BY:Neil J. Rosini
The termination mechanisms in the U.S. Copyright Act are extraordinary because they can undo contracts. Their purpose is to benefit creative “authors” in their autumnal years or, depending on the longevity of authors and their family members, to benefit their spouses, children, and other persons identified in the Copyright Act decades after the contracts were made. By that time — it is presumed– the true value of the author’s work has become known, which may not have been the case when the rights first were sold.
The termination provisions fall into two main categories: mechanisms for terminating pre-1978 grants in certain pre-1978 copyright-protected works and a mechanism for terminating post-1977 grants of rights in all copyright-protected works, no matter when they were created or copyrighted. There’s also a no-man’s-land of pre-1978 grants conveying rights in post-1977 works that merits some discussion.
Termination of Pre-1978 grants in Pre-1978 Works
In 1977, the maximum duration of copyright protection in the U.S. was 56 years – a first term of 28 years followed by a “renewal term” of equal length — for works that were “copyrighted” before the end of that year (that is, published or registered with the U.S. Copyright Office). In 1978 that maximum was increased to 75 years and in 1998 increased again to 95 years owing to extensions of the renewal term. A termination mechanism was created by Congress with each increase in protection time on the premise that authors and other successors in interest who are named in the law and referred to as “statutory successors” should be able to benefit from that extended term of protection.
Those two termination provisions, which are found at Sections 304(c) and 304(d) of the Copyright Act, have nothing to do with reversions of copyright ownership discussed in the 1990 Abend Supreme Court decision involving the motion picture “Rear Window.” That opinion interpreted an automatic reversion of rights under section 304(a) – a different mechanism altogether – in which reversion occurred in most instances only if the author survived beyond the first 28-year term of copyright. (That Abend-type of reversion is almost passé now because 2005 – the 28th year after 1977 — was the last in which survival of the author determined ownership.) The termination mechanisms under Sections 304(c) and (d) are not automatic; they require effort. Also, their utility does not depend entirely on an author’s lifespan.
Both Sections 304 (c) and (d) grant authors of works created prior to 1978, or their statutory successors in a categorical hierarchy (surviving spouse, children and grandchildren; or, further down the chain, the author’s executor, administrator, personal representative or trustee), two optional recapture opportunities respecting grants of rights made before 1978. They apply only to works that were in their first or renewal terms of copyright on January 1, 1978. A notice of intent to terminate a copyright grant pursuant to Section 304(c) must specify an effective date of termination after the 56th year of copyright and prior to the end of the 61st year of copyright. If that five-year window of opportunity is missed, a second opportunity is afforded under Section 304(d) but only for a small slice of older works copyrighted between January 1, 1923 and October 26, 1939. A notice of intent to terminate a copyright grant pursuant to Section 304(d) must specify an effective date of termination after the 75th year and prior to the end of the 80th year of copyright.
Not all grants are subject to termination, but many are. Those in which the author conveys copyrights or rights under copyright may be terminated by the author or by one or more statutory successors if the author is dead. Grants made by an author’s statutory successor also may be terminated if the signatory survives long enough to send a timely notice of termination. A major exception to the termination scheme concerns works made for hire: grants that convey rights in works made for hire are exempt and cannot be terminated at all.
Under each of Sections 304(c) and (d), written notice of an intent to terminate a grant must be given at least two years and no more than ten years prior to the effective date specified in the notice. The rights holder who receives that notice can continue to exploit the copyrighted work to the full extent the grant permitted until the effective date arrives. For example, if the grant conveyed publishing rights in a musical composition, the publisher could continue to give licenses to third parties for somewhere between two and ten years, depending on the effective date of termination specified in the termination notice.
If the grant included the right to create derivative works, termination does not affect the grantee’s right to continue to exploit derivative works made prior to the effective date of termination. However, the former holder of recaptured rights may not create new derivative works after the effective date of termination.
Under both Sections 304 (c) and (d), notices of termination are effective notwithstanding an “agreement to the contrary.” This means, for example, that the recipient of rights can’t ask the author in the first instance to waive her right of termination or those of her statutory successors. An attempt to create such an “agreement to the contrary” would be null and void.
Here’s an illustration of Section 304(c) at work: Assume a copyright date of March 1, 1956 (picking a date arbitrarily for a pre-1978 work). The five-year window opens March 1, 2012, which is 56 years later, and closes at the end of the 61st year on March 1, 2017. The effective date of termination in the notice of termination has to be specified somewhere within that five-year period. Arbitrarily, let’s say April 1, 2013. The time to serve notice of an intent to terminate is no more than ten years or less than two years prior to that arbitrarily selected effective date, which in this case would fall between April 1, 2003 and March 31, 2011.
