17 U.S.C. § 203 — Termination of transfers and licenses

Page 135 TITLE 17—COPYRIGHTS § 203 alienation, or hypothecation,’’ including assignments, mortgages, and exclusive licenses, but not including nonexclusive licenses. Representatives of motion pic- ture producers have argued that foreclosures of copy- right mortgages should not be left to varying State laws, and that the statute should establish a Federal foreclosure system. However, the benefits of such a sys- tem would be of very limited application, and would not justify the complicated statutory and procedural requirements that would have to be established. Clause (2) of subsection (d) contains the first explicit statutory recognition of the principle of divisibility of copyright in our law. This provision, which has long been sought by authors and their representatives, and which has attracted wide support from other groups, means that any of the exclusive rights that go to make up a copyright, including those enumerated in section 106 and any subdivision of them, can be transferred and owned separately. The definition of ‘‘transfer of copy- right ownership’’ in section 101 makes clear that the principle of divisibility applies whether or not the transfer is ‘‘limited in time or place of effect,’’ and an- other definition in the same section provides that the term ‘‘copyright owner,’’ with respect to any one exclu- sive right, refers to the owner of that particular right. The last sentence of section 201(d)(2) adds that the owner, with respect to the particular exclusive right he or she owns, is entitled ‘‘to all of the protection and remedies accorded to the copyright owner by this title.’’ It is thus clear, for example, that a local broad- casting station holding an exclusive license to transmit a particular work within a particular geographic area and for a particular period of time, could sue, in its own name as copyright owner, someone who infringed that particular exclusive right. Subsection (e) provides that when an individual au- thor’s ownership of a copyright, or of any of the exclu- sive rights under a copyright, have not previously been voluntarily transferred, no action by any governmental body or other official or organization purporting to seize, expropriate, transfer, or exercise rights of owner- ship with respect to the copyright, or any of the exclu- sive rights under a copyright, shall be given effect under this title. The purpose of this subsection is to reaffirm the basic principle that the United States copyright of an indi- vidual author shall be secured to that author, and can- not be taken away by any involuntary transfer. It is the intent of the subsection that the author be enti- tled, despite any purported expropriation or involun- tary transfer, to continue exercising all rights under the United States statute, and that the governmental body or organization may not enforce or exercise any rights under this title in that situation. It may sometimes be difficult to ascertain whether a transfer of copyright is voluntary or is coerced by cov- ert pressure. But subsection (e) would protect foreign authors against laws and decrees purporting to divest them of their rights under the United States copyright statute, and would protect authors within the foreign country who choose to resist such covert pressures. Traditional legal actions that may involve transfer of ownership, such as bankruptcy proceedings and mort- gage foreclosures, are not within the scope of this sub- section; the authors in such cases have voluntarily con- sented to these legal processes by their overt actions— for example, by filing in bankruptcy or by hypoth- ecating a copyright. Editorial Notes AMENDMENTS 1978—Subsec. (e). Pub. L. 95–598 inserted ‘‘, except as provided under title 11’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1978 AMENDMENT Amendment effective Oct. 1, 1979, see section 402(a) of Pub. L. 95–598 set out as an Effective Date note pre- ceding section 101 of Title 11, Bankruptcy. § 202. Ownership of copyright as distinct from ownership of material object Ownership of a copyright, or of any of the ex- clusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phono- record in which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any mate- rial object. (Pub. L. 94–553, title I, § 101, Oct. 19, 1976, 90 Stat. 2568.) HISTORICAL AND REVISION NOTES HOUSE REPORT NO. 94–1476 The principle restated in section 202 is a fundamental and important one: that copyright ownership and own- ership of a material object in which the copyrighted work is embodied are entirely separate things. Thus, transfer of a material object does not of itself carry any rights under the copyright, and this includes trans- fer of the copy or phonorecord—the original manu- script, the photographic negative, the unique painting or statue, the master tape recording, etc.—in which the work was first fixed. Conversely, transfer of a copy- right does not necessarily require the conveyance of any material object. As a result of the interaction of this section and the provisions of section 204(a) and 301, the bill would change a common law doctrine exemplified by the deci- sion in Pushman v. New York Graphic Society, Inc., 287 N.Y. 302, 39 N.E.2d 249 (1942). Under that doctrine, au- thors or artists are generally presumed to transfer common law literary property rights when they sell their manuscript or work of art, unless those rights are specifically reserved. This presumption would be re- versed under the bill, since a specific written convey- ance of rights would be required in order for a sale of any material object to carry with it a transfer of copy- right. § 203. Termination of transfers and licenses granted by the author (a) CONDITIONS FOR TERMINATION.