More Powerful Than A Locomotive – Terminating Copyright Grants

In 1938, two young, aspiring comic book creators from Ohio, Jerry Siegel and Joe Schuster, sold the rights to their “Superman” comics to DC Comics for $130.00. Hundreds of millions of dollars later — after countless Superman books, television shows, motion pictures and merchandise of every conceivable type — this story vividly illustrates how the value of the rights to copyrighted works can explode over time.

The U.S. Copyright Act of 1976 (the “Copyright Act”) allows authors, musicians and artists (and their heirs) to recapture the original copyrights in their creations by terminating a prior grant of the copyright. For the most part, these termination rights cannot be waived by contract, regardless of the terms of the assignment or license, provided that the artist and their heirs meet the complex statutory termination requirements. Counsel involved in the creation, acquisition or exploitation of copyrighted works should be aware of the statutory right to terminate copyright grants.

Recently, Siegel’s heirs prevailed (at least in part) in a battle to recover the Superman copyrights from DC Comics and its owner, Warner Brothers, under the termination provisions of the Copyright Act. In 2008, the U.S. District Court for the Central District of California ruled on summary judgment that the Siegels had successfully recaptured (as of 1999, the date of their termination notice) Siegel’s copyright in certain aspects of the first Superman comic sold to DC Comics in 1938. Siegel v. Warner Bros. Entertainment Inc., 542 F.Supp.2d 1098 (C.D. Cal. 2008).

The procedures for terminating copyright grants are fairly technical. Two provisions in the Copyright Act govern the right to terminate copyright transfers. These rules are codified at Sections 203 and 304 of the Copyright Act. The date that the grant was made determines which provision applies. Grants made after January 1, 1978 are governed by Section 203. Grants made before January 1, 1978 are governed by Section 304.

Before looking at the specific procedures under each of these regimes, it is important to note several key exceptions to the right to terminate a grant.

First, the grant must have been an inter vivos transfer by the author. In other words, the author had to have made the transfer during his or her lifetime. The statutes referred to here generally cannot be used to invalidate a transfer of copyrights under an author’s will.

Second, the termination right does not apply to a “work made for hire” under Section 201(b) of the Copyright Act. A “work made for hire” includes a work prepared by an employee within the scope of his or her employment, or a commissioned work coming within certain specified categories under the Act, where the parties agreed in writing that it was a work for hire.

Third, the right to terminate a copyright grant does not apply to an authorized derivative work created after the grant by the grantee, but prior to termination of the grant. Thus, if an assignment of a copyright in a book included the right to create a film based on the book, the assignee may continue to reproduce and distribute copies of any such film created prior to the exercise of the termination right after the termination, but may not create a television series based on the book after termination of the grant.

Assuming the copyright grant does not fall within one of the exceptions, the initial issue is when the termination right may be exercised. For grants made in or after 1978, Section 203 provides that the author or the author’s heirs may seek to terminate the grant 35 years after the grant was made; or if the grant covers the right of publication of the work, then the grant may be terminated 35 years from the date the work was published. Thus, works transferred or published in 1978 will be eligible for termination in 2013 — in a little over three years from now.

The right to terminate under Section 203 is subject to compliance with a number of specific procedural requirements and time limitations. The right to terminate may only be exercised during a five-year window beginning 35 years after the grant was made. That means the author or the heirs have only five years from the time the grant is eligible for termination to effectuate the termination. Further, the authors must give written notice to the assignee or licensee not less than two or more than ten years from the intended termination date. Thus, for post-1978 copyrights, the earliest date of notice of termination is 25 years after the grant was made (or the date the work was published).