Paul B. Ungar, Esq.

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In The Year 2013....

 

By Paul B. Ungar, Esq. © 2010

 

           

          It’s really, really hard nowadays to get away from the ubiquitous Doom-and-Gloom Alarmists who have lately latched onto the year 2012 as “The Year That It All Comes To An End”, for all sorts of reasons: biblical, climatological, spiritual and/or otherwise.  I’m not really sure what to make of it all. Some of it seems very silly, some of it not so. Maybe there’s something to it. Maybe not (remember the Millennium Bug?). Who knows? I guess we’ll find out one way or another -  soon enough.

 

          But here’s something I know for a fact:  an Intellectual Property tsunami - the likes of which has never, ever been seen before -  has already started to Rock ‘N Roll – and it is without a doubt going  to swell into a gigantic “Perfect Storm”  In The Year 2013 and thereafter  – which will fundamentally change just about everything we’ve all learned to Know And Love – or Absolutely Hate – about The Biz -  all thanks to Sections 203 and 304 of The United States Copyright Act of 1976 (17 U.S.C. §101 et. seq.). 

 

          Assuming I’ve captured your attention thus far:  please indulge me and hold the following thought as you read below:  Section 304 is in effect right now   and -  Dum-da-Dum-Dum:   Section 203 goes into effect:  In The Year  2013.

 

          Whether you own a record label or a music publishing company, or whether you are a songwriter or a recording artist, Sections 203 and 304 could most definitely change your life! So unless you subscribe to the ancient Latin dictum:  Ignorantia Aequus Gaudium*,   I respectfully suggest that you pay close attention.

 

          When Congress passed the Copyright Act of 1976, there was a Great Debate. Many in the artistic community at that time cited numerous examples where creative people – particularly at the beginning of their careers – signed away intellectual property rights to their work only to enrich content owners who then often failed to reward these artists commensurately for their contributions which resulted in the success of the content owners.  So, despite heavy lobbying by the content owners, when the Copyright Act went into effect in 1978 a completely new intellectual property right was created:  the right – albeit under very proscribed conditions, thanks to the  content owners’ lobbyists - of “authors” (which is broadly defined and includes not only traditional “authors” of books, but also songwriters, recording artists, fine artists and other creators of intellectual property) to terminate certain prior grants - or prior transfers - of the authors’ copyrights to the content owners. Under Sections 203 and 304 “authors”, as well as their heirs and successors-in-interest, may re-claim total ownership and control of their copyrights – essentially just by writing a letter to that effect – again, under strict guidelines – and sending it to the holder of the grant, and filing a copy  of it with the U.S. Copyright Office.

 

          So, let’s say you own a music publishing company which has agreements with songwriters assigning the copyrights to their songs to your company “for the life of copyright”  (which, under the Sonny Bono Copyright Term Extension Act of 1998, now lasts - for most newly created works [other than works-for hire] - for a period equal to the life of the “author” plus 70 years), and let’s say you’re thinking about selling your catalogue a few years down the road so you can start planning to buy that nice little cozy private island in the Caribbean you’ve had your eye on for a while, and thusly you and your accountants have been playing around with potential Net Publisher Share (or “NPS”) valuations of your catalogue and future revenue projections, which are often derived in substantial part from historical earnings. Well, even though you think that your company’s past earnings are relevant to its present and future value, and even though you think that you’ve got long-term rights to license or sell – because your songwriter agreements “say so”:  “The Party of the First Part Hereby Assigns, Grants, Transfers, Sells and Hypothecates to The Party of the Second Part, For The Life of Copyright, Etc., Etc..” --

 

          Well, Think Again, My Brother!

 

          Same thing goes for a songwriter who – because she was broke “Back In The Day”  – literally sold her one-and-only hit song to someone for a  $500 buy-out – because she needed the cash that day to fix her car that day to make her gig that night (Yes, Virginia, people actually did stuff like that -  I’ve actually seen Zee Papers). For years, she’s thought “Oh, well, That’s the End Of That”, because her songwriter contract “says so” --

 

          Well, Think Again, My Sister!