—In the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is sub- ject to termination under the following condi- tions: (1) In the case of a grant executed by one au- thor, termination of the grant may be effected by that author or, if the author is dead, by the person or persons who, under clause (2) of this subsection, own and are entitled to exercise a total of more than one-half of that author’s termination interest. In the case of a grant ex- ecuted by two or more authors of a joint work, termination of the grant may be effected by a majority of the authors who executed it; if any of such authors is dead, the termination inter- est of any such author may be exercised as a unit by the person or persons who, under clause (2) of this subsection, own and are enti- tled to exercise a total of more than one-half of that author’s interest. Page 136 TITLE 17—COPYRIGHTS § 203 (2) Where an author is dead, his or her termi- nation interest is owned, and may be exer- cised, as follows: (A) The widow or widower owns the au- thor’s entire termination interest unless there are any surviving children or grand- children of the author, in which case the widow or widower owns one-half of the au- thor’s interest. (B) The author’s surviving children, and the surviving children of any dead child of the author, own the author’s entire termi- nation interest unless there is a widow or widower, in which case the ownership of one- half of the author’s interest is divided among them. (C) The rights of the author’s children and grandchildren are in all cases divided among them and exercised on a per stirpes basis ac- cording to the number of such author’s chil- dren represented; the share of the children of a dead child in a termination interest can be exercised only by the action of a majority of them. (D) In the event that the author’s widow or widower, children, and grandchildren are not living, the author’s executor, administrator, personal representative, or trustee shall own the author’s entire termination interest. (3) Termination of the grant may be effected at any time during a period of five years be- ginning at the end of thirty-five years from the date of execution of the grant; or, if the grant covers the right of publication of the work, the period begins at the end of thirty- five years from the date of publication of the work under the grant or at the end of forty years from the date of execution of the grant, whichever term ends earlier. (4) The termination shall be effected by serv- ing an advance notice in writing, signed by the number and proportion of owners of termi- nation interests required under clauses (1) and (2) of this subsection, or by their duly author- ized agents, upon the grantee or the grantee’s successor in title. (A) The notice shall state the effective date of the termination, which shall fall within the five-year period specified by clause (3) of this subsection, and the notice shall be served not less than two or more than ten years before that date. A copy of the notice shall be recorded in the Copyright Office before the effective date of termi- nation, as a condition to its taking effect. (B) The notice shall comply, in form, con- tent, and manner of service, with require- ments that the Register of Copyrights shall prescribe by regulation. (5) Termination of the grant may be effected notwithstanding any agreement to the con- trary, including an agreement to make a will or to make any future grant. (b) EFFECT OF TERMINATION.—Upon the effec- tive date of termination, all rights under this title that were covered by the terminated grants revert to the author, authors, and other persons owning termination interests under clauses (1) and (2) of subsection (a), including those owners who did not join in signing the notice of termi- nation under clause (4) of subsection (a), but with the following limitations: (1) A derivative work prepared under author- ity of the grant before its termination may continue to be utilized under the terms of the grant after its termination, but this privilege does not extend to the preparation after the termination of other derivative works based upon the copyrighted work covered by the ter- minated grant. (2) The future rights that will revert upon termination of the grant become vested on the date the notice of termination has been served as provided by clause (4) of subsection (a). The rights vest in the author, authors, and other persons named in, and in the proportionate shares provided by, clauses (1) and (2) of sub- section (a). (3) Subject to the provisions of clause (4) of this subsection, a further grant, or agreement to make a further grant, of any right covered by a terminated grant is valid only if it is signed by the same number and proportion of the owners, in whom the right has vested under clause (2) of this subsection, as are re- quired to terminate the grant under clauses (1) and (2) of subsection (a). Such further grant or agreement is effective with respect to all of the persons in whom the right it covers has vested under clause (2) of this subsection, in- cluding those who did not join in signing it. If any person dies after rights under a termi- nated grant have vested in him or her, that person’s legal representatives, legatees, or heirs at law represent him or her for purposes of this clause. (4) A further grant, or agreement to make a further grant, of any right covered