Stayin' Alive: An Overview of Copyright Termination

Remember Heart, Donna Summer and KC and the Sunshine Band? The ubiquitous artists of the 1970s could soon champion a fundamental shift in ownership
of previously granted copyright interests, thus impacting the recording business and other content industries. The year 2013 will mark the first year that authors can take advantage of the Copyright Act's ' 203 termination provision, likely setting off a flood of termination notices by artists seeking to regain rights previously granted to record labels, book publishers, advertising agencies, and other content owners. This newly effective right, particularly when combined with the increasing number of works subject to termination under the Act, will soon bring to the legal forefront the complex and until now largely ignored termination provisions of the Copyright Act.

Overview

When it enacted the 1976 Copyright Act, Congress fashioned a new property right: the right of authors and their statutory successors to recapture ownership and control of copyrights by terminating past assignments or licenses following a statutorily specified duration of time. Congress's primary goal in enacting these provisions was to allow an author to reclaim financial benefits arising from the copyrighted work after the passage of time allowed the true value of the work to be determined, for which the author might not have been adequately compensated at the time of the original transfer. The termination provisions, found in ” 304(c) and 203 of the Copyright Act, are similar but not identical, and are distinguished by the date of the transfer or license.

As potentially significant as an author's termination rights are, they are subject to substantial limitations. For example, “works made for hire” are excepted from the termination provisions. Further, authors cannot terminate rights as to derivative works that a grantee may have created within the timeframe of the original
grant of copyright interests. Additionally, terminations are only effective as to U.S.-based rights. These limitations, and nuanced factual determinations, will factor prominently in copyright termination litigation.

Section 304(c)

Section 304(c), which has been the subject of all copyright termination litigation thus far, governs transfers and licenses executed before Jan. 1, 1978, and by its own terms covers only works that were in either their first or renewal term on Jan. 1, 1978. Furthermore, the section does not apply to works that were not yet published as of Jan. 1, 1978. Under ' 304(c), the duration of time for which the grant of rights remains in effect is measured from the date copyright is originally secured (most likely the date of the copyrighted work's publication), regardless of when the rights were actually transferred, so long as that transfer occurred prior to 1978. See 17 U.S.C. ' 304(c). This provision of the Copyright Act provides for a five-year window beginning at the end of the original 56-year copyright term in which an author may terminate his or her prior grant of rights. See Id. To illustrate, if an author transferred his rights in a book first published in 1955, so long as that transfer was executed prior to Jan. 1, 1978, the author (or his heirs) could terminate the grant of rights beginning in 2011 and ending in 2016.

Section 203

Section 203, which will take effect in 2013, covers transfers and licenses executed on or after Jan. 1, 1978, and potentially applies to three categories of works:

1. Works created on or after Jan. 1, 1978;
2. Works protected under the 1909 Act that were in the first or renewal term on Jan. 1, 1978, but where the transfer or license was executed on or after that date; and
3. Works that were subject to common law copyright on Jan. 1, 1978.

When ' 203 governs, the duration of the transfer is measured not from the time the work was created or published but rather from the date on which the grant of rights was executed. See 17 U.S.C. ' 203. Under ' 203(a), in most instances, an author may choose to terminate his prior grant of rights within a five-year window that commences 35 years after he transfers those rights. For example, if the author of a work transferred rights in 1978, his right to terminate this transfer would vest in 2013, a mere three years from now. The author would then be allowed to terminate this transfer anytime between 2013 and 2018.

Transfer of Rights Is Not Automatic

Termination of a transfer of rights is not automatic under the 1976 Copyright Act. Rather, the onus is on the author (or his heirs, as defined by the statute) to give formal notice to the grantee of the author's intent to terminate the transfer as early as 10 years and as late as two years prior to the date on which the author wishes to effect the termination. See, e.g., 17 U.S.C. ” 304(c)(4)(A), 203(a)(4). Absent explicit action on the part of the original author, the termination right disappears once the five-year termination window closes, leaving rights in the work permanently in the hands of the grantee until statutory expiration of the copyright term.

Book Authors: Milne and Steinbeck Strike Out, But Mewborn Prevails

Three recent ' 304(c) cases involving rights to the Winnie the Pooh character, the works of John Steinbeck, and rights to the Lassie character sharply illustrate the importance of following the strict requirements of the Copyright Act's termination provisions, and the perhaps unpredictable nature of a court's nuanced interpretation of the statutory language.

