Reversion of Rights Under the Copyright Statute: When and How Authors, Composers and Recording Artists Can Get Their Intellectual Property Back from Publishers and Record Companies
Section 203 of the U.S. Copyright Act permits “authors” — a term which includes writers, composers and recording artists — who signed away rights to their works on or after January 1, 1978, to terminate their contracts and, to some extent, recapture those rights. This comes as good news to many authors but mostly bad news to book and music publishers and record companies who will either lose valuable back catalog or have to pay higher royalties in order to retain it.
The “Window” of Termination.
Termination of contracts which cover the right of “publication” (including release of records) must be made within a five-year window beginning either thirty-five years from the date of publication, or forty years from the date of execution of the contract (grant of rights), whichever term ends earlier. Thus, for someone who signed a deal in 1978 for a book published or a record released in the same year, that window opens on January 1, 2013. On the other hand, for someone who signed a deal in 1978 for a work released in 1980, the window opens on January 1, 2015.
Limitations on Termination.
The right of termination does not apply to “work made for hire.” (For an explanation of “work made for hire” doctrine under the Copyright Act, and in particular as it relates to sound recordings, see, “Statement of Marybeth Peters, The Register of Copyrights, before the Subcommittee on Courts and Intellectual Property Committee on the Judiciary, United States House of Representatives, 106th Congress, 2nd Session, May 25, 2000, available [http://www.copyright.gov/docs/regstat52500.html] here. Nor does the right of termination apply to derivative works authorized and created prior to termination. So while an author of a book of fiction may terminate his/her contract with a publisher, s/he cannot also terminate an already executed contract between the publisher and a film production company for a motion picture based on the book. (Terminations in the case of sound recordings which contain so-called “samples” will be addressed in a different posting.)
Time for Sending Notice and Filing Notices of Termination.
Before termination can occur, the author of the work (or his or her heirs) must (1) provide written notice to the company or person whose rights are being terminated, and (2) file the termination notice in the Copyright Office prior to the date of intended termination. The notice of termination must be sent to the party who is being terminated not less than two nor more than 10 years prior to the intended date of termination. (See, 17 U.S.C. § 203(a)(4)(A).) If the window of termination opens on January 1, 2013, but notice of termination is sent only on January 1, 2012, then termination cannot take effect until January 1, 2014. Authors should take care to file their notices in the Copyright Office promptly, as notices submitted for filing after the closure of the five-year window will be rejected. (See, 37 C.F.R. § 201.10(f)(4).) Instructions for filing a notice of termination with the Copyright Office are provided in [http://www.copyright.gov/circs/circ12.pdf] Circular 12, “Recordation of Transfers and Other Documents, available from the Copyright Office website.)
Although termination is required, the filing does not necessarily make the termination valid. Whether termination is valid depends on whether all the requirements (the contents of the notice, the methods of service and the procedure for “recordation” of filing) are satisfied. Needless to say, the termination procedures are full of pitfalls for the lay person and lawyers alike. And the right to terminate is a “use it or lose it” one. A failure to do it just right may invalidate the termination and prevent the recapture of rights.
Termination by Majority
Section 203 also provides that termination is effective only if it is made by the holders of more than 50% of the copyright in the work. This means that where there is more than one author or where one or more of the authors is deceased and the rights have passed to the author’s heirs, there may be a lot of parties who need to sign the termination notice in order to make it effective.
Moreover, when an author dies, it is the Copyright Act, not the author’s last will and testament, which determines who gets the copyright in the creator’s work. In other words, the author’s will could grant the copyrights in his work to a third party, but the authors widow and children can still exercise their termination rights, thereby wresting control of the work away from the third party. Under the Copyright Act, the author’s interest passes to a widow or widower, unless there are children or grandchildren, in which case the widow/er gets half. The other half is then divided equally among the author’s children. If any is deceased, the deceased child’s living children (i.e., the grandchildren of the author) take their parent’s interest divided in equal shares.
