What Is It?
Section 203 of the 1976 Copyright Act (effective in 1978) permits an author or creator of a copyrighted work (grantor) to “opt out” of a grant of a transfer of rights after 35 years, regardless of any terms in the contract to the contrary. A “grant” means either an outright assignment of copyright, or a license to exploit the copyright. So, for example, if an author when she is an unknown in 1985 grants a publisher a broad exclusive license to her novel for the duration of the novel’s copyright (which would be the life of the author plus 70 years), she may nevertheless exercise her Section 203 rights in 2020 to regain control of the copyright and terminate the publisher’s rights.
These termination rights apply to a broad range of copyrighted materials, including, for example, all types of written works, music, and visual art in all media. (Grants made before 1978 are subject to different termination rules, with different and more complex rules for calculating the termination window, under Section 304(c), but the timing is similar.)
Why?
These unique rights to terminate a contract, regardless of what the contract says, were created by Congress in recognition of the common disparity in bargaining strength of grantors who, often to survive, are prone to sign any contract put in front of them. It also addresses the circumstances of a work being controlled by a publisher decades after the author does become famous or highly marketable. By the same token, it provides the grantee or publisher a very substantial 35 years to monetize the success, fairly rewarding the publisher for taking the initial risk of promoting the author.
To give the law teeth, Congress also saw fit to provide that a grantee or publisher cannot have the grantor waive her rights.
When?
The right may be terminated any time in a five-year window beginning 35 years after the grant was made. If the grant included the right to publish, the five-year window begins 35 years after the date of publication or 40 years after the grant was made, whichever is earlier. If the termination right is not exercised within the five-year window, the grantor’s rights to terminate are lost.
Who?
The author or creator, while alive, of course may exercise the termination right. If the grantor is deceased, the law provides a prioritized schedule of rightsholders much like the various state laws governing distribution of property when someone dies without a will (intestate succession), e.g., if no children, then under federal copyright law the surviving spouse inherits the entire interest; if there are children, then half to the children and half to the surviving spouse, etc.
What Exceptions Apply?
One exception of a work not subject to termination is a derivative work. So, for example, if the publisher publishes the book but also licenses a third party to produce a movie (a “derivative work” under copyright law), the termination does not affect the movie. However, once the termination has been effected, the third party may not create further derivative works, e.g., a sequel or next-in-series of the movie.
Another notable exception is a work for hire (e.g., created by an employee of a company in the course of her employment duties, or by an independent contractor under certain limited circumstances). If it it is a work for hire, then the author, as recognized by copyright law, is the employer, not the employee.
What Advice for Grantors and Grantees?
For grantors it is important to understand when the 35-year window begins, and to timely give notice. The information to be included in and the procedures for giving an effective termination are detailed and critical for the termination to be effective. Retaining legal counsel is highly recommended.
For their part, grantees should evaluate whether a work may have been a work for hire, even if the contract, for example, recited freelance or independent contractor status. Further, there sometimes are intermediate contracts following the initial grant that may amount to a renewed grant that starts the 35-year clock all over again. Legal counsel can assist in evaluating those and similar issues.
Contributed by Larry Townsend