Deciphering termination rights in copyright cases

LEGAL ENTERTAINMENT

The Copyright Act of 1976 offers the author of a work a second chance at ownership by providing a right to terminate a transfer. This has created a small civil war within the entertainment industry between the companies and the authors. It's important for all parties to a transfer of copyright ownership to understand the termination rights, and which section of the Copyright Act applies. The act has two main sections that apply to the termination of grants: Section 304(c) applies to grants executed before Jan. 1, 1978, and Section 203 applies to grants executed on or after Jan. 1, 1978.

Under Section 304(c), the author of a work may terminate the grant 56 years from the date copyright was secured. The effective date of termination can be any day within a five-year window following the 56 years. To terminate, the author that executed the grant must serve a notice of termination on the grantee not less than two or more than 10 years from the date of termination. In the event of co-authors, each may terminate their personal interest in the grant. If the author is deceased, the surviving spouse would receive ownership rights unless there are surviving children, in which case, its split with 50 percent going to the spouse and 50 percent divided between all children equally. Finally, the notice must be recorded in the Copyright Office.

The Section 203 process is almost identical to Section 304(c) but with some important differences. Under Section 203, the five-year window opens 35 years from the date of grant rather than the date the copyright was secured. If the grant included publication of the work, the window opens either 35 years from the date of publication or 40 years from the date of the grant, whichever comes first. In addition, in the event of co-authors, termination may be effected by a majority of the authors. Otherwise, as with pre-1978 works, the author must send the appropriate notice not less than two or more than 10 years before termination, and the author must record the notice with the Copyright Office.

It's important to note that there are a few exceptions that apply to both termination sections of the act.

First, the work cannot be a work for hire. There are two types of work-for-hire: created by an employee within the scope of employment and that which is specially commissioned under written contract. This will be one of the biggest issues with termination as it's not always easy to decide. The screenwriter for "Friday the 13th," Victor Miller, is in the midst of litigation to regain the original rights to the screenplay from producers Horror, Inc. and Manny Company. Horror and Manny filed a lawsuit in August 2016 alleging that the screenplay is a work for hire and thus Miller does not have the right to recapture ownership. The producers argue that because Miller entered into a formal employment agreement and was ultimately directed and supervised in creation, Miller falls under a work for hire as an employee. Furthermore, they hope that even if Miller is found to be an independent contractor rather than an employee, the parties entered into a written agreement and the work therefore falls under the second type of work for hire. While it looks as if Horror and Manny commissioned Miller for the screenplay, Miller argues that the agreement does not specify that all works created will be works for hire. The court will have to determine whether or not Miller was an employee. If categorized as an employee, the screenplay would be owned by the producers as it was clearly created during a type of employment. If found to be an independent contractor, the court must decide if the agreement is sufficient to fulfill the writing requirement of the act. If the court decides the work was a work for hire, Miller would not have the right to terminate.

Second, the right to terminate cannot end a transfer by will. This means that if an artist transfers the copyright to anyone specifically through their will, the heirs will not inherit a right to terminate that transfer.

Third, termination rights only apply to copyright within the United States. This issue has been addressed with current cases surrounding the well known bands Duran Duran and the Beatles. Duran Duran sent their publisher Sony/ATV a termination notice for their catalogue. Sony/ATV in turn sued Duran Duran for breach of contract. The case was filed in the English High Court and in December of 2016, the court found that English contract law overruled U.S. copyright law. The court recently accepted the case for appeal, so the decision could be overturned.

Paul McCartney is also working to recapture his catalogue from Sony/ATV. McCartney filed a lawsuit in U.S. federal court early 2017 asserting that the case should be litigated under U.S. copyright law rather than English contract law. McCartney's attorneys argue that the termination notice only applies to ownership within the U.S. thus termination should be permitted. This issue seems to be ongoing at this point. These cases will be looked to as precedent to decide future terminations for international artists.

Lastly, termination rights do not apply to derivative works. The act defines derivative works as "a work based on or derived from one or more already existing works." Common derivative works include musical arrangements, motion picture versions of literary materials and art reproductions. So for example, taking Miller's situation into consideration, Miller can attempt to terminate the ownership of the screenplay he created but not the actual movies that were created based on the screenplay.

As demonstrated by ongoing litigation, termination rights are much more difficult to decipher than they seem. It's essential for all parties to understand termination rights, when they can be enforced, and by whom. If misunderstood, the parties risk jeopardizing their rightful property, whether the work belongs to the original author, or to the grantee as a work for hire. The right to terminate is inalienable and if not exercised during the five-year window, the grant will continue for the remainder of the copyright. On the flip side, grantees should address the issues at the outset of creation to minimize the chance of litigation in the future. Authors have a battle ahead of them, and from the looks of it, companies are not giving up easily, so it looks like it may be a long one.