20 May Recapturing Copyrights
Help your clients make money from their works
This is a big year for copyright in the United States. For the first time in 20 years, on Jan. 1, 2019, works first published in the United States in the early 20th century fell into the public domain— making them free to copy or use to create derivative works based on those public domain works.1 At the same time, rights in the United States to certain works created in the early 1960s and early 1980s can now be recaptured by the authors, if those authors are still alive, or if deceased, by their heirs.2 On recapture, those authors or their heirs can make a new agreement with the same or a new party on potentially better terms. The grand scheme about owning rights for a limited period of time so that works will eventually pass into the public domain, as well as Congress’ intent to give creators a second bite at the revenue apple, is now in full operation, after years of legislative tinkering. Recapturing of rights in the United States—U.S. law doesn’t apply in foreign countries (more on that later)—offers creators and their families a new opportunity to make more money from these works.
Copyright is Territorial
Copyright law is territorial in nature. As such, the U.S. laws don’t apply in Canada or France, for example, nor do the laws of Germany or Australia apply in the United States. Each country can establish its own laws, rights and obligations. While these laws, rights and obligations are often similar and consistent in many respects around the world, there are important differences from country to country. For example, there was no copyright law in Cambodia when one of our clients made a movie there using local works, so works created there could be used by the rest of the world at no cost.3 Conversely, many European countries created the “making available” right so that in the music area, for example, merely offering the ability to listen to a song on a website, even if the song is never played or downloaded, makes the website owner obligated to pay the copyright holder. On the other hand, in the United States, no such right exists so that only the actual copying or performance of a song generates revenue for the copyright owners.4 Certainly, there’s an effort to ensure that certain rights exist under all copyright laws, such as the owner of the copyright owning the exclusive right to copy, perform or display certain works. There’s also an effort to harmonize the term of copyright protection among the countries of the world. Further, for a country to become a member of the leading international treaty, the Berne Convention, there must be no formalities required to secure copyright protection. Under U.S. law, for example, copyright subsists from the moment of creation when the work is fixed in a tangible medium of expression, but registration is only required to enforce in court any rights granted to the owner under the statute.5
British Reversionary Rights
Under the U.K. Copyright Law, rights granted by authors in copyrighted works created between 1911 and 1957 are automatically vested in the author’s heirs 25 years after the author’s death. This concept also applied across the British Commonwealth. Over time, however, each of the Commonwealth territories elected to rescind those rights, so their importance in copyright law is diminishing each year. However, there are some important countries where this concept may still apply. These include the United Kingdom, Ireland, Canada, Australia and New Zealand, Israel, South Africa, Jamaica and other Caribbean countries. So, the concept of copyright recapture isn’t unique to the United States.6
U.S. Copyright Law Background
The 1909 U.S. Copyright Act provided that works registered for copyright would have an original term of 28 years, and, if a renewal application was timely and properly filed, a renewal term of 28 additional years. In the 1976 U.S. Copyright Act (the 1976 Act), which became effective on Jan. 1, 1978, as the rest of the world was providing for copyright of much longer duration, Congress extended the term for another 19 years, for a total of 75 years. Then, under the 1998 Sonny Bono Copyright Term Extension Act (Sonny Bono Act), works that weren’t works for hire received another 20 years, for a total of 95 years from their publication dates. In the interim, Congress eliminated the need to file renewal applications, so the term of copyright protection wasn’t dependent on filing properly completed and timely renewal applications. In addition, the Sonny Bono Act effectively protected works that were created in 1923 or after and not yet in the public domain until Jan. 1, 2019 or later.7
Current Term of Copyright
Now, like most of the rest of the world, under the 1976 Act, generally speaking, works created after Jan. 1, 1978 —other than works made for hire—are protected in the United States for the life of the author, plus 70 years, or if it’s a joint work prepared by two or more authors, then it’s 70 years after the death of the last surviving author.8 But, if the author, or his now-deceased family member, created a work and granted rights “in perpetuity” or similar language, the author or, if the author has passed away, certain specified heirs, has the right to recapture the U.S. rights to those works. This is true regardless of where the work was created geographically. In general, works created after Jan. 1, 1978 and licensed or assigned to another person or company are subject to recapture 35 years after the grant, or, if the grant has a right of publication, then it’s measured from the earlier of: (1) 35 years from the date of publication, or (2) 40 years from the date of the grant.9 A work published in 1979 was susceptible to recapture in 2014. Works published in 1984 are eligible for recapture in 2019,10 35 years after publication. Next year, in 2020, works published in 1985 will be eligible for recapture, and so on. Generally, for pre-1978 works, those works created in 1963 may also be recaptured in 2019, 56 years after creation, under certain conditions.11 It’s important to note that unlike the British Reversionary Rights, which provide that rights revert to the author’s heirs 25 years after death, U.S. rights aren’t recaptured unless notice of termination is timely served and properly filed.