         

          As I alluded to above – there is a fairly complex set of rules regarding which transfers of copyright are terminable, by whom, and when such transfers may be terminated. But it can be done! Here’s a brief (Really!) summary:

 

          Section 304 covers works that were in either their initial or renewal copyright term on January 1, 1978 (the effective date of the 1976 Copyright Act).  Take a minute and let’s reminisce about all those songwriters who wrote all the  “classic hits” from, let’s say,  the 1960s and early-to-mid 1970s and who transferred their copyrights to music publishing companies - and then think about all those music publishing companies who’ve made literally millions of dollars from their song catalogues over the years. Please hold that thought.

 

          Section 203 covers transfers of copyrights made on or after January 1, 1978. Take another minute and think about all the recording artists – starting from the late 1970s - who assigned the copyrights to their master recordings to record companies - and think about the basis of the record companies’ wealth: their record catalogues. Hold that thought, as well.

         

Termination of Pre-1978 Copyright Grants under Section 304

 

          If a work was copyrighted prior to 1978 and was assigned before 1978, then Section 304 basically provides two separate “windows” for termination:

 

          The first “window” is a 5 year period beginning on the 56th anniversary of the earlier of either: (a) the first registration of copyright; or (b) the first date the work was published with a copyright notice. This 5 year period extends through the last day of the 60th year. The “author” – or his or her heirs or successors-in-interest -  simply designates a date within that timeframe to terminate the prior transfer, and he or she must notify the holder of the grant no more than 10 years, and no less than 2 years, prior to the selected termination date. In an effort to be Truly Interactive: Pick your favorite “Oldie But Goodie”, look up the relevant dates, and Do The Math**.

 

          There is a second “window” within which to terminate copyright grants for pre-1978 copyrighted material. For an older work that was in its renewal term (a reminder: under the old pre-1978 Copyright Act of 1909, works could be protected for an initial term of 28 years and then renewed for an additional renewal term of 28 years), if the work was in its renewal term as of October 27, 1998  (the effective date of the Sonny Bono Copyright Term Extension Act),  but the original termination “window” described above had already expired, Section 304 provides a second 5 year time period in which to terminate the grant, beginning 75 years from the date copyright was originally secured. 

 

Termination of Post-1977 Copyright Grants under Section 203

 

          Under Section 203 if a work was published before the date of the post-1977 transfer, the transfer may be terminated any time during a 5 year period beginning at the end of 35 years from the execution of the grant.  However, if a work has not been published before the date of the post-1977 grant, the transfer may be terminated at any time during a 5 year period beginning the earlier of either: (1) at the end of 35 years from the date of publication under the grant; or (2) at the end of 40 years from the date the grant was executed. If the post-1977 grant does not involve any publication, then the grant may be terminated at any time within a 5 year “window” beginning 35 years from the grant.

 

          One More Time: Pick a record, find the date, Do The Math***.

 

           There are exceptions to all of this. For instance, Section 203 doesn’t cover assignments or grants of “works-for-hire” (Quick – start re-reading those old contracts!). Section 203 also does not apply to works protected under foreign copyrights, or to grants made in an “author’s” will. Perhaps most significantly to many industries – particularly to the motion picture business - Section 203 also does not apply to derivative works. So for instance, an author of a successful book may be able to terminate a grant of rights to her book publisher during the applicable “window” and all of the rights in the book would revert to her. But, if a movie had been made from the book, the motion picture company would not lose any rights to the movie as a result of the termination by the author of the underlying book rights, because the movie is a derivative work. Also, even if a grant of rights to a work is lawfully terminated, such termination does not terminate any related trademark rights or certain other ancillary rights (such as character licensing rights) which may have been included in, or which was ancillary to, the original transaction which included the (now terminated) copyright transfer.