by a termi- nated grant is valid only if it is made after the effective date of the termination. As an excep- tion, however, an agreement for such a further grant may be made between the persons pro- vided by clause (3) of this subsection and the original grantee or such grantee’s successor in title, after the notice of termination has been served as provided by clause (4) of subsection (a). (5) Termination of a grant under this section affects only those rights covered by the grants that arise under this title, and in no way af- fects rights arising under any other Federal, State, or foreign laws. (6) Unless and until termination is effected under this section, the grant, if it does not provide otherwise, continues in effect for the term of copyright provided by this title. (Pub. L. 94–553, title I, § 101, Oct. 19, 1976, 90 Stat. 2569; Pub. L. 105–298, title I, § 103, Oct. 27, 1998, 112 Stat. 2829; Pub. L. 107–273, div. C, title III, § 13210(9), Nov. 2, 2002, 116 Stat. 1909.) HISTORICAL AND REVISION NOTES HOUSE REPORT NO. 94–1476 The Problem in General. The provisions of section 203 are based on the premise that the reversionary provi- sions of the present section on copyright renewal (17 U.S.C. sec. 24 [section 24 of former title 17]) should be eliminated, and that the proposed law should sub- stitute for them a provision safeguarding authors against unremunerative transfers. A provision of this sort is needed because of the unequal bargaining posi- Page 137 TITLE 17—COPYRIGHTS § 203 tion of authors, resulting in part from the impossibility of determining a work’s value until it has been ex- ploited. Section 203 reflects a practical compromise that will further the objectives of the copyright law while recognizing the problems and legitimate needs of all interests involved. Scope of the Provision. Instead of being automatic, as is theoretically the case under the present renewal pro- vision, the termination of a transfer or license under section 203 would require the serving of an advance no- tice within specified time limits and under specified conditions. However, although affirmative action is needed to effect a termination, the right to take this action cannot be waived in advance or contracted away. Under section 203(a) the right of termination would apply only to transfers and licenses executed after the effective date of the new statute [Jan. 1, 1978], and would have no retroactive effect. The right of termination would be confined to inter vivos transfers or licenses executed by the author, and would not apply to transfers by the author’s successors in interest or to the author’s own bequests. The scope of the right would extend not only to any ‘‘transfer of copyright ownership,’’ as defined in section 101, but also to nonexclusive licenses. The right of termination would not apply to ‘‘works made for hire,’’ which is one of the principal reasons the definition of that term as- sumed importance in the development of the bill. Who Can Terminate a Grant. Two issues emerged from the disputes over section 203 as to the persons em- powered to terminate a grant: (1) the specific classes of beneficiaries in the case of joint works; and (2) whether anything less than unanimous consent of all those enti- tled to terminate should be required to make a termi- nation effective. The bill to some extent reflects a com- promise on these points, including a recognition of the dangers of one or more beneficiaries being induced to ‘‘hold out’’ and of unknown children or grandchildren being discovered later. The provision can be summa- rized as follows: 1. In the case of a work of joint authorship, where the grant was signed by two or more of the authors, majority action by those who signed the grant, or by their interests, would be required to terminate it. 2. There are three different situations in which the shares of joint authors, or of a dead author’s widow or widower, children, and grandchildren, must be di- vided under the statute: (1) The right to effect a ter- mination; (2) the ownership of the terminated rights; and (3) the right to make further grants of reverted rights. The respective shares of the authors, and of a dead author’s widow or widower, children, and grand- children, would be divided in exactly the same way in each of these situations. The terms ‘‘widow,’’ ‘‘wid- ower,’’ and ‘‘children’’ are defined in section 101 in an effort to avoid problems and uncertainties that have arisen under the present renewal section. 3. The principle of per stirpes representation would also be applied in exactly the same way in all three situations. Take for example, a case where a dead au- thor left a widow, two living children, and three grandchildren by a third child who is dead. The widow will own half of the reverted interests, the two children will each own 162⁄3 percent, and the three grandchildren will each own a share of roughly 51⁄2 percent. But who can exercise the right of termi- nation? Obviously, since she owns 50 percent, the widow is an essential party, but suppose neither of the two surviving children is willing to join her in the termination; is it enough that she gets one of the children of the dead child to join, or can the dead child’s interest be exercised only by the action of a majority of his children? Consistent with the per stir- pes principle, the interest of a dead child can be exer- cised only as a unit by majority action of his sur- viving children. Thus, even though the widow and one grandchild would own 551⁄2 percent of the reverted copyright, they would have to be joined by another child or