J. Fred Coots and Haven Gillespie wrote the musical composition “Santa Claus is Comin’ To Town” (the Song) in the 1930s. Through a series of grants, EMI came to own the copyright in the Song. Coots’ heirs brought suit against EMI to terminate EMI’s copyright interests in the Song. The district court ruled in EMI’s favor, determining that EMI owns the copyright until it expires in 2029. My post Santa Claus Song Copyright Grant Not Terminated and Under Copyright Until 2029 details the district court’s ruling.
Copyright grant termination gives authors or their heirs a “second estate” in a copyright by allowing the author or heirs to reclaim the rights that the author previously assigned to someone else, usually a publishing company. That way, the author or heirs can share more broadly in the financial benefits of a successful copyrighted work.
The Second Circuit concluded that Coots’ heirs’ 2007 termination notice will terminate a 1981 grant in 2016. The Second Circuit reversed the district court’s judgment and remanded for the entry of a declaratory judgment in favor of Coots’ heirs.
EMI Owns Its Rights in the Song Under the 1981 Agreement, not the 1951 Agreement.
Coots made two agreements with EMI’s predecessors, the 1951 Agreement and the 1981 Agreement. The 1981 Agreement came about because Coots filed a copyright Termination Notice terminating his grant under the 1951 Agreement. Section §304(c) of the Copyright Act of 1976 provides a mechanism for terminating a pre-1978 copyright grant. The glitch with the 1981 Termination Notice is that it was not successfully recorded with the Copyright Office. EMI argued that the 1981 Agreement did not supersede the 1951 Agreement and that the 1981 Termination Notice did not terminate the 1951 Agreement because the 1981 Termination Notice was not recorded.
The Second Circuit rejected EMI’s argument. It considered the failure to record the 1981 Termination Notice irrelevant to the question of whether EMI owned the copyright to the Song under the 1951 Agreement or the 1981 Agreement. The Second Circuit reached this conclusion even though service of a termination notice immediately gives the author or heirs a vested interest in a future copyright interest, but the author or heirs acquire a possessory interest in the copyright only if the termination notice is recorded before the termination date.
The 1981 Agreement not only granted EMI the future interest scheduled to revert to Coots upon termination, it also replaced the 1951 Agreement as the source of EMI’s existing rights in the Song. Where the parties have clearly expressed or manifested their intention that a subsequent agreement supersede or substitute for an old agreement, the subsequent agreement extinguishes the old one. The question is simply whether the parties intended for the new contract to substitute for the old one, and that intention, if otherwise clear, need not be articulated explicitly in the new agreement.
The parties to the 1981 Agreement clearly manifested an intention to replace the 1951 Agreement and not merely to convey to EMI Coots’s future interest in the nineteen‐year statutory renewal term extension. The relevant language is contained in §1 of the 1981 Agreement, which reads as follows:
Grantor hereby sells, assigns, grants, transfers and sets over to Grantee
 all rights and interests whatsoever now or hereafter known or existing, heretofore or at any time or times hereafter acquired or possessed by Grantor in and to the Song under any and all renewals and extensions of all copyrights therein and  all United States reversionary and termination interests in copyright now in existence or expectant, including all rights reverted, reverting or to revert to Grantor by reason of the termination of any transfers or licenses covering any extended renewal term of copyright pursuant to Section 304 of the Copyright Act of 1976, together with all renewals and extensions thereof.
It is quite clear from the first half of the quoted language that Coots was granting more than the vested future interest scheduled to revert to him or his statutory heirs upon termination; he was also granting all rights and interests heretofore acquired or possessed by him under any and all renewals and extensions. Ignoring the bedrock principle that a contract should be read to give effect to all its provisions, EMI makes no effort to explain why EMI and Coots would have included the first half of §1 had they not meant for it to have some effect. But to give any effect to this language at all, we must read it as replacing the 1951 Agreement, creating a new conveyance of all of Coots’s interest in the copyright at once, and not merely as a piecemeal conveyance of his reversionary interest. Put simply, it would make no sense to have two grants of the same exact rights be operative at the same time; if the first half of §1 were not meant to replace the 1951 agreement, there would be no reason for the parties to have included it.
(Opinion pdf pages 23 – 25).
