The Copyright Ownership Boomerang: Automatic Reversionary Interests in Canada
In Canada, an author’s assignment of their copyright ownership is not always a final disposition of rights. Section 14 of the Canadian Copyright Act (the “Act”) provides an author’s estate with a reversionary interest in the copyright in work assigned or exclusively licensed by the author during their lifetime. The interest is triggered automatically. It kicks in at the end of 25 years after the author’s death, with few exceptions. Subject to minimal judicial interpretation, the reversionary interest in Canada is an oft overlooked provision that has the potential to cause much mischief.
Today, more and more businesses rely on acquired IP in works created in the mid-to-late 20th century (e.g., comics, movies, books, etc.) to build and develop their brands and market share, particularly in the entertainment industry. As the original authors of those IP works age and pass, reversionary interests are poised to take on new significance for both rights holders and authors' estates. Large entertainment companies in the US are already beginning to grapple with the potential ramifications of reversionary rights—in 2014, Disney and Marvel entered into a high-profile settlement with the estate of Jack Kirby triggered by his heirs’ invocation of their reversionary interest in works involving comic heroes Spiderman and X-men, and in 2021 were subject to reversionary claims by the estate of a different comic book artist, and that could impact the future use of characters such as Iron Man and Doctor Strange. While there are differences in how and when reversionary interests come into play in a Canadian versus U.S. context, there is good reason to believe that such claims are likely to be brought in Canada and affect Canadian rights.
The Reversionary Interest in Canada
The reversionary interest in Canada is set out in Section 14 of the Copyright Act:
14 (1) Where the author of a work is the first owner of the copyright therein, no assignment of the copyright and no grant of any interest therein, made by him, otherwise than by will, after June 4, 1921, is operative to vest in the assignee or grantee any rights with respect to the copyright in the work beyond the expiration of twenty-five years from the death of the author, and the reversionary interest in the copyright expectant on the termination of that period shall, on the death of the author, notwithstanding any agreement to the contrary, devolve on his legal representatives as part of the estate of the author, and any agreement entered into by the author as to the disposition of such reversionary interest is void.
(2) Nothing in subsection (1) shall be construed as applying to the assignment of the copyright in a collective work or a licence to publish a work or part of a work as part of a collective work.
It provides that where the author of the work was also the first owner of the copyright in the work, ownership of that copyright will automatically revert to the author’s estate at the end of 25 years after the author’s death (i.e., for the last 25 years of the copyright term), and that reversion will occur regardless of any copyright assignments or exclusive licensed granted by the author to the contrary.
There are a few exceptions: (a) works created during the course of employment (i.e., because in such cases the author is deemed to not be the first owner of the work); (b) the work in question is a collective work; (c) the license related to the inclusion/publication of the work in a collective work; or (d) the copyright assignment is reconfirmed in the author’s last will and testament.
This automatic reversion regime is different than how copyright could revert to an author (or their estate) in the United States. First, US authors (or their estates) must take active steps to “reclaim” their assignment copyright via the delivery of a termination notice. Second, the US regime applies in a different time period — the termination notice must be delivered during the five-year period that begins at the end of the thirty-fifth anniversary of the original grant date and served on grantees no less than two and no more than ten years before the date of termination.
The policy rationale underlying Canada’s automatic reversion interest is to allow the author’s estate to revisit prior assignments and exclusive licenses and enter into new or better arrangements for the remaining years the work is protected by copyright (i.e., before it falls into the public domain). By making it automatic and not subject to agreement, the regime recognizes the reality that authors often grant an interest in their copyright for the entirety of its term before its full potential value is understood.
Although reversion is incredibly important, there is minimal Canadian jurisprudence interpreting and considering Section 14’s reversionary interest. At present, there appear to be only two decisions discussing the reversionary right, and those merely confirm the application of sections 14(1) and 14(2). They provide no interpretation. The first decision, Kelley Estate v. Roy, 2002 FCT 950, confirmed the application of 14(1) to an assignment of copyright[1], and that parties cannot contract out of the reversion.[2] The other decision, Drouin (Estate of Côté-Drouin) c. Seed, 2019 QCCS 848, confirmed that what is an exempted “collective work” in section 14(2) applies to collections (in that case, volumes of le Dictionnaire National des Canadiens Francais (DNCF) and genealogies).
Due to the territoriality of copyright law, the reversionary interest will likely only apply to an author’s Canadian copyright interests.[3] This means that if a first owner author assigned copyright in the work to a third party for exploitation globally, only the author’s Canadian copyright interest would revert—in other words, the assignee could continue to rely on its assigned/licensed rights outside of Canada (of course, subject to the provisions of foreign copyright laws).
Because the reversionary interest applies to nearly all works in Canada and is automatically triggered, it is worthwhile to consider the interplay between this requirement and other provisions of the Copyright Act, including those that differ between Canada and the United States. Some of these are discussed below.
