IP Tech Knowledgy

The Supreme Court may not be able to decide important cases in the publishing and music industries because four of the Justices have book contracts with the same publisher. Because of their connection to a party in a recent case on appeal to the Supreme Court, the four justices recused themselves, meaning the court did not have a quorum to decide, or take, the case. That let stand an appellate court ruling that did not follow other Circuits on the issue of terminating a licensee’s foreign rights.The situation injects uncertainty into what had been a relatively stable assumption in the world of music and literary rights.  

First the case, then the drama.

The case, Vetter v. Resnik, relates to 17 U.S.C. § 304(c) that allows a licensor of copyrights to terminate the non-US licenses of the work after 35 years and recapture full control of the work. Vetter relates to works created before 1978, but a similar portion of the Copyright Act relates to post-1978 works. Prior cases in other Circuits had held that the termination right did not apply to non-US licenses. In Vetter, the Fifth Circuit held that foreign rights were intended to be governed under the statute.  

The failure of the Supreme Court to grant certiorari means that the lower court case stands. The Fifth Circuit ruled that the reversion applies to copyrights obtained in foreign countries if the United States copyright registration was also included in the license. This section 304(c) is a boon to authors and composers who can, with the proper notice as prescribed in the statute, take back the rights and then increase their benefit in monetizing a work that has had such longstanding popularity. Additionally, knowing the duration of the licenses allows the parties to value the initial license. Because the Supreme Court is unable to resolve the differences between the Circuits, a future litigant may forum shop between the Fifth Circuit (favoring rights holders) and other Circuits (favoring publishers). License agreements for foreign rights drafted by the publisher may want to select governing law any state other than Texas, Louisiana, and Mississippi.

The human interest side and broader application is that Justices Sonia Sotomayor, Neil Gorsuch, Amy Coney Barrett, and Ketanji Brown Jackson each have book publishing agreements with Penguin Random House. The case brought up on appeal is BMG Rights Management (US) LLC v. Vetter.  PRH is a prominent subsidiary of the German conglomerate Bertelsmann focused on book publishing. Bertelsmann also owns BMG Rights Management (US) LLC, which is a significant music licensee and distributor. Due to the conflict of interest, all four Justices recused themselves from the case. The Supreme Court requires a six-judge quorum to rule on a case. Because the Supreme Court would have only five eligible Justices, it could not take the case.

The fact that four justices cannot rule on any case relating to Bertelsmann means that a variety of copyright cases could go unaddressed by the Supreme Court, meaning that there may be a split of authority between different appellate courts on publishing and music cases, and the Supreme Court would be unable to resolve the discrepancies and create a reliable, unified, definitive nationwide rule.  

Ned T. Himmelrich
410-576-4171 • nhimmelrich@gfrlaw.com