Termination of Post-1977 Grants
Sections 304(c) and (d) only relate to termination of pre-1978 grants. As for post-1977 grants (respecting both pre-1978 post-1977 works), one must look to another section, 203(a), which opens its own five-year window for the first time in 2013. The timing of that debut follows from this: 2013 is the 35th year after 1978 when Section 203(a) became effective, and the effective date of terminating a grant under 203(a) can occur no sooner than the 35th anniversary of the grant.
One major difference between 203(a) and 304(c) and (d) is that while the opening of the five-year windows under the latter provisions are measured from the date of copyright, the opening of the five-year window applying to Section 203(a) generally is measured from the date of the grant — subject to this exception: if the grant covers the right of publication of the work, the effective date of termination must occur between the end of the 35th year and the end of the 40th year measured from the date of publication OR if earlier, between the end of the 40th year and the end of the 45th year measured from the date of the grant. (Congress did not make this simple.)
Although many of the same procedural details that relate to termination under 304(c) and 304(d) also apply to Section 203(a) – including an exemption for works made for hire — there are two major differences. First, Section 203(a) provides a right of termination for post-1978 grants made by the author and only the author. There is no provision for termination of a grant made by an author’s statutory successors. Second, as noted above, the five-year time windows are not determined by reference to thedate of copyright. Instead, the date of the grant is the reference point for calculating the relevant time windows, unless it’s thedate of publication.
Notices of termination under Section 203(a) can be sent now for effective termination dates in 2013 (when the first time window opens up respecting grants made in 1978) through 2020 (ten years from now).
Pitfalls and The No-Man’s Land
As much of this implies, effecting a termination is not simple. It takes some thought and often time, money and considerable effort.
To begin with, the termination right holder must comply with the U.S. Code of Federal Regulations in order to draft and serve a valid notice. Section 201.10(d) of the CFR requires a “reasonable investigation” to identify and locate “each grantee whose rights are being terminated, or the grantee’s successors in title.” Following decades of assignments and sub-licenses, not to mention corporate mergers, dissolutions and bankruptcies, this can take some effort, even with the benefit of a Copyright Office search.
There are other potential pitfalls, too. For example, under Sections 304(c) and (d) for a notice to terminate a grant executed by a person or persons other than the author, it must be signed by all of them who survive (or their agents). It may be difficult to locate all of them, or once they are located, to obtain a signature. (E.g., three signed the grant, two wish to terminate, and one refuses to cooperate.) Similarly, under all of these provisions, termination of a grant signed by an author since deceased must be effected by the author’s surviving statutory successors who collectively own more than one-half of that author’s termination interest. A span of time may pass before enough successors agree to attempt a recovery of rights, and by that time, the termination time window may be closed.
And what about a work made after 1977 for which rights were earlier conveyed to a grantee in a pre-1978 grant? This situation could arise, for example, when parties sign an agreement requiring creation and delivery of a work on a due date several years after the contract is signed. Sections 304 (c) and (d) apply only to pre-1978 grants that relate to pre-1978 works; Section 203(a) applies only to post-1978 grants. This hypothetical work created post-1977 pursuant to a pre-1978 grant lies in a no-man’s-land. The Copyright Office has acknowledged the problem and is working on a solution.
An Alternative Approach
The three termination provisions described above provide for recovery of copyright rights through a rigid procedure in which a formal termination notice is pivotal. After the notice is sent, the terminating party can negotiate only with the party who received it until the effective date of termination arrives, two to ten years later. Negotiations with third parties must wait until after the effective date, assuming no deal was made with the current rights holder in the interim. But just the threat of sending that notice can be as effective in achieving a new deal and in a much shorter time frame. The party with the right to terminate simply can offer to negotiate a new deal in lieu of pursuing the formal route. This approach only works for a renegotiation with the current rights holder and assumes that he or she finds value in retaining rights in the copyrighted work. From the standpoint of each party, making a new contract immediately would likely bring the same result as a formal termination followed by a contract.
But do new contracts that don’t involve formal termination notices survive the statutory rule that terminations are effective notwithstanding any “agreement to the contrary”? For example, would a statutory successor under Section 304(c) be barred from terminating a pre-1978 contract after substituting a new post-1978 deal with the same grantee without a formal termination? Recent court decisions answer that question in the affirmative provided there’s evidence of a knowing waiver of termination rights by the party who could have exercised those rights; secondly, there’s an explicit revocation of that pre-1978 grant in the new post-1978 contract; thirdly, the new deal is made during the time period in which a notice of termination could have been sent (that is, between two and ten years prior to a relevant termination time window); and lastly, there’s a substantially better deal for the statutory successor in the new agreement, which demonstrates that his or her bargaining leverage was used to good effect.
This article offers an overview of some complicated rules and does not attempt to include all factors and considerations that apply in all instances. It should not be construed as legal advice.