grandchild in order to effect a termination or a further transfer of reverted rights. This principle also applies where, for example, two joint authors ex- ecuted a grant and one of them is dead; in order to ef- fect a termination, the living author must be joined by a per stirpes majority of the dead author’s bene- ficiaries. The notice of termination may be signed by the specified owners of termination interests or by ‘‘their duly authorized agents,’’ which would include the legally appointed guardians or committees of per- sons incompetent to sign because of age or mental disability. When a Grant Can be Terminated. Section 203 draws a distinction between the date when a termination be- comes effective and the earlier date when the advance notice of termination is served. With respect to the ul- timate effective date, section 203(a)(3) provides, as a general rule, that a grant may be terminated during the 5 years following the expiration of a period of 35 years from the execution of the grant. As an exception to this basic 35-year rule, the bill also provides that ‘‘if the grant covers the right of publication of the work, the period begins at the end of 35 years from the date of publication of the work under the grant or at the end of 40 years from the date of execution of the grant, whichever term ends earlier.’’ This alternative method of computation is intended to cover cases where years elapse between the signing of a publication contract and the eventual publication of the work. The effective date of termination, which must be stated in the advance notice, is required to fall within the 5 years following the end of the applicable 35- or 40- year period, but the advance notice itself must be served earlier. Under section 203(a)(4)(A), the notice must be served ‘‘not less than two or more than ten years’’ before the effective date stated in it. As an example of how these time-limit requirements would operate in practice, we suggest two typical con- tract situations: Case 1: Contract for theatrical production signed on September 2, 1987. Termination of grant can be made to take effect between September 2, 2022 (35 years from execution) and September 1, 2027 (end of 5 year termi- nation period). Assuming that the author decides to terminate on September 1, 2022 (the earliest possible date) the advance notice must be filed between Sep- tember 1, 2012, and September 1, 2020. Case 2: Contract for book publication executed on April 10, 1980; book finally published on August 23, 1987. Since contract covers the right of publication, the 5- year termination period would begin on April 10, 2020 (40 years from execution) rather than April 10, 2015 (35 years from execution) or August 23, 2022 (35 years from publication). Assuming that the author decides to make the termination effective on January 1, 2024, the advance notice would have to be served between Janu- ary 1, 2014, and January 1, 2022. Effect of Termination. Section 203(b) makes clear that, unless effectively terminated within the applica- ble 5-year period, all rights covered by an existing grant will continue unchanged, and that rights under other Federal, State, or foreign laws are unaffected. However, assuming that a copyright transfer or license is terminated under section 203, who are bound by the termination and how are they affected? Under the bill, termination means that ownership of the rights covered by the terminated grant reverts to everyone who owns termination interests on the date the notice of termination was served, whether they joined in signing the notice or not. In other words, if a person could have signed the notice, that person is bound by the action of the majority who did; the termi- nation of the grant will be effective as to that person, and a proportionate share of the reverted rights auto- matically vests in that person. Ownership is divided proportionately on the same per stirpes basis as that provided for the right to effect termination under sec- tion 203(a) and, since the reverted rights vest on the date notice is served, the heirs of a dead beneficiary would inherit his or her share. Under clause (3) of subsection (b), majority action is required to make a further grant of reverted rights. A Page 138 TITLE 17—COPYRIGHTS § 204 problem here, of course, is that years may have passed between the time the reverted rights vested and the time the new owners want to make a further transfer; people may have died and children may have been born in the interim. To deal with this problem, the bill looks back to the date of vesting; out of the group in whom rights vested on that date, it requires the further trans- fer or license to be signed by ‘‘the same number and proportion of the owners’’ (though not necessarily the same individuals) as were then required to terminate the grant under subsection (a). If some of those in whom the rights originally vested have died, their ‘‘legal representatives, legatees, or heirs at law’’ may represent them for this purpose and, as in the case of the termination itself, any one of the minority who does not join in the further grant is nevertheless bound by it. An important limitation on the rights of a copyright owner under a terminated grant is specified in section 203(b)(1). This clause provides that, notwithstanding a termination, a derivative work prepared earlier may ‘‘continue to be utilized’’ under the conditions of the terminated grant; the clause adds, however, that this privilege is not broad enough to permit the preparation of other derivative works. In other words, a film made from a play could