Each case involved judicial interpretation of ' 304(c)'s “agreement to the contrary” language, which was included in this provision to protect authors from predatory practices by those with far greater bargaining power. To prevent publishing
companies, record labels and similar entities from forcing authors to give up their future termination rights as a condition of signing a book deal, recording contract, or similar agreement transferring copyright interests, Congress explicitly included a provision stating, “[t]ermination of the grant may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.” 17 U.S.C. ' 304(c)(5). Section 203 contains identical language.

Despite this language, two courts have rejected efforts to terminate pre-1978 transfers where the heirs of authors had executed subsequent grants in favor of third parties after 1978. See Milne v. Stephen Slesinger, Inc., 430 F.3d 1036 (9th Cir. 2005); Penguin Group (USA) Inc. v. Steinbeck, 537 F.3d 193 (2d Cir. 2008). In these cases, the heirs of Winnie the Pooh creator A.A. Milne and noted writer John Steinbeck were deemed to have forfeited the right to terminate early and mid-20th century grants of rights due to further grants of these rights. These post-1978 grants were found by both courts to have superseded the original grants and were not deemed to be invalid “agreements to the contrary.”

In 2008, however, the Ninth Circuit addressed the issue with different results. The court in Classic Media, Inc. v. Mewborn, 532 F.3d 978 (9th Cir. 2008), found an agreement executed in 1978 to be an “agreement to the contrary” and distinguished Milne on its facts since, at the time of the re-negotiated agreement, Mewborn did not have the right to serve a notice of termination, whereas Milne had a present right, and thus a vested interest, to serve the notice of termination at the time the renegotiated agreement was executed.

Although only a few cases have so far interpreted the “agreement to the contrary” language, these interpretations illustrate both the importance of understanding the impact of signing subsequent agreements and the seemingly subjective determinations made by courts as to which agreements constitute “agreements to the contrary” and which do not.

'Superhero' Cases: Works Made for Hire?

Because “works made for hire” are entirely exempt from the Act's copyright termination provisions, this exception has become the defense of choice in several cases involving rights in famous superhero characters.

In 1999, for example, Joseph Simon, the author of Captain America Comics, served a termination notice on Marvel, seeking termination of Marvel's rights despite a 1969 settlement agreement whereby Simon had assigned his rights in the Captain America Comics and Captain America character to Marvel's predecessor-in-interest and had further acknowledged that the character and works were “works made for hire.” See Marvel Characters, Inc. v. Simon, 310 F.3d 280 (2d Cir. 2002). Despite Marvel's argument that the termination notice was ineffective because Simon had expressly acknowledged in the 1969 agreement that the works were “works made for hire,” the court found the retroactive characterization of the works as void and part of an “agreement to the contrary,” holding in favor of Simon. The “works made for hire” issue also figures prominently in a decades-long line of decisions involving rights in the Superman and Superboy characters. See, e.g., Siegel v. Time Warner Inc., 496 F. Supp. 2d 1111 (C.D. Cal. 2007); Siegel v. Warner Bros. Entm't Inc., 542 F. Supp. 2d 1098 (C.D. Cal. 2008); Siegel v. Warner Bros. Entm't, Inc., 658 F. Supp. 2d 1036 (C.D. Cal. 2009).

The ' 304(c) copyright termination provision, and attempts at neutralizing its effect through use of “works made for hire,” are again at the forefront in recently filed litigation involving the heirs of Jack Kirby, the legendary co-creator of numerous Marvel characters such as the Incredible Hulk, Spider-Man, and the X-Men. In late 2009, the Kirby heirs sent 45 notices of copyright termination to Marvel, Disney and other studios. Marvel responded by filing a declaratory judgment action against the Kirby heirs, asserting that the Kirby works were “works made for hire” and asking for invalidation of each termination notice. Shortly thereafter, the Kirby heirs filed a counter-suit seeking to establish their termination right in numerous Kirby creations, with some terminations vesting as early as 2014. This pending case is the broadest in scope to date and could have wide-ranging implications for countless works created in similar fashion. See Marvel Worldwide Inc. v. Kirby, Case No. 10-cv-00141 (S.D.N.Y. filed Jan. 8, 2010).

Conclusion

As the pace of copyright termination activity increases, copyright practitioners will need to understand the many nuances and technicalities associated with the two termination mechanisms under the Act, and appreciate the fundamentally fact-specific nature of proceedings brought under these provisions. The new wave of copyright termination actions is expected to increasingly affect the film, music, and book industries as more and more works reach the 56 year threshold for pre-1978 grants and as numerous post-1978 transfers of copyright interests become subject to ' 203's provisions beginning in 2013.

