Diamonds are forever . . . But what about copyright transfers

When I enter into a license agreement for the use of software, I plan on using the software for as long as the license grants me the right and I comply with the terms of the license.  When I sell a used car to a neighbor, I don’t expect to have the right to take it back after a few years.  When I purchase a new electronic device through amazon.com, I don’t anticipate Amazon asking for it back at some time in the future.  Usually when we purchase a product or service we can plan on keeping the product or using the service for as long as we want, or for as long as we continue to pay for the service.

However, in the world of copyright, beginning effective January 1, 2013, the owner of a copyrighted work may terminate rights granted to a third party thirty five years earlier, whether the rights granted were a full assignment of the work, or limited rights under a license. Copyrighted works are virtually any original works created by someone.  For example, songs, music, computer software programs, photographs, electronic images, books and publications, and websites may all be copyrighted works.  The author or creator of the works generally owns them, and has the right to control the use, reproduction, and distribution of the works, among other rights.

Copyright owners may give rights in the copyrighted work to others by assigning the copyright, or the owner may grant a license that allows for use of the copyrighted work under the conditions of the license.  When the copyright in a work is sold or assigned, the original owner of the copyright has no residual or remaining rights in the work.  When a work is licensed, the rights of the owner are subject to the rights of the licensee under the license.

The Copyright Act provision, which was adopted thirty five years ago, allows the owner of a copyrighted work that has either been assigned or licensed, to terminate the assignment or license.  If the owner is dead, the estate of the owner may exercise the right.  When the right is exercised, all rights granted by the copyright owner revert back to the original owner.  This right may be exercised thirty five years after the date of the original assignment or license, which means that this year is the first year these rights may be exercised.  If there are multiple owners of a jointly created work, then a majority of the owners may exercise the right to terminate an assignment or license.

Frequently when a similar right exists in another setting, the parties might seek to have the copyright owner waive the right of termination to avoid the potentially significant impact of the termination right.  Unfortunately, in this case, an agreement to renew the assignment or license after the right to terminate is effective only if it is made after the effective date of the termination.

There is at least one significant exception to right to terminate.  The statute does not apply to works made for hire.  Generally speaking, works made for hire are works created by an employee within the scope of his or her employment.  The employer owns the works in this case, and such works are not subject to the obligation to return the works.  If the work is a work made for hire, the employer, as the owner of the work, may not exercise the right to terminate an assignment or license of the copyrighted work.

Not much has been said about this provision of the Copyright Act, and that’s probably because it has only now been thirty five years since the statute was adopted.  More will be said, and rights will certainly be challenged.  But assignees and licensees of copyright rights need to be aware of this potentially significant development.