continue to be licensed for perform- ance after the motion picture contract had been termi- nated but any remake rights covered by the contract would be cut off. For this purpose, a motion picture would be considered as a ‘‘derivative work’’ with re- spect to every ‘‘preexisting work’’ incorporated in it, whether the preexisting work was created independ- ently or was prepared expressly for the motion picture. Section 203 would not prevent the parties to a trans- fer or license from voluntarily agreeing at any time to terminate an existing grant and negotiating a new one, thereby causing another 35-year period to start run- ning. However, the bill seeks to avoid the situation that has arisen under the present renewal provision, in which third parties have bought up contingent future interests as a form of speculation. Section 203(b)(4) would make a further grant of rights that revert under a terminated grant valid ‘‘only if it is made after the effective date of the termination.’’ An exception, in the nature of a right of ‘‘first refusal,’’ would permit the original grantee or a successor of such grantee to nego- tiate a new agreement with the persons effecting the termination at any time after the notice of termi- nation has been served. Nothing contained in this section or elsewhere in this legislation is intended to extend the duration of any li- cense, transfer or assignment made for a period of less than thirty-five years. If, for example, an agreement provides an earlier termination date or lesser duration, or if it allows the author the right of cancelling or ter- minating the agreement under certain circumstances, the duration is governed by the agreement. Likewise, nothing in this section or legislation is intended to change the existing state of the law of contracts con- cerning the circumstances in which an author may can- cel or terminate a license, transfer, or assignment. Section 203(b)(6) provides that, unless and until ter- mination is effected under this section, the grant, ‘‘if it does not provide otherwise,’’ continues for the term of copyright. This section means that, if the agreement does not contain provisions specifying its term or dura- tion, and the author has not terminated the agreement under this section, the agreement continues for the term of the copyright, subject to any right of termi- nation under circumstances which may be specified therein. If, however, an agreement does contain provi- sions governing its duration—for example, a term of fifty years—and the author has not exercised his or her right of termination under the statute, the agreement will continue according to its terms—in this example, for only fifty years. The quoted language is not to be construed as requiring agreements to reserve the right of termination. Editorial Notes AMENDMENTS 2002—Subsec. (a)(2)(A) to (C). Pub. L. 107–273, in sub- pars. (A) to (C), substituted ‘‘The’’ for ‘‘the’’ and, in subpars. (A) and (B), substituted period for semicolon at end. 1998—Subsec. (a)(2). Pub. L. 105–298, § 103(1), struck out ‘‘by his widow or her widower and his or her chil- dren or grandchildren’’ after ‘‘exercised,’’ in introduc- tory provisions. Subsec. (a)(2)(D). Pub. L. 105–298, § 103(2), added sub- par. (D). § 204. Execution of transfers of copyright owner- ship (a) A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memo- randum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent. (b) A certificate of acknowledgement is not re- quired for the validity of a transfer, but is prima facie evidence of the execution of the transfer if— (1) in the case of a transfer executed in the United States, the certificate is issued by a person authorized to administer oaths within the United States; or (2) in the case of a transfer executed in a for- eign country, the certificate is issued by a dip- lomatic or consular officer of the United States, or by a person authorized to admin- ister oaths whose authority is proved by a cer- tificate of such an officer. (Pub. L. 94–553, title I, § 101, Oct. 19, 1976, 90 Stat. 2570.) HISTORICAL AND REVISION NOTES HOUSE REPORT NO. 94–1476 Section 204 is a somewhat broadened and liberalized counterpart of sections 28 and 29 of the present statute [sections 28 and 29 of former title 17]. Under subsection (a), a transfer of copyright ownership (other than one brought about by operation of law) is valid only if there exists an instrument of conveyance, or alternatively a ‘‘note or memorandum of the transfer,’’ which is in writing and signed by the copyright owner ‘‘or such owner’s duly authorized agent.’’ Subsection (b) makes clear that a notarial or consular acknowledgment is not essential to the validity of any transfer, whether executed in the United States or abroad. However, the subsection would liberalize the conditions under which certificates of acknowledgment of documents executed abroad are to be accorded prima facie weight, and would give the same weight to domestic acknowledg- ments under appropriate circumstances. § 205. Recordation of transfers and other docu- ments (a) CONDITIONS FOR RECORDATION.—Any trans- fer of copyright ownership or other document pertaining to a copyright may be recorded in the Copyright Office if the document filed for rec- ordation bears the actual signature of the per- son who executed it, or if it is accompanied by a sworn or official certification that it is a true copy of the original, signed document. A sworn or official certification may be submitted to the Copyright Office electronically, pursuant to reg- ulations established by the Register of Copy- rights.