A Second Bite at the Apple: Termination Rights for Writers Introduction

by Ken Liu

Early in their careers, writers sometimes sign away valuable rights under less than favorable terms. This article discusses the important right of termination under US copyright law, which allows writers to reclaim such rights in their works and to try to make a better deal. For a majority of writers today, the termination right first became available at the beginning of 2013.

The termination right can be especially important for authors with extensive backlists. For example, digital self publishing has provided authors with established reputations and fans a way to monetize their backlists effectively. If rights in these works had been signed away back when the author had little bargaining power, the termination right gives the author a chance to renegotiate a better deal with the publisher or to strike out on their own.

Caveat: this article is intended for educational purposes only and cannot be taken as legal advice. As will be explained in more detail, the termination right can be legally complex and full of traps for the unwary. You should always consult a specialist for your own situation.

Overview of Section 203 (post–1977 grants)

For authors who transferred or licensed their copyright on or after January 1, 1978, Section 203 of the Copyright Act of 1976 gives them the right to terminate any such transfer or license (together, “grants”) 35 years after the date of the grant. In layman’s terms, this means that the author has the right, 35 years after signing a contract, to end the contract and take back all rights from the grantee (usually, this is the publisher). Note that this right does not apply to works-for-hire.

Congress enacted this section in order to protect inexperienced authors who may have been too eager to give up their rights by giving them a “second bite at the apple” later in their careers. This is explicitly set out in the legislative history of Section 203 (House Report on Copyright Act of 1976, H.R. Rep. No. 94–1476, at 124 (1976)):

The provisions of section 203 safeguard[] authors against unremunerative transfers. A provision of this sort is needed because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited. Section 203 reflects a practical compromise that will further the objectives of the copyright law while recognizing the problems and legitimate needs of all interests involved.

The Copyright Office has a page that provides an overview of the Section 203 termination right and links to applicable regulations at http://www.copyright.gov/docs/203.html

Who can terminate?

If the author is alive, the author himself may choose to terminate. If the author is deceased, then the author’s surviving spouse, children, grandchildren, or legal representative may choose to terminate (heirs owning more than half of the interest must agree to do so). 17 U.S.C. §§203(a)(1), (2). For ease of discussion, we’ll assume that it’s the author who exercises the right in the rest of this article.

If multiple authors executed a grant, the statute provides that a majority of the authors must elect to terminate.17 U.S.C. §203(a)(1).

When can termination occur?

The author must select a termination date within a five-year window beginning on the 35th anniversary of the date of the grant. (In cases where the grant covered the right of publication, the five-year window begins 35 years after the date of publication or 40 years after the date of grant, which ever is earlier.) 17 U.S.C. §203(a)(3).

How do you terminate?

The way to exercise the right is by serving an “advance notice” on the publisher. This notice must be given at least two years (but not more than ten years) prior to the date of termination.

This means advance notice of termination can be given prior to the 35th anniversary of the date of grant. For example, the earliest date on which a Section 203 termination may occur is January 1, 2013 (for a transfer executed on January 1, 1978), and notice for such termination may be given as early as January 1, 2003. 17 U.S.C. §203(a)(4).

This also means that for contracts signed during 1978, authors who are only now becoming aware of the termination right must choose a termination date during 2015-2017 because of the requirement to give two years advance notice.

Effect of termination

Although termination means that the publisher can no longer make use of the author’s work, it doesn’t mean that the publisher loses all rights originally granted by the author. Most importantly, derivative works authorized by the original grant that were made before termination may continue to be exploited under the terms of the grant even after termination. (This is the so-called “derivative rights exception.”) However, no further derivative works may be prepared after termination. 17 U.S.C. §203(b)(1).

After the author has served the advance notice of termination, the publisher essentially has an exclusivity period to try to sign a new agreement with the author for the reclaimed rights prior to the effective date of the termination. See 17 U.S.C. §203(b)(4). The new agreement is likely to be more favorable to the author since the value of the work is now known, and the author has more bargaining power.

Termination right cannot be signed away

The statute is explicit that the author’s termination right cannot be contracted away. 17 U.S.C. §203(a)(5)(“Termination of the grant may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.”) However, as will be explained later, this provision, intended to protect the author, is not quite as ironclad as it may appear at first glance.

A Note on Section 304 (pre–1978 grants)

For grants executed before January 1, 1978 (the effective date of the Copyright Act of 1976), a substantially similar termination right, defined in Section 304 (c) and (d), applies.