By granting EMI the same rights that it already owned under the 1951 Agreement in addition to the new interest that vested in Coots upon service of the 1981 Termination Notice, the 1981 Agreement made it sufficiently clear that the parties intended to replace the earlier contract.
(Opinion pdf page 27).
The 2007 Termination Notice will terminate the 1981 Agreement in 2016.
Coots’ heirs served EMI with both a 2007 Termination Notice and a 2012 Termination Notice. Both the 2007 Termination Notice and the 2012 Termination Notice cited §203 as the source of the heirs’ right to terminate the 1981 Agreement. The 2012 Termination Notice was issued just in case the 2007 Termination Notice was premature.
Termination under § 203 is available for grants executed by the author on or after January 1, 1978. 17 U.S.C. § 203(a). Where the author is dead, termination may be effected by individuals holding more than half of the author’s termination interest as set forth in the statute. § 203(a)(1), (2). Ordinarily, these individuals may effect termination at any time during a period of five years beginning at the end of thirty‐five years from the date of execution of the grant. § 203(a)(3). In this case, that period would begin in 2016. But if the grant covers the right of publication of the work, an alternative calculation method applies: termination may be effected in the five‐year period beginning thirty‐five years from the date of publication of the work under the grant or forty years from the date of execution of the grant, whichever term ends earlier. A termination notice may be served between two and ten years before the termination date. § 203(a)(4)(A). The notice must state the effective date of the termination, be recorded in the Copyright Office as a condition to its taking effect, and comply with various other formalities prescribed by regulation. § 203(a)(4).
(Opinion pdf pages 34 – 35).
EMI argued that Coots’ heirs (his children), could not use §203 to terminate the 1981 Agreement because Coots’ children also signed the 1981 Agreement.
This argument is meritless. As a factual matter, the 1981 Agreement plainly was executed by the author—namely, Coots—and specifically identified him alone as the Grantor, who was exclusively and solely possessed of any and all termination interests arising under Section 304. As a legal matter, moreover, the Coots children who signed the 1981 Agreement did not have any interest in the Song that they could have conveyed in 1981, because Coots was still alive; the future interest that vested upon service of the 1981 Termination Notice therefore vested solely in him. Accordingly, while the 1981 Agreement purported to result in the transfer to EMI of all of the Coots children’s rights and interests in the Song, the only rights that the Coots children conceivably could have transferred at the time were the termination rights that they were scheduled to inherit by operation of the statute upon Coots’s death. Those rights, however, cannot be contracted away.
(Opinion pdf pages 35 – 36).
EMI also argued that the 1981 Agreement covered the right to publication of the Song and that the earliest the 1981 Agreement can be terminated is 2021, forty years after the 1981 Agreement was executed.
The Second Circuit rejected EMI’s right to publication argument.
At the start, our conclusion that the 1981 Agreement became the operative source of EMI’s rights immediately upon its execution suggests that even if EMI’s premise that the 1981 Agreement covers the right to publication were sound, publication would have occurred under that agreement in 1981. Thus, even the alternative calculation method that EMI prefers would yield an earliest possible termination date of 2016. Regardless, EMI’s premise is incorrect. As relevant here, the statute defines publication as the distribution of copies or phonorecords of a work to the public by sale or other transfer of ownership, or by rental, lease, or lending. As § 203 itself suggests, the publication of a work is a one‐time event. In other words, publication happens when the work is first sold or otherwise distributed to the public. EMI does not claim, nor could it, that the Song was not made available to the public until 1990; in the original 1934 Agreement, EMI’s predecessor Feist agreed to publish the Song in saleable form within one year. As a result, it was the 1934 Agreement, and not the 1981 Agreement, that covered the right to publication of the Song.
(Opinion pdf pages 37 – 38).
In sum: EMI does not dispute that the 1981 Agreement was executed on December 15, 1981. Because that grant was executed by the author and does not cover the right of publication, it is terminable under § 203 starting on December 15, 2016—which is the effective date of termination stated in the 2007 Termination Notice. Accordingly, we conclude that the 2007 Termination Notice will terminate the 1981 Agreement on that date.
(Opinion pdf page 39).
This case is Baldwin v. EMI Feist Catalog, Inc., No. 14‐182‐cv, Second Circuit Court of Appeals.