Remember Heart, Donna Summer and KC and the Sunshine Band? The ubiquitous artists of the 1970s could soon champion a fundamental shift in ownership
of previously granted copyright interests, thus impacting the recording business and other content industries. The year 2013 will mark the first year that authors can take advantage of the Copyright Act's ' 203 termination provision, likely setting off a flood of termination notices by artists seeking to regain rights previously granted to record labels, book publishers, advertising agencies, and other content owners. This newly effective right, particularly when combined with the increasing number of works subject to termination under the Act, will soon bring to the legal forefront the complex and until now largely ignored termination provisions of the Copyright Act.

Overview

When it enacted the 1976 Copyright Act, Congress fashioned a new property right: the right of authors and their statutory successors to recapture ownership and control of copyrights by terminating past assignments or licenses following a statutorily specified duration of time. Congress's primary goal in enacting these provisions was to allow an author to reclaim financial benefits arising from the copyrighted work after the passage of time allowed the true value of the work to be determined, for which the author might not have been adequately compensated at the time of the original transfer. The termination provisions, found in ” 304(c) and 203 of the Copyright Act, are similar but not identical, and are distinguished by the date of the transfer or license.

As potentially significant as an author's termination rights are, they are subject to substantial limitations. For example, “works made for hire” are excepted from the termination provisions. Further, authors cannot terminate rights as to derivative works that a grantee may have created within the timeframe of the original
grant of copyright interests. Additionally, terminations are only effective as to U.S.-based rights. These limitations, and nuanced factual determinations, will factor prominently in copyright termination litigation.

Section 304(c)

Section 304(c), which has been the subject of all copyright termination litigation thus far, governs transfers and licenses executed before Jan. 1, 1978, and by its own terms covers only works that were in either their first or renewal term on Jan. 1, 1978. Furthermore, the section does not apply to works that were not yet published as of Jan. 1, 1978. Under ' 304(c), the duration of time for which the grant of rights remains in effect is measured from the date copyright is originally secured (most likely the date of the copyrighted work's publication), regardless of when the rights were actually transferred, so long as that transfer occurred prior to 1978. See 17 U.S.C. ' 304(c). This provision of the Copyright Act provides for a five-year window beginning at the end of the original 56-year copyright term in which an author may terminate his or her prior grant of rights. See Id. To illustrate, if an author transferred his rights in a book first published in 1955, so long as that transfer was executed prior to Jan. 1, 1978, the author (or his heirs) could terminate the grant of rights beginning in 2011 and ending in 2016.

Section 203

Section 203, which will take effect in 2013, covers transfers and licenses executed on or after Jan. 1, 1978, and potentially applies to three categories of works:

1. Works created on or after Jan. 1, 1978;
2. Works protected under the 1909 Act that were in the first or renewal term on Jan. 1, 1978, but where the transfer or license was executed on or after that date; and
3. Works that were subject to common law copyright on Jan. 1, 1978.

When ' 203 governs, the duration of the transfer is measured not from the time the work was created or published but rather from the date on which the grant of rights was executed. See 17 U.S.C. ' 203. Under ' 203(a), in most instances, an author may choose to terminate his prior grant of rights within a five-year window that commences 35 years after he transfers those rights. For example, if the author of a work transferred rights in 1978, his right to terminate this transfer would vest in 2013, a mere three years from now. The author would then be allowed to terminate this transfer anytime between 2013 and 2018.

Transfer of Rights Is Not Automatic

Termination of a transfer of rights is not automatic under the 1976 Copyright Act. Rather, the onus is on the author (or his heirs, as defined by the statute) to give formal notice to the grantee of the author's intent to terminate the transfer as early as 10 years and as late as two years prior to the date on which the author wishes to effect the termination. See, e.g., 17 U.S.C. ” 304(c)(4)(A), 203(a)(4). Absent explicit action on the part of the original author, the termination right disappears once the five-year termination window closes, leaving rights in the work permanently in the hands of the grantee until statutory expiration of the copyright term.

Book Authors: Milne and Steinbeck Strike Out, But Mewborn Prevails

Three recent ' 304(c) cases involving rights to the Winnie the Pooh character, the works of John Steinbeck, and rights to the Lassie character sharply illustrate the importance of following the strict requirements of the Copyright Act's termination provisions, and the perhaps unpredictable nature of a court's nuanced interpretation of the statutory language.

