The opinion of the court was delivered by: WERKER
Following a two-day bench trial and certain preliminary rulings, and pursuant to stipulation among the parties, this declaratory judgment action comes before the Court for decision on an issue of contractual interpretation arising out of two agreements, concluded in the 1930s, concerning the right to produce motion pictures based upon copyrighted "Hopalong Cassidy" stories. After careful consideration of all of the testimony and documentary evidence, it is the Court's view that the question raised must be resolved in favor of the defendant and intervenors. The factual findings and legal conclusions upon which this decision is predicated are set forth in the remainder of this opinion as is required by Rule 52(a) of the Federal Rules of Civil Procedure.
During the period from 1907 to 1935, Clarence E. Mulford wrote 23 Hopalong Cassidy books. Each of the books was duly copyrighted and the renewal copyrights in them continue to be effective. The books were all published by Doubleday Page & Company or Doubleday Doran & Company, Inc. ("Doubleday") pursuant to written agreements under which Mulford expressly reserved the "motion picture and dramatic rights" to his literary materials. Doubleday also acted as Mulford's literary agent.
On February 27, 1935, Mulford entered into an option agreement (the "1935 Agreement") under which he granted Prudential Studios Corporation ("Prudential"), in Paragraph One, the right to:
acquire all "sound," musical and talking motion picture rights and the rights to produce, transmit, reproduce, distribute, exhibit and exploit in any manner or by any method or device (except as hereinafter specified) now or hereafter known or used, motion pictures taken from or based upon [21 books specified in the agreement].
Paragraph One also expressly reserved certain rights as follows:
All rights of production and use upon the spoken stage with living actors appearing and speaking in person in the actual and immediate presence of the audience are specifically reserved to Mr. Mulford.
All television, broadcasting and radio rights are specifically reserved to Mr. Mulford.
And Paragraph Ten of the 1935 Agreement further delineated the scope of Prudential's motion picture rights by providing that:
Prudential may (within the limitations of this agreement) make, exhibit and market everywhere, motion pictures, sound records and stills based upon or adopted from any of the above books in respect to which Prudential has exercised its option using any methods or devices for such purpose which are now or hereafter known or used....
On July 13, 1938, the 1935 Agreement was supplemented by an agreement (the "1938 Agreement") between Doubleday and Este Productions, Inc. ("Este"), a successor to Prudential. Pursuant to the terms of that instrument, three additional Hopalong Cassidy books were added to the list of those covered by the 1935 Agreement.
Eventually, 23 motion pictures were produced under the terms of the two agreements. Each of the motion pictures was initially copyrighted, but renewal applications were never filed for them and they are consequently no longer subject to copyright protection. It is for this reason that plaintiff seeks a declaratory judgment that it may use without restriction physical negatives of the 23 motion pictures and related materials which are in its possession. In a counterclaim not presently before the Court, defendants seek an injunction restraining plaintiff from using the motion pictures, and damages for copyright infringement.
The controversy arises because plaintiff has licensed and states that it is attempting to issue further licenses to third parties who wish to exhibit the motion pictures on television. At an earlier stage of this lawsuit, plaintiff maintained that this course of conduct was permissible because the motion pictures were not protected by copyrights; however, that argument was rejected in a previous opinion in which it was held that the renewal copyrights in the books could "be infringed by the use of materials in the public domain as readily as they are by the use of separately copyrighted matter." 426 F. Supp. 690, 694 (1976). At trial, plaintiff advanced the alternative theory that it could not have infringed Mulford's interest in the books by exhibiting the motion pictures on television since Mulford had already ceded all necessary rights to third parties pursuant to the terms of the 1935 Agreement as supplemented by the 1938 Agreement. It is the correctness of this contention which is now before me. As the parties have phrased it, the issue is:
"Did the grantor and grantees [under the two agreements] intend that the reservation of certain television rights by grantor should limit the use for television exhibition of the Hopalong Cassidy ...