An Analysis of Reversionary Interest in Canada and Termination Rights the United States
By: Farhia Mohamad & Japneet Gudh
Introduction
For our project, we’ve decided to examine reversionary rights in Canada and Termination Rights in the United States, as they are two doctrines that have similar results but are vastly different in process.
CANADIAN REVERSIONARY INTERESTS
What is Reversionary Interest?
Section 14 of the Copyright Act legislates reversionary interest rights into Canadian Copyright Law. This right mandates the automatic transfer of copyright ownership to the author’s estate after 25 years following the author’s death. Any prior agreements such as assignments or exclusive licenses, are void, through reinstating the copyright to the author’s estate. The estate then retains the copyright for another 25 years.[1] Exceptions to reversionary interest include situations where the author is not the first owner of copyright, the work was created during the course of employment, or collective works.[2] Another limitation to reversionary rights include, that they are applicable only within Canadian copyright law, and the author must be the original copyright holder.
There have been very few cases related to reversionary rights in Canada. The most significant case is arguably Anne of Green Gables Licensing Authority Inc. v. Avonlea Traditions Inc. This case involved a dispute over reversionary interest claimed by the heirs of Lucy Maud Montgomery, the author of “Anne of Green Gables” and any sequels created.[3] The court ruled in favor of the heirs, since they met the requirements for reversionary interest, invalidating the defendant’s arguments.[4] Kelley Estate v. Roy is another leading case in reversionary interest for confirming that parties cannot opt out of this provision.[5]
While there haven’t been many cases litigated concerning reversionary interest, this aspect of copyright law is particularly notable given that it significantly influences the nature of copyright interest through mandating reversions. This is especially significant in the commercial context.
What is the purpose of Reversionary Interest?
Reversionary Interest essentially grants the author’s estate the authority to renegotiate terms or establish new arrangements regarding the copyrighted work. [6] If the author entered into an exclusive license, an automatic reversionary interest allows the authors estate to render the agreement void so the estate can reap the remaining value of the copyright. This is significant because it is often the case that authors may grant license their copyright before “its full potential value is understood”[7]. This means that when an author licenses their copyright it may gain most of its value after the agreement has been entered into and without reversionary interest, there would be no way for an author’s estate to render an exclusive licence void.
Reversionary interest stands out within copyright law for this unique ability [to render any contract entered into by the author null and void 25 years after the death of the author]. This leads to an interesting dynamic between creating tension between business interests versus the author’s interest. The automatic nature of reversion can catch many businesses off guard, as they may assume exclusive rights for the entire copyright term.[8] Consequently, they may invest significant resources in creative works like books, TV shows, or movies, only to find themselves unable to continue profiting from the copyright due to its reversion to the author’s estate. [9]
For example, “audiovisual producers spend millions of dollars” to acquire rights in a literary work and then go on to make movies or T.V series along with their sequels and other venues to profit from said copyrighted work.[10] Reversionary rights limit their capacity to do so. Since businesses cannot opt out of this provision, this further intensifies the tension between their interests and those of the author’s estate. Importantly, the author’s estate doesn’t need to take any proactive steps to regain the copyright; it reverts to them automatically.
Is Reversionary Interest Consistent with the Purpose of Copyright Law?
The purpose of copyright law has evolved from an author-centric and focused approach to one that balances the author’s interests alongside the benefits of the public interests.[11] Copyright law also aims to allow creators to benefit from their work financially as an incentive for creativity.[12] In my opinion section 14 of the Copyright Act aligns with this purpose.
Upon an author’s death, their estate inherits their works. It is more so in the author’s interest to empower their estate to not only negotiate better deals but also ensure their work continues to be published and serve its original purpose. Business interest groups make arguments that the author’s estate may not use the copyright beneficially nor serve its intended purpose in a way the author would want.[13] However, it is important to note section 14 states “no assignment of the copyright and no grant of any interest therein, made by him, otherwise than by will.” Meaning the author can choose which part of their estate has this right. This is more likely to be aligned with what the author intended compared to business interests which are often incentivised by their bottom line contradicting the purpose of copyright law. Another argument made against reversionary interest is the freedom to contract is negatively impacted by this provision.[14] However, this argument similarly centres the business while the purpose of copyright law is to center the author and public interest. Contracts should be renegotiated if the work becomes successful as this would incentivize creativity.
