The Hollywood Reporter has published a story that major studios risk losing their franchise rights to major 80’s films like Terminator, Friday the 13^th and Who Framed Roger Rabbit because authors have the right to terminate grants to their work and regain ownership under copyright law.

Under U.S. copyright law, authors (or, if the authors are not alive, their surviving spouses, children, or executors), can “terminate” copyright assignments they have previously made in certain circumstances and regain rights to their work.  Consequently, even if an author, musician, or filmmaker signed an agreement transferring all rights in their work in perpetuity, the Copyright Act provides that the author can terminate that grant and demand that the rights revert. Essentially, the author is getting a second chance to make money from his work.

Congress deemed these provisions desirable “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.”  However, the mechanism that Congress put in place in order to allow authors and their heirs to regain their rights is complicated. 

Copyright termination rights are found in § 203 and § 304  of the U.S. Copyright Act of 1976. The relevant provisions in § 203 of the statute set forth that “[i]n the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination.  Termination of works assigned after January 1, 1978 may be exercised during a five-year window that starts 35 years after the date of assignment under certain conditions.  These conditions include the requirement that the author provide notice of an intent to exercise the termination right between two and ten years before the effective date of the termination. On the effective date of termination, all rights previously transferred from the author to the grantee revert to the author.

Works previously created before termination can continue to be distributed. The owner of a film produced based on a novel, for example, can continue to exploit the movie because that grant was prepared under authority of rights before termination.  However, no new sequels or remakes could be made after termination. 

It bears noting that termination rights cannot be waived in advance by contract including an agreement to make a will or to make any future grant.” §§ 203(a)(5), 304(c)(5).

These rules do not apply when the content created was made as a work for hire. This is one reason it is preferable for producers to enter into work for hire agreements with their collaborators, rather than obtain rights from them by way of assignment. 

Notices of termination may be served no earlier than 25 years after the execution of the grant or, if the grant covers the right of publication, no earlier than 30 years after the execution of the grant or 25 years after publication under the grant (whichever comes first).  However, termination of a grant cannot be effective until 35 years after the execution of the grant or, if the grant covers the right of publication, no earlier than 40 years after the execution of the grant or 35 years after publication under the grant (whichever comes first).

The provisions generally provide that transfers before 1978 can be terminated during a five-year period beginning at the end of 56 years from the date copyright was originally secured, while transfers after 1978 can be terminated during a five year period beginning either 35 or 40 years after execution of the grant, depending on the nature of the grant.

Mark Litwak is a veteran entertainment attorney and producer’s rep based in Los Angeles, California. He is the author of six books including: Dealmaking in the Film and Television Industry, Contracts for the Film and Television Industry, and Risky Business: Financing and Distributing Independent Film. He is an adjunct professor at USC Gould School of Law and the creator of the Entertainment Law Resources (www.marklitwak.com). He can be reached at law2@marklitwak.com

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Two recent Supreme Court cases have dramatically changed trademark law. The prohibitions on scandalous or disparaging trademarks have been struck down.

Historically, trademarks that consist of immoral, deceptive, or scandalous material have been denied registration. Under the Lanham Act,^[1]the Patent and Trademark Office is required to refuse registration ofmarkscomprised ofimmoralorscandalousmatter.^[2]

For example, in Greyhound Corp. v. Both Worlds, Inc., the Trademark Trial and Appeal Board (“TTAB”) held that a mark portraying a defecating dog was immoral and scandalous. The court rejected the argument that the mark was not scandalous because it was a satirical commentary on the silliness of designer labels.Likewise, in In re McGinley, the court deemed as scandalous a mark comprised of “a photograph of a nude man and woman kissing and embracing in a manner appearing to expose the male genitalia,”^[3]and in another case the court found the mark, “Only a breast in the mouth is better than a leg in the hand,” for a chicken restaurant to be offensive.^[4]And the TTAB has denied the mark “BULLSHIT” for attache cases, handbags, purses, belts, and wallets, finding that the word “bullshit” was scandalous.^[5]

However, the Supreme Court has now decided that the scandalous prohibition in trademark law is unconstitutional under the Free Speech Clause of the First Amendment.  The case was brought by Erik Brunetti, who founded a clothing line that uses the trademark FUCT. According to Brunetti, the mark (which functions as the clothing’s brand name) is pronounced as four letters, one after the other: F-U-C-T.

