How Creators Can Recover Rights Under Copyright Termination

By Eric Perrott, Esq.

If you are a designer or creator, there is a good chance you’ve owned hundreds, if not thousands, of copyrights during your career. For creative professionals working on a contract basis, those copyrights will typically transfer to the person or company who paid for them.

However, it is not always easy for a creator to know the value of their work, especially early in their career. It is even more challenging for creators to predict which creative assets will be valuable in the long run. As a result, creative people are at an inherent disadvantage when negotiating the sale or license of their creative works, including songs, photographs, artwork, illustrations, novels, and even computer software.

What is Copyright Termination?

Congress (lobbied by various artist rights groups) recognized that creators might be inadequately compensated for their work through copyright transfer and enacted the 1976 amendment to the Copyright Act, which, among many other changes, gave artists who’ve entered long-term contracts or sold their creative works a new right, called “Copyright Termination.”

For creative works made after 1978, the original author can “terminate” a transfer of rights that they previously granted to any person or entity in the United States. There are some exceptions to this rule in addition to some “gap” rights in pre-1978 works, so if you have any questions about copyright termination, please contact an experienced attorney.

Many design agreements include express copyright transfer clauses that usually look something like this:

Upon receipt of payment for the Design, the Designer hereby assigns to the Customer, all Intellectual Property Rights which the Designer has or may in the future have in the Design.

A copyright transfer starts the 35-year clock for copyright termination, which may feel like a very long time, but in practice can go by quickly.

How Do Creators Benefit from Copyright Termination?

Any creator, who has created copyrighted material after 1976 can use a Notice of Copyright Termination to attempt to gain control over their copyrights. The examples below illustrate a few ways that creators have benefited from the use of copyright termination tactics.

A Hypothetical Example of Copyright Termination

The following example is a hypothetical situation based on a real-world issue.

It’s 1989, and an aspiring young graphic designer was hired by Gone Fishin’ LLC, an apparel company, to create a dozen fish designs for $2,000. The agreement was a straightforward design agreement, where the artist agreed to transfer all rights to the 12 watercolor fish paintings upon payment of the $2,000 fee. At the time, the hypothetical graphic designer was fresh out of school and was thrilled to get the work.

Company “Gone Fishin’ LLC” bought the designs and used them on the front of their line of t-shirts.

Within a year or two, the designs were a huge hit – Gone Fishin’ sold millions of dollars worth of fish-design t-shirts, and the designs became ingrained in the era’s pop culture. The graphic artist went on to do other things but never quite matched this level of success.

Gone Fishin’ LLC eventually waned in popularity but continued selling a steady stream of shirts yearly with these designs.

Fast forward about three decades. Nostalgia brands are reemerging again, and social media influencers and fashionistas alike have given the Gone Fishin’ shirts new life. The graphic designer, however, has an opportunity to get another bite at the apple and, thirty-five years after initially designing these shirts, profit from its valuable copyrighted works.

The graphic designer, through their lawyer, sends a Notice of Termination to the successor of Gone Fishin’ LLC, a big company called Corporate Fish LLC, which bought the rights a few years earlier. It states that, as of the termination date, the rights will return to the graphic designer, and the original designs cannot be used any further.

Typically, this Notice of Termination will initiate negotiations – Corporate Fish LLC is owned by savvy business owners who know how to sell apparel. The graphic artist does not. So, it might make sense for the graphic artist to enter into a new agreement with Corporate Fish LLC so that the artist can make money on the t-shirt sales without having to actually sell t-shirts (or find a new partner that can sell them on the graphic designer’s behalf).

Through negotiation, both parties agree that Corporate Fish LLC will provide the graphic designer with 5-7% of royalties from all sales, and a $15,000 flat fee. These types of negotiations are driven by these types of numbers, projections, and the risk exposure both sides are willing to accept. An experienced attorney can help negotiate these rates.

