simultaneously reassigned the same rights to Disney

in exchange for substantial additional royalty

payments. 430 F.3d at 1040-41.

In 2002, Christopher Milne’s daughter, Claire,

attempted to terminate the 1983 assignment of

merchandising rights to Disney. J/d. at 1041. The

Ninth Circuit held that Claire’s notice of termination

was invalid because the 1930 Agreement had been

revoked and superseded by the 1983 agreement,

leaving no _ pre-1978 agreement for Claire to

terminate under § 304. Jd. at 1042-43. The Ninth

Circuit also rejected Claire’s argument that the 1983

agreement negotiated by Christopher Milne should

be voided as an “agreement to the contrary.” 17

U.S.C. § 304(c)(5). The court explained that,

“lajlthough Christopher presumably could have

served a termination notice, he elected instead to use

his leverage to obtain a better deal for the Pooh

Properties Trust. His daughter, Claire, was a

beneficiary of this new arrangement, and her current

dissatisfaction provides no reason to discredit the

validity of the 1983 agreement and the rights

conferred thereby.” 430 F.3d at 1045.

The facts in Mi/ne closely parallel this case. Like

Christopher Milne, Elaine Steinbeck could have

joined with Steinbeck’s offspring to terminate the

agreements with Penguin, but instead = she

“renegotiateld] and cancelled] the 1938 Agreement

while wielding the threat of termination.” Pet. App.

15a. The 1994 Agreement extinguished the 1930

Agreement, leaving no pre-1978 agreement to he

terminated. In leveraging her termination rights for

a more favorable deal, Elaine, like Christopher

Milne, engaged in a “renegotiation” process that

“appears to be exactly what was intended by

Congress.” /d.

In an attempt to distinguish Wi/ne, Petitioners

argue that—unlike Claire Milne—Thom and Blake

received no benefit from the 1994 Agreement

negotiated by Elaine for the thirteen Karly Works.

As a purely factual matter, that is incorrect. The

1994 Agreement for the thirteen Early Works was

part of an integrated deal that obtained similarly

favorable terms with respect to the fifteen Late

Works that were partially owned by Thom and John

IV. Supra at 8-10. Thom ratified the companion

agreement for the Late Works and has benefited

from it for the past 15 years. Pet. App. 4a n.1. Blake

has also collected royalties from the companion

agreement pursuant to an agreement she entered

into with John IV’s heirs. Pet. App. 29a n.15.

Further, as Petitioners’ own amici point out, Claire

Milne did not receive the entire benefit of

Christopher Mulne’s’ renegotiated contract with

Disney—she benefited only indirectly through the

Pooh Properties ‘Trust, which also benefited “various

charities along with [Milne’s] family members.” Prof.

Br. 16 n.5.

The parallels between this case and Mi/ne refute

Petitioners’ assertion that the Second Circuit and

Ninth Circuits are somehow “intractably divided” on

this question, Pet. 11 (heading). Just the opposite is

true. Before the Second Circuit issued its decision

here, the widespread assumption was that if it

affirmed the district court with a decision in favor of

Thom and Blake, that would create a circuit split

with Mi/ne that would require this Court’s review.

See Allison M. Scott, Oh Bother’ Milne, Steinbeck,

and an Emerging Circuit Split Over the Altenability

of Copyright Termination Fights, 14 J. of Intell.

Prop. L. 357 (2007). Thus, in reversing the decision

of the district court in this case, the Second Circuit

did not create a circuit split—it averted one.

Petitioners disregard Myi/ne and instead argue

that the Second Circuit’s decision conflicts with

another Ninth Circuit case, Mewborn. But Mewborn

applied precisely the same legal principles that the

Ninth Circuit applied in Mi/ne and that the Second

Circuit applied in this case. In this case and in

Milne, the courts concluded that the original

assignments had been revoked and _ superseded,

leaving no pre-1978 agreement in place to be

terminated. In Mewborn, however, the court

examined a post-1978 agreement with very different

terms and, on that basis, concluded that the pre-1978

agreement in that case had never been revoked, so

that termination rights could still be exercised.

Thus, Mewborn is simply an instance where the

same rule of decision was apphed to different facts,

resulting in a different outcome. ‘That kind of fact-

based difference obviously does not create a circuit

split.

