Authors – even the more successful composers, painters, writers, and other creatives – are familiar with the early career financial struggles that come with devoting oneself to creative work before that “big break.”
An author’s initial negotiations with publishers, producers and distributers often have a “David & Goliath” character, with the author concerned not to overplay his or her hand, or just truly lacking bargaining power.
Many early career artists don’t have lawyers, managers or representation; and publishers and producers are wary when the creator has no track record. The result can be contracts that turn out to be disappointing or seem unfair to the artist, especially in the case where a copyrighted work later proves to be a huge success for the publisher or distributer.
Even absent “exploitation” of the situation, an artist’s “deal points” can be kept low when authors, publishers and distributors all have difficulty anticipating the value or popularity of a new work. Recognition of these difficulties was one reason Congress included the author’s right to terminate a transfer of copyright in the Copyright Act of 1976.
The stated purpose of the termination right was (1) to safeguard authors and creators against transfers to entities that do little or nothing with the work, and (2) to address “the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited.”
When an author successfully terminates a grant, the un-contracted for domestic rights (i.e. U.S.) revert from the assignee publisher or distributor, as the case may be, to the author, often giving the author the opportunity to renegotiate the deal or even find a new licensee.
For works assigned by an author after 1978 (the year the 1976 Act took effect), termination can commence at the start of the 35th year after the date of transfer (during a five year window). Notice of termination must be served on the publisher or distributor (assignee) by the artist at least two years (but not more than 10 years) prior to the anticipated termination date.
Crunching the numbers, this means that 2011 was the last year termination notices were served for a termination to take place in 2013, the first year authors can effect termination (under the 1976 Act) based on proper earlier notice.
With the early instances of what are likely to be many exercises of the termination right, it is critical that both authors and publishers understand the statutory copyright assignment termination provision and how the courts will address the subject. Overall, the procedure for terminating a copyright grant under the 1976 Act is exacting and can be confusing.
The existence of the termination right and the potential consequences of an author’s reclaiming rights are just beginning to be encountered as exercise of the right becomes more prevalent. A recent district of California case, Scorpio Music S.A. v. Willis, has already addressed one question, which, on its face, looks fairly esoteric: where joint authors of a work transfer their respective copyright interests through separate agreements, can a single author alone terminate his separate grant of his copyright interest in the joint work, thereby recovering his unexploited rights (or renegotiating them)? Or must all or a majority of all the authors agree in order to terminate the grant? A California district court sided with the power of a single author in this case. The decision, while specific, gives some insight into the rationales courts may apply to address the odd and unexpected scenarios that exercise of this right may well create.
Last year Victor Willis, the original lead singer of the Village People, terminated grants he had made in 1977 – 1979 to music publishers of his copyright interests in 33 musical compositions, including in the hit songs, “YMCA”, “In the Navy” and “Go West.” Scorpio Music and Can’t Stop Productions, the two companies holding publishing rights to the Village People’s songs, went to court to stop Willis from regaining control over the rights in play. The publishers argued that Willis could not, by himself, exercise a termination right because the songs were created and licensed by several authors, not Willis alone. According to the publishers, the termination of the grant was improper unless a majority of the authors agreed. The district court rejected the publishers’ arguments and granted Willis’ motion to dismiss the publishers’ efforts to block him.
The District Court concluded that the language and purpose of the termination statute, coupled with copyright law governing the individual rights of joint authors, permit a single joint author who has separately transferred his copyright interest to terminate the grant that author made. This holding is limited to a very specific situation. The Court noted that if two or more joint authors entered into a joint grant of their copyright interests, a majority of those authors acting in concert would be essential to the proper exercise of the termination right. The Court explained that requiring a single co-author to get agreement from a majority of joint authors to terminate the co-author’s separate transfer would frustrate the purpose of termination rights; it would be harder for an author to terminate a grant than to transfer it.
This interpretation is consistent with the law governing joint authors. Under the Copyright Act, each co-owner of a joint work owns an equal undivided interest in that work and is allowed, in the absence of an agreement otherwise, to freely act alone to transfer his or her unencumbered rights to a third party. This can lead to chaos, so most often joint authors have copyright administration agreements or do not act alone.
Finally, the Court also addressed the economics of this termination. It refused to limit the single author’s termination to a portion of the intellectual property at stake equal to the percentage interest for which publishers agreed to pay the author in the first place (for Willis, a 12 -20% interest in various songs). The Court held that Willis would get back his copyright interests based on the rights he granted, regardless of the percentage compensation he received for the grant. The Court uses “YMCA” as an example. On the copyright registration Willis is one of three authors listed. The legal assumption is that 3 co-authors each hold 1/3 undivided interest in the copyright. Thus, according to the Court, the terminable rights of Willis would reflect that 1/3 interest, not the approximately 12% interest that he was paid.
No doubt the music industry was watching the Willis case closely as record companies are receiving more and more termination notices from musicians who had hit songs in the 1970’s. Artists such as Bob Dylan, Tom Waits and Tom Petty have conveyed termination notices. The Victor Willis opinion eliminates one argument licensees might have attempted in order to block certain terminations: i.e., arguing that record producers and sound engineers who are co-copyright holders should also be deemed joint holders of the particular termination right and (had Willis not prevailed) capable as majority holders of blocking a single joint author’s exercise of the right to terminate a grant of a copyright.
What comes next in this complicated area? Given the unknowns and the potential for errors and irregularities, it is not surprising that many copyright termination situations are mediated and also, that many artists simply fore go exercise of that right.
Lizbeth Hasse
Lizbeth Hasse is the founder of Creative Industry Law. Her practice encompasses intellectual property, media, entertainment and business counseling for corporate and individual clients. She is also a neutral expert in these areas, negotiating and resolving IP, business and media matters.
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