If the negotiation falls through, the graphic designer will become the owner of the works once again and will be able to use them as they see fit.

However, there are limits to this – if Corporate Fish LLC (or Gone Fishin’ LLC) created derivative works (new artwork based on the original artwork) then the termination will not apply to the derivative works. Also, if the original artwork contained any logos or trademarks belonging to Corporate Fish LLC, then the graphic artist cannot use those logos or trademarks in any way that could make consumers think that their reacquired art is related to Corporate Fish LLC.

In some circumstances, these limitations can make it difficult to market the artwork in the future, so these potential implications should be carefully considered during negotiations.

Real-World Examples of Copyright Termination

Copyright termination is not only available to graphic designers and artists. This right is available to all original authors of any copyrighted material created after 1976. Below are a few other circumstances where this right may apply.

An author vs. a movie studio

There have been a few high-profile cases of copyright termination in the media recently, such as the Top Gun: Maverick dispute. The original Top Gun film was inspired by author Ehud Yonany’s magazine article, which was similarly titled Top Guns. Shortly after the article’s release, Paramount Pictures received the rights to the story and used it to create the major motion picture Top Gun.

In 2018, Yonany’s heirs allegedly filed a “notice of termination” against Paramount to reclaim ownership of the Top Guns story. According to the heirs, they did not receive a response.

This week, Yonany’s heirs asked an LA court to rule that Paramount’s 2022 movie sequel, Top Gun: Maverick, is a derivative work of the Top Guns article, therefore, it is covered by their copyright ownership and that Paramount did not have the rights to create the movie sequel without the heirs’ permission. Further, they argued that as the movie was created after the rights were terminated, it effectively made the screenplay and resulting film an infringement of the original article.

Paramount potentially has some defenses to this infringement claim. They could argue that the “notice of termination” was not “noticed” correctly and was, therefore, ineffective. They may also argue that the Top Gun sequel used the “idea” of the original article (which is not subject to copyright) but did not copy any of the “expression” of that idea (which is subject to copyright.) Top Gun: Maverick passed $1 billion in sales worldwide, so while Paramount may have defenses, the stakes are large, and copyright termination will be at the center of this high-profile dispute.

Musicians who signed with record labels

In a case involving the 80’s music group, Village People, one member of the group notified the band’s record label that he was terminating his copyright transfers, including rights to the hit song “YMCA”.

Famous costumes

In 1978, creators Bonnie Erickson and Wayde Harrison designed the Phanatic mascot and in 1984 they assigned the mascot’s copyright to the Philadelphia Phillies. 30-some years later, Erickson and Harrison notified the Phillies that they were terminating their rights to the mascot. Upon receiving the termination notice, the Phillies promptly hired an artist to create a modified version of the Phanatic mascot.

The team also sued the creators of the original mascot arguing that the redesigned mascot was unaffected by the termination because it was a derivate work created before the team’s rights to the mascot were terminated. Ultimately, the parties reached an agreement that allowed the Phillies to continue using the Phanatic mascot, but this dispute goes to show that while the right of termination enables artists to recoup fair compensation for their works, it doesn’t necessarily allow them to renegotiate the terms of an agreement.

The Copyright Termination Process

The copyright termination process requires precise timing and proper notice, through a Notice of Copyright Termination. Essentially, the law requires that all parties be on notice of the termination at least two years before the termination occurs. There are also different ways to calculate the termination date.

1. Identify the specific “grant of rights” for your copyright

First, an author (or the author’s heirs) should identify the specific “grant of rights” that transferred or licensed any of the rights from the original author to another party in the U.S. This may be a design agreement, music publishing agreement, or other written agreement that gave an ongoing right to another party to use, publish, reproduce, publicly display, or otherwise utilize the copyrighted work.

