Efficient Contracting Under The U.S. Copyright Termination Law

Abstract

The American copyright act from 1976 allows authors to terminate their copyright grants after a certain vesting period if these are not categorized as work made for hire. The literature suggests substantial effects on the author-publisher relationship because in negotiations publishers may internalize the harm from a termination decision. This paper illuminates the internalization problem and shows that contracts should be designed differently for terminating and non-terminating authors. The total remuneration offered by the initial publisher is strictly lower for authors who terminate. This paper also points out the limits of the copyright law under scrutiny considering additional institutional regulations and existing market norms.