Among its many innovations, the 1976 Copyright Act created a statutory right to terminate transfers of copyright interests, whereby authors or their statutory heirs could recapture rights they had previously granted irrevocably to third parties, “notwithstanding any agreement to the contrary.” Sanctity of contract be damned, Congress made a policy decision that individual creators of copyrightable works should be entitled to a second bite at the apple, i.e., allowed to get back rights they had previously bargained away, because the true value of their works would not generally have been apparent to either party at the time the rights were sold. This termination right was embodied in two sections of the Act, section 304 (for works created before Jan. 1, 1978) and section 203 (for works created after that date).

Section 203 is at the heart of a recent decision by Judge Lewis Kaplan of the Southern District of New York in Waite v. UMG Recordings, No. 19-cv-01091 (ECF #68, March 31, 2020). In Waite, a putative class of copyright owners, comprised of recording artists who signed contracts with predecessors of defendant UMG in the 1970s and 1980s, brought an action seeking inter alia a declaration that their termination notices to UMG under Section 203 were valid, and that UMG’s rights to continue exploiting the class members’ recordings therefore expired at the conclusion of the statutory period—typically 35 years after the date of the original grant. This column will discuss one particularly consequential issue that the Southern District resolved in a March 31, 2020, decision on a motion to dismiss under Rule 12(b)(6), namely, whether recording artists who transferred their rights to record labels through so called “loan-out” companies are entitled to any termination rights at all under Section 203.