The time has come: a proposed revision to 17 U.S.C. section 203.

• Author: Gilbert, Amy

Contents Introduction I. The Copyright-Based Industry II. The Current Law A. The Termination Provision B. The Intent Behind the Right to Terminate C. The Exceptions & Limitations 1. Works Made-for-Hire 2. Derivative Works 3. Inalienability D. Termination 1. Notice 2. Effect III. The Impacts of Termination A. Voluntary Cancellation and Renegotiation B. Made-for-Hire C. Derivative Works D. Availability IV. Proposed Revision of the Termination Provision A. Right to Contract B. Notice Conclusion INTRODUCTION

An unknown, struggling single mother wrote a novel in 1995. (1) She was eager to get her work published and it is clear now that, at that moment in time, no one could have known that one book would be the beginning of a worldwide phenomenon. (2) That novel turned out to be the first of the Harry Potter book series, written by J.K. Rowling. In such a situation, the initial contract entered into by the author of the work and the publishing company could in no way adequately reflect the actual value of the work, as no one could have predicted Harry Potter's immense success. This is exactly what 17 U.S.C. [section] 203, the copyright termination provision, was designed to remedy. This provision recognizes that there is an inherent valuation problem in contracting before a work has been subjected to the market and its value more accurately determined. (3) Such a situation typically results in authors being inadequately compensated for their work and, thus, the provision gives authors a "second bite of the apple" by providing them the ability to terminate these contracts and regain their copyright interests in the work. (4) Ultimately, termination allows authors the opportunity to recapture some of the work's value.

As a general principle, copyright law protects "original works of authorship fixed in any tangible medium of expression," (5) and this protection lasts, in most cases, for the author's life plus seventy years. (6) The fundamental policy objectives behind copyright law are to encourage artistic creativity and innovation while, at the same time, providing benefits to authors for their work, and enabling society to gain access to their work. (7) For the most part, copyright law has been able to accomplish these goals. However, it is important to recognize that "copyright law as we know it 'on the books' is not exactly how copyright law operates in practice." (8) And historically, "[s]ome of the most seminal developments in copyright law have been driven by technological change." (9)

The copyright interest in a work "vests initially in the author," (10) but such interests are also easily transferrable. (11) Generally, copyright law only protects the interests of the copyright holder, which in many cases is not the actual author of the work. However, beginning in 2013, authors have been able to reclaim copyright interests that they had once contracted away; and Section 203 of the Copyright Act, (12) known as the termination provision, (13) has enabled them to do so. (14) Not only have authors exercised their rights under this provision, they have also been taken to court over it--and won. (15)

The termination provision is important from a policy perspective in terms of author rights; however, given the current state of affairs in the copyright-based industry (16) due to the Internet and digital technologies, the provision, as written, causes unintended negative effects for authors, the industry, (17) and society. The major issues stem from the overbroad inalienability of the provision and the far too expansive notice requirement.

In terms of the industry, there have been recent technological developments enabling, among other things, the immediate access to and easy distribution of copyrighted materials, all of which occurred after the enactment of Section 203 and fundamentally transformed the copyright-based industry. The industry is trying to adapt to the new, digital environment that has completely changed the nature of its business and resulted in declining sales and profits. (18) In addition, the industry now must worry too about losing the copyright interests in some of its older, successful works, works upon which these industries are now disproportionally more dependent. (19)

Additionally, in respect to the author, although the termination provision is beneficial to authors' rights in general, it may put the author in a difficult initial bargaining position, which was definitely not its intent. (20) Section 203's statutorily imposed thirty-five-year term is taken into account in the determination of the initial deal, whether or not that is what the parties would want. The termination provision prevents the industry from purchasing the full rights for the life of the copyright, as was possible prior to Section 203's enactment. This is because no matter what, authors will be able to terminate the agreement in thirty-five years, well before the life of the copyright ends. As these grants are not--and cannot be--full grants of the author's copyright interest in the work, they will not be compensated as such. The industry knows that it will inevitably lose the copyright interest in the work, and this makes it even more important for the industry to get the most out of its investment while it can, meaning that authors will ultimately receive worse deals as a result of the inalienability of this provision. (21)

Along the same lines, due to the disproportionate bargaining situation, the industry is in a position to force the work into the category of work made-for-hire, an exception to termination. (22) The industry can accomplish this by either changing the parties' arrangement to reflect that of an employer-employee relationship or by conditioning the production of the work on the author agreeing in writing that the work be made-for-hire, a potential tactic only if the work falls within one of the statutorily enumerated categories. (23) Another tactic to accomplish this goal without fundamentally restructuring the relationship is that the industry is likely to take more control of the work from the beginning, and basically quell the author's creativity in the process, in an attempt to have the work qualify as made-for-hire under agency principles.

And finally, there are significant risks that authors may have their anticipated interest in the work diminished through the industry's use of derivatives. Derivatives, like works made-for-hire, are also exempt from termination and, therefore, the industry can use the derivatives to continue to compete with the author's work even after termination. (24) The industry might also make the work widely available, in which case the value of the interest in the terminated work can be potentially significantly diminished (25)--just as the value has already been diminished through piracy.

Copyright law also has vast impacts on society as a whole. Certainly, copyright effects society from an economic perspective, but copyrighted material also has broad effects on the average person's everyday life. For example, it has been estimated that, by 2015, the average American will consume over fifteen hours of media each day. (26) And copyright law directly affects a person's access to and enjoyment of these types of works. Therefore, copyright law has to take this reality into account not just when determining what the law's objectives are and what the law says--but also in how it operates.

Due to its unintended negative effects on authors, the industry, and society and, as a result, its failure to accomplish the purpose of having such a provision in the first place, this Note argues that Section 203 should be revised. The proposed solution limits the broad language that makes the statute inalienable to situations in which the purpose of the provision would be furthered and narrows the statute's far too expansive notice requirements. This revision takes into account the nature of the industry in terms of risks and the recent technological developments by upholding the ideals of freedom of contract and attempting to cure the various issues surrounding anticipatory termination. Part I of this Note provides an overview of how the copyright-based industry operates today through an economic analysis of the mechanics that drive this area of the market. Part II examines the current copyright law governing termination, including Section 203's key elements, the intent behind the provision, its exceptions and limitations, and how an effective termination would occur. Part III discusses some realistic scenarios and the negative implications the provision may have in these common situations. And finally, Part IV suggests a revision to Section 203 that reflects these practical considerations.

1. THE COPYRIGHT-BASED INDUSTRY

   The copyright termination provision applies to all copyrighted works (27) except derivative works and works made-for-hire. (28) Before understanding the specific details of the provision, it is important to understand the operational framework of a copyright-based industry. A copyright-based industry is one in which its "primary purpose is to create, produce, distribute or exhibit copyright[ed] materials." (29) Most copyright-based industries, including the music industry, the book publishing industry, and the motion picture industry, (30) operate in a similar manner--they essentially rely exclusively on copyright grants from authors or directly developed copyrighted materials that are then delivered to an audience. (31)

   Historically, technological changes have forced revisions to copyright law in order to better align copyright's fundamental goals with the law in light of such changes. (32) Due to recent technological developments, including the expansion of the Internet and the now primarily digital nature of copyrighted material, these industries have been changed forever. (33) Such advancements now provide practically immediate access to, and...