Introduction To Terminations of Copyright Transfers

With passage of the 1976 Copyright Act, Congress created a valuable new property right under U.S. law – a right of authors, their estates and/or successors to recapture ownership and control of copyrights by terminating past assignments or licenses of those works following a prescribed period of time.1

• “Authors” as used here includes songwriters, novelists, painters, photographers, recording artists, composers, poets, architects, choreographers, etc.

• Grants of even the entire copyright (including all renewals and extensions) can later be terminated by an author, the author’s heirs or statutory successors, regardless of what the contract provides and of what consideration was paid.

• Congress made the termination right “inalienable.”
  

Numerous well-known authors have already used terminations law to recapture copyrights to valuable literary, musical and other creative works.2 Threat of termination has enabled many authors, their heirs or successors to renegotiate more lucrative deals, frequently with the original grantee.3

Use and significance of terminations heightens every year as more past grants become eligible for termination. Accordingly, all stakeholders – authors, their estates and successors, publishers, distributors, executors and trustees – should develop familiarity with this area of copyright law and practice.

Key Limitations On Termination Rights

As far-reaching as an author’s termination rights are, they are subject to many limitations. First, an author’s right to terminate a past grant must be exercised within a statutorily prescribed period of time or the termination right is lost forever. Second, terminations recapture only U.S. rights insofar as copyright law is generally applied territorially. Third, “works for hire” are not subject to termination. Fourth, derivative works based on the granted work “prepared under authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination.”4 Fifth, transfers of copyright interests by will or intestacy are not subject to termination.5

Key Procedural Requirements

The 5-year window: Termination rights must be exercised within a 5-year period or the right is lost forever. Every year countless opportunities to terminate past grants are never asserted and are lost.6

Advance notices of termination: Before a past grant may be terminated, the grantee(s) whose rights are to be terminated and the Copyright Office must each receive a written notice of termination. Advance notice to the grantee(s) must occur no more than ten and no less than two years before the effective date of termination. If notice is not timely served, the right to terminate is lost.

Form and service of notices: The form and service of termination notices must comply with the precise requirements of the Copyright Act, related regulations and any relevant case law. 7 Preparing a proper notice of termination requires due diligence in obtaining copies of copyright registrations, grants, and chain of title documents. While some terminations can be effected straightforwardly, others may require considerable effort and analysis, such as terminations involving grants (1) by joint authors; (2) by a deceased author; (3) by an author’s heirs or successors; (4) where there are successors-in-interest to the original grantee; and/or (5) where there are multiple grantees.

Planning For Termination

From the author’s perspective: An author’s terminations of grants in commercially successful works may be the most significant economic events in his or her career. Authors, their heirs and statutory successors may wish to use terminations to recapture not only economic but creative control over copyrighted works. Terminations may be useful in collecting multiple works into a single catalog to increase market value or ease of administration. Because termination rights vest upon service of a notice of termination, terminations may be used for estate planning purposes.

At minimum, authors should determine and track when any past grants become eligible for termination. Further planning may include conducting audits, contacting co-owners of affected works to coordinate efforts, or entering into discussions with original grantee(s) concerning the rights at issue.

From the heirs’ and successors’ perspective: Not only authors but their heirs and statutory successors need to familiarize themselves with terminations law.

Depending on the circumstances, a deceased author’s termination interests may vest in either the author’s heirs or the author’s “statutory successors.” An author’s statutory successors are (1) the widow or widower; (2) the author’s surviving children, and the surviving children of any dead child of the author; and (3) the author’s executor, administrator, personal representative, or trustee.8 Termination of grants requires the collective participation of persons owning at least 51% of the author(s)' termination interest(s), without which termination is impossible. Careful analysis must be undertaken to confirm who owns a deceased author’s termination interests.  Disputes between heirs may sometimes require mediation or other resolution before termination can be effected.

