I. Introduction

The 1976 Copyright Act (the “Act”) has been in effect since January 1, 1978. Since that time, the Act has provided authors (and some heirs, beneficiaries, and representatives) with the right to terminate prior grants of their copyrights under certain conditions and within specific time frames.[1] Notably, on January 1, 2013, many artists and musicians who transferred their copyright rights following the enactment of the Act thirty-five years ago finally gained the opportunity to terminate those transfers.

The rationale underlying the termination provisions is clearly equitable in nature; namely, to allow authors or their heirs a second opportunity to share in the economic success of their works. The House Report accompanying the Act explains that the provisions are “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.”[2] Furthermore, the Congress that enacted the Act specifically recognized the necessity of “safeguarding authors against unremunerative transfers”[3] as justification for providing authors with the opportunity subsequently to terminate prior transfers.

The termination provisions involve very specific and formulaic time frames and notification requirements for two types of grants: those grants made prior to January 1, 1978 (the date on which the Act went into effect), and those grants executed on or after such date. However, despite Congress’s clear intent to provide authors and/or their heirs with a second bite of the apple, an unfortunate oversight on Congress’s part in drafting the Act has created a dilemma that could prove costly for many authors and heirs looking to exercise their termination rights.

Specifically, the dilemma involves how the Act’s termination provisions should apply, if at all, to what have come to be known as “gap works.” Gap works are works transferred and/or assigned by an agreement dated before the effective date of the Act (January 1, 1978) but not actually created until on or after January 1, 1978.[4] This “gap dilemma,” unless clarified by Congress, could affect authors by, among other things, generating a multitude of litigation, thereby undermining the purpose of the Act and deterring authors from enforcing their reversion rights by making it cost-prohibitive to do so.

II. Overview of Termination Rights Under the 1976 Copyright Act

A. Sections 203, 304(c), and 304(d)

The law relating to the termination of transfers and reversionary rights in connection with copyright grants executed on or after January 1, 1978, is set forth in 17 U.S.C. § 203. The law relating to the termination of transfers and reversionary rights for copyright grants in existence prior to January 1, 1978, is set forth in 17 U.S.C. § 304(c)-(d). Both §§ 203 and 304 vest in authors and/or their heirs a right to terminate their prior grants during a set time period after their execution, and are designed “to protect authors and to confer on them an additional opportunity to profit from their works.”[5]

1. Termination of the Grant

Section 203 provides that any exclusive or nonexclusive grant of a transfer of copyright, “executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination.”[6] The “[t]ermination 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.”[7]

Section 304(c), on the other hand, provides that the exclusive or nonexclusive grant of a transfer or license of the renewal copyright or any right thereunder, executed before January 1, 1978, otherwise than by will, is subject to termination.[8] Under § 304(c), “[t]ermination of the grant may be effected at any time during a period of five years beginning at the end of fifty-six years from the date copyright was originally secured, or beginning on January 1, 1978, whichever is later.”[9] Thus, as opposed to § 203, in which the time frame is based on the “date of the execution of the grant,” under § 304 the termination time-frame is based on “the date [the] copyright was originally secured.”[10]

Additionally, § 304(d) provides another opportunity for authors and/or heirs to terminate a grant made prior to January 1, 1978, if the grant is not timely terminated during the window allowed by the fifty-six-year measure set forth in § 304(c).[11] Where § 304(c) termination rights have expired on or before the effective date of the Sonny Bono Copyright Term Extension Act, which went into effect on October 27, 1998, and the author or owner of the termination rights has not previously exercised any termination rights, the grant may be terminated at any time during a five-year period beginning at the end of seventy-five years from the date on which the copyright was originally secured.[12] The termination of this twenty-year extension is subject to all of the other requirements of termination that are applicable to grants terminated under § 304(c).[13]

Terminations of grants under both §§ 203 and 304(c)–(d) “may be effected notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.”[14] Generally speaking, the only transfers excluded from the termination of grants are for works made for hire and grants made by will.[15] Additionally, there are limitations relating to the termination of a grant to the extent such grant includes foreign rights,[16] which are not terminable, and derivative rights, which, if exercised prior to the termination, can generally continue to be exploited.[17]

 2. Notice of Termination

(a). Notification Periods

Under § 203, the earliest date on which a termination notice may be served in connection with grants that are executed on or after January 1, 1978, is twenty-five years after execution of the grant, and the latest date on which such termination notice may be served is thirty-eight years after execution of the grant.[18] In sum, the termination must take effect during the five-year window following the end of year thirty-five, but the notice can be given as early as ten years prior to the start of the five-year window, and must be given, at the latest, two years before the five-year window closes. For example, if an author’s grant was executed on January 1, 1978, the five-year termination window would begin on January 1, 2013, and run until January 1, 2018, and the period for serving the notice of termination would begin on January 1, 2003 (twenty-five years after the grant) and end on January 1, 2016 (thirty-eight years after the grant). (See Illustration No. 1, below)

