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Termination of Copyright Grants
 

Termination of Copyright Grants

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Do you work with copyrights? If so, do not forget about an author’s rights to terminate transfers and licenses. ...

Do you work with copyrights? If so, do not forget about an author’s rights to terminate transfers and licenses.

The copyright act provides the authors of transferred or licensed works the opportunity to recapture his or her rights. This means that after waiting a specific period of time, an author, or an author’s estate, can terminate a prior transfer or license. Such terminations can have a dramatic impact on a company’s rights to use certain intellectual property or the rights to revenue from certain copyrighted works. Terminating transfers and licenses also gives authors an opportunity to make additional revenue by retransferring or relicensing their work.

The rules surrounding the terminations of transfers and licenses are quite complicated, and the opportunity to recapture one’s rights is only available for a limited period of time. A new window is opening in 2013 for the recapture of works subject to post-1978 grants. For works transferred or licensed after 1978, the five-year termination period can begin at one of three times: (1) the end of thirty-five years from the date of execution of the grant; (2) thirty-five years from the date of publication of the work; or (3) forty years from the date of the execution of the grant.

If you are an author, assignee, or licensee of a work that may soon enter a termination window and have questions, feel free to contact our experienced patent, trademark, and copyright attorneys here at Woodard, Emhardt, Moriarty, McNett & Henry LLP.

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  • Arguably thwarting Congresses intention by creating the renewal term - Situation developed where it was common for author to grant both initial term and renewal term by contract
  • - Extended CR term meant that owners of copyright grants would receive a windfall of additional copyright term
  • -Unequal bargaining position of the authors Concern for authors not knowing true value of work until exploited In fairness, authors should have a chance to recover copyrights during the extended copyright terms
  • 304(c) and (d) allow authors or statutory successors to terminate pre-1978 grants by AFFIRMATIVELY serving notice of termination, effective within 5-yr windows
  • As of the date of the copyright act, which is 1/1/1978
  • - Remember that a grant by person other than an author must follow an earlier grant by the author
  • In response to Sonny Bono CTEA of 1998, adding 20 more years, gave author second bite at the apple
  • Assume copyright secured 3/1/1956 5 yr window opens 3/1/2012 5 yr window closes 3/1/2017 Effective date within 5yr window (arbitrary) 8/1/2013 Time to serve notice: 8/1/2003 – 7-31-2011
  • WFH - If in business of acquiring other artists works, advantageous to get agreement as work for hire rather later grant Derivative works - If know termination is approaching, can still exploit that work by creating derivatives prior to effective date
  • Twist: Effectively gives Grantee 5 yr grace-period to publish before clock starts
  • -This follows Congresses intention to fix pre-1978 situation where renewal copyright term was alienable, in recognition of unequal bargaining power of authors
  • Both 9 th circuit and 2 nd circuit recently come out with cases where the termination right was destroyed by a prior contract allowed grantee to rescind and re-grant for express purpose to block author’s family members from terminating license -Milne- post 1978 re-grant (in 1983) not made by author, so not subject to 203, not subject to section 304 bc grant after 1978 - 9 th circuit asserted that “termination… may be effected notwithstanding any agreement to the contrary” was not plain on its face
  • Both courts applied state contract law to void original contracts (Milne – “rescinded”, Steinbeck – “cancelled”) – Professor Nimmer argues that both these cases were decided incorrectly, and that the Courts should have applied only federal copyright law and never reached state contract law. These cases clearly go against the intentions of Congress.
  • Ways to get around termination rights *1 -new agreement can’t be with author *2 –exercise of unilateral right, not agreement – explicitly contemplated by Congress, evidenced by legislative history re-negotiation after notice of termination: specifically contemplated by Congress (legislative history) Work can be transferred back to original grantee AFTER notice of termination becomes effective, even BEFORE termination becomes effective – “ termination notice” is not an “agreement”, but is a unilateral right WFH – comes with authorship rights, not subject to termination
  • Quirk -Present grant of future rights: Pre-1978 grant for post 1978 work: -not 203 bc not post-78 grant. -Not 304 bc 304 applies to “Works “subsisting in either [their] first or renewal term” as of 1/1/78”. -Odd scenario that we probably won’t have to deal with
  • Understandable considering revenues have dwindled over last few years - Works for hire argument is weak- Artists can pursue litigation, but risk creating bad blood if win and try to re-negotiate grants Songwriter’s Guild is going full steam Article in NY Times yesterday (thanks Jack) Victor Wills of “Village People” filed to termination notice to regain “YMCA” in 2013 article 2 days ago
  • *2 – successors could use as bargaining tool for new royalty rates, or

Termination of Copyright Grants Termination of Copyright Grants Presentation Transcript

  • 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 yrs 8-year window 5-year window 5-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 3/1/2012 8/1/2013 5-year window 2 yrs 8-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) Majority of joint authors can terminate Either joint author can terminate Author/successors can terminate Author/successors or surviving persons who executed grant can terminate Applies to grants by authors only Applies to grants by authors and others Measure from date grant executed Measure from date copyright secured Post-1978 grants Pre-1978 grants §203 §304
  • 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
    • 2 nd 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 9 th and 2 nd 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