Tuesday, February 17, 2009

Supreme Court asked to answer the burning question: what's an 'agreement to the contrary'?

The Hollywood Reporter's legal blog brings news of an interesting cert. petition filed with the Supreme Court, seeking much-needed clarification of the rules regarding the Copyright Act's termination of transfer provisions. These provisions grant creators (or sometimes their heirs) the ability to reclaim works from licensees to whom they had granted rights early in the copyright term, before they knew how valuable those rights would turn out to be. If the creators (or heirs) follow certain highly technical steps, at precisely the right times, they can choose to terminate the grants that they made decades before -- thus reclaiming their copyrights and gaining the ability to negotiate more lucrative deals.

Of course licensees -- book and music publishers, record labels, movie studios, etc. -- hate the termination of transfer provisions. They prefer certainty, and they don't relish the thought of losing a valuable copyright in which they may have invested huge sums (and reaped huge rewards) over long periods of time. Licensees would, if they could, include provisions in all their contracts that state something like:
Licensor agrees not to exercise any rights licensor may have to terminate pursuant to 17 U.S.C. §§ 203, 304(c), or (d) the grant of rights encompassed in this Agreement.
But they can't. That's because Congress sought to make the termination right inalienable, i.e., impossible to sign away. So it included in the various termination provisions a right to termination "notwithstanding any agreement to the contrary." 17 U.S.C. §§ 203(a)(5), 304(c)(5), (d)(1). But copyright lawyers are nothing if not crafty, and they have gone to great lengths to seek ways around that "notwithstanding any agreement to the contrary" language without being too obvious about it. One common technique is, sometime before the termination right can be exercised, to enter into a new agreement with the creator (or his heirs), thus purporting to restart the termination clock and extinguish the looming termination right. But wait: are such "new" agreements really just prohibited "agreement[s] to the contrary"? Depends which judges you ask. And in which circuit.

Which brings us back to the cert. petition in Steinbeck v. Penguin Group (USA), Inc. As the petition summarizes the case:
In 2004, petitioners—the only living son and granddaughter of author John Steinbeck—invoked Section 304(d)(1) to terminate certain transfers Steinbeck executed in 1938. The Second Circuit concluded that the Steinbeck descendants’ termination was ineffective because, in 1994, the copyright holder (Steinbeck’s third wife) had entered into an agreement that purported to replace the 1938 agreement and retransfer the same rights, leaving intact (on the second Circuit’s view) no transfer to which a descendant’s termination right could apply.

The question presented is whether the right of termination granted by Congress to authors and their families and made available for exercise “notwithstanding any agreement to the contrary” can be extinguished by a copyright holder’s agreement to regrant previously transferred rights.
In other words, the petition argues that the 1994 agreement could not have extinguished the termination right because it was a prohibited "agreement to the contrary." And it claims that the Second Circuit's decision in the Steinbeck case is inconsistent with the Ninth Circuit's holding in Classic Media, Inc. v. Mewborn, 532 F.3d 978 (9th Cir. 2008), namely that a purported re-grant of rights involving Lassie did in fact constitute an "agreement to the contrary."

The Supreme Court does not take a lot of copyright cases, but the fact that former Solicitor General Ted Olson authored this cert. petition will at least ensure that it gets read closely. Termination is an obscure and often highly complex issue, but it's an important one for both creators and their licensees. Those on both sides of that divide would probably welcome the clarity that the Supreme Court could, if it grants cert., provide.

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