The Canadian copyright regime is home to a little known mechanism that all copyright holders should be aware of – the author’s reversionary right. Until now, this provision in the Copyright Act has slipped between the cracks of larger debates on copyright policy and creators’ rights. Recently, the Canadian government has shifted its attention to this unheralded provision and there have been strident calls for legislative amendments to limit the enforceable term of copyright transfers and exclusive licences. As policy makers turn their mind to this issue, the future of a copyright termination right in Canada seems bright.
Section 14 and the current reversionary right in Canada
Section 14 of the Copyright Act (Canada) mandates the automatic reversion of the copyright in most works from the copyright holder to the estate of the author 25 years after the author’s death – the section deems any assignments of copyright and any exclusive licences to be void at that 25 year mark. The copyright is then controlled by the estate for another 25 years until the work enters the public domain 50 years after the author’s death.
The reversionary right seeks to give an author’s estate an opportunity to revisit copyright assignments and potentially enter into new and better arrangements with transferees and licensees. What does this look like in practice? Assume an author writes a book and grants an exclusive licence of the copyright in the book to a publishing company for the life of the copyright. Down the road, the publishing company decides they no longer want to produce copies of the work or, in the alternative, the work becomes so popular that the value of the original contract skyrockets. 25 years after the author’s death, the rights the author originally granted to the publishing company automatically expire and return to the estate. The estate now has 25 years to renegotiate a better deal with the publishing company, sell or re-license the rights to an entirely different publisher, or otherwise exploit the work how they wish. They also have the option to do absolutely nothing with the right and simply wait until the work enters the public domain.
As alluded to above, the reversionary right doesn’t apply to all works in Canada. For example, the reversion only applies when the author is the first owner of the copyright – thus excluding works made in the course of employment. Collective works, licences to use a work in a collective work, and assignments or licences that are reaffirmed in the will of the author also do not receive the benefit of the reversionary right.
Territorially, the reversionary mechanism only applies to Canadian copyright. This means that if a Canadian author granted exclusive global rights in a work to a publisher, the publisher would lose the Canadian rights in the work 25 years after the author’s death but would continue to enjoy their rights everywhere else.
Concerns with the current reversionary right
Although reversionary rights aim to provide measurable benefits to authors, they are not without criticism.
For the most part, creators rely on commercial intermediaries to undertake the production, marketing, and distribution of their works. In turn, these intermediaries seek to maximize how long they control the copyright in the work and can enjoy the revenue it generates. With the reversionary mechanism as it stands, copyright holders who may have invested funds in the expectation that they would enjoy a lengthy period of exclusive rights face the prospect that the fruits of their investments may be enjoyed not just by the estate, but potentially by their competitors.
Because the reversionary right essentially imposes a termination date on any assignments or licences of works of recently-deceased authors, intermediaries may be less willing to invest in the exploitation of a work as it nears its reversionary threshold. This has the counter-intuitive effect of making the works of recently-deceased authors less valuable in the market – at least until the 25 year post-death period has expired.
Another concern arises with what exactly the author’s estate will do with the rights they receive. There is no guarantee that the author’s estate will be savvy or interested enough to assert ownership and do something beneficial with the copyright.
The reversionary right is also unique in that it represents a noteworthy shift from the contracting freedom an author typically enjoys with respect to their copyright – no other form of intellectual property is subject to a legislative provision which essentially renders agreements and assignments void once the 25 year mark hits.
The administrative difficulty of managing the reversion itself also presents an issue. The timing of the right is contingent on the year an author has died yet Section 14 does not contemplate any form of notification system either for the estate of the author or for the copyright holder, who may not know that the reversionary clock has started running. Whether Section 14 applies to moral rights or to subsequent grants by assignees or licensees is similarly unclear, which poses major challenges to “clearance” and chain of title analyses.
The United States termination right
Although the reversionary right does not have an exact analogue in United States copyright law, US authors enjoy the benefit of a “termination right”. The operation of this right is complex, but for our purposes it will suffice to note that the US termination right allows authors or their estates to take back their rights 35 years after the rights were granted. (Similar to the Canadian reversionary right, the US termination right does not apply to works made for hire.) To exercise the termination right, the assigning author may terminate any licences or grants within a five-year period beginning 35 years after the initial grant by serving a “Notice of Termination” giving notice that the termination will take place no less than two years and no more than 10 years after the notice. Instead of an automatic reversion (as in Canada), the termination right is an optional one that the author, or their heirs, must choose to exercise. To qualify for the termination right, the initial grant of copyright must have been made by the author (i.e., an author’s heirs who effected a grant of copyright cannot make use of the termination rights in respect of their grant).