 

          In addition to the very limited timeframes for terminating copyright transfers, there are very specific detailed procedures which must be carefully and exactly followed in order to properly terminate assignments and grants of copyrights. There is also case law interpreting these general rules in differing ways. For instance, there is language in Section 304(c) which seems to suggest that “agreements to the contrary” are superseded by Section 304 – e.g., that termination of the grant may be made “notwithstanding any agreement to the contrary”.  So, just because a contract “says so”, that may not necessarily be the end of the matter. However, it may be up to the individual judge or jury, since federal courts have treated similar contractual provisions completely differently in different cases****. Termination of copyright grants is a fairly complex area – and not that widely publicized. (Gee, can you guess why?) – and the above is only intended to be a general synopsis of the state of the law. So, the moral of this story is, as they say in the intro to “1000 Ways To Die”:   PLEASE DON’T TRY THIS STUFF AT HOME!!

 

          As you can probably now surmise: the Earth (As We Know It) Is Already Starting To Move. For instance, many “classic” recording artists and songwriters have recently announced that they intend to terminate their copyright grants, and that they also intend to directly market their newly to be re-acquired “classic” hit songs and recordings. Other “classic” recording artists and songwriters have announced their present intention to elect instead to let their old copyright transfers stay in place – but only if they are first able to substantially re-negotiate their old deals due to their newly-found leverage which, as I hope you now can readily understand, is based on the very real possibility of their record companies and their publishers losing valuable rights.

 

          Whether you’re an author or a content owner, I hope that I’ve opened your eyes a bit (maybe widely?) about that song, record, novel or other work of art that - if you are an “author”- or the heir of an “author” – you thought had been  sold  away” for good - or - if you are a an intellectual property content owner – that you thought  you owned for the “life of copyright”.

 

          Whichever side you’re on, at least hopefully now you know that “Life of copyright” ain’t exactly what you may have previously thought it was.

 

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*Look It Up!! Oh wait, you can’t because - even tho’ you might think Everything On The Internet is Absolutely True - I must confess - in the interest of full disclosure & transparency – that:  I Made It Up! It’s My Take On Phony Latin for: “Ignorance Is Bliss”.  Hey, I get it honestly from my Dad, the Creator of: Illegitamenti Non Carborundum (“Don’t Let The Bastards Grind You Down”) and Si Quid Putria Cur Poner Proboscis (“If Something Stinks Why Stick Your Nose Into It?”). Guess what:  He was in the music business, too!

 

**OK, so you never got good grades in math – try this simple example: Pick your favorite “classic rock” tune from 1969 (the year I graduated High School! No comments, Please!!). So, 1969 + 56 years  =  2025. What if that song has been a cornerstone of a major music publishing catalogue for the last 41+ years? As of the writing of this article, there are only potentially 14 years of value left.

 

***OK. OK. Even if you got an A in Algebra, this one’s a little harder: if a songwriter assigned his unpublished song to a music publisher, effective on January 1, 1985, and then the publisher published the song on January 1, 1986, then the correct 5 year period would be the earlier of either  (1985 + 40 = ) 2022, or (1986 + 35 = ) 2021. So in this case, the termination period would begin 35 years from the date of publication under the grant (e.g., beginning on January 1, 2021 - since that is the earlier period) and would end on December 31, 2025.

 

****For you lawyers out there:  See: Milne v. Stephen Slesinger (430 F.3rd 1036, 9th Cir. 2005) where the heirs of A.A. Milne, the creator of Winnie The Pooh, were found to have forfeited their Section 304 termination rights for pre-1978 transfers. The court held that subsequent post-1978 grants involved in the case superseded the original pre-1978 grants, and that the post-1978 grants were not invalid “agreements to the contrary” and thus enforceable.  But see: Classic Media, Inc. v. Mewborn (532 F.3rd 978, 9th Cir. 2008), where the same court found a 1978 contract to be an “agreement to the contrary” and therefore invalid and unenforceable. Although the circumstances in both cases were similar, the court distinguished them  and came to a completely opposite result because at the time Mewborn’s contract was re-negotiated, Mewborn didn’t have the right to serve a termination notice; however, at the time Milne’s re-negotiated agreement was executed, Milne had a then present vested right and interest to serve the termination notice. 

 

-        Paul B. Ungar, Esq.

 


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