Originally published October 8, 2009
Recent press reports regarding copyright termination notices
filed by the heirs of famed comic book illustrator Jack Kirby as
well as a recent decision by a federal District Court in a
long-running case regarding termination notices filed by the heirs
of "Superman" co-creator Jerome Siegel both serve as
timely reminders of the substantial complexity of copyright and
other intellectual property issues raised by the transfer of
valuable intellectual property assets and the critical importance
of a thorough analysis and understanding of the potential pitfalls
involved in transactions concerning such assets.
On September 20, 2009, only three weeks after the Walt Disney
Company announced it was acquiring Marvel Entertainment, the
New York Times reported that representatives of the heirs
of Jack Kirby — the creator or co-creator with Stan Lee
of many of Marvel Comic's most iconic characters, including the
Fantastic Four, the Hulk, Iron Man and the X-Men — had
sent forty-five notices of copyright termination to Marvel and to
Disney, as well as to other companies that have exploited rights
with respect to these and other characters originally created by
Mr. Kirby. If the notices are valid, Mr. Kirby's heirs could be
entitled as a matter of statute to begin to recapture certain
rights to his creations as early as 2014.
In a decision handed down on August 12, 2009 (Siegel v. Warner
Bros. Entm't, Inc., C.D. Cal. 2009) after years of
litigation and interim decisions, the District Court in the Central
District of California, in what it described as the "final
installment regarding the publication history of and the rights to
the iconic comic book superhero Superman," conclusively
determined and affirmed its earlier holdings that Jerome
Siegel's heirs were entitled to recapture, and become co-owners
of, some of the original materials in which the character
"Superman" first appeared, as a result of Mr.
Siegel's heirs effectively exercising termination rights
afforded to them under the U.S. Copyright Act of 1976
("Copyright Act").
These two recent examples, along with other instances of well-known
literary works and characters becoming entangled in litigation
arising out of attempts to exercise similar statutory termination
rights, demonstrate the importance of a detailed analysis of the
"chain of title" documents that evidence ownership in a
book, comic book, play, screenplay or other form of literary or
other property, and the motion pictures, television series, video
games, theme park attractions, merchandise and other creations that
may be based thereon, in addition to all applicable statutes,
regulations and case law, whether in the context of a potential
sale or acquisition of an entire company or with respect the
exploitation of a single but valuable property, such as
"Superman."
The Copyright Act affords authors and their heirs two separate
rights to terminate grants of a transfer or license of copyright,
depending on when the work at issue became subject to copyright.
Section 203 applies with respect to transfers executed by the
author on or after the effective date of the Copyright Act, i.e.,
January 1, 1978. In the case of any work other than a "work
made for hire," the exclusive or nonexclusive grant of a
transfer or license of copyright or of any right under a copyright,
executed by the author on or after such date (other than by will),
can be terminated by the author or his heirs during a five-year
window that commences 35 years after execution of the grant, on at
least two (but no more than ten) years advance written notice to
the grantee or his successor. Once effective, the termination does
not affect the grantee's right to exploit derivative works that
were created prior to the termination date, but it does
terminate the right to create any future derivative works based on
the same underlying property. The termination right was created by
Congress for public policy reasons, to allow authors who may have
entered into unremunerative arrangements when initially licensing a
work a "second bite at the apple" if the work proved more
successful than originally envisioned. As the House Report on this
section notes, a "provision of this sort is needed because of
the unequal bargaining position of authors, resulting in part from
the impossibility of determining a work's value until it has
been exploited."
Section 304 affords similar rights with respect to works that were
already subject to copyright as of the effective date of the
Copyright Act. For such works, a grant of a transfer or license of
the renewal copyright in a work can be terminated on the later of
fifty-six years after the date copyright was originally secured
(i.e., what would have been the end of the renewal term of
copyright for the work under the 1909 Copyright Act, before the
term of copyright was extended) or January 1, 1978. Additionally,
upon effectiveness of the Sonny Bono Copyright Term Extension Act
in 1998, which extended the term of copyright for pre-1978 works by
twenty years, an additional termination window was added if the
foregoing termination right had expired, which could be exercised
beginning at the end of seventy-five years from the date copyright
was secured.
Although these statutory requirements seem reasonably clear on
their face, it is often the case that in actual application they
can become quite complicated. As the judge in the Siegel
case noted, "The 1976 Copyright Act contains many intricate
formalities that an author (or his or her heirs) must navigate to
successfully terminate" a grant. As one example, both Sections
203 and 304 provide that a grant can be terminated when the
statutory right ripens "notwithstanding any agreement to the
contrary," in order to prevent an unsuspecting author, or one
with little leverage, from waiving the right at the time of the
grant or before its value can accurately be measured. But what if
the author or his heirs have subsequently entered into an agreement
with the grantee after the work has been exploited, in a manner
that takes into account the demonstrated value of the work? Should
those be considered "agreements to the contrary" that
have no bearing on the validity of the termination right? Or should
they be upheld as waiving the termination right, on the basis that
they have effectively fulfilled the public policy of providing the
author or his heirs the chance to re-negotiate from a position of
knowledge and possibly strength? Both the 2nd Circuit and 9th
Circuit have considered this issue in several different cases over
the last few years, but the conclusions they have reached may not
be entirely consistent, even taking into account the factual
differences in each case (e.g., Marvel v. Simon (2nd Cir.
2002) regarding another famous Marvel character, "Captain
America," Classic Media, Inc. v. Mewborn (9th Cir.
2008), analyzing ownership of "Lassie," Milne v.
Slesinger (9th Cir. 2005) regarding the "Winnie the
Pooh" series of books, and Penguin Group (USA) Inc. v.
Steinbeck (2nd Cir. 2008), where rights to "The Grapes of
Wrath," "Of Mice and Men" and other famous works by
John Steinbeck were at issue).
O'Melveny & Myers LLP routinely provides advice to clients on complex transactions in which these issues may arise, including finance, mergers and acquisitions, and licensing arrangements. If you have any questions about the operation of the applicable statutory provisions or the case law interpreting these provisions, please contact any of the attorneys listed on this alert.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
