Appellant, a New York corporation which is engaged within the State of Georgia in the business of licensing copyrighted motion pictures, brought this suit to restrain the collection of the state tax upon the gross receipts of royalties under such licenses. The tax was challenged upon the ground that copyrights are instrumentalities of the United States. On demurrer, the suit was dismissed, and the Supreme Court of the State, the Justices being equally divided in opinion, affirmed the judgment. 172 Ga. 403; 157 S.E. 664. The case comes here on appeal.
The Gross Receipts Tax Act (Georgia Laws, 1929, p. 103), describes the tax as laid "upon the privilege of engaging in certain occupations" and "upon certain business and commercial transactions and enterprises." As the tax is measured by gross receipts, the case in not ruled by Educational Films Corp. v. Ward, 282 U.S. 379, where the tax was based upon the net income of the corporation. Appellant insists, and we think rightly, that the operation of the statute here in question, in its application to gross receipts, is to impose a direct; charge upon the royalties. Northwestern Mutual Life Ins. Co., v. Wisconsin, 275 U.S. 136, 141. See, also, Crew Levick Co. v. Pennsylvania, 245 U.S. 292, 297; United States Glue Co., v. Oak Creek, 247 U.S. 321, 328, 329; New Jersey Bell Telephone Co., v. State Board, 280 U.S. 338, 346. The question is thus presented whether copyrights are to be
The Constitution empowers the Congress "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." Art. I, § 8, par. 8. The production to which the protection of copyright may be accorded is the property of the author and not of the United States. But the copyright is the creature of the Federal Statute passed in the exercise of the power vested in the Congress. As this Court has repeatedly said, the Congress did not sanction an existing right but created a new one. Wheaton v. Peters, 8 Pet. 591, 661; American Tobacco Co., v. Werckmeister, 207 U.S. 284, 291; Globe Newspaper Co., v. Walker, 210 U.S. 356, 362; Caliga v. Inter Ocean Newspaper Co., 215 U.S. 182, 188. The Statute confers upon the author after publication the exclusive right for a limited period to multiply and vend copies and to engage in the other activities described by the statute in relation to the subject matter. U.S.C., Tit. 17. In creating this right, the Congress did not reserve to the United States any interest in the production itself, or in the copyright, or in the profits that may be derived from its use. Nor did the Congress provide that the right, or the gains from its exercise, should be free of tax. The owner of the copyright, if he pleases, may refrain from vending or licensing and content himself with simply exercising the right to exclude others from using his property. Compare Continental Paper Bag Co., v. Eastern Paper Bag Co., 210 U.S. 405, 422, 424. The sole interest of the United States and the primary object in conferring the monopoly lie in the general benefits derived by the public from the labors of authors. A copyright, like a patent, is "at once the equivalent given by the public for benefits bestowed by the genius and mediations and skills of individuals and the incentive to
The principle of the immunity from state taxation of instrumentalities of the Federal Government, and of the corresponding immunity of state instrumentalities from Federal taxation — essential to the maintenance of our dual system — has its inherent limitations. It is aimed at the protection of the operations of government (McCulloch v. Maryland, 4 Wheat. 316, 436), and the immunity does not extend "to anything lying outside or beyond governmental functions and their exertions." Indian Motocycle Co., v. United States, 283 U.S. 570, 576, 579. Where the immunity exists, it is absolute, resting upon an "entire absence of power" (Johnson v. Maryland, 254 U.S. 51, 55, 56), but it does not exist "where no direct burden is laid upon the governmental instrumentality, and there is only a remote, if any, influence upon the exercise of the functions of government." Willcuts v. Bunn, 282 U.S. 216, 225.
In this instance, the mere fact that a copyright is property derived from a grant by the United States is insufficient to support the claim of exemption. Nor does the fact that the grant is made in furtherance of a governmental policy of the United States, and because of the benefits which are deemed to accrue to the public in the execution of that policy, furnish ground for immunity. The disposition by the Government of public lands, in order to advance the general interest by promoting settlement, illustrates the principle and its limitation. The property of the United States is not subject to state taxation (Van Brocklin v. Tennessee,) 117 U.S. 151, but the property of individual owners, although derived from the United States under its public land laws, may be taxed. The power to tax exists as soon as the ownership is changed. Witherspoon v. Duncan, 4 Wall. 210, 219.
In Gillespie v. Oklahoma, 257 U.S. 501, the question concerned income derived from leases of restricted Indian lands. The leases were deemed to be instrumentalities of the United States in carrying out its duties to the Indians, and the Court, speaking through Mr. Justice Homes, concluded that the tax imposed by Oklahoma was "a direct
We agree, however, with the contention that in this aspect royalties from copyrights stand in the same position as royalties from the use of patent rights, and what we have said as to the purposes of the Government in relation to copyrights applies as well, mutatis mutandis, to patents which are granted under the same constitutional authority to promote the progress of science and useful arts. The affirmance of the judgment in the instant case cannot be reconciled with the decision in Long v. Rockwood, 277 U.S. 142, upon which appellant relies, and in view of the conclusions now reached upon a re-examination of the question, that case is definitely overruled.