The plaintiff in Mewhorn was Winifred Mewborn,

the daughter of the author of the children’s book

Lassie Come Home. Mewbhorn, 532 F.3d at 980. In

1976, Winifred Mewborn executed an agreement

assigning to Classic Media all her motion picture,

television, and radio rights in Lassie Come Home in

exchange for a one-time payment of $11,000. /d. In

1978, Mewborn signed a second agreement with

Classic Media assigning additional merchandising,

dramatic performance, recording, and publishing

rights in Lassie Come Home. Td. at 980°81. In

exchange for assigning these additional rights,

Mewborn received the nominal sum of $38,000. Jd. at

981. The second agreement did not purport to

rescind, revoke, or renegotiate the motion picture,

television, and radio rights Mewborn had assigned in

1976. Instead, the second agreement stated that the

new rights were being assigned “in addition to” the

rights that Mewborn had previously assigned in

1976. Jd.

When Mewborn served a notice of termination in

2005 to reclaim the rights she had assigned in 1976,

Classic Media asserted that the termination notice

was invalid because the 1978 agreement had

superseded the 1976 one. /d. The Ninth Circuit

rejected Classic Media’s argument and held, as a

matter of fact, that while Mewborn could not

terminate any of the additional rights’ she

transferred in the 1978 agreement, Mewborn

retained the ability to terminate the original rights

she transferred in 1976. Id. at 989 & n.8. The

Ninth Circuit explained that, “lulnlike Christopher

Milne’s 1983 assignment, which expressly revoked

the earlier 1930 and 1961 assignments and

simultaneously re-granted the same rights,

Mewborn’s 1978 Assignment explicitly stated that it

granted rights ‘in addition to’ the rights granted in

the 1976 Assignment.” /d. at 989. Accordingly,

because the 1976 agreement remained in effect,

Mewborn retained the ability to terminate rights

transferred pursuant to that agreement.®

In addition, the Ninth Circuit explained,

“Mewborn’s predicament is a far cry trom

Christopher Milne’s.” /d. Christopher Milne had

used his termination rights as leverage to negotiate a

more lucrative deal. In contrast, there was “no

evidence in the record that Mewborn was even aware

of her termination rights in March 1978,” much less

that she used them as negotiating leverage when she

® As background to its discussion of termination rights,

Mewborn cited the district court’s decision in this case (which

was then on appeal but had not yet been reversed) upholding

the validity of Thom and Bluke’s termination notices

Mewborn, 532 F.3d at 986. But Mewhorn's discussion was

based on the district court’s erroneous factua/ conclusion that

“at no point did Penguin lose or gain any rights other than

those originally granted to it under the 1938 Agreement.” /d.

at 986 (quoting Pet. App. 33a). On appeal, the Second Circuit

ruled that the district court's factual statement was incorrect

and that the 1994 Agreement did in fact replace the 1932

Agreement with matenally different terms. Pet. App. )2a-l3a

Nothing in Mewborn indicates that the Ninth Circuit would

have reached a different result than did the Second Circuit

based on a correct understanding of the underlying facts

had received only the paltry additiona) payment of

$3,000. Jd.

All of the facts that the Ninth Circuit relied on to

distinguish Mewborn from Mi/ne also distinguish

Mewborn from this case. First, the 1994 Agreements

negotiated by EKlaine—like the agreement signed by

Christopher Milne but unlike the agreement signed

by Winifred Mewborn—expressly revoked and re-

granted the pre-1978 assignment of rights. Pet. App.

4a. Second, at the time Elaine negotiated the 1994

Agreements, termination notices could have been

immediately served for ten of the Early Works and

seven of the Late Works. Supra at 8. Like

Christopher Milne, Elaine therefore held an

immediate power to terminate that she leveraged to

negotiate a more favorable deal. Pet. App. Lda.

Third, unlike Winifred Mewborn, who did _ not

renegotiate the pre-1978 grant for more generous

terms, Elaine negotiated a far more lucrative

agreement guaranteeing minimum yearly payments

of several hundreds of thousands of dollars and

requiring that all of Steinbeck's works be kept in

print. Supra at 8-10. The Petitioners dismiss these

distinctions as “unpersuasive,” Pet. 14, but they are

precisely the same factors the Ninth Circuit relied on

to distinguish “2/ne trom Mewborn.

Nor did Mewbhorn create a circuit conflict through

its discussion of whether the 1978 agreement in that

case was an “agreement to the contrary.” Because

the Mewhorn court found as a factual matter that

the 1976 assignment remained in effect, the court

concluded that if the 1978 agreement purported to

assign Mewborn’s termination rights, such an

assignment would be an “agreement to the contrary.”

