Copyright termination likely to alter future for major studios as film creators assert rights.

The November 1 U.S. release of Terminator: Dark Fate will once again reunite Linda Hamilton’s Sarah Connor character with Arnold Schwarzenegger’s T-800 terminator to save the future from the past. Initial reactions described the picture as “both a suitable closing chapter for the original two James Cameron films and a possible gateway to exciting new chapters ahead.” From an entertainment lawyer’s viewpoint, however, current events involving copyright in the first film in the series are perhaps even more interesting.

That’s because a flurry of copyright termination notices have been filed in the last year by writers—including Gale Anne Hurd who with James Cameron penned The Terminator—seeking to reunite transferred rights with their creators under the Copyright Act of 1978 (17 U.S.C. § 203). The statute gives copyright authors who transferred their interests a five-year window to terminate those transfers beginning 35-years after the date of execution. Congress believed that 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.”

For some 80’s films, that time is up or soon will be. Copyright in The Terminator was registered in 1985, and the Section 203 notice filed by Hurd provides a November 26, 2020, termination date. The list of those seeking termination of transfers also includes heirs of Michael McDowell (Beetlejuice) and the family of Roderick Thorp (Nothing Lasts Forever, aka Die Hard).

Legal Background
The statute provides details for properly executing such a termination. One requirement is that an author must give written notice to the transferee, stating a precise termination date at least two years and up to ten years’ in the future. But the basic rule is that transferred rights can be reclaimed by the original creator 35-years after the date of transfer. A precise calculation depends on the rights involved. If a copyright author fails to terminate the transfer within the proscribed time, it continues under its terms. Unlike many provisions in the law, however, this termination right cannot be circumvented by contract. 17 U.S.C. §203(a)(5). Thus, like the T-800, the countdown to the ability to reclaim rights absolutely will not stop, at least absent legislative action. Congress intended to give authors and their heirs a more robust way to revisit the valuation of works that initially were of uncertain commercial worth (perhaps because they were just the kind of new, original works that copyright protects). In enacting Section 203, Congress reasoned that the prospect of termination would lead those holding transferred rights back to the negotiating table after the licensed properties proved their monetary value over time.

Following termination, all transferred rights revert back to authors or their successors. In the context of properties like franchise films, copyright termination could prevent major studios from making sequels or launching reboots. Powerful leverage for copyright authors. But recapturing or capitalizing on those rights is not always easy.

Paths for Studios Facing Copyright Termination
In the face of a Section 203 notice, studios have essentially three options. Ideally, they will sit back down at the table and renegotiate rights based on current valuations. Studios may elect to do so where there is an ongoing business relationship and the potential for lucrative future work. Skydance Media, for example, which currently holds the Terminator rights, could decide to negotiate based on the financial potential of sending yet another Skynet cyborg back in time. Terminator: Dark Fate’s U.S. open is projected to be relatively soft at $35-45 million but global potential is likely significantly higher. Based on the original film’s copyright registration, Skydance would need to do so on a 50-50 basis with Hurd and Cameron. Otherwise, another studio could gain the opportunity to move the franchise forward for the remainder of the copyright term (likely for the life of the last living author plus 70 years).

For projects with less potential for monetization, studios could become more aggressive negotiators, hesitant to greenlight projects with rights remaining subject to termination. They could also resort to litigation to retain and enforce rights. They may argue, for example, that transferred works are works-made-for-hire—a class expressly excluded under the transfer termination statute. 17 U.S.C. § 203(a). Under the Copyright Act, copyright in an original work of authorship generally vests in the author at the moment the work is “fixed in any tangible medium of expression.” But when a copyright author contributes material such as a screenplay as a work-made-for-hire, the statute deems the employer to be the author. This eliminates the possibility of a screenwriter or other creator relying on Section 203 to reclaim the transferred rights.

Finally, the minimum two-years notice provides studios with an opportunity to “use it before they lose it”—to push through projects based on their transferred rights before the termination date. Paramount Pictures, for example, reportedly did just that, releasing a reboot of Pet Sematary earlier this year following a termination notice from Stephen King. Other works targeted for termination reportedly include the Nightmare on Elm Street and Predator franchises.

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Cassandra Dawn