How to Recapture U.S. Rights
The steps to be followed to recapture U.S. rights are detailed and tricky. The recapture doesn’t happen automatically. One misstep and the recapture won’t be effective. The law says that to recapture the rights, notice must be given within a proper time frame (called the “window”), papers must be filed in the Copyright Office and a specified amount of time must lapse. The successful recapture of these rights requires substantial advance planning. It requires having the proper contracts, the author’s signature or the signature of a majority in interest of certain of the author’s heirs who are specified in the statute. Also, if more than one author signed the original grant, then to terminate such grant, a majority of the authors must join in serving notice of termination. The recapturing process is best accomplished with assistance from an experienced copyright lawyer to help navigate the complexities and nuances involved. Planning in advance of a recapture is essential to its success. The hardest part is calculating the dates on which notice must be sent and the effective dates of such notice of termination. The author or his specified heirs must give notice no earlier than 10 years and no later than two years before the rights would vest. Notice must be provided not to the original grantee, but to the current owner of the rights, who’s sometimes difficult to find, especially because catalogs of copyrights are frequently bought and sold. Notice must be properly served, and copies of the notice and a special form must be filed in the Copyright Office. As mentioned above, works created before Jan. 1, 1978 are eligible for recapture 56 years after registration or publication. Works created on or after Jan. 1, 1978 are eligible for recapture 35 years from the date of publication or 40 years from the date of the grant depending on the grant.12
After Notice, but Before Vesting
During the period between: (1) the service of proper notice along with filing a recordation in the copyright office, and (2) the effective date of recapture, only the existing right holder may negotiate and reach an agreement with the author or the author’s heirs regarding these terminated rights. That gives the existing owner a leg up to keep the rights. Once the author or the author’s heirs recapture those rights, the exclusivity period ends, and the author or the author’s heirs are free to make a new deal with anyone—or just keep the rights themselves.13
Estate Planning
Estate-planning professionals should consider how, when and with whom termination rights will vest and make sure the proper parties are well versed in how to exercise these rights. The Copyright Act doesn’t prohibit the children of an author from agreeing among themselves how to handle these rights, prior to the author’s demise. Further, while an author’s will can’t dictate what happens to these rights, because the statutory scheme may not be altered, the author’s will can indicate how the deceased wants his works handled, who’ll administer them for all the children and similar related issues. The will can’t, however, mandate, for example, that only two of five children can exercise the recapture rights for all the children, because that clearly violates the statutory scheme.
Recapture isn’t Public Domain
This right of recapture may be the antithesis of the public domain. Because the U.S. Constitution says that copyright should be secured to authors for a “limited time,” it’s appropriate that works fall eventually into the public domain. Before 1998, works did fall into the public domain every year. Under the 1976 Act, nothing went into the public domain for the last 20 years. Now, pre-1924 works, like Kahlil Gibran’s The Prophet and Robert Frost’s “Stopping by Woods on a Snowy Evening” and songs like “Who’s Sorry Now” by Kalmar, Ruby and Snyder (which is the song that, after a 1985 U.S. Supreme Court Case, helped set the stage about how the recapture actually works) are now in the public domain.14 These works may now be published by others with no royalty due to the authors, and movies, plays and other works may be created based on those public domain works without paying for the underlying rights. But, while the other works fall into the public domain, the legislative construct to give authors and their heirs another chance to make a deal also is developing full steam ahead. Congress recognized that an author or creator has less bargaining power when making his first deal. Even though that first contract may grant rights for what appears to be forever, the law says that “if, and only if, you follow these procedures, you get to make a new deal for your U.S. rights.”
