Steinbeck Case Illustrates Termination Issues

August 25, 2006


Neil J. Rosini, Michael I. Rudell

U.S. copyright law gives authors and their heirs the right to terminate certain grants, but legal and business hurdles demand attention -- as illustrated by a case involving "The Grapes of Wrath" and other works by John Steinbeck

(Originally published in the Entertainment Law column in the New York Law Journal, August 25, 2006. ***Note: The United States Court of Appeals for the Second Circuit reversed the District Court decision discussed below in August, 2008, on the following basis: “Because a subsequent agreement entered into in 1994 terminated and superseded the 1938 agreement, sections 304(c) and (d) are inapplicable; the notice of termination is therefore invalid, and the 1994 agreement remains in effect.” Judgment was entered in favor of Penguin.)

A recent Southern District decision in Steinbeck v. McIntosh & Otis, Inc.,1 dealing with book and film rights in some of the most famous novels of a generation, was recently added to the short but slowly growing list of federal court opinions that interpret the termination provisions of U.S. copyright law. Although these provisions were added to the U.S. Copyright Act (the “Act”) in 1976 and augmented in 1998, the exercise of termination rights is still not an obvious choice for those with a termination interest. This is partly because the statutes are complicated and the meaning and application of their terms do not always reveal themselves on first reading. Also, some practical business issues must be hurdled before the procedures can be prudently put in play.

The termination provisions at issue in Steinbeck – found in §§ 304 (c) and (d) of the Act – are extraordinary not only because they override contracts but also because they can override the intent of contracting authors. As the Second Circuit has said of § 304(c), termination is “not necessarily a provision for the effectuation of the author’s ‘intent.’ If the author’s intent were the paramount concern of the statute, then no termination of any kind would be allowed, because most authors presumably ‘intend’ to make the assignment that is the very object of [termination]…”2 Rather, these sections are intended to benefit authors in their autumnal years, or their widows, widowers, children, and other statutory successors identified in the Act, after the true value of the author’s works has become clear. If the statute’s criteria are met, termination can be effected no matter what the author intended when he or she made the grant being terminated. These principles are illustrated in Steinbeck.

The Steinbeck Case

Steinbeck addresses the validity of notices of termination served by successors of John Steinbeck to recapture rights in some of his best-known works, including Of Mice and Men, and The Grapes of Wrath. One termination notice was sent to Penguin Group (USA) Inc., successor to the Viking Press, Inc., to recapture “sole, exclusive and open-ended publication rights” in a list of Steinbeck’s books; other notices were sent to motion picture companies.3 The notices were served under §§ 304(c) and (d) by Steinbeck’s son from his second marriage, Thomas; and by Blake, the daughter of another of Steinbeck’s sons by that marriage. At the time of service, Thomas and Blake collectively possessed the entirety of the statutory termination interest, though they had inherited no copyright interest under Steinbeck’s will. The Court noted that Blake and Thomas previously had been unable to exercise their termination rights because Steinbeck’s third wife and widow, Elaine (who had inherited copyrights in Steinbeck’s early works under his will), held 50% of the statutory termination interest until her death in 2003. She had been “in disagreement” about exercising the termination right with Steinbeck’s descendants so that the simple majority interest required by § 304 to exercise a termination right could not be mustered while she lived. She died in 2003 leaving all copyrights to her heirs from a previous marriage, all unrelated to Steinbeck. Blake and Thomas served their notices the following year.

The question raised in connection with the termination notice to Penguin was whether or not a “new agreement” with Penguin made by Elaine in 1994 invalidated the purported termination; the Court answered in the negative and confirmed the validity of the termination notice served on Penguin.

