THE PROBLEMS WITH "OLD" CONTRACTS 


IVAN HOFFMAN, B.A., J.D. 


        If you are a publisher, music publisher or other party with contracts dealing with copyrights that are more than 15-20 years old, you may have some ticking and potentially problematical issues of which you may be quite unaware.  These issues often arise at unexpected and inconvenient times, although when a convenient time for a problem to arise is not clear.  Two potential problems deal with the renewal rights to your “older” copyrights and the use of books and other writings in the areas of newer, electronic technologies.

         If you are one of these parties, it may be time to take a look at your agreements with authors.  What you believe you have by way of rights may simply not be so.  I use the term “author” in this article to refer to the creator, whether it be a book, a song or other work.

WHO CAN RENEW AN “OLD” COPYRIGHT?

        If your catalog contains older “works,” you may be well advised to take some heed.  You may not own what you believe you own in these works—which are long term rights to renew the original copyright.  No matter what your underlying agreement with the author may state, even if it grants to you the right to the renewal of the copyright in the work, the right to renew these “old” copyrights is strictly regulated.

        Initially, there is the issue of what steps had to be taken to renew copyrights. Until 1992, for all works originally copyrighted prior to January 1, 1964, in order to secure the second or renewal term of 47 years (up from the previous 28 years of the renewal term under the 1909 Copyright law and now extended to 67 years), the person entitled to renew had to file a certificate to renew that copyright during the 28th year of the original term.  If no such renewal was made, the copyright went into the public domain at the end of that 28th year.  In 1992, the second or renewal term was automatically extended for 47 years (now 67 years) without the need to file that renewal certificate but only as to works originally copyrighted on or after January 1, 1964.

        In either case, whether a renewal application is required to be filed or not, only a certain category of person is entitled to the renewal rights in the most frequent of situations, as follows (there are other, more unusual situations that have different rules but for the sake of simplicity, I will leave those out of this article):

1. The author, if the author is still living.

2. The widow, widower, or children of the author, if the author is not living.

3. The author’s executors, if the author, his widow, widower or children are not living.

4. The author’s next of kin, in the absence of a will of the author.

        But this is not always as easy as it seems and who obtains the renewal rights may depend upon whether or not an application to renew the copyright was made during the 28th year of the original term and whether or not the author lives throughout that 28th year.  The rules are quite complex and you should consult with an attorney familiar with these issues if you are facing such a problem.

        For the most part, issues related to renewals should have ended December 31, 2005.  This is because the last copyright that could have been subject to the renewal issues would have been registered December 31, 2005, the end of the "old" copyright act.  Add 28 years to that and you end up at December 31, 2005.  However, cases indicate that a party is entitled to claim renewal rights without regard to any statute of limitations, meaning that the party or parties in whom the renewal rights vested at the onset of the 29th year retain the right to claim those renewal rights at any time.  There are certain equitable issues that may limit the right to claim back royalties, however.  In Stone vs. Williams (970 F. 2d. 1043), the Court held that a daughter of Hank Williams had the right to claim the renewal rights even though her claim was very late in being presented but she could not recover money for the exploitation of the compositions preceding the 3 year limitations period.

        Of course, under the current copyright law, works created after January 1, 1978 have a copyright duration equal to the life of the author plus 70 years in instances similar to the one described in this article.  However, agreements made both before January 1, 1978 and those made after that date are subject to termination according to very complex rules.   So even if there are no renewal issues, there are still these termination of transfer issues.  You should read “When Do Copyrights Expire?” and “Terminations of Transfers.”

THE “FUTURE TECHNOLOGIES” CLAUSE

        You may also have a clause in your older agreements that grants to the acquiring party the right to use the material in “all media, whether now known or hereafter developed” or words to that effect.  It may even specifically mention rights to “electronic media.”  Unfortunately, like many things in the law, words do not always mean what they appear to mean.  And if you don’t have such a clause, then as such a party it appears your rights may be even more limited.

