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Terminating Exclusive Licenses and Recapturing Copyrights

Gerald M. Levine, Co-author

Authors control the rights to their works until they agree to exclusive licenses for all or some of them. At that point the rights are controlled by the grantee, typically the publisher for the term of copyright. A typical provision in publishing contracts provides that “[t]he Author agrees to grant and assign to the Publisher during the term of copyright and all continuations, extensions, and renewals thereof the exclusive right to publish” the work in stipulated languages and territories. The word “assign” in the phrase “grant and assign” is synonymous with “transfer of copyright ownership” (Act, §101). The exclusive license typically granted in a publishing agreement is such a transfer. However, the phrase “all continuations, extensions, and renewals thereof ” does not override an author’s or her heirs’ statutory rights provided in §§203 (grant of right or publication after January 1, 1978) and 304 (grant of right or publication prior to January 1, 1978). The statutory provisions that permit an author or her heirs to terminate an exclusive license and recapture the copyright may come as a suprise. Recapturing copyright requires some complicated calculations to be effective.

Authors beginning their writing careers are not likely to have any bargaining power in negotiating the disposition of their copyrights. The Copyright Act compensates for this inequality between author and publisher (or any other licensee) by granting authors (or their statutory heirs) the right to terminate exclusive licenses; in effect, to pressure publishers to relicense works that continue to have significant market value.  

How does this statutory gift for terminating exclusive licenses and recapturing copyrights work? The statutory rules are complicated and the benefit conferred can be lost by failure to follow the rules.  For both pre- and post-1978 copyrights and depending upon the grant and publication date of the work authors and their heirs should be alert to the notice requirements for exercising the termination right.  2013 is a magic year; 1978 plus 35 years.  (It is either 35 or 40 years depending on the grant of rights and publication date.  I’ll work only with 35 years here). Sections 203 and 304(c) do not apply to authors who produced their works as “works made for hire.”

Section 203 of the statute provides

In the case of any work … the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination under the following conditions:

(1) In the case of a grant executed by one author, termination of the grant may be effected by that author or, if the author is dead, by the person or persons who, under clause (2) of this subsection, own and are entitled to exercise a total of more than one-half of that author’s termination interest….

(2) Where an author is dead, his or her termination interest is owned, and may be exercised … as follows:

(A) The widow or widower owns the author’s entire termination interest unless there are any surviving children or grandchildren of the author, in which case the widow or widower owns one-half of the author’s interest….

The Act goes on to delineate the interests of the surviving children.  The notice has to be signed by a majority of those entitled to receive the benefit under the Copyright Act.

This termination right provides authors or their statutory heirs the opportunity to capture some of the added value produced by the lengthened copyright term of life plus 70 years.  The typical contract provision such as quoted above would have the author believe that having granted an exclusive license when she had no idea of the economic value of her work she (or her husband and children) are stuck with it for the full term of copyright.  The quoted language in the grant of rights (“grant and assign”) does not constitute a waiver; the termination right is inalienable and overrides any contract provision to the contrary. The right cannot be taken away, although it can be exchanged for an improved financial arrangement negotiated at any time within the window for exercising the termination.

The termination provision is not appropriate for every author or every work.  It is directed to authors whose works have such value that the publisher with exclusive rights will bargain with the author for a new contract for the remaining years of copyright.

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