Navigating US Copyright Termination Rights

By Brian D. Caplan, Esq., Caplan & Ross, LLP¹

In the Copyright Act of 1976, the US Congress gave recording artists and songwriters the possibility to claw back rights to previously licensed works after 35 years. This so-called “termination right” is designed to enable creators to renegotiate the terms of the publishing deals they concluded before the true value of their work was known. The termination right, codified as 17 USC §203, applies to rights assigned from January 1, 1978, on condition they are not “made for hire”.

The right, which has significant implications for the entertainment and publishing industries, will first have an impact starting in 2013. These sectors are understandably closely following related court decisions. One of the first such cases involves Victor Willis, the former lead singer of the 1970s pop band, Village People. In May 2012, a court in California held that Mr. Willis has the right, in 2013, to recapture his interests in the copyright of 33 songs he co-authored, including the iconic hits, “YMCA”, “Go West” and “In the Navy.” This article takes a closer look at the termination right and some of the key legal issues likely to arise from its application.

Legal context

Prior to 1976, Congress had attempted to protect authors who had assigned rights in their works before their true commercial value was known. The 1909 Copyright Act, for example, provided an initial 28-year protection period renewable for a further 28 years. This sought to ensure that the copyright in a work revested in the author after the first 28 years, on condition renewal rights had not already been assigned. In practice, to get their works commercially published, authors generally had no option but to assign their rights for both terms of protection.

The 1976 revision of US copyright law introduced a new “termination right” whereby rights must revest in the author before any further reassignment would be valid. For works created after January 1, 1978, the Act provides for a single term of copyright protection - the life of the author plus 50 years (since extended by 40 years). It also provides authors with an inalienable right to “terminate” a grant of copyright 35 years after the grant was made.²

The mechanics of termination

To exercise this right the assigning authors must terminate their grants within a five-year period beginning at the end of the 35th year from the original grant date (i.e. the 35th to the 40th year) by serving a Notice of Termination on grantees no less than 2 and no more than 10 years before the effective date of termination.

Upon termination all copyright interests conveyed under the initial grant revert to the original grantors-creators (even if only two of three executing grantors sign the termination notice) with respect to rights in the US. Outside the US, the rights of the grantee remain unaffected as do those relating to derivative works prepared under the original grant prior to its termination. Authors exercising their termination right, however, do recover the right to authorize new derivative works.

When only one of multiple co-authors effectuates termination, that author becomes a co-copyright owner and may license use of the underlying copyright on a non exclusive basis, subject to a duty to account to the co-owners. If the other co-authors do not terminate, their grantee arrangements remain unchanged. After the effective termination date the right to grant exclusive licenses requires the authority and consent of all copyright co-owners – including all co-authors who terminated (or their subsequent assignees).

The obligatory notice period under the Act is designed to mitigate any eventual loss of rights by giving original grantees an opportunity to negotiate a new deal.

The case

In May 2012, a court in California held that
Mr. Willis has the right, in 2013, to recapture
his interests in the copyright of 33 songs he
co-authored, including the iconic hits, “YMCA,”
“Go West” and “In the Navy.” (Photo: Copyright
2010, VictorWillisWorld.Com)

The Court’s decision in Scorpio Music, et al. v. Willis, 11 Civ. 1557 (BTM), 2012 WL 1598043 (S.D.Ca. May 7, 2012) is one of the first to interpret the copyright termination provisions applicable to post-1977 grants. The US District Court sitting in San Diego, California, rejected a publisher’s challenge to the validity of a termination notice submitted by Victor Willis. It determined that, from 2013, Mr. Willis has the right to recapture his copyright interests in the 33 songs he co-authored, including “YMCA,” “Go West” and “In the Navy”.

In the late 1970s, Mr. Willis assigned his copyright interests in these compositions to Can’t Stop Music, a Division of Can’t Stop Productions, Inc., through a series of identically worded publishing agreements (the “Willis Grants”). While Jacques Morali and others composed the music for the compositions, Mr. Willis claims to be the sole lyricist having separately conveyed his copyright interests in the compositions to Can’t Stop.

Accordingly, each of the Willis Grants was solely between Can’t Stop and Mr. Willis, solely concerned Mr. Willis’ interests in the compositions, and was solely executed by Can’t Stop and Mr. Willis. Moreover, each of the Willis Grants contained the classic language of copyright conveyance, stating that Mr. Willis, “hereby sells, assigns, transfers and delivers to Publisher, its successors, and assigns, the Adaptation [including the title and lyrics thereof]… together with the worldwide copyright thereof…” Each of the Grants provided for Mr. Willis to receive between 12 and 20 percent of the gross receipts generated by the publishers from the songs.

Thirty-three years later, in January 2011, Mr. Willis served a notice to terminate the Willis Grants, providing Can’t Stop with the requisite two years’ notice ahead of the effective dates of termination in 2013.