The opinion begins with a short history and some highlights of the termination provisions, which are summarized briefly here. Section 304 grants authors of works created prior to 1978, or their statutory heirs 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 for grants executed before 1978 in works in their first or renewal terms on January 1, 1978. The first opportunity, under § 304(c), was created in 1978 when the term of copyright was extended by 19 years and the author or his or her successors were given a chance to recapture rights in the extended term. Termination of grants under this section must have an effective date after the 56th year of copyright and prior to the end of the 61st year of copyright in the relevant copyrighted work, without reference to the date of the grant. The second opportunity, under § 304(d), was created in 1998 when the term of copyright was extended by another 20 years. This right may be exercised only if the termination right under § 304(c) expired by October 27, 1998 without being exercised. (Accordingly, § 304(d) only can apply to copyrights secured between January 1, 1923 and October 26, 1939.4) Termination of grants under § 304(d) must have an effective date after the 75th year and prior to the end of the 80th year of copyright in the relevant copyrighted work. Under each section, notice must be given at least two years and no more than ten years prior to the effective date of termination, and neither termination procedure affects the grantee’s right to continue to exploit derivative works made under authority of the terminated grant.

Under both sections, termination may be effected notwithstanding “any agreement to the contrary,” a term that the SteinbeckCourt was called upon to interpret in connection with the notice of termination by Thomas and Blake to Penguin. In 1994, Elaine had entered into a “new agreement for continued publication” which re-granted to Penguin the same rights it already had under pre-1978 agreements, but “at increased cost to Penguin.” Penguin now argued that the notice of termination was invalid because the “new agreement” was executed well after January 1, 1978 and therefore was not subject to termination.

The Court rejected this argument because the 1994 agreement, by its terms, explicitly acknowledged and “carrie[d] forward” Elaine’s right “to terminate grants made to [Penguin]…in accordance with § 304(c)…”. For that reason alone, the agreement could not have extinguished the termination right of Blake and Thomas, according to the Court’s holding. In dicta, the Court also declared that the 1994 Agreement could not be interpreted to strip Thomas and Blake – who in 1994 owned one-half of the termination interest – “of their inalienable termination rights in the pre-1978 grants” because an agreement to do so would be “void as an ‘agreement to the contrary.'” (Compare the recent Ninth Circuit decision in Milne v. Stephen Slesinger, Inc., not mentioned in Steinbeck, which interpreted the same phrase also in the context of a revocation and re-grant, but under different facts and taking note of legislative history.5 That court reached the opposite conclusion and rejected a granddaughter’s notice of termination under § 304(d) concerning rights in Winnie the Pooh. By way of disclosure, the authors’ firm is outside counsel to Slesinger.)

Practical Aspects of Termination

Effecting a termination is not simple. It takes some thought and often time, money and considerable effort as well.

For one thing, the termination right holder must comply with regulations found at 37 C.F.R. § 201.10 in order to draft and serve a valid notice. Section 201.10(d) 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, sub-licenses and copyright mortgages – not to mention corporate mergers, dissolutions and bankruptcies – this can take some effort, even with the benefit of a Copyright Office search.

An effective notice terminating a grant executed by a person or persons other than the author, must be signed by all of them (or their agents) who survive. It may be difficult to locate all of them, or once located, to obtain the necessary signatures from them (e.g., three signed the grant, two wish to terminate, and one refuses to cooperate). Similarly, termination of a grant signed by an author, now deceased, must be effected by the author’s surviving statutory successors under § 304(c)(2) who collectively own more than one-half of that author’s termination interest. As occurred in the Steinbeck case, a long period of time may pass before enough successors agree to join in a termination, and that consensus might not be reached before the termination time window closes.

Consider a hypothetical license of rights in a classic story that includes the right to publish the story, make new stories based on it, and exercise merchandising rights in the associated trademarks, all worldwide. The licensee’s right to make more copies of the copyrighted work itself, the right to make new stories, and the right to distribute them in the U.S., can be brought to a halt two years after the service of an effective termination notice. But there will be loose ends. The recapture of terminable rights under copyright will have no effect whatever on the rest of the license: the continued publication anywhere in the world of new stories based on the original (derivative works) created by the licensee prior to the effective date of termination; or the exercise of trademark rights anywhere in the world; or the exercise outside the U.S. of all rights granted in the original license. The termination procedures of §§ 304(c) and (d) have no effect on those rights.

In many instances, these issues could be addressed most efficiently without a formal statutory termination. Instead, a new deal with the current grantee that results in a revocation of the old agreement and the making of a new one with improved payment terms, would still benefit the termination right holder. In the renegotiation, both parties would have some leverage: the termination right holder’s being an ability to terminate certain rights under copyright and the grantee’s being the ability to let the termination right holder avoid an involved and perhaps costly formal procedure that would have no effect on trademark rights, foreign rights and those derivative works mentioned above. From the termination right holder’s standpoint, making a new contract would have much the same effect as formally terminating and then making a new contract with the same grantee.

