Estate Planning and the Forgotten Right to Recapture Copyrights: How Not to Overlook this Important Right.

February 6th, 2009

If your client’s estate plan overlooks the right to terminate contracts and recapture copyrights, it could cost your client’s heirs significant future income. Let’s take for example that you have a client who wrote a children’s book and signed a publishing contract in 1965. The copyright was secured that same year and your client transferred all his interest in the copyright to the publisher. For estate purposes, you may be thinking there is nothing there of value except for any income that your client is receiving and may continue to receive after his death pursuant to the contract terms. If the thought crossed your mind, you are likely overlooking a very important right that could be costly to your client and his heirs.

Under the Copyright Act of 1976, the author, or if deceased, the author’s widow or widower and children or grandchildren may terminate all transfers or licenses of the renewal copyright or any right under it (for pre-1978 copyrights) at the end of 56 years from the date the copyright was originally secured and recapture the last 39 years of copyright protection (*provided the contract was executed prior to January 1, 1978 and timely notice of termination is provided*). Congress made the right of termination inalienable. Therefore, any contract terms to the contrary have no effect.

In your client’s case, the 56th year is 2021 and the copyright in his work extends until 2060. Therefore, there is the possibility that his heirs may acquire the right to terminate the contract and recapture the copyright. If the estate documents are silent regarding this right, the heirs may miss the opportunity. If they are aware of the right, they could renegotiate the contract or take back the copyright and the exploit the work themselves or enter into more lucrative contracts thereby taking advantage of the termination right to derive more income from the work’s copyright.

If the opportunity to terminate and recapture is missed, there is another chance to recapture the copyright for the last 20 years of protection (* if timely notice is provided*); however, your client or his heirs will lose the benefit of potential income derived from exploiting the copyright in the work during those 19 years between the 56th year and the 75th year of protection.

Also Beware of Traps: There is a limited window of opportunity to terminate and the *notice* requirements are highly technical. There are also traps, such as the right to terminate does not apply to works-for-hire and the right of termination for post-1977 works is different. Therefore, if you are dealing with this issue with regard to any works protected by copyright (not just pre-1978 literary works as described above) make sure that you have thoroughly researched all the requirements, including the notice requirements and have planned accordingly, or contact an attorney who is familiar with this area of law.

Walmart’s Lesson in Copyright Law

February 3rd, 2009

What comes as a surprise to many, including retail giants such as Walmart, is that even if you hire someone to perform services for you, it does not mean that you own the copyright in the works created by that individual or company.

Walmart learned this lesson when it terminated a small Kansas video production company that was hired on a handshake to videotape the ins and outs of Walmart’s business for more than two decades. The company, Flagler Productions, Inc., which owns the copyrights in the large archive of Walmart video footage began selling the footage to the public, including personal injury attorneys who are suing Walmart after Walmart terminated the company.

Below is Part 5 of Dan Rather’s report “A Sudden Explosion” wherein he interviews an attorney who represents children who were severely burned by a gasoline container sold at Walmart. The report shows video footage from Flagler Production’s archive (starting at approx. 3:19/9:08) of Walmart executives mocking the gas cans:

How did this happen? Under copyright law, the copyright in a work initially vests with the author of the work, unless the work is created by an employee within the scope of his or her employment, or the work is specially commissioned or ordered, falls within one of the nine narrow statutory exceptions, and the parties agree in advance in writing that the work is a work-for-hire. Absent the foregoing, the copyright initially vests and remains with the author unless there is an assignment of copyright, which MUST be in writing. In Walmart’s case, they had nothing more than a handshake.

What does this mean for attorneys? It stresses the importance of truly knowing your client’s business. Have they hired any outside individuals or companies to perform work on their behalf and what exactly are they doing for your client — developing software, creating websites, writing content, photographing, videotaping, creating drawings, designs, logos, graphics, etc…?

On this flip side, if you represent the individuals or companies that are hired to create the works, do your clients understand the difference between the tangible work and the intangible copyright in the work? To help minimize the risk of future disputes between your client and their clients, it may help your clients to know they can distinguish between creating the tangible work for their clients and providing their clients with a complete written assignment of all copyrights in the work; in most cases they can also command a higher price for the latter.