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A Walk on the Wild Side: Little Known Intellectual Property Rights Can Make for a Malpractice Minefield

By Frieda Gordon

Family law and estate planning attorneys generally know very little about intellectual property rights as they pertain to community property law. Knowledge of this highly specialized area of law necessarily impacts upon on our competence in counseling our clients about dividing such property. Heirs and spouses may have hidden interests in copyright renewal and termination rights. Thus, family law and estate planning attorneys must be aware of the existence of these assets and know what they mean. Furthermore, it would be helpful to at least have a surface knowledge of how the copyright owner's heirs might be affected by a disposition of those assets, so that they will know when to utilize expert help.

COPYRIGHT RENEWAL RIGHTS AND TERMINATION RIGHTS.

Intellectual property rights include the protected assets of writers, choreographers, graphic designers, audio-visual artists, musicians, computer programmers, fashion designers, architects, photographers, and any other person who has developed a concept unique to them which can be reproduced in any form. Depending on when vested, statutory renewal rights may or may not be community property subject to distribution during a divorce or after death.

There are two types of renewal rights. One type is considered "works for hire." For example, if a movie studio commissions an author to write a script, the studio, and not the author, is the owner of the renewal rights and there are no termination rights. The other type is termed a "work for assignment," where the owner of the copyright is the creator of the work and the assignment right is subject to both termination rights and renewal rights. You cannot back-date the assignment right in a work for hire. Thus, the right accrues from the date of completion of the work, not the date of the assignment of the work.

Federal copyright law, which can be found at Title17 USC :304, supercedes all states' rights, including community property rights. However, the Federal Copyright Act does not preempt state court's from having jurisdiction to recognize, distribute and enforce community property interests in a spouse's copyright. The Federal Act does not consider a copyright to be the recipient's separate property, unlike its definition of military insurance policies or U.S. savings bonds. In fact, the Federal Copyright Act expressly permits co-ownership of all or a part of a copyright as well as the transfer of those rights. [See, 17 USCA Sec. 201(a), (d); Marriage of Worth, 195 Cal.App.3d 768, 777-778, 241 Cal Rtpr. 135, 139-140(1987)].

In Worth, supra, at 774-775, the court defined a copyright interest as personal "property" subject to community property characterization and division separate and apart from the underlying creative work and the tangible benefits, including royalties, flowing therefrom. However, the court in Roddenberry v. Roddenberry, 44 Cal.App.4th 634, 660-662, 51 Cal.Rptr.2d 907(1996), held that once that copyright claims are bargained away in a Marital Settlement Agreement, the spouse retains no "literary property" or other "residual" profit participation right in post-dissolution works derived from the original copyrighted work. The main holding of Roddenberry was that, once a spouse bargains away all interest in community property copyrights and royalties, he or she does not retain a non-copyright "literary property" entitlement to profits from works derived from the original copyrighted work (profits earned when the corporation owned by the husband developed spin-off works). The owner of the copyright has the exclusive right to exploit them. Id., at 660-662, 51 Cal. Rptr.2d, at 922-924. In the context of this article's discussion, although the dispute in Roddenberry, supra, stemmed in large part from a lack of precision in the terms of the parties' marital settlement agreement, it is illustrative of the fact that, if the copyright owner had allowed his spouse to be awarded the renewal rights and termination rights pursuant to the marital settlement agreement in their dissolution action, then the assignment of those rights would be subject to challenge under Federal renewal and termination rights, as will be explained below.

Federal copyright renewal rights cannot be successfully transferred unless they are vested. They are vested when the original copyright becomes the property of the owner/author or her or his heirs. Accordingly, the owner or his or her surviving spouse and children, if any, or the author/owner's executor, if neither children nor spouse survives the owner of the copyright, or the next of kin, in the absence of a valid will of the owner, must apply within one year of the end of the copyright term for yet another term.

