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IP/Entertainment Case Law Updates

Welles v. Turner Entertainment Co., USCA Ninth Circuit

The U.S. Court of Appeals for the Ninth Circuit affirmed the district court’s grant of summary judgment to the defendants in part, vacated in part, and remanded a case filed by Orson Welles’ daughter involving rights to the motion picture “Citizen Kane.”

Beatrice Welles filed a declaratory action, asking the court to declare that she owned the copyright and the home video rights in “Citizen Kane,” and seeking an accounting of royalties that she alleged she was owed. The case involved a production agreement, an actor agreement and an exit agreement between Orson Welles and RKO Radio Pictures. The district court had granted summary judgment for the defendants on all the claims.

With respect to the copyright ownership claim, the Ninth Circuit began by rejecting the defendants’ argument that Welles’ claim was barred by the statute of limitations, which is three years from the “plain and express repudiation” of copyright ownership. The defendants stated that they had provided notice to Welles that they owned the copyright in “Citizen Kane” in the form of letters to the estate of Orson Welles about including the “Citizen Kane” screenplay in a home video collector’s edition gift set. The court held that although this correspondence told Welles that the defendants wanted to include the screenplay in a special edition of home videos, it was not a “plain and express repudiation” of Welles’ copyright in the motion picture.

The court went on to indicate that Welles’ copyright ownership claim would be determined by interpreting the 1939 production agreement which provided different rights to defendants in connection with the motion picture and the screenplay. The grant of rights relating to the motion picture was very broad: Welles granted RKO “all rights of every kind and nature . . . including, but not being limited to, the exclusive rights of distribution, exploitation, manufacture, recordation . . . and reproduction by any art or method.” The court said that this language granted the defendants, as successors to RKO, the right to exploit the motion picture in any manner. However, the court found that in order to distribute the motion picture on home video, the defendants also needed the rights to exploit the screenplay. The production agreement provided that Welles retained the rights to any screenplay written by him and granted to RKO only the “motion picture and television” rights in the screenplay, reserving to Welles the “publication, radio, dramatic and other rights” in the screenplay.

The question before the court was whether the defendants’ “motion picture and television” rights in the screenplay encompassed the right to distribute the screenplay on home video. “Had [Welles] granted RKO sweeping rights in the screenplay and only retained minimal rights for [him]self, we might be able to . . . conclude that, had RKO and [Welles] thought about the matter of home video rights, they would have vested those rights in RKO. But, in light of the narrow scope of rights granted to RKO and the broad reservation of rights by [Welles], we cannot conclude with certainty that the parties would have given RKO home video rights had they contemplated the issue.” The court concluded that the contract was ambiguous regarding which party owned the right to exploit the “Citizen Kane” screenplay on home video, vacated the district court’s grant of summary judgment on this issue and remanded for further proceedings. (In the footnote added to the decision when it was amended, the court noted that it was not adopting a presumption against applying a grant of rights in “motion pictures” to new technologies, but instead was simply interpreting the written contract in this case and recognized that “[i]n some cases, a contract might permit the licensee to exploit the work in a new medium without a future technologies clause.”)

Beatrice Welles had also argued that, by rescinding the production and actor agreements, the exit agreement restored ownership of the copyright in “Citizen Kane” to Orson Welles. The court disagreed, noting that the exit agreement, signed in 1944, “terminated and cancelled” the prior agreements and that under California law, “terminate” and “cancel” are not synonymous with “rescind.” The court explained that the words “terminate” and “cancel” refer to the abrogation of so much of the contract that has not been executed at the time of termination, but the word “rescind” has a retroactive effect and restores the parties to their former position. The court held that the exit agreement therefore prospectively terminated Welles’ right to future royalties, but that RKO obtained the copyright in the motion picture when it was created (which was before the exit agreement was executed) and retained that copyright even after termination of the production agreement.

Regarding Welles’ request for an accounting for royalties allegedly due on “Citizen Kane,” the court found that there was conflicting evidence about whether Welles and RKO entered into a profit sharing agreement after the exit agreement, and remanded this issue for further proceedings.

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