MUSINGS OF A STORY MERCHANT

Monday, February 11, 2013

Guest Post: Will the Copyright Act Open a Floodgate of Contract Rewrites for Authors in the Year 2013?




By Lloyd J. Jassin |


Publishing attorney Lloyd Jassin has been writing and speaking about the termination clause for more than two years. He was a major source for an August 2011 PW story on the clause and what it could mean for the book industry. With the first authors able to opt out of old contracts starting in January 2013, PW asked Jassin for a reminder about the termination provision and how it is triggered.

When the Copyright Act was passed in 1976, little thought was given to the future impact of an esoteric provision that gave individual authors the “option” to terminate book contracts and “recapture control” of their copyrights. This provision was designed to protect against bad deals for authors—and is intended to aid authors who signed contracts with little bargaining power and who were not aware of the potential future value of their work. Accordingly, Congress embedded in the Copyright Act a “reset button” for every post-1977 contract, which, when activated 35 years after a contract was signed, returns ownership and control of the copyright to the author or author’s heirs.

This means that, starting in 2013, authors and their heirs or estates will be able to terminate virtually any publishing contract entered into on or after January 1, 1978. While some authors will use this powerful right to reclaim ownership and control of their books, others will leave their publishing contracts intact, but extract more favorable terms for doing so.

Given that 35-year “reset button,” the first author termination right to vest began taking effect on January 1, 2013. There is, however, a very specific process that must be followed in order for authors to successfully reclaim control of their copyrights. To successfully terminate the copyrights, holders must provide “legally sufficient” termination notices, which need to be sent and recorded. What is meant by legally sufficient? To give a precise summary, you have to know that grants signed after 1977 can be terminated during a five-year window starting 35 years from the date the author-publisher agreement was signed. Since termination notices can go out as early as 10 years before the effective date of termination, or as late as two years prior, notices for 1978 works can be served as late as 2016. To complete the termination, the notice must also be recorded with the Copyright Office. Boring stuff, until you get the big picture.

This powerful “re-valuation” mechanism, the termination, trumps written agreements—including valid and duly signed author contracts or licenses which state they are in perpetuity.

While exceedingly complex, no one should underestimate the impact this termination process is already having on thepublishing industry. For example, to avoid losing valuable backlist titles, publishers must, on a rolling basis, respond in a timely manner to notices of termination, and renegotiate contracts entered into 35 years ago. Ergo, 2013 will simultaneously be cannibalistic, with publishers looking to take over backlists from competitors, and liberating for authors and agents, who have unprecedented publishing options available to them given the plethora of new digital distribution platforms. To that end, we will see continued legal skirmishes, as publishers increase efforts to retain copyright. We need look no further than the recent case involving Penguin and the Steinbeck estate, where the publisher successfully challenged the recapture of copyrights by an author’s family.

With the exception of true works for hire, it is not hypothetical speculation to say that every author contract entered into on or after January 1, 1978, is subject to termination. But authors cannot delay, because failure to send a timely (or properly drafted) notice can be the end of the road for those wishing to recapture control of their books. Because these notices must conform to strict legal requirements prescribed by statute, there are many traps for the unwary author or heir, affording publishers opportunities to challenge deficient or late notices.

A Bigger Bite of the Backlist

While this article focuses on 1978 and beyond, books published 56 and 75 years ago are also subject to copyright recapture under a less publicized, but equally powerful, section of the 1976 Copyright Act. For example, in 2008, the U.S. Court of Appeals for the Ninth Circuit returned rights to the 1938 children’s story Lassie Come Home to the author’s family. Unlike the “35-year rule,” here the key date was the date of copyright, not the date the contract or license was signed. In this instance, Congress thought it was fair to award the additional term of copyright conferred by the controversial Copyright Term Extension Act to authors and their families, not their publisher partners. Like the 35-year rule, it is the author’s responsibility to understand whether he or she is eligible to terminate.

Copyright used to be an esoteric subject. That is no longer the case. In 2013, legacy authors, or their survivors, will be asking for explanations as to why they shouldn’t terminate their book contracts. To retain backlist titles, publishers will have to accept that these older titles are going to generate less revenue on a per unit basis. One certainty as a result of this: the price of doing business in publishing is going up in 2013.

The Termination Clause

The claim system works on a 35-year plan. Provided certain conditions are met, a publishing contract can be terminated during a five-year window, which begins 35 years after initial publication, or 40 years from the date the contract was signed. The termination right applies to any book published in or after 1978. Taking a work published in 1978 as an example, the earliest the termination right could take effect is 2013 (since it takes two years after filing to get the rights back), but the latest a termination notice could be filed is 2016, in order to fall within the five-year eligibility window (because the window expires in 2018).

Lloyd J. Jassin is a copyright attorney and adjunct professor at the NYU-SCPS Center for Publishing. He blogs at www.copylaw.org.

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