Termination of Copyright Grants

August 18, 2011

Prior to 1976 Act

• Prior to 1978, an author could renew copyright for a second term (28 yrs) after expiration of the initial term (28 yrs)

• The rights for the entire renewal term automatically reverted to the author or statutory successors

• Courts ruled that the renewal term was alienable

After 1976 Act

• The renewal term was extended in 1978 (by 19 yrs) and again in 1998 (by 20 yrs) - totaling 67 years (+ 28-year first term = 95 years of copyright protection)

• Works created during or after 1978 were given a single term of life of author plus 70 years (if work for hire the shorter of creation date plus 120 years or publication date plus 95 years)

• Owners of copyright grants would receive a windfall of additional copyright term

After 1976 Act

• Congress chose to give the author and statutory successors the chance to recover some of the extended renewal term for pre-1978 works and part of the copyright term for post-1978 works

• Under the 1976 Act, the author and statutory successors (spouse, children, etc.) were given a right under §§ 304(c) and (d) to terminate pre-1978 grants to recover some of the extended renewal term for pre-1978 works

• Under the 1976 Act, the author and statutory successors given rights under §203(a) to terminate post-1978 grants made by author

Congressional rationale:

“A provision of this sort is needed because of the unequal bargaining position of authors,

resulting in part from the impossibility of determining a work’s value until it has been

exploited.”

H.R. Rep. No. 94-1476, at 124 (1976).

Sections 304 (c) and (d) allow statutory successors to terminate pre-1978 assignments and exclusive or non-exclusive licenses of the renewal term of copyright, or any right under it, by affirmatively serving notice of termination effective within specified 5-year windows

• Copyrights to which termination under §§ 304(c), (d) applies: – Works “subsisting in either [their] first or renewal

term” as of 1/1/78

• Grants subject to termination under §§ 304(c), (d):– Executed prior to 1/1/78– by the author or, after author’s death, by the

author’s statutory successors (i.e., spouse or children/ executors/ next of kin)

• Who can terminate under §§ 304(c), (d):

– For grants by author: author, surviving spouse, children, grandchildren, estate, can terminate In case of joint works: either author (or successors)

can terminate the particular author’s share

– For grants by persons other than the author: surviving person(s) who executed it can terminate

§ 304(c)

Provides for termination of grants with effective dates from the 56th anniversary through the 61st year (the first 5-year window) measured

from the date copyright was originally secured

§304(d)

Limited second chance: § 304(d) provides for termination of grants with effective dates from the 75th anniversary through the 80th year (a second 5-year window) measured from the date copyright was originally secured – but only for copyrights secured on or between

1/1/1923 and 10/26/1939 (37 CFR § 201.10)

• Sections 304(c) and (d) both provide that notice must be served between 2 years and 10 years (8-year window) before the effective date of termination, and the effective date must occur within the relevant 5-year window

Effective termination

date

Effective termination

date

Effective termination

date

Effective termination

date

2 yrs8-year window

5-year window5-year window

Example• Assume copyright date of 3/1/1956• 5yr window opens 3/1/2012• 5yr window closes 3/1/2017• Effective date (arbitrary) 8/1/2013• Time to serve notice: 8/1/2003-7/31/2011

3/1/2017

8/1/2013

5-year window

3/1/2012

2 yrs8-year window

8/1/2003 7/31/2011

Major exceptions to §§ 304(c), (d) termination mechanisms:

• Grants related to works for hire can’t be terminated

• Dispositions by will can’t be terminated• Derivative works created prior to effective

date of termination can still be utilized under terms of the grant after termination

• Exploitation outside of U.S.A unaffected• Non-copyright grants (e.g., trademark rights

or publicity rights), even in the same agreement as a terminated copyright grant, can’t be terminated

In 2013 another termination window opens:

• §203(a) provides a right of termination for post-1978 grants made by author (applicable both to pre-1978 and post-1978 works) with a 5-year window open from the 35th through the 40th year measured from the date of the grant

• The twist: If the grant covers the right of publication of the work, effective date must occur between (i) the 35th anniversary through the 40th year measured from the date of publication OR (ii) between the 40th year through the 45th year measured from the date of execution of the grant, whichever ends earlier.

