Window for Terminating a Copyright Transfer Agreement Opens in 2013



A little-known provision of the Copyright Act of 1976 could wreak further havoc on a publishing industry already struggling to deal with the transition from traditional print formats to digital content. Section 203 on the Copyright Act allows the original author(s) of creative works to terminate any transfer or licensing agreement 35 years after the license was signed and “reclaim” their copyrights. As this provision went into effect on Jan. 1, 1978, the “window” for terminations will open on Jan. 1, 2013. However, as this termination “window” is only open for a limited period, authors may lose their termination rights if they don’t take steps promptly.

It has long been the expectation among authors and publishers that if an author wants his or her work to be published and commercially distributed, the author will be expected to transfer or license the copyright in the work to the publisher. This made economic sense on several levels as the publisher was often in the best position to identify and exploit a market for a particular work. Also, the publisher has a substantial investment in its production and distribution infrastructure, which is protected by obtaining the copyright in the work in which it intends to invest.

In the best of all worlds, both sides benefit from these arrangements. The publisher generates revenue—and hopefully profit—from the sales of the work. In turn, the author gets royalty income from those efforts. Unfortunately, problems can arise in some cases. New or unknown authors often have less bargaining power when entering into licensing or transfer agreements and sign agreements for lower royalty rates. Should their work be an unexpected “hit,” they may not receive a fair or reasonable proportion of the revenue being generated. Another challenge may arise when the publisher determines that the work is no longer profitable and pulls it from distribution—the work goes out-of-print. However, as the publisher still controls the copyright in the work, the author may not be free to seek out an alternative publisher or pursue self-publishing.

These challenges were recognized when the Copyright Act was being redrafted in the mid-1970s. The intention of Section 203 was to give authors a “second bite of the apple,” either to renegotiate with their original publisher or seek out a new publisher, after a reasonable time had passed. Specifically, it provides that a license or transfer agreement, signed on or after Jan. 1, 1978, can be terminated during a period beginning 35 years from the date the agreement was executed and ending 5 years later. While copyright lawyers and other copyright specialists have been aware of the termination provisions for years, many authors are less familiar with their termination rights, and only recently—with the “window” for termination soon to open—has the issue started to gain attention.

Section 203 (available online as Title 17, United States Code, Section 203 at www.law.cornell.edu/uscode/text/17/203) has several provisions that require careful attention by authors seeking to reclaim their copyrights. Section 203 applies to any copyrighted work, so it applies to books, articles, music, dramatic works (including movies and movie rights agreements), photographs, artworks, etc. However, the law applies only to license or transfer agreements that are signed on or after Jan. 1, 1978. The law is not retroactive so does not apply to agreements signed before that date. It does not matter if the work was created before this date, only that the agreement was signed after this date. Therefore, a book written in 1975 but not transferred to the publisher until 1978 would be covered by the law.

The law’s 35- to 40-year “window” for terminating a license or transfer agreement also requires careful scrutiny. Works created under the 1976 law are now protected by copyright for decades (the life of the author plus 70 years, or 95 years for corporate authors). Consequently, the termination window is comparatively narrow when measured over the lifespan of the copyright. If the termination is not executed within the 5-year window, it could be lost until the copyright expires.

In addition, there is a requirement that the author give “advance notice in writing” that must be provided to the publisher “not less than 2 years or more than 10 years” before the proposed termination date. This is very critical as any author whose termination window were to open in 2013, but who has not yet given notice, finds that their 5-year window has now shrunk to 3 years.

For example, if Jane’s book was transferred on Feb. 1, 1978, her termination window is from Feb. 1, 2013 to Feb. 1, 2018. If she has not given notice yet, then the soonest she could terminate the agreement would be in 2 years. But, if Jane is unaware of her rights and only learns of them after February 2016, then her 2-year notice would extend beyond the February 2018 cut-off date and she could not terminate her rights.

But what if Jane is not the author, but the deceased author’s daughter? Section 203 deals with deceased authors, but it is complicated and is in part dictated by estate law principles. Did the author have a spouse who is still alive? Does Jane have siblings? If any of Jane’s siblings are deceased, did they have children (grandchildren of the original author)? All of these parties appear to have some role in and responsibility for acting to terminate the rights. And the critical questions are: Does Jane (or the others) even know that she has this right? Does she know who the publisher is? Does that publisher even exist anymore?

Just as the publishing industry is dealing with the challenges caused by the emergence of ebooks, alternatives to traditional booksellers, increased options for self-publishing, copyright piracy, and extensive online infringement, Section 203 comes into effect at a bad time. Back catalogs are an important part of a company’s assets, one that can be more easily exploited in a digital age. Section 203 puts those resources at risk. But only if the author knows about it.