Penguin Group (USA) Inc., et al. v. Steinbeck, et al.

The Second Circuit held that a 1994 agreement between an author’s widow and a publisher terminated and superseded the 1938 grant of rights by the author, thus leaving no pre-1978 grant intact that could be terminated by the author’s son in 2004.

John Steinbeck entered into a publishing agreement with The Viking Press in 1938 relating to some of his most successful works; these rights were later transferred to Penguin Group (USA). Steinbeck died in 1968 and bequeathed his copyright interests to his wife, Elaine Steinbeck, and bequeathed to his two sons from a previous marriage $50,000 each.

In 1994, Elaine Steinbeck entered into a new agreement with Penguin. The new agreement increased the annual guaranteed advance and royalties that were paid to Elaine Steinbeck and stated that, when signed, it would “cancel and supersede the previous agreement.”

Elaine Steinbeck died in 2003 and bequeathed her copyright interests to her children and grandchildren from a previous marriage. A year later, John Steinbeck’s surviving son and grandson provided a notice of termination to Penguin, attempting to terminate the 1938 agreement under Section 304(c) of the Copyright Act. Section 304(c) allows authors or their statutory heirs to terminate a pre-1978 grant by providing notice during a specific 5-year window, “notwithstanding any agreement to the contrary.” Section 304(c) states that an author’s widow owns half of the termination interest and the author’s surviving children and grandchildren own the other half.

The district court granted summary judgment to the defendants and held that the 2004 termination was valid on the grounds that the 1994 agreement was “an agreement to the contrary” and did not supersede the 1938 grant.

The Second Circuit reversed, holding that the plain language of the 1994 agreement indicated that the parties intended to supersede and terminate the 1938 agreement, thereby leaving no pre-1978 grant intact. The court ruled that the 1994 agreement was not an “agreement to the contrary” because it was entered into at a time when Elaine Steinbeck wielded the threat of termination to her advantage: “[i]n this case, Elaine Steinbeck had the opportunity in 1994 to renegotiate the terms of the 1938 Agreement to her benefit . . . . By taking advantage of this opportunity, she exhausted the single opportunity provided by statute to Steinbeck’s statutory heirs to revisit the terms of her late husband’s original grants of licenses to his copyrights.”

The court also rejected the defendants’ argument that the 1938 agreement remained in effect because it intended that termination rights survive the agreement. “The availability of termination rights under the Copyright Act is not dependent on the intent of the parties but on, among other things, the date that a grant of rights was executed and the relationship to the author of those seeking to exercise the termination right. So, even if we accept that the 1994 Agreement ‘explicitly carries forward possible future termination,’ it does not matter inasmuch as the pre-1978 grant of rights no longer existed.”