This approach, however, would turn on the fact that the new agreement, coming well after January 1, 1978, falls outside the scope of termination under § 304; and the dicta in Steinbeck suggests that such an agreement might be an ignorable “agreement to the contrary” — especially if another statutory successor possessed a termination interest on the date of the new agreement, did not agree to it, and otherwise still would be entitled to exercise a termination right.

A termination might not make sense in other circumstances as well. Sometimes the property has little remaining value. Sometimes the current grantee is doing such a fine job exploiting the property that both parties realize there is no real alternative. Sometimes the current grantee doesn’t even have a viable competitor. In such cases, termination would be a meaningless exercise without foreseeable gain for the termination right holder.

In other instances, a statutory termination of rights makes good sense and ought to encounter no special obstacles. For twentieth century classic works of literature that are now eligible for termination and to this day generate considerable annual revenue, the termination provisions provide authors, their estates, successors, and their agents, an opportunity to renegotiate a new and more commercially advantageous arrangement.


Sections 304(c) and (d), which apply only to pre-1978 grants concerning copyrights going back as far as the 1920s, will have an effect on twentieth century classics of literature (and music and theater, too) for years to come. For grants made in 1978 and beyond, another termination provision in § 203(a) soon will come into play. It has much in common with the § 304 provisions but contains some important differences (e.g., its two time windows are measured from the date of the grant rather than the date of copyright and it only allows for termination of grants by authors). Effective dates of termination begin in 2013 and notices of termination under § 203(a) already can be sent affecting some grants. Notwithstanding the ambiguities in their language and complexities in their exercise, all these termination provisions are important to grantees and termination right holders alike.


1 __ F. Supp. 2d __, 2006 WL 1586547 (S.D.N.Y. 2006), decided June 8, 2006.

2 Larry Spier, Inc. v. Bourne Company, 953 F.2d 774, 778 (2d Cir. 1992).

3 The decision also addresses the validity of notices sent to Paramount Pictures; Rogers & Hammerstein and MGM; and to Twentieth Century Fox Film Corporation; concerning motion picture and other rights. The notices to Paramount were held to be valid because Paramount offered in its defense only a “bland conclusory assertion …that discovery [was] needed” which the court found inadequate. The other notices were found to be invalid because the recipients held none of the rights sought to be terminated once rights in the renewal copyright had vested automatically under § 304(a)(1)(C) in the author’s statutory heir, his widow Elaine.

4 This follows the Copyright Office’s “better reading” of the statute, 67 Fed. Reg. 69134, 69135 (November 15, 2002).

5 430 F.3d 1036 (9th Cir. 2005). In Milne, the author’s son (and granddaughter’s father) – who held 100% of the termination interest in 1983 and could have exercised it formally – executed a contract in that year which (inter alia) revoked pre-1978 grants and regranted rights to defendant Slesinger, which in the same instrument, re-granted specified rights to its own prior grantee, Disney, in return for continued payment of royalties by Disney. Unlike the facts in Steinbeck, the post-1978 agreement in Milne explicitly confirmed the commitment of the author’s son not to seek termination in light of the new agreement. Though the son could have served a formal notice of termination, the court found that he “elected instead to use his leverage to obtain a better deal” for a trust created under the author’s will, which benefited the granddaughter among others. The court also held that the statutory reference to “agreements to the contrary,” did not apply to an agreement to revoke a prior grant and make a new grant, which is not akin to examples given in the statute (namely, agreements to make a will and agreements to make a future grant). Moreover, relevant legislative history showed that “Congress specifically stated that it did not intend” for the statute to prevent parties from contracting “as an alternative to statutory termination, to revoke a prior grant by replacing it with a new one.” Accordingly, the court declared that the pre-1978 grants, having been revoked in 1983, could not be terminated, and the post-January 1, 1978 revocation and regrant was not subject to termination either, because it fell outside the scope of the statute.