Reversionary rights can mitigate the impact of unfair agreements, allowing an author’s estate to reclaim control. This is significant as authors may have initially agreed to an exclusive license for their entire lifetime plus 50 years. Additionally, there are also non-monetary benefits including the ability to bring back works from publishers who may refuse to do so, ultimately contributing to more works entering the public domain. In conclusion, reversionary Interest benefits both authors and consumers, as it ensures that those who should benefit from copyright are the ones who do, ultimately serving the public interest.
UNITED STATES TERMINATION RIGHTS
What are termination rights, and how are they different from reversionary rights?
Similar to reversionary rights, the United States allows termination rights. Both the Canadian and American doctrines have a similar end result in that rights that have granted through transfer or licence are terminated and returned back to the author/author’s estate. Due to this, they are often spoken about together, however there are several key distinctions. While the Canadian reversionary rights regime reverts ownership of a work back to the original author’s estate 25 years after the author dies, the American termination rights regime reverts ownership back to the author 35 years after work has been transferred, even if the author is still alive.[15] Another key difference is that where reversionary rights are automatic, termination rights require active steps on the part of the author/their estate.[16] In a stark contrast to the Canadian reversionary rights system, the United States doctrine of termination rights is also much more widely used, and there is a lot more jurisprudence around its applicability.
How do termination rights work?
Termination rights and the process of availing them are set out in Title 17 of the United States Code, which contains the US Copyright Act, 1976.[17] Unlike reversionary rights which revert back to the author’s estate, who can avail termination rights depends on several factors, including who made the grant, if there are multiple authors and which termination provisions apply.[18] The main inquiry is who granted the rights out – a living author or living heir can generally terminate a grant that they made. In the case of multiple authors or heirs, terminating rights requires consensus amongst majority of the authors/heirs.[19] However, there is only a five year window during which the rights can be terminated – the window opens up 35 years after the rights were transferred/granted and closes 5 years later.[20] At that point, it will no longer be possible to terminate the rights. During this 5-year period, a Notice of Termination needs to be served on the grantees at minimum two years and maximum 10 years before the effective termination date.[21] This notice gives grantees the opportunity to negotiate a new deal, while also giving author’s to reclaim the rights over their own work if the work increases in value. This a stark contrast to Canadian reversionary rights which revert back to the author’s heirs automatically.
First US Termination Rights Case
Although termination rights were codified in 1976, one of the first times that they were interpreted was by a California court in 2012 in Scorpio Music, et al. v. Willis. This case involved Victor Willis, the defendant, who was the original lead singer of the band Village People, wanting to reclaim rights to 33 songs that he co-authored in the late 1970s.[22] Willis had been hired by the Can’t Stop Music, an affiliate of Scorpio Music, the plaintiff, to translate lyrics and write new lyrics for French compositions. For each of those 33 songs, their copyright registrations listed Willis as a co-author.[23] Willis claims to have been the sole lyricist, although the songs were composed by various composers. In the late 1970’s, Willis granted his copyright interests to Can’t Stop Music, through a number of different publishing agreements, that were referred to by the court as the “Willis Grants”. These grants were only between Willis and Can’t Stop Music and only transferred Willis’ interests in the composition, which means the composers of the songs retained their own interests. As stipulated in these Willis Grants, Willis was to receive between 12-20% of the gross profits generated from the works. In January 2011, 33 years after the execution of the Willis Grants, Willis served Can’t Stop Music with a notice of termination that the grants would be terminated in 2013 – this is consistent the required timelines mentioned above. Can’t Stop Music claimed that Willis was not the sole author and therefore couldn’t unilaterally terminate the grants.[24] As mentioned above, the US Copyright Act states that if the rights have been granted by multiple people, a majority of the grantors need to be involved with the termination. Therefore, the Can’t Stop Music claimed that the termination notice was invalid. They also argued that termination rights only apply to works that are not “works for hire”, and claimed that since Willis was employed by them at the time, the termination rights would not apply. Although this argument was later withdrawn by the plaintiff, the fact that termination rights are not applicable to “works for hire”, is very similar to s.13(3) of the Canadian Copyright Act, which lays out the employment exception that stipulates that the rights to works created in the course of employment are owned by the employer. That would mean that reversionary rights also would not go to the employee’s estate given that even though the employee may have been the “real” author of the work, for legal purposes their employer owns the rights.
