The Right of Termination and the Problem of Unfair Copyright Contracts

Copyright contracts can exhibit significant unfairness both at the time of agreement and in their long-term implications. This is particularly evident in cases where creators, often lacking bargaining power, transfer their copyrights to publishers, record labels, or distributors under unfavorable terms. This paper examines the right of termination as a mechanism to mitigate these unfair contractual outcomes, drawing comparisons between the U.S. termination right under Section 203 of the U.S. Copyright Act and Canada’s reversionary right under Section 14 of the Canadian Copyright Act. It first explores the historical origins of the termination right, tracing it back to the Statute of Anne and its initial form as a reversionary right that sought to restore rights to authors after a fixed period. While this principle persisted in various forms, it underwent transformation in the United States, evolving into a structured termination right that allows authors (or their heirs) to reclaim their works after 35 years. In Canada, the reversionary right, inherited from British law, grants authors’ estates automatic reclamation 25 years after the author's death. Empirical evidence from the U.S. demonstrates both the potential benefits and the practical challenges of termination rights including the complexities of enforcement, including stringent procedural requirements, litigation costs, and contractual circumventions, which have limited the accessibility of termination rights for many authors. In contrast, Canada's current reversionary system, while automatic, has been criticized for occurring too late to provide meaningful financial benefits to authors. Recent policy discussions in Canada suggest a shift towards a termination right model similar to the U.S., with proposals to allow authors to terminate copyright assignments 25 years after the transfer, rather than after their death. These proposed changes aim to increase fairness in copyright contracts while balancing the interests of publishers and distributors. Applying these insights to South Korea, the paper evaluates whether a termination right should be adopted within its legal framework. South Korea has witnessed high-profile disputes over copyright contracts, such as the cases of “Cloud Bread” and “Black Rubber Shoes”, where original creators were excluded from financial gains despite the immense success of their works. The controversy surrounding “Squid Game”, which generated billions for Netflix while its creators received only a fixed production fee, further underscores the necessity of reform. Currently, legislative proposals in South Korea have focused on the bestseller clause, similar to the German model, which allows authors to demand additional compensation if a work achieves unexpected success. However, this approach presents legal and practical difficulties, including challenges in proving what constitutes an “unexpected success” and enforcing compensation adjustments. In light of these challenges, the paper offers the argument that a termination right may offer a more structured and predictable remedy for authors and recommends a termination right similar to Canada’s model including the proposed amendments allowing termination after 25 years from the execution of transfer, with a 5-year window to exercise the right and requiring a formal notice and registration, ensuring clarity in enforcement. Derivative works should be excluded allowing continued exploitation of pre-existing adaptations to provide contractual safeguards. In conclusion, while termination rights are not a perfect solution, they represent a viable policy tool to address unfair copyright contracts, particularly in industries where creators lack initial bargaining power. By drawing on the experiences of the U.S. and Canada, South Korea can develop a tailored approach that enhances fair compensation for creators while maintaining contractual stability in the market.