From the executor’s or trustee’s perspective: Executors and trustees of estates containing copyrights must take a careful inventory of grants subject to termination. The law may impose fiduciary duties upon executors and trustees to exercise a deceased author’s termination rights in a prudent manner. Because terminations must be timely and properly effected by the executor or trustee or else will be waived, the area creates a trap for the unwary.

From the original grantee’s perspective: Grantees of works subject to termination must remain keenly aware of terminations law and practice. Valuation of catalogs requires an up-to-date understanding of terminations and their potential effect upon future rights and royalty streams. Planning may enable the grantee or its licensees to complete the creation of valuable derivative works prior to termination.

In certain instances it may be possible to renegotiate an ongoing relationship with the author, since the original grantee already has promotion and collection mechanisms in place for exploiting the work.9 Congress in fact provided original grantees special treatment under the terminations provisions: between the date a notice of termination is served and the effective date of termination two to ten years later, the author may agree to make a further, post-termination grant only to the original grantee.10

Conclusion

The area of termination of copyright transfers is highly complicated and specialized. Parties potentially affected by terminations are urged to seek the advice of qualified counsel in preparing a strategy for dealing with the effects of this landmark law.

© 2007 Bill Gable 

1. “[T]he termination right was expressly intended to relieve authors of the consequences of ill-advised and unremunerative grants that had been made before the author had a fair opportunity to appreciate the true value of his work product. That general purpose is plainly defined in the legislative history and, indeed, is fairly inferable from the text of § 304 itself.” Mills Music, Inc. v. Snyder, 469 U.S. 153, 172-73 (1985).
2. A recent example involved the termination by John Steinbeck’s son and granddaughter of grants to Penguin Books for rights to various John Steinbeck novels including “Grapes of Wrath,” “Of Mice And Men,” “Tortilla Flats” and “In Dubious Battle.” See Steinbeck v. McIntosh & Otis, Inc., 433 F. Supp. 2d 395 (S.D.N.Y. 2006).
3. See Milne v. Stephen Slesinger, Inc., 430 F.3d 1036, 1040 (9th Cir. 2005) (author’s son able to renegotiate more lucrative deal with defendant and Disney for rights to “Winnie The Pooh” “using the bargaining power conferred by his termination right”).
4. 17 U.S.C. §§ 203(b)(1), 304(c)(6)(A).
5. However such grants will be not be effective if the author does not own the work being bequeathed when he or she executes the will.  See, e.g., Larry Spier, Inc. v. Bourne Co., 953 F.2d 774, 778 (2d Cir. 1992).
6. See The Patry Copyright Blog,  http://williampatry.blogspot.com/2005/06/do-termination-of-transfers-matter.html (last visited June 10, 2005) (Prof. William Patry estimating that perhaps as few as 4% of termination rights are being effectuated while suggesting the percentage to be “much higher for musical works”).
7. “Instead of the copyright vesting automatically in the author or the author’s heirs, the burden was placed on them to file a notice of intent to terminate the transfer. And the hoops erected for filing the termination notice are even more complicated than those for filing a renewal application, the latter hoops having been rightly described by the Copyright Office as ‘the source of more confusion and litigation than any other in the copyright law.’” W. Patry, The Failure of the American Copyright System: Protecting the Idle Rich, 72 Notre Dame L. Rev. 907, 921 (1997).
8. See 17 U.S.C. §§ 203(a)(2), 304(c)(2).
9. See Milne v. Slesinger, 430 F.3d 1036, 1046 (9th Cir. 2005) (“Congress specifically stated that it did not intend for the statute to ‘prevent the parties to a transfer or license from voluntarily agreeing at any time to terminate an existing grant and negotiating a new one. Congress further stated that ‘nothing in this section or legislation is intended to change the existing state of the law of contracts concerning circumstances in which an author may terminate a license, transfer or assignment.”) (citing H.R. Rep. No. 94-1476 at 127, 142.)
10. See 17 U.S.C. §§ §§ 203(b)(4), 304(c)(6)(D).