The obscure “termination of transfer” provision of the 1976 Copyright Act popped up twice in the news recently. The provision allows a copyright owner who assigned his copyright interest to another to undo the transfer after a number of years and recover ownership of the copyright. How the termination right operates depends on when the copyright interest arose, but the language governing copyrighted works created after January 1, 1978 is as follows:
Conditions for Termination. — In the case of any work other than a work made for hire, 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:
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(3) Termination of the grant may be effected at any time during a period of five years beginning at the end of thirty-five years from the date of execution of the grant; or, if the grant covers the right of publication of the work, the period begins at the end of thirty-five years from the date of publication of the work under the grant or at the end of forty years from the date of execution of the grant, whichever term ends earlier.
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(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.
17 U.S.C. § 203(a). Statutory procedures must be followed carefully to invoke the termination right. Yet, if they are, any author who has assigned or exclusively licensed his work can recover it after 35 years, and there is no way to contract around it. Think of it as a “starving artist” provision designed to ensure an economic return to authors who create works for others, transfer them for a pittance, and find themselves losing out as their works become enormously popular and highly valuable.
The only types of works not subject to the termination right are “works made for hire”, a category of works defined by Section 101 of the Copyright Act as either (1) works created by an employee within the scope of his employment; or (2) a specially commissioned work of certain defined types (the work must fall within one of 9 specific categories) “if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.” 17 U.S.C. § 101. Because many if not most copyrighted works do not fall within the 9 categories, they cannot qualify as specially commissioned works made for hire, not even if contracts call them works for hire.
Thus, assignments of most works created by independent contractors rather than employees can be terminated after 35 years. There is one wrinkle to this that can be helpful: a work created by an independent contractor’s employee and then assigned to the contractor’s client still qualifies as a “work made for hire” (initially owned by the contractor), and so neither the author nor the contractor can terminate the transfer to the client. Because of this quirk, it is fairly common in independent contractor agreements to require that creative deliverables of the contractor were created by their employees within the scope of their employment.
The two recent news items both involve works in the entertainment industry. Most termination disputes involve these types of works, as they sometimes gain enormous value and have very long commercial lives.
Most recently, The New York Times reported that Victor Willis, the original lead singer of the group The Village People, sent a notice to terminate his transfer of rights in the song “Y.M.C.A.” The article did not disclose what costume he wore at the time, but his assignee filed suit to prevent the transfer, arguing that the group members were really employees and as a result the song was a Type 1 work made for hire not subject to termination Larry Rother, A Village Person Tests the Copyright Law, New York Times, August 16, 2011. Evidently disco still will not die.
In late July, the U.S. District Court for the Southern District of New York ruled that the heirs of Jack Kirby, a famous artist who had a long association with Marvel Comics, was not entitled to terminate transfers of his copyright interests in 45 works or series of works, all comics involving well-know characters such as Spider-Man, The Fantastic Four, and the Incredible Hulk. Again, the issue was whether the comics were works made for hire, and the court ruled they were. These works were created before 1978 and so were subject to the Copyright Act of 1909, under which works by contractors (Kirby was a free-lance artist) could much more easily qualify as works for hire. See Marvel Worldwide, Inc. v. Kirby, 2011 U.S. Dist. LEXIS 82868 (S.D.N.Y., July 28, 2011).
Most copyrighted works do not have commercial lives over 35 years, and certainly few are as valuable as the Spider-Man character. Yet, one never knows: the parties to these two recent disputes probably did not anticipate longstanding success. The possibility of termination therefore is something worth thinking about when there exists a reasonable chance of longstanding use and success.
One area where the termination issue is potentially very important is artistic works used as logo trademarks. Stylized trademarks very often do have long life spans and great value. Designs used as marks frequently are sufficiently creative to qualify as copyrightable works. Both trademark and copyright interests exists in such works, and the two protect different things. A company that uses and federally registers its logo as a trademark still could face the possibility of termination of the copyright interest in the logo by a contractor who created the work. The consequences could be disastrous: the author could prevent ongoing trademark use by exercising his right as a copyright owner to prevent copying, modification, distribution and public display. Indeed, the risk can arise before 35 years: a company that hired an independent contractor to create a logo and did not obtain a written, signed assignment of copyright interests (logo marks seldom would qualify as Type 2 works for hire), and relies instead on an express or implied license, runs the risk of the contractor terminating the license or claiming the scope of the license is more narrow than the company’s use. Thus, if logo marks are not developed by employees, it is essential to obtain an express, written copyright assignment; to avoid termination of transfer, the work should be created by an employee of the hired independent contractor.
Christopher J. Mugel practices intellectual property law from Kaufman & Canoles’ Richmond, Virginia office. He spoke on intellectual property transactional matters at the Annual Meeting of the American Intellectual Property Law Association in Washington, D.C., October 20-22, 2011.
–Christopher J. Mugel