Copyright Law: Welles 053007

Welles v. Turner Entertainment Company, 9th U.S. Circuit Court of Appeals, No. 05-55742 (May 30, 2007):

Issue:
When Orson Welles (OW) signed on for "Citizen Kane," (CK) he actually signed on for a threefer of movies. When the movies, including CK, flopped, OW signed an exit agreement that essentially cancelled the first contract that RKO signed with Mercury and OW. According to those agreements, OW agreed to take $30,000 and 20 percent of $0 revenue as his pay for the movies. Decades later, Turner, the current owner of RKO's rights, wishes to release CK to home video. Beatrice Welles, OW's daughter, opposes the distribution on the grounds that she owns the copyright and home video rights. Her declaratory judgment action against Turner ended in a summary judgment for Turner. She appealed.

Pertinent issues of copyright law:
1) How does a court decide who owns the distribution rights to copies in a media that hadn't even been contemplated or even invented at the time of signing?
2) Who owns the copyright for works created pursuant to a now canceled contract?

Conclusion:
The court found that without further review of extrinsic evidence to the initial agreement, it would be impossible for it to determine the projected intention of the parties had they known that home videos would be invented. As such, the court found that this inquiry required remand. As the initial contract put the ownership of all positives or negatives of the film into the hands of RKO, then the cancellation of the initial contract had the effect of terminating, not rescinding, the initial contract. California law, which is the law of the state in which the contract was governed, interprets "rescind" as entirely different from revocation, termination, and cancellation. Only the word rescind, under California law, implies a retroactive removal from existence. Since the contract did not use that word to cancel the contract, the copyright interest remained in RKO's, and now Turner's, exclusive possession.