Mewborn, 532 F.3d at 986. But Mewborn did not

hold or even suggest that the 1978 agreement would

have been an “agreement to the contrary” if (ike the

post-1978 agreements in this case and Mi/ne) it had

revoked and renegotiated the pre-1978 assignment,

thereby leaving nothing to terminate. Given the

facts of Mewborn, any such suggestion would have

been dicta. It also would have been contrary to

Milne, which Mewborn pointedly did not overrule.

Id. at 988. In fact, to the extent there might be any

conflict with Mewborn at all (which there is not), it

would be an intra-circuit conflict within the Ninth

Circuit that should be resolved by that court en banc

if necessary. Such an intra-circuit conflict is not a

proper basis for invoking this Court’s certiorari

jurisdiction. See Sup. Ct. R. 10.9

9° Petitioners implicitly concede as much when they claim the

case law within the Ninth Circuit is “confused and fractured,”

Pet. 16—which appears to be a euphemism for alleged (though

non-existent) intra-circuit splits. In that vein, Petitioners also

claim the decision below is somehow in tension with the Second

Circuit’s own earlier decision in Marvel Characters, Inc. v.

Simon, 310 F.3d 280 (2d Cir. 2002). Pet. 17. The Second

Circuit in Marve/ held that the author of Captain America

Comics could terminate a 1940 publishing agreement with

Marvel Comics notwithstanding a 1969 agreement the author

signed that retroactively re-characterized the comic as a “work

for hire.” The facts in Marve/ bear no resemblance to this case.

All the agreements in Marve/ took place before 1978, so there

was unquestionably a pre’ 1978 grant in place to be terminated.

And the author in .VMarve/ had clearly not used his termination

rights as leverage to negotiate a more favorable agreement

In short, the difference between this case and

Milne on the one hand and Mewborn on the other is

that Christopher Milne and Elaine Steinbeck

cancelled and renegotiated pre-1978 licenses while

Winifred Mewborn did not. The Mewborn decision

does not call into question the basic premise that a

leverage to cancel a pre1978 agreement and

negotiate a new license with more favorable terms.

There is no circuit split for this court to resolve—just

different cases reaching different outcomes by

applying the same legal rule to different underlying

contracts.

Il. The Test Employed By the Second and Ninth

Circuits Does Not “Turn Back the Clock” to Fred

Fisher.

Effectively acknowledging that there is no circuit

split, Petitioners’ amici argue that both the Second

Circuit and the Ninth Circuit have misinterpreted

§ 304, which in amricrs view snould prohibit

because the second agreement had been entered into in 1969,

before those termination rights even existed. See Pet. App. 18a

(“Marvel concludes only that backward-looking attempts to

recharacterize existing grants of copyright so as to eliminate

the right to terminate under 304(c) are fobidden by 304(c)(5).

There was no such attempt at recharacterization here”). In any

event, even if the decision below could not be reconciled with an

earlier decision from the Second Circuit, that purported intra-

circuit conflict would be no basis for this Court’s intervention.

Petitioners’ reliance on Marve/ to support their petition for

certiorari simply underscores their inability to point to a true

circuit spht warranting this Court’s review

pre-1978 agreements without formally serving

termination notices. Amici admit that no appellate

decision, including Mi/ne and Mewborn, has ever

adopted that view. See Prof. Br. 15 (asserting that

“Inlone of these decisions follow [sic] the clear

dictates of the federal statute”).!° But amici

nevertheless assert that the test unanimously

adopted by the courts of appeals would “turn[] back

the clock to the Fisher regime, under’ which

publishers could contractually block authors and

their families from exercising copyright reversion.”

Prof. Br. 12.

These policy-based concerns are groundless. The

problem created by the Fred Fisher decision was that

publishers could use their superior bargaining power

to force unknown authors to assign their renewal

rights at the time the works were first pubiished,

jong before their value was known. See Mills Music,

469 U.S. at 172-73 (referring to “ill-advised and

unremunerative grants that had been made before

the author had a fair opportunity to appreciate the

true value of his work product”). But § 304 applies

only to grants made before 1978. Thus, all the

copyrights implicated by § 304 are at least 30 years

old, and the holders of termination rights for these

0 Indeed, amicus curiae Professor Nimmer served as counsel of

record to Claire Milne before the Ninth Circuit and in a petition

for a writ of certiorari to review the Ninth Circuit's decision.