Examples of “assignment” clauses or “exclusive licenses” are:

NOW, THEREFORE, the Assignor hereby assigns, transfers and relinquishes to Assignee, its successors and assigns, all of Assignor’s right, title, and interest in and to the Copyrights for the United States and all foreign countries, including all registrations or applications therefor, and all renewals and extensions thereof, in and to all works based upon, derived from, or incorporating the Copyrights, and in and to all causes of action, either in law or in equity for past, present or future infringement based on the Copyrights, and in and to all rights corresponding to the foregoing throughout the world, including but not limited to, the right to duplicate, reproduce, copy, distribute, display, license, adapt, and prepare derivative works from the Copyrights.

2. Ensure the copyright is eligible for copyright termination

Next, an author (or the author’s heirs) needs to make sure they are eligible for copyright termination in the first place. This article only discusses Section 203, which applies to grants executed by the author on or after January 1, 1978, regardless of whether the copyright registration in the author’s work was secured before or after that date.

If the creative work had multiple authors (like a band with multiple songwriters), a grant of rights can be terminated by a majority of such authors. If the termination is on behalf of an author’s heirs, then a grant of rights can generally be terminated by the author’s heir (if only one), a majority of the author’s heirs (in the case of 2 or more heirs), or author’s executor or trustee (if there are no heirs.)

For example, if Band A had five members, all of which are listed as authors of a song, three of the five band members would need to agree to sign the Notice of Termination to terminate a grant of rights, such as a publishing agreement with a record label they signed when they were younger.

3. Double check the copyright dates

Next, the author needs to double-check the dates to ensure the termination is timely. The Copyright Office has a few charts to help determine these dates:

Grants Executed by the Author on or after January 1, 1978 (17 USC § 203):

• Grant Did Not Convey Right of Publication
• Grant Conveyed Right of Publication (Calculation Based on Date of Publication)
• Grant Conveyed Right of Publication (Calculation Based on Date of Execution)

4. File the Notice of Copyright Termination

Finally, the author needs to file the Notice with the Copyright Office using the appropriate cover sheet.

Instances when the Copyright Termination Process Cannot Be Used

While it can be a powerful tool, copyright termination has limits. Termination rights do not apply in situations where the original work was created as a work-for-hire. If you create something pursuant to your job (regardless of whether you’re a contractor or freelancer), on company time, using company property/resources, then there is a good chance that you created that as a “work for hire.”

In these situations, the employer is automatically designated as the “author,” not the individual employee. So, in the hypothetical example above, if the graphic designer were an employee of Gone Fishin’ LLC and created the designs, then they would not be able to terminate the Gone Fishin’ LLC’s rights.

Further, the right of termination does not apply to derivative works. If the party that you transferred your rights to was authorized to make derivatives of your original work, then that party is not required to stop using those derivative works even if their right to use the original work is terminated.

For example, if the party that received rights to an original still drawing animated it and added assets, they’d still be able to use the animation they created based on the still image. In the Top Gun dispute, even if the heirs to the original author of the article the first Top Gun movie was based on successfully terminated the grant of rights to Paramount, Paramount would not be stopped from making copies and selling the original Top Gun movie, as the original would be a derivative work.

Finally, to validly terminate another’s rights, you must give them notice of the termination. The terms of the Copyright Act require authors to give notice of termination to rights holders no less than two years and more than ten years before the effective date of the termination. If you miss those dates, the termination window closes, and you can no longer terminate the agreement.

Final Thoughts

Terminating a grant of rights through copyright termination can be complicated and requires specific procedures and several different legal determinations to form the best possible strategy. If done correctly, copyright termination can be a great chance for creators to get a second chance to profit from their work.

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Eric Perrott, Esq.

Eric Perrott, Esq. is a trademark and copyright attorney committed to providing high-quality legal services for any sized budget. Eric’s ability to counsel clients through any stage of trademark and copyright development and protection allows him to provide his clients with personalized advice and unique analysis. Eric can be reached directly at: eric@gerbenlawfirm.com. The contents of this blog are for informational purposes only and may not be relied on as legal advice.