Music publishers’ response

Can’t Stop and its foreign affiliate Scorpio Music contended that Mr. Willis, as one of at least three credited co-authors, could not unilaterally serve a notice of termination. The publishers further argued that the songs were “works made for hire,” and Mr. Willis therefore had no right to terminate the Willis Grants. The publishers also claimed that even if Mr. Willis could terminate the grants, his recaptured copyright interests should be limited to the terms agreed 35 years earlier (12 to 20 percent of each composition, mirroring the income streams to which he had agreed). When Mr. Willis rejected these contentions, the publishers brought suit in San Diego, where Mr. Willis resides, seeking to have the termination notice declared either invalid in toto or limited in its breadth.

The court decides

The Court found that because Mr. Willis had granted his copyright interests in the 33 compositions separately and apart from his co-authors, he had standing and the right under the 1976 Copyright Act (17 U.S.C. § 203) to unilaterally terminate his grants to the publisher.

The Court further found that, “upon termination, Mr. Willis would get back what he transferred – his undivided interest in the whole,” despite the terms of the Willis Grants. It determined that if Mr. Willis was one of two authors of a composition, he would recapture a 50 percent interest in it.

Another more significant “authorship” issue, relating to a disagreement about who co-authored the compositions with Mr. Willis, remains undecided. The writing credits had been “established” when Mr. Willis had no real bargaining power. He claims that one of the listed “writers” did not in fact contribute to the creation of the compositions and that he and Mr. Morali were the sole authors of many of the Willis Grant compositions. As such, he should recapture a one-half interest in them. The Court’s decision alluded to this disagreement but as the original complaint did not squarely put this issue before it, the Court granted the publishers leave to amend their case. On June 5, 2012, the publishers filed an amended complaint addressing this dispute. It is likely that Mr. Willis will recapture, either a 50 percent copyright interest or a 33 percent interest in the compositions if prior co-authorship claims and credits of a third purported writer are deemed as a matter of law not subject to review.

The Willis case also raises another significant issue - the work-for-hire defense initially used by the publishers, but later withdrawn. In Community for Creative Non-Violence v. Reid, 490 US 730 (1989), the Supreme Court established numerous factors to consider in determining whether a work was “made for hire” under the Copyright Act. These include whether the hiring party had the right to control the manner and means by which the product was created; the skill required; whether the hiring party has the right to assign additional projects to the hired party; the extent of the hired party's discretion over when and how long to work; the method of payment; the hired party's role in hiring and paying assistants; the provision of employee benefits; and the tax treatment of the hired party. None of these factors weighed in favor of the publishers in the Willis case.

While songwriters may be able to fend off a work-made-for-hire claim, will the courts give credence to the use of such a defense by a record company in relation to a recording artist’s or producer’s attempt to terminate post-1977 grants in sound recordings? A record company could argue that it:

• advances all recording costs associated with the creation of the sound recordings;
• has the right to accept or reject the master recordings submitted by the recording artist;
• has the right to select the recording studios and the producers for the projects; and
• engages writers to create musical compositions when the recording artist is not a songwriter.

Moreover, recording agreements typically purport to “acknowledge” that artists work for hire. Similarly, copyright registrations filed by record companies specify that the sound recordings/masters created by recordings artists are “works for hire”.

On the other hand, recording artists could argue that:

• great skill and creativity are required to record songs;
• the time and place of recording, often determined by recording artists, is immaterial to the outcome of the final product;
• they often engage their own producers;
• standard recording agreements state that if the recording artist is not a worker for hire, their copyright interests are assigned to the record company;
• they are not treated as an employee with respect to taxes or employee benefits;
• the record company typically does not have the right to assign additional projects to the recording artist; and
• although the record company initially covers the costs of production, these are fully recoupable by the record company from the artist’s royalties.

Moreover, recording artists who write their own songs need not rely upon record company involvement in the creative aspects of making records.

As the work-made-for-hire debate makes its way through the courts, the future ownership and control of master recordings and musical compositions created since the late 1970s will be decided. It is clear that the ability of recording artists and songwriters to recapture their copyright interests will dramatically impact the way these works are commercially exploited. Each incremental decision will have lasting effects, as myriad licensing, administration and ownership issues are fleshed out and clarified by the courts. Those decisions will not only affect the music industry, but also, by application, the literary, film and other industries that depend upon the creation and exploitation of copyrightable works.

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1 Caplan & Ross, LLP is a New York City-based law firm that specializes in entertainment and intellectual property litigation.
2  For pre-1978 grants, the Copyright Act continued the renewal term system, but added an additional 19 years of copyright protection to the renewal term (since extended), and provides authors with a commensurate right to terminate grants; 56 years after copyright was originally secured. This termination right with respect to the “extended term of copyright” is codified in 17 U.S.C. § 304 and largely mirrors the provisions of § 203.