Illustration No. 1 – Re § 203

Similarly, under § 304(c), the termination must take effect during the five-year termination window; however, rather than starting after thirty-five years, it follows the end of year fifty-six (or beginning on January 1, 1978, whichever is later), or the end of year seventy-five, under § 304(d). Also similar to § 203, under § 304, the notice can be given as early as ten years prior to the start of the five-year window (i.e., forty-six years from the date on which the copyright was originally secured under § 304(c), or sixty-five years under § 304(d)), and at the latest, two years before the five-year window ends.[19]

For example, under § 304(c), if the copyright was originally secured on January 1, 1939, the original five-year termination window would have begun on January 1, 1995, and run until January 1, 2000, and the period for serving the notice of termination would have begun on January 1, 1985 (forty-six years after the copyright was secured), and have ended on January 1, 1998 (fifty-nine years after the copyright was secured). (See Illustration No. 2, below)

 Illustration No. 2 – Re § 304(c)

However, under § 304(d), assuming that the author or owner of the termination rights has not previously exercised such rights under § 304(c), because the termination rights expired before October 27, 1998 (i.e., the effective date of the Sonny Bono Copyright Act), there is an additional five-year termination window beginning on January 1, 2014, and running until January 1, 2019. The period for serving the notice of termination under this additional period would begin on January 1, 2004 (sixty-five years after the copyright was secured) and would end on January 1, 2017 (seventy-eight years after the copyright was secured). (See Illustration No. 3, below)

 Illustration No. 3 – Re § 304(d)

 (b). Notice Requirements

The requirements relating to the actual notices of termination under § 203 and § 304(c)–(d) are also similar. While there are some differences regarding the persons and number of persons who must sign the notice[20], both Sections require that the termination be effected by serving an advance notice in writing upon the grantee or the grantee’s successor in title, which shall state the effective date of the termination, and which shall fall within the five-year termination window.[21]

These Sections also require that the notice be served not less than two or more than ten years before that date.[22] Additionally, both Sections require that a copy of the notice be recorded in the Copyright Office before the effective date of termination as a condition to its taking effect.[23] Finally, both Sections set forth that the notice “shall comply, in form, content, and manner of service, with requirements that the Register of Copyrights shall prescribe by regulation.”[24]

The requirements prescribed by the Register of Copyrights are set forth in 37 C.F.R. § 201.10(b)(1)–(2) and include, but are not limited to: a statement that the termination is made under § 203 or under § 304(c) or 304(d); the name of each grantee whose rights are being terminated, or the grantee’s successor in title, and each address at which service of the notice is being made; a brief statement reasonably identifying the grant to which the notice of termination applies; and the effective date of termination.[25]

III. The “Termination Gap” Dilemma

A. The Problem With Grants of “Gap Works”

The “termination gap” dilemma refers to “gap works,” which are works for which transfers were made by an agreement executed before January 1, 1978, but that were not created until after January 1, 1978 (the effective date of the Act). These works literally fall within a “gap” between the two sections by which an author or heir may terminate a copyright transfer (§§ 203 and 304(c)–(d)) and, unfortunately, leave open the question as to whether or not termination rights apply to such works.

Due to the fact that §§ 304(c) and (d) only allow for the termination of a grant in connection with “any copyright subsisting in either its first or renewal term on January 1, 1978,”[26] those sections would be inapplicable to “gap works” under the plain language of the statute because the copyrights for those works (i.e., those works created after January 1, 1978), would obviously not be subsisting as of January 1, 1978. However, the applicability of § 203 to such works is also unclear. Due to the fact that § 203 only allows for the termination of a grant “executed by the author on or after January 1, 1978,”[27] it would also arguably, under the plain language of the statute, be inapplicable to any grant made by an agreement entered into before January 1, 1978.[28]

 B. Recent Steps Taken By The Copyright Office To Address The “Termination Gap” Dilemma

In March 2010, recognizing this dilemma, the Copyright Office posted a Notice of Inquiry requesting comments regarding how best to handle “gap works.” In response, the Copyright Office received numerous comments and in December 2010, issued a detailed analysis of gap grants under the termination provisions of Title 17. Tthe Copyright Office summarized the nature of the problem, in particular whether or not § 203 should apply to gap works, as “a very technical question,” namely: “Is it possible for an author to execute a grant prior to creating the work of authorship?”[29]