The main difference between the Section 304 termination right and the Section 203 termination right is the length the author must wait before they can terminate. Whereas Section 203 allows termination 35 years after signing a contract to give authors a chance to make a better deal, Section 304 is intended to allow authors with old contracts a chance to get at the “new” rights under the Copyright Act of 1976 instead of giving publishers a windfall.

This distinction stems from how the Copyright Act of 1976 extended the term of protection for copyrights that originated under previous law. Previous law had given authors a copyright term of 28 years plus a possible renewal term of another 28 years (for a total of 56 years). The Copyright Act of 1976 essentially made renewal automatic and extended the 28-year renewal term to 47 years for a total of 75 years of protection. Later, the Sonny Bono Copyright Term Extension Act extended the renewal term to 67 years, for a total of 95 years of protection, and Section 304 was amended to take this further extension into account as well.

The termination right under Section 304 is intended to allow authors to reclaim the portion of the “extended renewal term” in excess of the original 56-year term of protection under previous law. The idea here is that publishers prior to 1978 really could only have bargained for 56 years of use, so the excess years represented an additional, valuable right that authors should have the right to reclaim for themselves.

Thus, Section 304(c) gives authors the right to terminate grants during a five-year window 56 years after the date when the copyright was originally secured (and this gets into complicated issues about copyright registration and publication, relevant only under prior law). Section 304(d) provides authors with a similar right to reclaim the 20 additional years added by the Sonny Bono Act if the author had let the 304(c) termination right lapse without exercising it.

Finally, while the termination right under Section 203 applies only to grants executed by the author, the termination right under Section 304 applies to grants executed by the author or the author’s heirs.

Advance Notice

Since authors must serve advance notice on the publisher to terminate, it’s important to understand that this notice must comply with the regulations issued by the Register of Copyrights. 37 CFR §201.10 (available here: http://www.copyright.gov/docs/201–10-final.pdf).

The regulations require the advance notice to include a great deal of information, such as: the code section pursuant to which termination is sought (Section 203, 304(c), or 304(d)), the name of the grantee and the grantee’s address, the date of execution of the grant (or the date of publication, where applicable), the title of the work, the name of the author, the copyright registration number (if available), a description of the grant being terminated so that the right contract can be identified, the effective date of the termination, the persons seeking the termination (the author or the author’s heirs).

In addition, the regulations also prescribe in detail the method of service for the notice, the recording of the notice with the Copyright Office, and other procedural requirements.

It’s important to note that the regulations require “a complete and unambiguous statement of facts in the notice itself, without incorporation by reference of information in other documents or records.” But unlike the case of copyright registration, the Register of Copyrights has not provided a form that may be used by authors seeking to terminate.

Drafting a notice that fully complies with the regulations is not trivial, and inadequate notice may cause the attempt to terminate to fail. Thus, authors are urged to seek professional assistance in preparing such notices.

Other Complications

The significant stakes involved in termination of past grants lead to many legal complications.

For example, despite the apparently definitive language Congress employed in stating that “termination of the grant may be effected notwithstanding any agreement to the contrary” (emphasis added), courts have interpreted this language in (possibly) surprising ways. Subsequent, new copyright grants that are deemed to supersede older grants have been held to be not “agreement[s] to the contrary” and caused heirs to forfeit their termination rights. See Milne v. Stephen Slesinger, Inc., 430 F.3d 1036 (9th Cir. 2005); Penguin Group (USA) Inc. v. Steinbeck, 537 F.3d 193 (2d Cir. 2008). On the other hand, agreements made after a work’s creation that purport to turn them into works-for-hire without termination rights have been held to be invalid. See Marvel Characters, Inc. v. Simon, 310 F.3d 280 (2d Cir.2002).

Summary 

Although a trickle of terminations have been executed under Section 304 for years, 2013 is the first year in which the termination right under Section 203, involving more recent grants, may be effectuated. This is likely to result in a dramatic increase in the number of termination notices filed and the amount of litigation over them.

The termination rights under Section 203 and 304 can give authors and their heirs an opportunity to recover valuable rights. They can then choose to sell the rights elsewhere or to force the existing publisher back to the negotiating table. Given the many legal and practical considerations involved in the process, authors are urged to consult their agents and copyright professionals to advise them on the right course tailored to their individual circumstances.

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Ken Liu is an author and translator of speculative fiction, as well as a lawyer and programmer. His fiction has appeared in The Magazine of Fantasy & Science Fiction, Asimov’s, Analog, Clarkesworld, Lightspeed, and Strange Horizons, among other places. He has won a Nebula, a Hugo, a World Fantasy Award, and a Science Fiction & Fantasy Translation Award, and been nominated for the Sturgeon and the Locus Awards. He lives with his family near Boston, Massachusetts.