Recapturing Ownership Through Copyright Terminations

Under such circumstances, the Ninth Circuit held that Ms. Mewborn’s post-1978 assignment was “an agreement to the contrary,” that Ms. Mewborn was therefore entitled to exercise her statutory termination rights, and that the termination notice she served in 1996 was valid and effective.

The Classic Media opinion left the door slightly ajar to the possibility that a renegotiation did not have to occur during the actual five-year termination window but could instead occur at any time during the longer notice period. But just one month later in Penguin Group Inc. v. Thomas Steinbeck, 537 F.3d 193 (2d Cir. 2008), the Second Circuit kicked that door wide open.

‘Steinbeck’ Case

The Steinbeck case involved various works written by John Steinbeck and first published from 1929 through 1941, including “The Grapes of Wrath” (1939) and “Of Mice and Men” (1937). Steinbeck had granted Viking Press the right to publish these works in a 1938 Publishing Agreement. Steinbeck’s surviving spouse Elaine renegotiated the 1938 Publishing Agreement and entered into a new agreement on Oct. 24, 1994 (the “1994 Agreement”) with Penguin (Viking’s successor) for the continued publication of all the works that were covered in the 1938 Publishing Agreement as well as several others.

The 1994 Agreement also changed the economic terms of the 1938 Publishing Agreement, mostly to Elaine’s benefit. The 1994 Agreement was entered into during the first termination window that applied to “Of Mice and Men” (1993-1998), after the expiration of the first termination window that applied to Steinbeck’s earlier works, and before the first termination window (but within the notice period) that applied to Steinbeck’s later works, including “The Grapes of Wrath” (1995-2000).

Round two began 10 years late. On June 13, 2004, Steinbeck’s surviving son and grandson served what purported to be a notice of termination on Penguin Group, seeking to exercise their termination rights. This termination notice was served during the second termination window that would have applied to “The Grapes of Wrath” and “Of Mice and Men,” after the expiration of the second termination window that would have applied to Steinbeck’s earlier works, and before the second termination window (but within the notice period) that would have applied to Steinbeck’s later works.¹⁰

The district court held that the termination notice was valid as to all works covered by the 1938 Publishing Agreement, but in a decision issued Aug. 13, 2008, the Second Circuit reversed, holding that the 1994 Agreement replaced the 1938 Publishing Agreement and, thus, there was no pre-1978 transfer of rights to which the termination right could be applied. If the Second Circuit had followed the narrowest interpretation of the Ninth Circuit’s decision in Classic Media, the 1994 Agreement would have been an “agreement to the contrary” as to “The Grapes of Wrath” and Steinbeck’s later works because the 1994 Agreement was entered into before the first termination window even opened for those works. But the Second Circuit diverged from that narrowest interpretation of Classic Media when it held that the 1994 renegotiation of the original 1938 transfer of rights was not “an agreement to the contrary.”

What remains to be seen is if the Ninth Circuit meant that the renegotiation has to occur in the midst of the five-year termination window to avoid being labeled an “agreement to the contrary” or whether the renegotiation just has to occur at some point during the 13-year notice period, which after Steinbeck is the narrowest interpretation that can be taken in the Second Circuit.

Until there is a case resolving the issue in the Ninth Circuit or in the U.S. Supreme Court, copyright grantees seeking to renegotiate terminable grants should consider taking advantage of the precedent in the Second Circuit that is more tolerant of renegotiations on this issue by designating New York choice of law and venue in their renegotiated contracts.

Benjamin R. Mulcahy is a partner in the entertainment, media and communications group of Sheppard Mullin Richter & Hampton, and co-head of the firm’s sports industry team. He practices out of the firm’s New York and Century City offices. Gina Reif Ilardi, an associate with the firm in New York, helped prepare this article.

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