Practice Pointers: Statutory Termination of Copyright Grants
Imagine you represent an exclusive licensee of a copyrighted work, such as a book publisher. The client's license provides, as per the usual boilerplate, that the licensee can exploit the licensed work "for the full term of copyright in the work, including all renewals and extensions thereof." The copyright in the work, initially issued in 1966, will not expire until 2061. Does this mean your client's rights are safely locked in until that date? No. Under the Copyright Act, there are two different statutory termination provisions, set forth in sections 203 and 304 of the 1976 Copyright Act, under which your client could lose its right to exploit the work prior to the end of the copyright term.
Under Â§203, any grant of rights in a copyrighted work "executed by the author on or after January 1, 1978" may be terminated at any time during a five-year window beginning 35 years after the date of execution of the grant. Significantly, the termination right under Â§ 203 may not be waived by prior agreement, as the statute provides that termination may be effected "notwithstanding any agreement to the contrary, including an agreement to make a will or a future grant."
Section 203 does have its limits, however. It does not apply to works made for hire, since those works are deemed owned by the employer ab initio rather than by means of a grant from the individual creator. Also, it does not divest the licensee of foreign rights in the work, but only pertains to rights that "arise under this title [17 U.S.C.]" Moreover, only grants executed by the author may be terminated under the section. Further, Â§203 does not prohibit the continued exploitation of derivative works prepared by the licensee "under authority of the grant before its termination." Accordingly, your client the publisher would not be able to continue distributing the licensed book in its original form after termination, but could continue to distribute lawfully produced derivative works, such as sequels or illustrated editions.
Section 304 provides for another form of termination, which takes effect at the end of the 56th year of the copyright term. Under Â§304, any grant executed before 1978, by the author or any of his/her statutorily designated heirs, may be terminated in a five-year window between the 56th and 61st year, allowing the author or heirs to recapture the copyright in the work for the remainder of the term. For works still under copyright but beyond their 61st year in 1998, the Â§304 right is available in the five-year period between the 75th and 81st years of the copyright term.
Like Â§203, Â§304 does not apply to works made for hire and does not allow for the termination of foreign rights. Like Â§203, Section 304 also permits the continued exploitation of derivative works made prior to termination, but only when the terminated grant was made by a party other than the author (Â§304(c)(6)(A)). Under Â§203, grants made by persons other than the author are not terminable at all, but all pre-termination derivative works may continue to be exploited.
Under both Â§203 and Â§304, only certain statutorily specified persons can exercise the termination rights, and they must follow specific procedures as to the timing and content of the notice of termination. These formalities are easily complied with by motivated authors and their estates, however, provided that they are made aware of their termination rights.
In sum, if your client obtained its rights under a grant that was (a) made prior to 1978, (b) by the author or a statutorily designated successor, Â§304 makes those rights subject to termination, in the U.S., as of the 56th year of the copyright term in the work, or beginning in the 75th year, if the work was already past its 61st year in 1998. If your client's rights derive from a grant (a) made in 1978 or later, (b) by the author, those rights are vulnerable to termination under Â§203 starting in the 35th year after the execution of the grant.
Â© 2000 Cowan, Liebowitz & Latman, P.C.