        If your agreement does not go into some specifics of exactly what kind of “future technologies” are intended to be covered, you may have some open questions as to whether or not a given usage is permissible under the agreement.  For example, may you convert the book into a CD-ROM format or post it on the Internet?  What about granting motion picture or television rights?  Broad general language about these future uses may be subject to a different interpretation by the different parties to the agreement.  Courts have gone in a couple of directions when it comes to later exploitation of older material in media that was not in existence at the time the contract was executed.

        Essentially the court decisions turn on the response to the questions: “What was the parties’ intention at the time the contract was entered into?”  “What did they intend and what could they have reasonably foreseen?”  And the language of the agreement is among the key issues used to answer these questions.

        Some courts have decided that the original material, in this instance a book, can be exploited in all ways that are reasonably related to the original medium.  So for example, if you as the acquiring party wanted to put out a CD-ROM version of the book or license it to an on-line data base, you might be able to do so since you might be able to argue that such use, although not in existence at the time the original agreement was signed, is reasonably related to the original use and by the broad language of the “future technologies” clause, it was contemplated by the parties.   This of course depends upon the breadth of the language of the clause.  These courts have said that if the granting language is broad enough to cover a new use, then the burden of proving that the use is *not* covered falls on the shoulders of the party making the claim that it should not be part of the original contract.

        Other courts have viewed the future technology clause much more narrowly, restricting the future media to only those that fall within the “unambiguous core” of the specifically referred to technology.  Any uses that fall outside this core are deemed not covered by a general grant.  Under these court decisions, if neither party knew or should have known about a particular technology at the time of execution of the agreement, then such future use might not be allowed and the rights thereto might not pass to the acquiring party under this general clause.  In examining this question, one of the issues is the scope of the experience of the parties in the industry.

        Thus, the rule is that the more specific the language of the grant is, the more likely it is to be upheld.  The more vague and less specific it is, the less likely it is to be upheld.

        Additionally, the courts look not only to the “granting” language but to any language in which the author reserves any rights.  There may be conflicts between what appears to have been granted to the publisher and what may have been reserved by the author.  So, for example, even if the granting language is broad, there may be another clause reserving to the author certain specific rights.  These specific reserved rights may serve to aid in the interpretation of what broader rights were intended to be granted.

        These points are not merely academic theorizing.  They translate into hard dollars since whoever has the “new media” rights is in a position to make money on them.  If the publisher has acquired such rights, then there may be a wide avenue of future income possibly to be derived in the coming years.  If the author ends up retaining such rights, the publisher may likely not share in any income from those rights at all.

        But there is a second aspect to this issue: the person making the broad grant, in this example the author, must also have negotiated to be paid on all such uses as are broadly granted.  This is often overlooked in the royalty clause of the agreement.  There are specific references to payments for one or another use—normal trade channels, book clubs, record clubs, motion pictures etc., but there also must be a “catch-all” clause that provides for payment for all uses not otherwise expressly set forth.  Without such a clause, it may amount to a “double whammy” for the author—he or she may have given away the rights but not provided to be paid on them.

        In other words, if you are an acquiring party and even if you have these “new media” rights, is there a clause in your agreement with the author requiring payment to the author for such exploitation?  Does the underlying agreement have a payment clause providing that the author receive some percentage of any such uses?  Merely because the agreement grants the acquiring party these rights does not automatically mean that the author shares in that exploitation.  There may be a gap in royalty coverage in that same underlying agreement.

CONCLUSION

        In sum, if you have an older contract and you are seeking new ways to exploit the book or other work, you had better take a look at the clause carefully.    When combined with the potential problem regarding renewal rights, you may be left out in the proverbial cold.

Copyright © 1996, 2012 Ivan Hoffman.  All Rights Reserved.

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This article is not legal advice and is not intended as legal advice.  This article is intended to provide only general, non-specific legal information.  This article is not intended to cover all the issues related to the topic discussed.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This article is based on United States law.  You should consult with an attorney familiar with the issues and the laws of your country.  This article does not create any attorney client relationship and is not a solicitation.

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