The Copyright Office answered this question in the negative, ruled that in the case of a grant signed before January 1, 1978, regarding rights in a work not created until January 1, 1978, or later, such grant cannot be “executed” until the work exists.[30] Accordingly, thereafter, the Copyright Office amended Section 201.10 of 37 C.F.R., in connection with “Notices of termination of transfers and licenses,” to allow termination notices for “gap works” to be accepted and recorded with the Copyright Office.[31]

The amendment added a new paragraph (f)(5), which reads: “In any case where an author agreed, prior to January 1, 1978, to a grant of a transfer or license of rights in a work that was not created until on or after January 1, 1978, a notice of termination of a grant under § 203 of title 17 may be recorded if it recites, as the date of execution, the date on which the work was created.”[32]

While the Copyright Office should be applauded for its proactive attempts to address the gap dilemma, its efforts and subsequent amendment to its notice requirements do not in any way act as a substitute or remove the need for this issue to be addressed by Congress and/or the courts. The Copyright Office has acknowledged the need for further resolution by noting that “the Office’s recordation of notices of termination of Gap Grants is without prejudice to how a court might ultimately rule on whether any particular document qualifies as a notice of termination within the scope of § 203, consistent with longstanding practices for all notices of termination recorded by the Office.”[33] Further, the Copyright Office has stated that “[i]f there is any dispute over the validity of such a notice of termination (or of notices of termination of Gap Grants in general), that dispute should be settled in the courts (or in Congress, if Congress accepts the Office’s suggestion to enact legislation that will clarify the status of Gap Grants).”[34]

Moreover, as correctly pointed out by attorneys Michael Perlstein, Bill Gable, and Kenneth D. Freundlich, in their comment to the Copyright Office regarding the Notice of Proposed Rule Making, the Copyright Office’s conclusion that “execution of the grant” in § 203 means the post-1977 date when a work is created while correct, on its own is “likely to generate litigation.”[35] The reason for this result is because without any corresponding statutory framework setting forth how the date of execution of the grant (i.e., the date of creation) should be determined and established, the Copyright Office’s amendment raises questions about what an author (or author’s heirs) must show to prove a date of creation.

The problem, as explained by the attorneys, is that “neither authors nor their grantees (e.g. publishing companies) were ever on notice that they needed to retain documents evidencing date of creation (as distinguished from date of delivery, for example) and that even if such documents may once have existed neither party often will have preserved them.”[36] The Copyright Office’s “requirement of identifying a date of creation 35-40 years after the fact, is unrealistic and likely to generate litigation,”[37] which is something that these regulations should seek to avoid.

The comment of Perlstein, Gable, and Freundlich also proposed a series of guidelines for possible future legislation to set forth other bases to determine the date of execution of a grant under § 203, which, as they describe, are “author-friendly [and] consistent with the legislative and judicial intent that authors and their heirs benefit from the termination statutes.”[38] The guidelines they propose are an “order of priority” of documents and other means to be used to determine the date of execution of the grant, including, but not limited to, “written documentation signed by the author, e.g. a short form instrument of transfer or single song agreement . . . or note or memorandum of some sort, with a date post-1977,” and “the date of publication as set forth on the Certification of Registration,” etc.[39] Whether or not Congress adopts any or all of these proposed guidelines or other similar type guidelines, it is clear that a more practical framework and statutory clarity are necessary.

IV. Conclusion

Congress’s intent in passing the Act was clearly to give authors or their heirs a second opportunity to share in the economic success of their works, and, so as such, it seems unlikely that Congress intended to exempt “gap works” from possible termination. However, while the Copyright Office has concluded that “the reasonable interpretation of Gap Grants is that they are terminable under section 203 as it is currently codified,”[40] until there is clarity on this issue from Congress, or a judicial decision on this point, it is likely that Congress’s intent to ensure that authors have enforceable termination rights will be undermined.

As stated by the Copyright Office itself, “lack of clarity will likely result in costly delays, the prospect of inconsistent or unfavorable court decisions, or a state of play where termination rights are left unexercised.”[41] Hopefully Congress will take action soon to clarify this issue and to preserve what was clearly meant to be a legislative means to protect authors and their works, not to drown them in unnecessary and expensive litigation.

*Pierre B. Pine is a Senior Associate Attorney at McPherson Rane LLP’s
Los Angeles Office
ppine@mcphersonrane.com; 310-553-8833

*Pierre B. Pine received his J.D., in 2000, at the University of San Diego School of Law, and his B.A., in 1995, at Loyola Marymount University. He is currently a Senior Associate Attorney at the entertainment litigation firm of McPherson Rane LLP. He would like to thank Edwin McPherson for his input and assistance on this article.

[1]. See 17 U.S.C. §§ 203, 304(c)–(d) (2012).