Works created by multiple parties may also present difficulties. The author of a sound recording, for purposes of the Copyright Act, is the performers who play on the recording and the record producer who processes the sounds and fixes them in the final recording. In the case of a musical group, if five members signed a single contract (as is usually the case) at least three out of those five would have to agree in order for the termination to be effective. The producer, however, is likely to have signed a different contract — the Producer Agreement — so s/he will have an independent right to terminate his/her grant of rights. If the producer terminates but a majority of the group does not, the group’s record company will have only a non-exclusive right to exploit the works going forward and the producer will be free to grant non-exclusive rights to another record company or even to release it him/herself, so long as the members of the group all receive their respective proportions of the earnings. Theoretically, multiple releases of a single sound recording could end up competing with each other in the marketplace.
A note for the music industry: Most record company contracts contain “work made for hire” language which purport to give the record company copyright ownership of the sound recordings produced under the agreement. However, unless they are made actual employees of the record company, sound recordings do not qualify as work made for hire. Many knowledgeable music industry lawyers believe that this language can be safely ignored as applied to recording artists. “Work made for hire” provisions may, however, be effective for sidepersons who are paid a lump sum for their contributions to a sound recording. In any case, as non-royalty participants, sidepersons are unlikely to be found to be “authors” of the sound recording for purposes of copyright ownership.
Contents of the Notice of Termination.
The notice of termination must contain the following:
(i) a clear statement that termination is being made pursuant to Section 203 of the Copyright Act;
(ii) the name(s) and addresses of each assignee (or successor in interest) whose rights are being terminated. (The termination notice must be served by personal service or first-class mail to the last known address of each party whose interests are being terminated. The terminating party must also use reasonable efforts to determine who has ownership rights subject to termination);
(iii) the date of execution of the original grant;
(iv) if the grant included the right of publication, the date of publication;
(iv) the title of each work to which the notice applies;
(v) the names of the author(s) or their heirs to whom the author’s rights have passed;
(vi) the original copyright registration number, if available;
(vii) a brief statement explaining what grant is being terminated;
(viii) date on which termination is to take effect; and
(ix) the signatures of the parties holding a majority interest in the copyright.
(See, 17 U.S.C. § 203(a)(4); 37 C.F.R. § 201.10(b)(2) and (3); and 37 C.F.R. § 201.10(d).)
A Gap in the Termination Provisions
On June 6, 2011, the Copyright Office announced an amendment to its termination regulations which are intended to address a perhaps unintended gap left by Congress for works which were the subject of a grant prior to January 1, 1978, but which didn’t come into existence until after January 1, 1978. This covers a substantial number of works delivered under multi-record or multi-book deals and long-term publishing contracts, many of which can extend for longer than a decade. The new regulation provides:
In any case where an author agreed, prior to January 1, 1978, to a grant of a transfer or license of rights in a work that was not created until on or after January 1, 1978, a notice of termination of a grant under section 203 of title 17 may be recorded if it recites, as the date of execution, the date on which the work was created.
(See, 37 C.F.R. § 201.10(f)(5).) See, “[http://www.copyright.gov/fedreg/2011/76fr32316.pdf] Gap in Termination Provisions.”)
The theory behind this amendment makes plenty of sense. First, the termination provisions under Section 304 of the Copyright Act (which will be the subject of a separate posting) apply only to works created prior to January 1, 1978. The way it stands now, neither Section 304 nor section 203 (the one we’re talking about here) allow for termination of works created after January 1, 1978 under a contract made before that date. Second, a contract which grants rights in a work to be created sometime in the future cannot be consummated until something copyrightable comes into existence.
But note that the new regulation covers filing, not sending notice. Unfortunately, this is because the Copyright Office doesn’t actually have the power to declare that authors whose works fall into the gap can actually terminate under Section 203. Rather, the new regulation merely provides a means by which authors of such works (i.e., a contract executed prior to January 1, 1978, but works created after) may go through the motions of termination in the hope that their right will eventually be recognized by Congress or vindicated in the courts. No one knows when or whether this will happen.
Lawyers as well as lay persons are advised to read carefully the termination provisions of Section 203 of the Copyright Act and the applicable regulations. While authors are not required to terminate their agreements, they may find that termination opens new commercial opportunities for their works or makes possible a favorable renegotiation of the commercial terms of their prior agreements. For now, those authors who works fall into the gap should go through the process of notification and filing just in case their rights are subsequently recognized.
[Thanks to Alistair Paton for pointing out a previous error in the window for termination.]