Relevant, Recent Litigation
After serving its notice of termination, the U.K. band Duran Duran was met with litigation from EMI Music Publishing (EMI), which asserted that the contract by which EMI secured its rights was governed by U.K. law. EMI also argued that under that contract, therefore, there was no basis for the band to terminate rights in the United States. Due to some procedural issues, and in my view, a failure of proof, EMI was able to defeat the band’s ability to terminate rights. Many copyright lawyers feel the decision is wrong and that it may even violate the Berne Convention. Failing to bring this violation to the court’s attention, as well as the lack of expert testimony about how U.S. law works, resulted in a decision in the publisher’s favor.15 Shortly after that decision, Sir Paul McCartney, one of the principal songwriters of The Beatles, then filed suit against EMI, seeking to make certain that his recapture of rights would be effective. Not surprisingly, that lawsuit was settled, and EMI didn’t even file an answer. While the terms of the settlement are confidential, I believe that the recapture notices were effective, and Sir Paul was able to achieve better financial terms for his songs as each song was recaptured. This, in fact, is the very essence of the statutory scheme, allowing the creator another bite at the revenue apple.16 Finally, while many cases filed and decisions rendered address the recapture process and right, the gist of which I’ve incorporated into the article, a new case, John Waite, Joe Ely et al. v. UMG Recordings Inc. et al., was filed that touches on the complicated issue of whether a recording is a work made for hire. As mentioned above, if a work is made for hire, it’s owned by the company engaging the author, from the moment of creation, and as such, there’s no grant of rights that may be terminated. Under the definition of “work for hire,” a work specially ordered or commissioned may be treated as a work made for hire if an agreement is signed in advance of the creation of the work. Another condition, however, is that the type of work created is listed as one of the nine categories of works eligible to be a work for hire. A recording isn’t one of the nine categories, although a compilation is one. Most recent recording agreements provide that the recordings delivered to the record company are to be treated as works for hire, but if such treatment is found ineffective, such rights are deemed assigned to the record company. U.S. rights to a work transferred by assignment may be recaptured, but U.S. rights to a work for hire may not be. The recent litigation posits, in a class action suit, on behalf of all artists who sought to recapture their rights from the labels, that the works created weren’t for hire, and therefore the recordings are eligible for recapture.17 My view is that it will be very difficult to certify that as a plaintiff class because of the challenges in determining who the authors of the work are—do the authors include, for example, engineers, mixers, side men and backup singers? If so, to what extent do they, and what percentage of them, need to execute a notice of termination to effectively recapture these rights? I think this case will die on a motion to dismiss. But, there will always be a new way to challenge the status quo, and efforts to expand these rights by authors and their heirs will be met with equal opposition from those who seek to retain them and limit these rights.
Investment in Legacy
If your client or his family member was a songwriter or even a recording artist (in some cases), a photographer, illustrator or writer of books or magazine articles, he may have rights that could be worth significant money to him and his family. Further, exercising these recapture rights may be investment in the legacy of his loved ones. Exercising these recapture rights can be complicated and tricky, but ignoring them is simply a mistake.
Endnotes
1. https://law.duke.edu/cspd/publicdomainday/2019/.
2. www.copyright.gov/recordation/termination.html.
3. www.wipo.int/edocs/lexdocs/laws/en/kh/kh003en.pdf.
4. www.copyright.gov/docs/making_available/making-available-right.pdf.
5. www.copyright.gov/circs/circ01.pdf.
6. See, e.g., Chappell & Co. Ltd v Redwood Music Ltd., [1981] RPC 337(HL).
7. www.copyright.gov/circs/circ15a.pdf.
8. www.copyright.gov/title17/92chap3.html.
9. www.copyright.gov/title17/92chap3.html.
10. www.copyright.gov/title17/92chap2.html.
11. www.copyright.gov/title17/92chap3.html#304.
12. www.copyright.gov/title37/201/37cfr201-10.html; www.copyright.gov/ docs/203.html.
13. www.copyright.gov/title17/92chap3.html; www.copyright.gov/title17/92 chap2.html.
14. https://law.duke.edu/cspd/publicdomainday/2019/.
15. www.bailii.org/ew/cases/EWHC/Ch/2016/3091.html.
16. www.scribd.com/document/336935184/Mccartney-termination#fullscreen&- from_embed.
17. www.documentcloud.org/documents/5726454-Waite-Termination.html.