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What Creative People Should Know About Copyright Termination

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Copyright is supposed to protect the economic rights of creative people, right? That’s the idea, at least. But all too often, copyright law ends up protecting the economic rights of corporations that have convinced creators to transfer ownership to their work. And worse still, sometimes that transfer happens for compensation that ultimately proves to be grossly unfair.

When Congress revised the federal copyright regime in 1978, the lawmakers were cognizant of this tendency. The fundamental difficulty they sought to address was that it’s usually impossible for an artist to know how much a work is really worth until they have already parted rights with it. In other words, the economic potential in creative work remains an unknown value until it is handed over to an entity capable of marketing and developing it as a product. And by the time that happens, it may be too late to effectively exploit that potential.

 

To help solve this problem, Congress introduced a powerful new tool for artists: the ability to terminate transfers of copyright after a defined period of time. The termination right was developed specifically to deal with the problem discussed above; the House committee report said a change was “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.”

Although copyright termination is one of the most complex features of an already near-impenetrable body of federal copyright law, the underlying concept is simple: artists and writers can take back the rights to their creations after 25 years. Of course, it’s far more complicated than that. For simplicity and brevity, I won’t get into the technical requirements for copyright termination (e.g. timeframes in which notice must be served, required disclosures within the notice, special rules pre-1978 works, etc.).

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But, here are two things every creative person should know about copyright termination.

First, you can’t terminate the rights to “works made for hire.” This means that if you did the work while actually employed by a person or company, then the copyright belongs to them. Since you never owned the rights it, there’s nothing for you to take back. On the other hand, if you created the work on your own, and then sold it to somebody as a freelancer or independent contractor, then it probably was not a work made for hire. This distinction makes all the difference: employees can’t terminate, but freelancers can.

Second, the termination right can’t be waived or bargained away by contract. Congress intended the right to be legally indestructible. That means that even if the transfer contract says expressly something like, “I agree to never, ever, exercise my termination right, and any such attempt shall be deemed ineffective,” you can still go ahead and exercise your termination right. Congress included this feature so that publishers couldn’t evade termination simply by adding a clause or two to their contracts. Since the problem was the disparity in bargaining power to begin with, allowing that kind of an escape hatch would defeat the termination right’s central purpose. To me, this is the provision’s defining characteristic. But as we’ll see below, certain courts have bent over backwards to interpret this provision of the law.

To young and struggling creators, 25 years may seem like quite a long time. But even if it sounds remote, it’s hard to overemphasize how important understanding the power of termination can be in the long run. For a truly unsettling illustration of just how important an author’s termination right is to striking a fair bargain between author and publisher, one may look no further than what happened to the estates of Superman’s founding fathers, Jerry Siegel and Joe Shuster.  DC Comics has had a long, tortured history with these two, with complex, acrimonious lawsuits spanning decades and little by way of fair dealing (on both sides).

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Shuster passed away in 1992. At the time, his sister and heir Jean Peavy contacted DC Comics, asking for “[a]ny help that Time Warner could give to the family of Joe Shuster to pay his final debts and expenses” and that any such help  “would be warmly appreciated.” Hardly an overture for negotiations over a world-famous multi-million dollar piece of intellectual property, this was essentially a grieving sister looking for help in settling her late brother’s estate. Jean’s brother Frank got involved, and DC eventually offered to settle Joe Shuster’s debts and increase Frank’s annual survivor benefits from $5,000 to $25,000.

In exchange, and at a time that Jean was grieving, desperate for money, and essentially powerless, she signed an agreement purporting to settle and waive all claims she had or ever would have respecting her succeeding interest in the Superman copyright. She signed the waiver in exchange for an additional $20,000 a year in survivor payments to her brother, as well as DC’s agreement to take care of the Shuster estate’s remaining debts.

Of course, one would be forgiven for assuming that the 1992 waiver that Jean signed would be unenforceable. After all, the express terms of the statute say, “termination of the [copyright] grant may be effectednotwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant.” But in a decision that came out last year, a federal district court in California came to the opposite conclusion. The district judge concluded that Jean’s 1992 agreement superseded Siegel and Shuster’s 1938 agreement. So Shuster’s family never got the rights back to Superman.

The myriad reasons for why this was a legally unsound decision are numerous and complex. I don’t have the space for them. But unfortunately, the decision rested on some federal circuit court decisions that probably aren’t going anywhere unless the Supreme Court decides to get involved. It doesn’t look like that’s happening at the moment.

Meanwhile, and after its own mess of legal hurdles, the Siegel estate fared much better in its termination efforts. To make a long story short, they succeeded in serving termination notice as to Siegel’s half of the copyright. And what did that mean? It meant a lot of money for his family – something to the tune of $20 million.

So there you have it, in stark contrast: Siegel’s family gets tens of millions, while Shuster’s family got practically nothing. And what was the difference? Siegel’s estate had effectively exercised its termination right, while Shuster’s estate hadn’t.

Needless to say, if you have any real questions about copyright termination, those are what lawyers are for. The above is intended merely to introduce the concept, but of course, basic awareness is always the first step. If Jean Peavy had only known in 1992 what she was signing away, things may have been different for the Shuster family.

Don’t let that happen to you!

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