A little-known section of the Copyright Act allows designers and developers of video games to terminate copyright assignments granted after January 1, 1978. Section 203 of the Act was intended to give creators of copyright-protected works, including video games, the opportunity to regain rights they may have previously transferred when they had little-to-no bargaining power. As the termination of the assignment may be made on the 35th anniversary of the grant, the earliest Section 203 terminations of transfers may take effect in 2013. Therefore, both creators and publishers of video games should consider their copyright assignment termination rights and remedies/defenses as part of any robust intellectual property protection strategy.

Background

In 1972 Atari released its simulated table tennis game, Pong, which went on to become the first video game to reach mainstream success. In the early years that followed many other seminal video games were released—Asteroids, Galaxian, Pac-Man, Pitfall, Frogger, Donkey Kong, etc.—which helped to launch a multi-billion dollar industry. From the birth of the industry, video game creators/developers have entered into contracts transferring their copyright interests to publishers. With very little negotiating power, the creator or developer was often presented with a “standard” contract assigning all intellectual property rights to a publisher in perpetuity in exchange for funds to develop the game and/or a royalty against sales. However, while not widely known in the video game industry, thirty-five years is a magic number when it comes to termination of copyright assignments . . . even ones that are by their language perpetual. As certain video games begin to reach the age of 35 this termination option may become a possibility and potentially a lucrative option. Therefore, it is now ripe to consider whether the creators/developers of video games can rescind a previous copyright assignment, as is becoming more prevalent with other types of copyright protected works. Moreover, publishers of video games should begin consider which older properties still retain significant value and what steps they can take to avoid the possibility of the termination of a copyright assignment.

Section 203

In 1976 Congress amended Section 203 of the United States Copyright Act granting creators of post-1978 protected works, which includes video games, the right to reclaim the copyright in their creations after 35 years. The termination right in Section 203 trumps the language of any written agreements -- even agreements which state they are made in perpetuity. Congress’ purpose in amending Section 203 was to alleviate the imbalance in the “take-it-or-leave-it” negotiating situation many copyright owners found themselves in and to provide a creator with a second bite at the apple to monetize their creation. Specifically, Section 203 states, in pertinent part, as follows:

In 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…17 U.S.C.A. § 203 (a).

Termination of the grant may be effected at any time during a period of five years beginning at the end of thirty-five years from the date of execution of the grant; or, if the grant covers the right of publication of the work, the period begins at the end of thirty-five years from the date of publication of the work under the grant or at the end of forty years from the date of execution of the grant, whichever term ends earlier… 17 U.S.C.A. § 203(a)(3).

Upon the effective date of termination, all rights under this title that were covered by the terminated grants revert to the author, authors, and other persons owning termination interests…17 U.S.C.A. § 203 (b).

While the above is understandably a mouthful, ostensibly Section 203 states that a creator of video game software, or other protected works like video game music, characters, design documents, etc., is entitled to terminate a copyright assignment 35 years after the first date of publication or 40 years after the execution of the grant, whichever comes first. After the proscribed term has passed, the creator or developer can recaptures his/her rights and can potentially renegotiate a license with the publisher on more favorable terms or can monetize the copyright in the game in some other fashion.