[2]. See Korman v. HBC Fla. Inc., 182 F.3d 1291, 1296 (11th Cir. 1999); H.R. Rep. No. 94-1476, at 124 (1976).

[3]. Id.

[4]. See U. S. Copyright Office, Analysis of Gap Grants Under The Termination Provisions of Title 17 (Dec. 7, 2010), available at http://www.copyright.gov/reports/gap-grant-analysis.pdf.

[5]. Korman, 182 F.3d at 1296.

[6]. 17 U.S.C. § 203(a) (emphasis added).

[7]. Id. § 203(a)(3) (emphasis added).

[8]. See 17 U.S.C. § 304(c) (2002).

[9]. The reason for the fifty-six-year measure, as opposed to the thirty-five-year measure for grants made after January 1, 1978, is based on the fact that fifty-six years is the maximum term of protection for all works under the 1909 Copyright Act, and the termination of such grants permits the author to recapture ownership in the work during the nineteen year additional period added to the renewal term by the 1976 revision of the Copyright Act. See 17 U.S.C. § 304(c)(3).

[10]. 17 U.S.C. §§ 203(a)(3), 304(c)(3).

[11]. See id. § 304(d).

[12]. See id. § 304(d)(2).

[13]. See id. § 304(d)(1).

[14]. See 17 U.S.C. §§ 203(a)(5), 304(c)(5).

[15]. See 17 U.S.C. §§ 203(a), 304(c).

[16]. A termination of rights is only applicable within the geographic limits of the United States. Thus, an author is precluded from terminating rights based upon foreign copyright laws, and a grant of copyright “throughout the world” (which is a term commonly found in copyright grants), is terminable only with respect to uses within the United States. See id.§ 203(b)(5).

[17]. “A derivative work prepared under the authority of the grant before its termination may continue to be utilized under the terms of the grant after its termination.” 17 U.S.C. § 203(b)(1).

[18]. See id. § 203(a)(4)(A).

[19]. See 17 U.S.C. § 304(c)(4)(A).

[20]. In the case of grants executed by two or more joint authors, a distinction is made between grants executed under § 304 (made prior to January 1, 1978), and those executed under § 203 (made after January 1, 1978). A grant executed under § 203, may be terminated only by a majority of the joint authors who executed it. Accordingly, a notice of termination of a joint work under § 203, must include the signatures of a majority of the authors who executed the grant. However, a grant executed by two or more joint authors under § 304, are terminable by each executing joint author (with respect to their interest in the work), and does not require a majority. Thus, a notice of termination of a joint work under § 304, need only be signed by the author terminating the grant, even if a majority of the executing joint authors do not join in such termination. See 17 U.S.C. §§ 203(a)(1), 304(c)(1).

[21]. See 17 U.S.C. §§ 203(a)(4)(A), 304(c)(4)(A).

[22. See 17 U.S.C. §§ 203(a)(4)(A), 304(c)(4)(A).

[23]. See 17 U.S.C. §§ 203(a)(4)(A), 304(c)(4)(A). Notices of Termination should be submitted to the address specified in 37 C.F.R. § 201.1(b)(2) [Copyright Office, Notices of Termination, P.O. Box 71537, Washington, D.C. 20024-1537].

[24]. See 17 U.S.C. §§ 203(a)(4)(B), 304(c)(4)(B).

[25]. See 37 C.F.R. § 201.10(b)(1)–(2) (2013).

[26]. See 17 U.S.C. § 304(c).

[27]. See id. § 203(a).

[28]. See Jake Shafer, The Gap Years, L.A. Law., Nov. 2011, at 36, 38.

[29]. U. S. Copyright Office, supra note 4, at ii.

[30]. U. S. Copyright Office, supra note 4, at 1.

[31]. See 37 C.F.R. §201.10. However, it is unknown, at this time, what deference, if any, the courts will give to the Copyright Office’s position.

[32]. See id. § 201.10(f)(5).

[33]. See 76 Fed. Reg. 32,316, 32,320 (June 6, 2011), available at http://www.copyright.gov/fedreg/2011/76fr32316.pdf.

[34]. Id.

[35]. See Comment from Michael Perlstein, Bill Gable, and Kenneth D. Freundlich to Maria Pallente, Acting Register of Copyrights, U.S. Copyright Office 1 (Jan. 24, 2011), available at http://www.copyright.gov/docs/termination/comments/2011/freundlich-law.pdf.

[36]. Id.

[37]. Id.

[38]. Id. (citing Korman, 182 F. 3d 1291 (11th Cir. 1999); Mills Music, 469 U.S. 153 (1985)).

[39]. Id.

[40]. See U. S. Copyright Office, supra note 4, at 7.

[41]. Id.

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