Copyright Transfer Terminations: What Happened?
Ryan B. McLeod is a J.D. candidate, 2021 at NYU School of Law.
Copyright
transfer termination, sometimes called copyright “recapture,” is a statutory
provision within the 1976 Copyright Act that allows authors an opportunity to
regain rights to their work after at least 35 years. In the years leading up to
2013, when the first post-1976 transfers became eligible for termination, legal
commentators began making dire predictions about the impact on industries that
rely on long-term copyright grants such as entertainment, suggesting
termination could be “another hard blow to the record industry business model …
lurking
just around the corner.” In the six years since, the impact
of termination has been far from clear. However, recent cases suggest that it
will at least increase the significance of work-made-for-hire status and
prolong battles over control of the estates of deceased artists.
The
policy argument behind copyright termination is best described as a “second
bite at the apple.” Congress has long recognized that authors have limited
leverage when negotiating grants or transfers early in their careers, and as a
result may be pressured to make unfavorable deals. As early as 1909, Congress
sought to solve this problem by ensuring that authors had an opportunity to
reclaim their rights and negotiate for a better deal. Initially, this mechanism
was provided by renewal, which would cut off the initial grantee’s interest and
allow the author to reassign their rights under the renewal term to whomever
they pleased. However, this restriction proved easy for grantees to contract
around once courts upheld
advance assignments of renewal terms. In 1976, however, Congress
rectified their failure with a new mechanism: a statutory right of the author
to terminate the transfer of any or all rights under copyright after a set
period of time (found in Section 203 of the Copyright Act).
Under
Section 203, the author’s termination right cannot be waived, and the author
cannot agree to a future grant of rights that will vest after termination, with
one exception: the author and the original grantee can agree to make a further
grant after notice of termination has been sent. Imposing such a strong
unilateral right may seem unfair to grantees, but the harshness of termination
is mitigated by several factors.
For
one thing, authors are required to jump through several hoops to exercise their
termination rights. Authors must serve notice of termination no more than ten
and no less than three years before the effective date of termination, which
must itself be within a five-year window beginning a set number of years from
either publication or execution of the grant. The effect is, of course, that
artists risk losing their opportunity to terminate if they do their math
incorrectly, although tools and publications from the Copyright
Office and authors’
advocacy organizations are increasingly available to help
with navigating the process. As long as the author is alive, they alone can
terminate a grant of rights using Section 203. After death, the termination
interest passes to their heirs in a manner and division specified by the Act.
Termination is also limited in application. Section 203 does not apply to works made for hire, meaning industries like film and television that already rely on work-for-hire to avoid severe holdup problems are largely unaffected. Termination also does not affect the grantee’s ability to exploit derivative works created under authority of the grant prior to termination. Lastly, only US rights revert, not any foreign rights granted by the author.
The above summary is merely to suggest that termination is a relatively straightforward process under Section 203 – a process that, in theory, could be exercised by any artist. While no empirical studies have yet analyzed the use of termination notices on an industry-wide scale, suits filed by grantees challenging these notices suggest that the bar to successful termination for many artists will at least be costly and protracted litigation.
Scorpio Music v. Willis, decided in 2012, was an early indicator of two avenues grantees would pursue to challenge termination. Scorpio Music v. Willis, 11 Civ. 1557 (BTM), 2012 WL 1598043 (S.D. Ca. May 7, 2012). Victor Willis was only one of three credited co-authors of the Village People songs in question, and his record label argued that he could not exercise his right of termination without his co-authors. They also argued that the songs in question were works-made-for-hire and thus exempt from termination. While the court decided in Willis’s favor on both arguments, the questions of who can terminate and whether the work in issue is, in fact, a work-made-for-hire continue to fuel litigation.
Courts since Willis have been willing to entertain the work-made-for-hire question so long as there is a genuine question of whether a work-for-hire relationship existed at the time the work was created. For instance, composer Ennio Morricone recaptured rights to six of his film scores based on the court’s finding that they could not be considered works-made-for-hire under Italian law governing his employment contract. Ennio Morricone Music, Inc. v. Bixio Music Grp., Ltd., 936 F.3d 69 (2d Cir. 2019). Deciding this question imposes a costly burden on both parties by requiring production of decades-old business records and examining equally dated industry practices. The greatest potential for industry disruption may lie in such business practices, as the producers of perennial slasher franchise “Friday the 13th” discovered when the original screenwriter attempted to recapture his rights. The district court’s holding in the case, now on appeal, suggests that grantees may bear the burden of proving that the work in question was a genuine work-made-for-hire, even when industry practice recognizes screenwriters as regular employees. Horror, Inc. v. Miller, 335 F. Supp. 3d 273 (D. Conn. 2018).
The issue of who can terminate has, at times, introduced additional complications into court battles over control of an author’s estate. After the author’s death, termination rights can be executed by holders of a simple majority of the termination interest, but this is easier said than done in many cases. The latest installment of the half-century legal battle over the literary estate of John Steinbeck illustrates how termination interests divided between family interests can disrupt the continued exploitation of an author’s work. Kaffaga v. Estate of Steinbeck, 938 F.3d 1006 (9th Cir. 2019). A chaotic, unsettled estate wielding termination rights is a threat most grantees want to avoid, but Section 203 gives authors and their partners no way to mitigate. Warner Bros. famously fought with the musician Prince over control of his music for years, until reaching a new agreement in the shadow of likely termination. However, Prince’s sudden death shortly thereafter—without apparent heirs—left Warner in many ways back where they started.
Termination continues to be a difficult right for most authors to exercise, in theory and in practice. It can be disruptive and costly for both authors and grantees, but for now it appears to be limited in utility to already-successful authors and their estates in need of additional leverage over producers and publishers.