Each case involved judicial interpretation of ' 304(c)'s “agreement to the contrary” language, which was included in this provision to protect authors from predatory practices by those with far greater bargaining power. To prevent publishing
companies, record labels and similar entities from forcing authors to give up their future termination rights as a condition of signing a book deal, recording contract, or similar agreement transferring copyright interests, Congress explicitly included a provision stating, “[t]ermination of the grant may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.” 17 U.S.C. ' 304(c)(5). Section 203 contains identical language.

Despite this language, two courts have rejected efforts to terminate pre-1978 transfers where the heirs of authors had executed subsequent grants in favor of third parties after 1978. See Milne v. Stephen Slesinger, Inc. , 430 F.3d 1036 (9th Cir. 2005); Penguin Group (USA) Inc. v. Steinbeck , 537 F.3d 193 (2d Cir. 2008). In these cases, the heirs of Winnie the Pooh creator A.A. Milne and noted writer John Steinbeck were deemed to have forfeited the right to terminate early and mid-20th century grants of rights due to further grants of these rights. These post-1978 grants were found by both courts to have superseded the original grants and were not deemed to be invalid “agreements to the contrary.”

In 2008, however, the Ninth Circuit addressed the issue with different results. The court in Classic Media, Inc. v. Mewborn , 532 F.3d 978 (9th Cir. 2008), found an agreement executed in 1978 to be an “agreement to the contrary” and distinguished Milne on its facts since, at the time of the re-negotiated agreement, Mewborn did not have the right to serve a notice of termination, whereas Milne had a present right, and thus a vested interest, to serve the notice of termination at the time the renegotiated agreement was executed.

Although only a few cases have so far interpreted the “agreement to the contrary” language, these interpretations illustrate both the importance of understanding the impact of signing subsequent agreements and the seemingly subjective determinations made by courts as to which agreements constitute “agreements to the contrary” and which do not.

'Superhero' Cases: Works Made for Hire?

Because “works made for hire” are entirely exempt from the Act's copyright termination provisions, this exception has become the defense of choice in several cases involving rights in famous superhero characters.

In 1999, for example, Joseph Simon, the author of Captain America Comics , served a termination notice on Marvel, seeking termination of Marvel's rights despite a 1969 settlement agreement whereby Simon had assigned his rights in the Captain America Comics and Captain America character to Marvel's predecessor-in-interest and had further acknowledged that the character and works were “works made for hire.” See Marvel Characters, Inc. v. Simon , 310 F.3d 280 (2d Cir. 2002). Despite Marvel's argument that the termination notice was ineffective because Simon had expressly acknowledged in the 1969 agreement that the works were “works made for hire,” the court found the retroactive characterization of the works as void and part of an “agreement to the contrary,” holding in favor of Simon. The “works made for hire” issue also figures prominently in a decades-long line of decisions involving rights in the Superman and Superboy characters. See , e.g. , Siegel v. Time Warner Inc. , 496 F. Supp. 2d 1111 (C.D. Cal. 2007); Siegel v. Warner Bros. Entm't Inc. , 542 F. Supp. 2d 1098 (C.D. Cal. 2008); Siegel v. Warner Bros. Entm't, Inc. , 658 F. Supp. 2d 1036 (C.D. Cal. 2009).

The ' 304(c) copyright termination provision, and attempts at neutralizing its effect through use of “works made for hire,” are again at the forefront in recently filed litigation involving the heirs of Jack Kirby, the legendary co-creator of numerous Marvel characters such as the Incredible Hulk, Spider-Man, and the X-Men. In late 2009, the Kirby heirs sent 45 notices of copyright termination to Marvel, Disney and other studios. Marvel responded by filing a declaratory judgment action against the Kirby heirs, asserting that the Kirby works were “works made for hire” and asking for invalidation of each termination notice. Shortly thereafter, the Kirby heirs filed a counter-suit seeking to establish their termination right in numerous Kirby creations, with some terminations vesting as early as 2014. This pending case is the broadest in scope to date and could have wide-ranging implications for countless works created in similar fashion. See Marvel Worldwide Inc. v. Kirby, Case No. 10-cv-00141 (S.D.N.Y. filed Jan. 8, 2010).

Conclusion

As the pace of copyright termination activity increases, copyright practitioners will need to understand the many nuances and technicalities associated with the two termination mechanisms under the Act, and appreciate the fundamentally fact-specific nature of proceedings brought under these provisions. The new wave of copyright termination actions is expected to increasingly affect the film, music, and book industries as more and more works reach the 56 year threshold for pre-1978 grants and as numerous post-1978 transfers of copyright interests become subject to ' 203's provisions beginning in 2013.