Works Made in the Course of Employment
A key condition precedent of the section 14 reversionary interest is that the author is the first owner of the work. Put differently, there is no need to worry about rights “boomeranging” back to the author’s estate if they are not considered the first “owner”. In Canada, the default position is that the author of a work is the first owner. The only explicit exception is when the work is made “in the course of employment”, in which case, the employer is deemed to be the first owner.[4] To be made “in the course of employment” there must be an employee-employer relationship between the human author and the employer. Importantly, it does not apply to independent contractors, who retain their copyright ownership under Canadian law unless and until they assign it in writing.
These are key differences compared to US law, which provide both for corporate authorship and for ownership of “works made for hire” to automatically ensure to the individual or entity who contracted for the creation of the work (i.e., it extends beyond employment relationships).
These differences may have serious implications where the Canadian reversionary interest is concerned—in particular, US-based corporate entities that hire independent contractors and rely on the “work for hire” doctrine in the United States to claim both authorship and ownership may not be able to do so in Canada, and find that since Canadian copyright law would not consider that corporate entity a valid author or the first owner (e.g., because there was no employer-employee relationship), the reversionary interest kicks in for any work created by that independent contractor in respect of exploitation of the work in Canada.
Joint Authorship
Another consideration further complicating whether, and to what extent, the reversionary interest in Canada could impact exploitation of an author’s work by an assignee starting 25 years after that author’s death, is works of joint-authorship — i.e., works created by two or more people, where the contribution of one author is not distinct from the contribution of the other author/authors.[5] In general, joint authors will be the first co-owners of a copyright (unless, of course, if the work was made in the course of employment). Moreover, to exploit a work of joint authorship, it is critical to have the required permissions/assignments from all the copyright owners. Practically, this means that unless all the owners are “on side”, or have all assigned their ownership to one entity, a single co-owner could block the exploitation of the work.
Moreover, copyright in a work of joint authorship runs until 50 years after the death of the longest living author. In other words, if two authors create a work of joint authorship in 2000, one joint author dies in 2001, and the other joint author dies in 2050, the work will not move into the public domain until 2100 (i.e., 50 years later). This is a potential boon for the estate of the first joint author, whose reversionary interest would trigger in 2026 (i.e, 25 years after the author’s death) giving them potentially 74 years to exploit the work.
The complications posed by joint authorship and the reversionary interest are particularly acute in the context of works produced through a highly collaborative process, such as comics, theatre, and film. While in some instances, the contribution of each author may be easy to parse (e.g. cinematographer, composer, director, writer, colourist, etc.) — in which case, the final result could arguably be a “collective work” rather than a work of “joint authorship” and thus reversion would have no effect on its exploitation — it can quickly become murky, particularly if more than one person fills a particular role or there are multiple stages or iterations involved in producing the final product. With respect to films, a further complication exists in that there is no clear answer at Canadian law whether a “cinematographic work” in general is considered a “collective work” or a “work of joint authorship”.
Proceeding with Caution
The Canadian reversionary interest has the potential to defeat otherwise certain contractual agreements and throw the best laid plans for IP-based franchise expansion into chaos. With the Canadian federal government’s plan to extend the term of copyright to the life of the author plus 70 years (on which we reported last year) authors’ estates are looking at a potentially extra 50 years during which they can exploit a work, even where that work may have been assigned or exclusively licensed during the author’s lifetime.
A further complicating factor is the effect on derivative works — how could the reversionary interest in the underlying work affect the ability to continue exploiting new works derived from it. For example, if an author has assigned copyright in a character created by them during their lifetime, and the new copyright owner created further works incorporating that character, could the reversionary interest impact the continued exploitation of those further works? Would there need to be a moratorium on their use in Canada starting at the end of 25 years after the author dies until the underlying work falls into the public domain? In the case of joint authorship, this could be decades!
What is a content creator to do? How can more certainty be found in who owns what and for how long? While there are the exceptions for works made in the course of employment, and those that are or form part of a collective work (to the extent that collective work can continue to be exploited), such exceptions do not apply to all works. Moreover, there is uncertainty surrounding whether and when such exceptions may even apply, particularly where a work is “made for hire” or may not be considered a “collective work”.
A key may be language within section 14 itself — that “no assignment of the copyright and no grant of any interest therein, made by him, otherwise than by will”. In the case of particularly high-profile works, or those that form the foundation for further works (for example, in a book or film franchise), it may be worthwhile for current copyright owners (or those contemplating acquiring such rights) to negotiate with the original human author(s) to include language in their will specifically bequesting copyright in that work to the new owner. Such an approach is not without its practical and legal challenges — for one, requiring an author to bequest copyright they no longer own in a testamentary instrument, and never remove that bequest from any subsequent will, may be void for reasons of public policy, as could any damages for breach of contract that arise from the author’s failure to comply or complying but later changing their will and thus voiding the contractual requirement; however, unless and until Courts begin to interpret the meaning and scope of the reversionary interest, or there are legislative changes, assignees and exclusive licensees of copyrighted works may need to live with the reality that the copyright they think they own in Canada could boomerang back to the author’s estate at the end of 25 years following that author’s death.