Prof. Br. 2. Amue?s brief in support of Petitioners recapitulates

the same arguments that the Ninth Circuit considered and

rejected in Mi/ne and that this Court found insufficient to

justify granting Milne’s petition for certiorari.

copyrights already have had time to “appreciate the

true value of 'the] work product.” Jd Instead of

allowing the holders of termination rights to

capitalize on that value, amic’s proposed test would

lock copyright holders into pre-1978 agreements

until the termination rights could be formally

exercised. Indeed, if the holders of termination

rights for a work were deadlocked—as occurred for

decades in this case until Elaine passed away—

amicis theory would frequently have the perverse

result of freezing “ill-advised and unrenumerative”

agreements in place. Jd. The only beneficiaries of

amicis proposed straitjacket would be publishers

who had extracted unfavorable terms from authors

when the value of their works was unknown.

In recognition that all copyrights imphcated by

§ 304 are already 30 years’ old, amici assert that the

Second Cuircuit’s decision could have a_ broader

impact on a different set of termination rights for

post-1978 assignments under § 203. But the lower

courts’ test—Is there a pre-1978 transfer in place to

be terminated? - cannot possibly implicate

termination rights under § 203 because that section,

unlike § 304, is not limited to grants made before

1978. Because § 203 does not require that a pre-

1978 grant still be in effect, termination rights under

§ 203 could be exercised even if the original grant

has already been revoked and renegotiated. Nothing

in the Second Circuit’s decision is to the contrary.

The Second Circuit's decision will have no impact

on new authors or on the separate termination

provisions for post’ 1978 grants in § 203. Aunic/s dire

predictions are fundamentally misplaced § and

certainly provide no reason for granting certiorari.

Ill. At Most, the Petition Raises Fact-Bound

Questions Concerning a2 Particular Contract.

Every Court of Appeals to consider the issue has

held that copyright owners may, in principle, negate

a precondition for exercising termination rights by

leveraging those rights to cancel and renegotiate a

pre-1978 agreement for more favorable terms. The

question before the Second Circuit was therefore

whether Elaine’s 1994 Agreement with Penguin

cancelled and superseded the pre-1978 agreement

(as in Milne) or simply reaffirmed the previous

transfers leaving the pre-1978 agreement intact (as

in Mewborn). This is fundamentally a fact-bound

question concerning a particular contract, not a

broad question of — statutory interpretation

warranting this Court’s review.

The 1994 Agreement with Penguin clearly and

unambiguously stated that “this agreement, when

signed by Author and Publisher, will cancel and

supersede” all prior agreements for the Karly Works,

including the 1938 Agreement. Pet. App. 4a; 2d Cir.

J.A. 507. Petitioners nevertheless assert that, as a

matter of contract interpretation, the Second Circuit

erred in concluding that the 1994 Agreement revoked

the 1938 Agreement and the termination rights that

went with it because the 1994 Agreement “explicitly

contemplated the future exercise of termination

rights.” Pet. 23 (quoting Pet. App. 10a). In support

of their contract interpretation, Petitioners point to

section 9A of the 1994 Agreement, which gave

Penguin the ability to claw back the enhanced

payments it made pursuant to the 1994 Agreement

in the event that Elaine’s statutory termination

rights were ever exercised. Pet. 7.

The Second Circuit correctly held that section

9A’s oblique reference to the future exercise of

termination rights “does not abrogate the 1994

Agreement’s clear expression of intent to terminate

all prior grants of a transfer or license in the subject

copyrights.” Pet. App. 14a. And because the 1994

Agreement, as so construed under New York contract

law, cancelled the 1938 Agreement, there was no pre-

1978 agreement in place for Thom and Blake to

terminate. /d. at 12a-14a. Rather than evidencing

intent to preserve termination rights, section 9A

underlines that the parties intended to negotiate a

quid pro quo whereby Penguin was agreeing to more

generous payment terms in exchange for Elaine’s

decision to refrain from serving termination notices.

Section 9A is thus akin to a force majeur clause

addressing what would happen if, contrary to the

expectations of the parties, termination rights

somehow | survived. As a matter of contract

interpretation, the Second Circuit correctly conclude

that this belt-and-suspenders provision did not

somehow negate the 1994 Agreement’s express and

unambiguous intent to “cancel and supersede” the

1938 Agreement. /d. at 4a, 14a.

Ultimately, Thom and Blake’s petition boils down

to an assertion that the Second Circuit

misinterpreted the 1994 Agreement in hght of its

section 9A. But, even if Thom and_ Blake's

interpretation of the 1994 Agreement and its section

9A had merit, their Petition does not present a

question of federal statutory interpretation, much

less a question on which the courts of appeals are

divided. The petition for writ of certiorari to review

this fact-bound question should be denied.!!