Understanding the US termination right, at least in principle, provides some insight into the inspiration behind the key proposals to revise the Canadian reversionary right.
Proposals to revise the right
In 2019, the Standing Committee on Canadian Heritage and the Standing Committee on Industry, Science and Technology provided recommendations on statutory changes to the Copyright Act. (These reports are referred to as the CH Report and the INDU Report, respectively.) The committees heard from hundreds of witnesses and engaged with a wide variety of stakeholders including creators, publishers, distributers, academics and legal practitioners.
When it came to Section 14, the committees concluded that authors should be granted a non-waivable right to regain control of their copyright 25 years after the initial assignment of the rights.
Specifically, the committees recommended:
INDU Report: “Statutory Review of the Copyright Act” (Recommendation 8)
That the Government of Canada introduce legislation amending the Copyright Act to provide creators a non-assignable right to terminate any transfer of an exclusive right no earlier than 25 years after the execution of the transfer, and that this termination right extinguish itself five years after it becomes available, take effect only five years after the creator notifies their intent to exercise the right, and that notice be subject to registration.
CH Report: “Shifting Paradigms” (Recommendation 14)
That the Government of Canada amend subsection 14(1) of the Copyright Act so that it reads “from 25 years after assignment.” [i.e., rather than the current 25 years from the death of the author].
To evaluate how these proposed recommendations might affect Canadian creators, a report was commissioned by the government to determine the best option for Canada. The report released in March 2020 by Paul J. Heald (the Heald Report), an American novelist and law professor, recommends that Canada adopt a carefully crafted termination right that:
- provides creators a non-assignable, non-waivable right to terminate any transfer of an exclusive right no earlier than 25 years after the execution of the transfer;
- extinguishes itself five years after it becomes available;
- takes effect no earlier than 12 months after the creator is notified of the intent to exercise the right;
- requires that notice be subject to registration;
- requires that termination can only be exercised by claimants holding 51% or more of the termination right;
- provides protection for a transferee who properly licensed the copyrighted work to create its own authorized original work of authorship.
The federal government has yet to take a firm position on whether this recommendation will be accepted.
What can we learn from the US and what’s next for Canada?
Introducing a termination right into the Canadian copyright regime will result in a significant shift in the balance of power between creators and intermediaries. Instead of giving a creator’s heirs one last kick at the can, a termination right would allow creators themselves to take advantage of their own copyright.
Using the termination right in the United States as a litmus test, it is clear that no solution is without its complexities. The US termination right has suffered from confusing legislative instruction and cumbersome procedures to exercise the right. Notice requirements have been critiqued as overly technical and, without the help of legal representation, the burden on creators wishing to exercise their own rights may actually dissuade them from doing so. Instead of proceeding through the termination process, many believe that creators or their heirs will choose to renegotiate with current licensees. That being said, in many ways, this may still achieve the ultimate purpose. In the United States, the threat of termination is often enough to kick negotiations into high gear. If the concern is a poor bargain, the opportunity to statutorily regain control of a valuable copyright is pretty effective leverage.
Of course, some creators never even find out the termination right exists. This difficulty is compounded by the “use-it-or-lose-it” nature of the US termination right. If the option to terminate isn’t invoked within 40 years of the grant, the right disappears.
The Canadian version of this right may want to avoid these complexities by keeping the reversion automatic rather than having an “opt-in” process. However, any automatic system will have to grapple with administrative hurdles, underdeveloped notice procedures, and the issue of parties who genuinely wish to continue their agreements. After all, not all rights will fall into the category of works that were drastically undervalued at the time their copyright was assigned (e.g. the original rights to Superman were sold for $130). The recommendations of the Heald Report go some way in addressing some of these concerns, but a termination right may just be inevitably complex.
While there are many forms the right can ultimately take, if the INDU Report and the CH Report are anything to go by, the current Canadian reversionary right seems to have overstayed its welcome. The call to action has been signalled, but the fate of a Canadian termination right remains to be seen.