§ 203(a)

Same advance notice as in § 304(c) and (d):

• The § 203(a) 5-year window opens for the first time in 2013 (1978 + 35 = 2013)

• Termination notices can be sent now for effective dates in 2013-2021 (2-10 yrs)

• Same exceptions as in § 304(c) and (d)

Major exceptions to §203(a) termination mechanisms:

• Grants related to works for hire can’t be terminated

• Dispositions by will can’t be terminated• Derivative works created prior to effective

date of termination can still be utilized under terms of the grant after termination

• Exploitation outside of U.S.A unaffected• Non-copyright grants (e.g., trademark rights

or publicity rights), even in the same agreement as a terminated copyright grant, can’t be terminated

Who can terminate under § 203(a)?

• Author if alive• If author is dead: the author’s statutory

successors (including surviving spouse, children and grandchildren/ or executor, administrator, personal representative or trustee)

§ 203(a)

Important differences from §§ 304(c), (d):

• Under § 203(a) the grant to be terminated must have been executed after January 1, 1978 by the author.

• For joint grants of joint works, majority of joint authors (or respective/successors) must terminate

Comparison of §203(a) and § 304(c) and (d)

§304 §203

Pre-1978 grants Post-1978 grants

Measure from date copyright secured

Measure from date grant executed

Applies to grants by authors and others

Applies to grants by authors only

Either joint author can terminate

Majority of joint authors can terminate

Author/successors or surviving persons who executed grant can terminate

Author/successors can terminate

What about the sanctity of contracts?

• Both sections 203(a) and 304(c),(d) provide that “termination . . . may be effected notwithstanding any agreement to the contrary”

• This is not true in practice.

Milne v. Stephen Slesinger, Inc.

• 9th Circuit held that a 1983 re-grant of Winnie the Pooh copyrights terminated the original 1931 grant such that no pre-1978 grant was in existence in 2002 when Milne’s statutory heirs attempted to exercise §304(d) (Milne v. Stephen Slesinger, Inc., 430 F.3d 1036, 1046 (9th Cir. 2005)

Penguin Group v. Steinbeck• John Steinbeck made 1938 grant to Viking

Press• Steinbeck died in 1968, left copyrights to

widow• Widow re-negotiated in 1994 to explicitly

supersede the 1938 agreement• Sons sent notice to terminate in 2003• 2nd Circuit held that the 1994 agreement

terminated and superseded the 1938 agreement and eliminated the termination rights under both sections §§ 304(c) and (d) (Penguin Group (USA), Inc. v. Steinbeck, 537 F.3d 193, 201 (2d Cir. 2008)

Ways to get around termination rights:

• Negotiate a new post-1978 agreement with a party other than the author (not subject to termination under § 304 or § 203) that revokes and replaces the pre-1978 contract that’s subject to termination (Milne, Steinbeck)

• Serve timely notice of termination followed by prompt sale of terminated interest back to grantor – termination is not “agreement” but exercise of unilateral right

• Devise by will • Work for hire

Pitfalls

• Rules can be complicated. It’s not always simple or inexpensive to identify the grantee who gets the notice (given corporate changes and subsequent transfers) or who can serve the notice; even the effect of a notice can be unclear

• Application is uncertain - Congress and statute differ from 9th and 2nd Circuits

No man’s land

• What about terminating a pre-1978 grant if the relevant work (e.g., book or sound recording) is post-1978?

• Copyright Office will accept notice of termination under § 203(a), but resolution by courts is awaited.

§ 203 litigation heating up soon

• “Universal, Sony, BMG, EMI and Warner have made it clear that they will not relinquish recordings they consider their property without a fight.”– Planned defense: recordings

are works for hire• So far, no definitive court

rulings

Bruce Springsteen’s “Darkness on the Edge of Town” (1978) as well as many other major works are susceptible to termination under § 203(a) with effective dates beginning in 2013

Takeaway

• New window opening in 2013 offers new opportunities for works subject to post-1978 grants

• Termination rules are complicated but potentially rewarding to author and successors

• During 2-10 year periods when termination notices may be sent, re-negotiation and a new grant may make more sense (send notice then transfer rights)

• Re-negotiations could cancel previous grant and remove option for termination of grant (Milne, Steinbeck)

Takeaway

• Original parties (must include author) can anytime re-negotiate and reset the 35 year clock – does not eliminate termination right, only postpones

• Best practice for businesses seeking rights in a work is to acquire the work as a work for hire

• If termination is imminent, can create derivative works prior to effective date and exploit after effective date