## Facts

- “Who’s Sorry Now” was copyrighted in 1923.
- In 1940, composer Ted Snyder assigned Mills Music, Inc. his renewal interests in exchange for an advance and an agreement to pay Snyder (and later his successors) royalties, including 50% of Mills’s net mechanical royalties.
- After Mills obtained the renewal copyright in 1951, it issued hundreds of licenses to record companies authorizing sound recordings of the song and requiring royalty payments to Mills, which then shared royalties with Snyder under the 1940 agreement.
- Record companies made sound recordings that qualified as statutory “derivative works,” generating continuing mechanical-royalty income.
- After Snyder’s death, his heirs terminated Snyder’s grant to Mills under 17 U.S.C. § 304(c) and demanded that post-termination royalties from the existing recordings be paid entirely to them.
- The licensing agent placed disputed royalties in escrow and filed an interpleader action to determine entitlement.

## Issues

1. Whether § 304(c)(6)(A)’s allowance that a pre-termination derivative work may continue to be utilized “under the terms of the grant” preserves the publisher’s contractual royalty share after termination.
2. Whether the relevant “grant” for § 304(c)(6)(A) is limited to publisher-to-record-company licenses, or includes the original author-to-publisher grant that authorized the licensing chain.

## Decision

- The Supreme Court reversed the court of appeals and held Mills remained entitled to its contractual share of royalties from pre-termination derivative works.
- The Court interpreted “the grant” in § 304(c)(6)(A) to refer to the original author-to-publisher grant under which the derivative works were prepared, not merely the downstream record-company licenses.
- Because the derivative works could continue to be utilized “under the terms of the grant,” the pre-termination royalty-allocation terms remained in effect for continued exploitation of those recordings.

## Legal Principles

- Under § 304(c)(6)(A), when a derivative work was prepared before termination under authority traceable to the terminated grant, it may continue to be utilized after termination “under the terms of the grant.”
- “Under the terms of the grant” includes financial terms—such as royalty-sharing provisions—embedded in the original author–grantee agreement that enabled and structured the derivative-work licensing chain.
- The derivative-work exception does not turn on whether the author directly authorized the derivative work or did so through an intermediary empowered to license others; successive authorizations can qualify as being made under the authority of the original grant.
- Although § 304(c) generally benefits authors by restoring rights after termination, that purpose does not override § 304(c)(6)(A)’s specific protection for continued exploitation of pre-termination derivative works on the original contractual terms.

## Conclusion

The Court held that termination under § 304(c) did not entitle the author’s heirs to recapture 100% of royalties from sound recordings made before termination; § 304(c)(6)(A) allowed those derivative works to continue to be exploited on the original grant’s royalty-sharing terms, leaving the publisher’s contractual royalty participation intact for those recordings.


Mills Music, Inc. v. Snyder, 469 U.S. 153 (1985)