Both the trademarkexaminingattorneyandtheTTABdecided thatBrunetti’smark wasvulgar andtherefore could not be registered.  The TTAB statedthatthemarkwas“highlyoffensive”and“vulgar,”andthatithad“decidedlynegativesexualconnotations.”

However, the Supreme Court held in Iancu v. Brunetti^[6]that the scandalous prohibition in trademark law is unconstitutional under the Free Speech Clause of the First Amendment because it is viewpoint-based. Consequently, the fact that a mark may consist of or comprise “immoral” or “scandalous” matter is no longer a ground on which to refuse registration or cancel a registration.The opinion was written by Justice Kagan and joined by Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito, Neil Gorsuch and Brett Kavanaugh.Consequently, the portions of Trademark Manual of Examining Procedure (TMEP) §1203 that relate specifically to the examination of immoral or scandalous matter no longer apply. 

On June 24, 2019 the Supreme Court struck down the prohibition^[7]against disparaging trademarks. Marks that disparage, condemn or which falsely suggest a connection with persons living or dead, institutions, beliefs or national symbols have been historically denied. This prohibition was challenged by an Asian-American band known as “The Slants.”[8]The Slants were denied trademark registration by the United States Patent and Trademark Office (“PTO”) based on finding the mark disparaging to “persons of Asian descent.” 

The Federal Circuit court agreed with The Slants, finding that that the government regulation at issue amounted to viewpoint discrimination and that the disparagement proscription of Section 1052(a) was unconstitutional.^[9]“The government cannot refuse to register disparaging marks because it disapproves of the expressive messages conveyed by the marks. It cannot refuse to register marks because it concludes that such marks will be disparaging to others.”^[10]

 The band claimed that it purposefully selected the racial epithet as its name; in an attempt to take that slur as the name of their group, they will help to “reclaim” the term and “drain its denigrating force.”The group has given its albums names such as “The Yellow Album” and “Slanted Eyes, Slanted Hearts.”

The decision may have far reaching consequences. As Nina Totenberg of NPR reported:”the trademark office has denied registration to a group calling itself “Abort the Republicans,” and another called “Democrats Shouldn’t Breed.” It canceled the registration for the Washington Redskins in 2014 at the behest of some Native Americans who considered the name offensive.

Mark Litwak is a veteran entertainment attorney and producer’s rep based in Los Angeles, California. He is the author of six books including: Dealmaking in the Film and Television Industry, Contracts for the Film and Television Industry, and Risky Business: Financing and Distributing Independent Film. He is an adjunct professor at USC Gould School of Law and the creator of the Entertainment Law Resources (www.marklitwak.com). He can be reached at law2@marklitwak.com

^[1]15 U.S.C. §1052.

^[2]While the Act does not define scandalous, courts have relied on the dictionary definition which include “shocking to the sense of truth, decency, or propriety; disgraceful; offensive; disreputable; giving offense to the conscience or moral feelings.”

^[3]In re McGinley, 660 F.2d 481 (1981).

^[4]Bromberg, et al. v. Carmel Self Service, Inc., 198 U.S.P.Q. (BNA) 176 (T.T.A.B. 1978).

^[5]In re Tinseltown, Inc., 212 U.S.P.Q. (BNA) 863 (T.T.A.B. 1981).

^[6]588 U.S. ___ (2019), available athttps://www.supremecourt.gov/opinions/18pdf/18-302_e29g.pdf

^[7]15 U.S.C. §1052(a).

^[8]Matal v. Tam, 582 U.S. ___ (2017), available athttps://www.supremecourt.gov/opinions/16pdf/15-1293_1o13.pdf

^[9]Id.

^[10]In re Tam, 808 F.3d 1321 (Fed. Cir. 2015).

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