Making things even more complicated, the Federal Copyright Act of 1909 was amended in 1976 and made effective as of January 1, 1978, so that works created prior to 1978 will have a different disposition than those created after 1978. A copyright is good for 28 years plus 28 years under the 1909 law and 28 years plus 57 years, for a total of 75 years under the 1976 law. Furthermore, any copyright created with a renewal term between January 1, 1976 and January 1, 1977 must be registered and then extended 75 years from the date first issued. This means that an author's heirs or estate representative can take away the author's termination and renewal rights if the author, as owner, dies before the end of the term unless the rights are properly disposed of by testamentary disposition. That is, if the renewal rights or termination rights are transferred by will, the rights will not be terminated. Only the estate of the owner of those rights can transfer them successfully. Most meaningful to family law and estate planning attorneys is how this fact is applied: by transferring this asset during the owner's lifetime, the copyright termination rights are subject to the recapture of terminable transfer rights during which period the asset could become the property of the wrong person[s]. Therefore, copyright renewal and termination rights cannot be effectively transferred during the owner's lifetime. If the asset is transferred by trust or other agreement during the lifetime of the owner of those rights, such as when such a transfer is made to a trust or to a spouse pursuant to a marital settlement agreement then this action will allow other heirs to claim those rights at the conclusion of the term of the copyright.

Termination rights, whether pre- or post 1978, demand an understanding of the concept of vesting. The first rule is that the original author or owner must live for 28 years in order for the termination rights to belong to that author/owner and assignee. Copyrights are terminable 35 years after the transfer of the interest. The term "terminable transfer" refers to any grant of a future right to a copyright by any person who is the owner of that copyright, which right could be terminated during that 28-year recapture period. A renewal right is terminable, whether before or after 1978. However, only the author or the author's heirs get termination rights, so, post-1978, the author or his or her heirs may inadvertently terminate the copyright if and when the author or his or her heirs has granted renewal rights to someone other than her or his heirs.

If the renewal rights are left to the children of the copyright owner by will, even a will with a pour-over clause, that act will not create a terminable transfer. However, since a trust can not own renewal rights, a gift of renewal rights to a trust will create a termination right. Even if a charity is the beneficiary of that trust, the gift will fail, because of the strong public policy to protect "widows and orphans." The intent of the donor is of no consideration because the letter of the law must be adhered to explicitly. The outcome of such a non-testimentary disposition will undoubtedly be that the statutory heirs will inherit the asset over the express wishes to the contrary by the author, if he or she chooses to divest him or herself of any portion of his or her interest in the copyright during her or his lifetime.

The classic example of the opposite result to the desired estate plan happened during the probate of the estate of author William Saroyan. Saroyan hated his children and created a trust in which he put all of his copyrights, giving all of his wealth in royalties to charities. Despite his intent, the Court gave all of those rights to the statutory heirs, whom he despised, because he did not live until he had reached the vesting period of the renewal rights.

Termination rights and renewal rights are expectancies only and are not available to creditors of the owners of those rights. They are not valued as part of the estate of the author, but rather belong to the estates of the statutory takers. On death, absent a different testimentary disposition, renewal rights are divided equally among a spouse and children of the deceased owner of a copyright. However, grandchildren are not statutory takers of renewal rights. On the other hand, termination rights are divided one-half to the spouse and the other half is divided equally among all of the children of the intestate author/owner and, if there is no spouse and there are no children, there are no termination rights.

To conclude this brief and by no means dispositive summary of why family law and estate planning attorneys should have an awareness of intellectual property rights law, it is also important to be mindful of the fact that any co-owner of a copyright in America can independently license the whole of the intellectual property. This means that each statutory heir has the right to unilaterally grant the renewal rights to the entire piece of property, as long as the fees and profits are disbursed equally. Additionally, it is interesting to note that unpublished works are also protected, as long as they are copyrighted. Thus, unless challenged, the children of the owner of the copyright will get the copyright on the unpublished work at the end of its term 35 years later. As difficult as it may seem to understand this area of Federal law, it may be a bit clearer to family law and estate planning attorneys that they must recognize copyrights as community property independent of the royalties derived therefrom and attempt to analyze the effects of assigning the renewal rights and termination rights and to whom and when to assign those rights.