The multi-year modernization initiative of the U.S. Copyright Office (“Office”) includes updating rules and practices for recording notices of termination to improve the efficiency while also easing authors’ burden of complying with the complex statutory and regulatory formalities required to reclaim ownership of their works. The Office launched an online electronic system pilot program in April 2020 that allowed participants to submit notices of termination and transfers of ownership for processing. Before permanently implementing the electronic system, the Office issued the June 2020 notices of proposed rulemaking and inquiry (NPRM) for public comment on efforts to modernize the recordation of termination notices.
The Office received comments from the Copyright Alliance, the Author’s Guild, Motion Picture Association, Nashville Songwriters Association International, Recording Academy, Recording Industry Association of America, Music Artists Coalition, Authors Alliance, National Music Publishers Association and Linda Edell Howard, an attorney in the entertainment industry. All comments supported modernizing the recordation of notices to grantees by improving efficiency, clarifying the Office’s processes, implementing consistent and reliable examination practices and clearly communicating accurate information about copyright grants and the works they identify.
In an earlier Insight article, we provided an overview of the statutory termination right and outlined the proposed rules and subjects of inquiry for amending the Office’s regulations governing the recordation of termination notices. Additionally, in another Insight article, we touched upon a few of the intricate limitations on the copyright termination right, such as the 35-year requirement, derivative works exception and work made for hire exception. This Insight Article provides an update about how the NPRM public comments have influenced the Office’s final rule and the implications for copyright owners.
Final Rules, Regulations and Policy
On February 26, 2021, the Federal Register posted the Final Rules and Regulations. In response to the public inquiries, the Office is considering the development of a sample form or template for use in preparing notices of termination. Currently, the Office provides information about preparing, serving and recording notices of termination on its website. The Office amended the language of 37 CFR § 201.10 - Notices of Termination of Transfers and Licenses in response to the NPRM comments and considerations regarding timeliness, harmless errors, manner of service, identification of work and date of recordation.
The Office changed the existing provision stating that the Office ‘‘will refuse’’ to record a notice that appears to be untimely, substituting the phrase ‘‘may refuse.’’ The timeliness rule change will give the Office additional discretion for legally permitted recordation. This amendment was supported by the majority of NPRM commentators. The Office also amended the timeliness rule to clarify the circumstances under which recordation of an untimely notice is barred by statute. See 37 CFR 201.10(f)(4) (‘‘Recordation of a notice . . . is without prejudice to any party claiming that the legal or formal requirements for effectuating termination (including the requirements pertaining to service and recordation of the notice of termination) have not been met, including before a court of competent jurisdiction.’’).
The NPRM proposed broadening the harmless errors exception, which currently applies only to errors in a notice, by expanding it to any non-material error in preparing, serving or seeking to record a notice. NPRM commentators were mixed in their responses – while some completely supported the Office’s rule amendment as proposed, others felt the proposed language was misleading and ambiguous because even if the error would not impact the Office’s ability to record the notice, it can still materially affect the ability of the notice to serve the purposes of the statute. The Office therefore expanded the harmless exception rule but clarified the language to state that harmless errors in a statement of service shall not render a notice invalid and that errors in ‘‘indexing information,’’ whether provided electronically or using a cover sheet such as the current Form TCS, may be harmless. 37 CFR 201.10(e)(1) (“Harmless errors in a notice, statement of service, or indexing information provided electronically or in a cover sheet shall not render the notice invalid. For purposes of this paragraph, an error is ‘‘harmless’’ if it does not materially affect the adequacy of the information required to serve the purposes of 17 U.S.C. 203, 304(c), or 304(d), whichever applies.”)
Manner of Service
The Office proposed two additional permissible manners of service: (1) by reputable courier (e.g., FedEx, UPS, DHL) and (2) by email where the grantee expressly consents. NPRM commentators universally supported notice delivery by reputable couriers. However, some commentators expressed concern about the practicality of email service because it is unclear how “express consent” is determined and may be too burdensome for the terminating party to prove. The Office revised the email service rule to specify authorization and consent. The terminating party must obtain express consent in writing from the grantee, successor-in-title or agent thereof who is duly authorized to accept service on its behalf within 30 days before service of the notice is made and must send the notice to an email address provided to the terminating party by the grantee or successor-in-title. If for any reason a grantee does not reply to a request for or declines consent, the terminating party continues to bear the burden of serving the notice in an acceptable manner, provided there is still time within the statutory framework to do so. Grantees can update their policies to specify their preferred email address or even to state that they opt out of service via email.
Identification of Work
Under the current rule, a title is required to identify each work in a notice and the original registration number is to be provided ‘‘if possible and practicable.’’ 37 CFR 201.10(b)(1)(iii), (2)(iv). The NPRM proposed to amend this provision to allow works to be identified by title, registration number or both. While most commentators agreed that terminating parties must include registration numbers for works identified in a notice, they expressed confusion as to why a rule change was necessary because almost all grantors with the registration number will also have the title of the corresponding work listed on the certificate of registration. Accordingly, the Office rejected the proposed change and will continue to require that each work in a notice be identified by title and, where possible and practicable, by the original registration number.
Date of Recordation
The new rule is that the date of recordation for a notice of termination will be determined by the date when the notice is received by the Office, irrespective of when the accompanying fee and statement of service are received. The reasoning behind this rule change is to avoid depriving terminating parties of the opportunity to exercise their rights, due to a fee miscalculation or immaterial filing error, if the date assigned falls on or after the effective date of termination. Despite commentator concerns that remitters will submit an incomplete package, the Office proceeded with this rule change because any party that intentionally submits materials in a piecemeal fashion to “lock in” a recordation date will be denied notice recordation because the Office’s examination methods for compliance and statutory timing provisions have not been altered. This rule change only provides additional discretion to the Office in implementing a broader policy favoring recordation where legally permitted.
It is crucial that creators, particularly those at the start of their careers, are aware of the final rule and policies regarding copyright termination when transferring their copyrights to publishers, filmmakers or other third parties so they do not unknowingly jeopardize their right to terminate. The attorneys at Lutzker & Lutzker are happy to assist creators—both at the beginning of their careers or later down the line—by reviewing proposed contract terms to understand the implications of the copyright grant and/or by guiding creators through the termination process.