In declaratory judgment action over competing stage rights to Harper Lee’s classic To Kill a Mockingbird, district court holds that derivative works exception to Copyright Act’s termination provision does not perpetuate exclusivity of derivative work created under terminated license, disagreeing with prior arbitral award that licensee continued to maintain exclusive amateur stage rights following termination.
Harper Lee, author of the iconic American novel To Kill a Mockingbird, granted to defendant The Dramatic Publishing Company (DPC) the exclusive right to stage stock and amateur productions (e.g., local and community theater and college, high school and church productions) of the novel pursuant to a 1969 grant. DPC’s then-president, Christopher Sergel, wrote the Sergel play, which DPC subsequently licensed to third parties for decades.
In April 2011, Lee served a notice terminating the 1969 grant pursuant to 17 U.S.C. Sec. 304(c), which confers upon authors and their statutorily designated heirs the right to terminate “the exclusive or nonexclusive grant of a transfer or license of the renewal copyright or any right under it, executed before January 1, 1978[.]” Following service of her notice of termination, Lee granted a new license in 2015 to a predecessor of plaintiff Atticus Limited Liability Company, which in turn contracted with Aaron Sorkin to write a new stage adaptation of the novel. The Sorkin play premiered at the Shubert Theatre on Broadway on Dec. 13, 2018.
In 2019, DPC initiated arbitration against the Estate of Harper Lee, invoking the 1969 grant to seek injunctive relief prohibiting the Estate from claiming to own or exploiting the stock and amateur rights in the novel. The arbitrator ruled in DPC’s favor, concluding that DPC continued to retain the exclusive right to stage stock and amateur productions of the novel pursuant to the so-called derivative works exception contained in the Copyright Act’s termination provisions. This exception provides, in relevant part, that a “derivative work prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination.” The arbitrator ruled that because exclusivity was one of the “terms of the grant,” DPC retained exclusive rights after termination. DPC obtained a judgment confirming the arbitration award in the District Court for the Northern District of Illinois.
Atticus subsequently commenced an action against DPC in the Southern District of New York seeking a declaratory judgment that DPC maintains no exclusive rights in the novel following Lee’s termination. DPC moved to dismiss on the basis that the derivative works exception preserved DPC’s right to exclusivity and, alternatively, that Atticus was bound by the arbitration award under principles of claim preclusion. Atticus filed a cross-motion for summary judgment.
Upon converting DPC’s motion to dismiss to one for summary judgment, the court denied DPC’s motion and partially granted Atticus’ motion.
On the issue “of whether an exclusive license to perform a derivative work remains exclusive following a valid termination of a license,” the court rejected DPC’s position and the arbitrator’s conclusion. The court reasoned that the derivative works exception does not “prevent an author from exercising its termination right,” but instead “permits a grantee to continue to ‘utilize’ derivative works created during the term of the license without the threat of litigation.” As the court explained, DPC’s reading “would thwart the plain language of the Copyright Act, rendering any exclusive license interminable. The Derivative Works Exception does not, and cannot, eviscerate the statutory termination right of Sec.304(c).”
With respect to claim preclusion, the court held that the arbitrator’s decision could only bind Atticus, a non-party to the arbitration, if it could be deemed to be in “privity” with the Estate. Applying federal claim preclusion principles articulated by the Supreme Court in Taylor v. Sturgell, the district court held that DPC failed to establish privity between Atticus and the Estate based on any of the exceptions to the general rule against non-party preclusion.
First, DPC argued that because the 2015 agreement contained a provision that the “rights granted hereunder shall be subject to the rights granted under the 1969 Grant, as limited by such termination,” Atticus had agreed to be bound by the arbitration clause contained in the 1969 grant. The court rejected this argument, reasoning that this provision was merely an acknowledgement that DPC could continue utilizing the Sergel play on a nonexclusive basis following termination.
Second, DPC claimed that because Atticus acquired any right to produce a stage and amateur production of the novel from Lee, Atticus was a “successor in interest” bound by the arbitration decision adjudicating the rights of the Estate. The court rejected this argument on the grounds this exception to nonparty preclusion “has no application to a successor who acquires his interest before the action was commenced concerning the property.” Because Lee had granted rights in the novel to Atticus in 2015, prior to the commencement of the arbitration, the court held that the “successor in interest” exception was inapplicable.
Third, DPC contended that the Estate “adequately represented” Atticus’ interests in the arbitration, so Atticus already had a full and fair opportunity to litigate the effect of Lee’s termination of the 1969 grant. The court noted that the Supreme Court in Taylor limited the “adequate representation” exception only to certain categories of formally defined legal relationships, such as class-action representatives, trustees, guardians and other fiduciaries. The court concluded that no such relationship existed as between the Estate and Atticus.
Fourth, DPC argued that Atticus was bound by the arbitrator’s decision because Atticus “influenced” the Estate’s litigation conduct in the arbitration. The court ruled that Taylor requires more than mere “influence” to establish nonparty claim preclusion. Instead, DPC would have to prove that Atticus “assumed control” of the Estate’s litigation conduct in the arbitration. DPC failed to produce evidence of such control in response to Atticus’ motion for summary judgment. Because DPC requested the opportunity to conduct discovery on that issue, however, the court left open whether discovery into this issue would be permitted.
Summary prepared by Wook Hwang and Keane Barger