In this case, the key issue before the court was whether a sole author can terminate his grant of copyright interest in a work that had multiple authors. Willis argued that even though there were multiple authors who held copyright interests in the songs, he had individually granted his copyright interests to Can’t Stop Music, and thus he should be allowed to terminate those grants individually as well. Looking at the text and purpose of the US Copyright Act, the court agreed with this argument. S.203(a)(1) stipulates that if one author executes a grant, that one author can also effect the termination of that grant. It also stipulates that if “two or more authors of a joint work, termination of the grant may be effected by a majority of the authors who executed it.”[25] Similar to the standard approach to statutory interpretation used by Canadian courts, the court in this case looked at the plain and ordinary meaning of the words used in the provision. They narrowed in on the word “grant” and noticed that even in a case where the rights are granted by two or more authors, the legislature used the word “grant” in its singular form as opposed to plural. The court took this to mean that a majority of the authors are needed to terminate a grant if they grant their rights through one agreement. However, if joint authors transfer their rights through separate agreements, then they fall into the first part of the provision that pertains to one author executing a grant. In this case, even though Willis was one of the authors and not the sole author, because he had executed the grant on his own, he could also terminate the grant on his own. Therefore, the court upheld the validity of Willis’ notice of termination.[26]
The court felt that this interpretation of the provision was consistent with the overall purpose of the US Copyright Act and termination rights, which is to “safeguard authors against unremunerative transfers” and “address the unequal bargaining position of authors”.[27] This is very similar to the purpose of revisionary rights in Canadian copyright law, which is to balance authors’ interests with the public’s interests, and to mitigate the impact of unfair agreements, as discussed above. Therefore, while the process for claiming reversionary rights and termination rights are very different, the purpose and end results are very similar.
For those curious about the 33 songs that Victor Willis was the co-author on, here is one of his hit songs that many of us grew up listening to: https://www.youtube.com/watch?v=QINoUyrP0BI&ab_channel=VictorWillisMusicChannel.
[1] Copyright Act (R.S.C., 1985, c. C-42) s 14.
[2] Ibid.
[3] Anne of Green Gables Licensing Authority Inc. v. Avonlea Traditions Inc. 2000 CarswellOnt 731, [2000]
[4] Ibid.
[5] Kelley Estate v Roy, 2002 CFPI 950.
[6] Francois Larose et al, “The Copyright Ownership Boomerang: Automatic Reversionary Interests in Canada” (30, March 2022). Online:<https://bereskinparr.com/news-insights/insights/the-copyright-ownership-boomerang-automatic-reversionary-interests-in-canada/>.
[7] Ibid.
[8] Entertainment & Media Law Signal, “Reversionary rights in Canada: The future of copyright’s “second chance” rule” 30, July 2020) Online: <https://www.entertainmentmedialawsignal.com/reversionary-rights-in-canada-the-future-of-copyrights-second-chance-rule/>
[9] Ibid.
[10] Casey Chisick et al, “A message from your future: Reversion of copyright in Canada” (November 2022), online: Cassels LLP <https://cassels.com/insights/a-message-from-your-future-reversion-of-copyright-in-canada/>
[11] Théberge v Galerie d’Art du Petit Champlain Inc [2002] 2 S.C.R. 336
[12] Cinar Corporation v. Robinson, 2013 SCC 73
[13] Supra note 8.
[14] Ibid.
[15] Casey Chisick, supra note 10.
[16] Ibid.
[17] United States Code: Copyright Office, 17 U.S.C. §§ 201-216.
[18] US Copyright Office, Notices of Termination, Online: <https://www.copyright.gov/recordation/termination.html>
[19] Ibid.
[20] Eric Alan Stone & Catherine Nyarady, “Recent Cases Address the Copyright Act’s Termination Right”, online: (2022) N.Y. Law J <https://www.law.com/newyorklawjournal/2022/07/12/recent-cases-address-the-copyright-acts-termination-right/?slreturn=20240326212016>
[21] Brian D Caplan, Navigating US Copyright Termination Rights (August 2012), online: WIPO Magazine <https://www.wipo.int/wipo_magazine/en/2012/04/article_0005.html>
[22] Ibid.
[23] USDC S.D. California, Scorpio Music S.A. v. Willis (May 2012), online: Leob & Loeb LLP <https://www.loeb.com/en/insights/publications/2012/05/scorpio-music-sa-v-willis>
[24] Ibid.
[25] Ibid.
[26] Ibid.
Communications Law