Prof. Rodney A. Smolla, Duke University School of Law
November 26, 2014

I write this IP Viewpoints piece on the eve of Thanksgiving.  One of our family rituals during the holidays is to sit down together and watch our favorite holiday films.  One of our favorites – and we are not alone – is the Frank Capra classic, It’s a Wonderful Life, in which the lead is played by one of the greatest American actors of all time, Jimmy Stewart.  Both the film It’s a Wonderful Life, and Jimmy Stewart himself, also offer up some telling tales on the pitfalls and perils of copyright protection.

Jimmy Stewart was in the middle of a major Supreme Court battle over copyright, arising from another of his great roles, as the lead in Alfred Hitchcock’s thriller, Rear Window.  In Stewart v. Abend,1 the Supreme Court, in an opinion by Justice O’Connor, ruled against Jimmy Stewart and the others aligned with him, the estate of Alfred Hitchcock, and MCA, in a case that explored the complex relationship between the copyright interests in a movie as a derivative work and the copyright of the original literary work from which the movie is derived.

The movie Rear Window was a derivative work based on a short story by the author Cornell Woolrich entitled “It Had to be Murder,” originally published in Dime Detective Magazine.  At the time authors had a 28-year copyright term, which could be renewed for an additional 28 years.  To make a complex story simple, Woolrich cut a movie deal in which the movie rights to the story were assigned to a production company.  Woolrich intended to renew his copyright in the story, and also, following his renewal, to re-assign the movie production rights to the production company.  The production company in turn sold its rights to a company owned by Jimmy Stewart and Alfred Hitchcock, for $10,000, to make Rear Window.  When Woolrich died, he had not yet renewed the copyright, or re-assigned the movie rights.  His estate renewed the copyright in the story but did not renew the movie deal, although Woolrich himself had intended to renew both.  Woolrich, who died without any close family members, left his estate to Columbia University, and Columbia assigned the rights to the short story to a literary agent, Sheldon Abend, with a provision that provided for a return to the university on any profits Abend could secure.

Meanwhile, the makers of the movie Rear Window signed a deal for the broadcast license rights to the film with ABC television.  Once the estate of Woolrich renewed the copyright in the underlying story “It Had to be Murder,” the conflict was framed.  Did the renewal of the underlying work carry with it an ongoing right to control licensure of derivative works, such as the film Rear Window?  In a close case that split the Supreme Court sharply, Justice O’Connor sided with the owners of the underlying work.  In the words of Court:

In this case, the grant of rights in the pre-existing work lapsed and, therefore, the derivative work owners’ rights to use those portions of the pre-existing work incorporated into the derivative work expired.  Thus, continued use would be infringing; whether the derivative work may continue to be published is a matter of remedy, an issue which is not before us.  To say otherwise is to say that the derivative work nullifies the “force” of the copyright in the “matter employed.” Whether or not we believe that this is good policy, this is the system Congress has provided, as evidenced by the language of the 1909 Act and the cases decided under the 1909 Act.  Although the dissent’s theory may have been a plausible option for a legislature to have chosen, Congress did not so provide.2

The result in Stewart v. Abend would be influential in the resolution of yet another famous copyright episode also involving Jimmy Stewart, the strange story of the intellectual property rights in It’s a Wonderful Life.

I should confess my own bias here – I adore It’s a Wonderful Life, and practically have it memorized.  Why?  Because in my formative years, growing up in Chicago, local television stations like WGN would play it round the clock from Thanksgiving through New Year’s.  I’d watch it several times each holiday season, year in and year out.  And so would millions of other Americans, back in the days of television broadcasting with only a handful of over-the-air channels and no large presence of cable and satellite channels, let alone the Internet.  These local stations would broadcast It’s a Wonderful Life because the movie was widely thought to have lapsed into the public domain.

Despite its brilliance and powerful moral resonance, the film was only a modest success when it was first released in 1946, and largely lapsed into cultural and commercial obscurity.  The film was based on a story written by Phillip Van Doren Stern entitled “The Greatest Gift.”  (The story was so short it was actually printed on Christmas cards.)  RKO Pictures bought the rights to the story for $10,000, and the movie was made.  For reasons that are uncertain, however, the owners of the copyright in It’s a Wonderful Life never renewed the film’s copyright when the film came up for renewal in 1974.  Some speculate that the film, which had never been very profitable and was all but forgotten, was simply not deemed important enough to bother with renewal.  Others ascribe the default to a clerical blunder at the film company.  In any event, the film was regarded as having escheated to the public domain, and local television stations, looking for cheap content, began to show the film.

Ironically, it was this mass movement of popular repetition that transformed the movie from a diffident box office performer into a beloved icon of American culture.  A new generation of television movie watchers would become utterly enraptured with the magnificent performances and magical story.  Frank Capra’s brilliant direction, the film’s timeless capturing of American life during the depression and war, and the powerful moral arc of the story, would elevate the film to the highest tiers of American holiday ritual.  It is always included in lists of the greatest movies ever made, and is among the select American films placed in the American Film Registry as “culturally, historically, or aesthetically significant.”

Once the film took on a life of its own, of course, it also suddenly became more commercially valuable.  Relying on the Supreme Court’s ruling in Stewart v Abend, the movie company that still owned rights to the underlying short story, which, as in Stewart v. Abend, had been renewed, asserted new derivative rights to control the film.  By now those rights were owned by Republic Pictures.  Viacom, through its subsidiary Paramount, would purchase Republic, and now NBC is licensed to show the film on American networks, which it typically does twice each holiday season.

If that’s the story, what’s the sermon?  From the perspective of copyright policy, we see the power in the bundle of rights owned by the creator of an underlying work, though in both the case of Rear Window and It’s a Wonderful Life it is plain that the creative genius of directors such as Alfred Hitchcock and Frank Capra and the charismatic humanity of the great Jimmy Stewart brought exponentially more creative and commercial value to the derivative works than ever existed in the original stories.  There is also the ambivalent lesson that it was the temporary lapse in copyright protection for It’s a Wonderful Life that brought it the play and acclaim and love it deserves.  For my own part, I am sure I’m now paying, one way or another, for what I once watched more or less for “free” (but with commercials, of course), but I’m okay with that.  Now my kids, oblivious to all these intellectual property machinations, see it again and again as well (we buy the DVD or pay for it on Netflix or whatever), and they also have it memorized.   As they should.