11 The fact that this dispute turns on state law rules of contract

interpretation further counsels against granting certiorari.

“Although the United States Copyright Act, 17 U.S.C. §§ 101-

1332, grants exclusive jurisdiction for infringement claims to

the federal courts, those courts construc copyrights as contracts

and turn to the relevant state law to interpret them.”

Automation By Design, Inc. v. Raybestos Prods. Co., 463 F.3d

749, 753 (7th Cir. 2006); cf£ Wharf (Holdings) Ltd. v. United

Intl Holdings, Inc., 532 U.S. 588, 596 (2001) (declining to

review 10th Circuit’s application of Colorado contract law, even

thougn state law question would determine whether federal

statute applied to the contract). Petitioners’ amici seek to

elevate the petition above a state-law question of contract

interpretation by asking this Court to create a new federal

common law of contract interpretation for renegotiated

agreement were interpreted under federal common law,

Congress specifically stated that “parties to a transfer or

license’ would retain under l[§ 304(c) and (d)] the continued

right to ‘voluntarily agreel] at any time to terminate an existing

grant and neyotiatle] a new one.” Pet. App. 18a-19a (quoting

H.R. Rep. No. 94-1476, at 127 (1976), as reprinted in 1976

U.S.C.C.A.N. 5659, 5743). As a result, whether the 1994

Agreement is interpreted in accordance with state law or

federal common law, a court must make an individualized

determination of whether the particular contract before it left a

pre- 1978 agreement in place. That is a fact-bound question

that does not warrant this Court’s review.

IV.This Dispute Between Two Factions of the

Steinbeck Family Is a Poor Vehicle for

Interpreting § 304’s Termination Provisions.

A final reason for declining exercise of this

Court’s discretionary jurisdiction is the distinctive

intrafamily character of the dispute here. This is

not primarily a dispute between a publisher on the

one hand and an author's family on the other. It is a

dispute between two different factions of the

Steinbeck family. Thom and Blake seek to use § 304

not to obtain a more lucrative publishing deal for

Steinbeck’s family, but to undo Steinbeck’s will and

seize for themselves the copyright interests that

Steinbeck intended to transfer to different family

members.

Thom and Blake’s efforts to use the termination

provisions to override Steinbeck’s will and seize

Steinbeck family are far afield from the central goals

Congress had in mind when it created the statutory

termination provisions. Congress created the

termination right to “safeguard[] authors against

unremunerative transfers,” H.R. Rep. No. 94-1476 at

124 (1976), as reprinted tn 1976 U.S.C.C.A.N 5659,

5740, not te privilege the author's “blood heirs” over

other family members. To be sure, Congress

designated certain statutory heirs who could exercise

termination rights. But Congress also sought to

honor the author’s own decisions about how to

allocate his or her inheritance by exempting

transfers made by will from the’ termination

provisions. 17 U.S.C. § 304(c), (da). Nothing in the

legislative history suggests that Congress’s purpose

was to create a birthright for biological offspring to

nullify the author’s will and disinherit the author’s

step-family.

This idiosyncratic, fact-bound dispute presents an

extremely poor’ vehicle for interpreting’ the

complicated statutory provisions in 17 U.S.C. § 304

and the interrelationship between rights recaptured

by termination and rights inherited by will, which

cannot be terminated. Petitioners have not cited any

other decision involving the use of termination

notices to nullify an author’s will or re-allocate

Petitioners have certainly not identified a circuit

split on this complex issue that might conceivably

warrant this Court's review.

CONCLUSION

For the foregoing reasons, the petition for writ of

certiorari should be denied.

Respectfully submitted,

WILLIAM M. HOHENGARTEN SUSAN J. KOHLMANN

JENNER & BLOCK LLP Counsel of Record

1099 New York Ave. NW JOSHUA A. BLOCK

Suite 900 JENNER & BLOCK LLP

Washington, DC 20001 919 Third Ave.

(202) 639-6000 Floor 37

New York, NY 10022

(212) 891-1600

Attorneys for Estate Respondents

April 17, 2009

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