IP Law Daily, COPYRIGHT—D. Conn.: Cash-for-royalties deal can’t be terminated under the Copyright Act, (Oct 21, 2022)

By Matthew Hersh, J.D.

A writer who traded away a portion of his future royalties in return for an upfront payment did not grant a copyright interest and therefore could not later terminate the agreement.

The widow of a Broadway lyricist who sold away a portion of his future royalties in return for an upfront payment in cash could not use the Copyright Act to terminate that agreement and claw back the royalties when the production proved more popular than expected, the federal court for New Haven, Connecticut, has held. The court, in granting summary judgment against the widow, emphasized that the termination right applied only to transfers or licenses of one of the exclusive rights to copyright, and not to the bare right to receive royalty payments (Merrill v. Hyman, October 20, 2022, Meyer, J.).

The lawsuit revolves around Funny Girl, the highly regarded musical which first opened on Broadway in 1964 based on a score by Jule Styne, lyrics by Bob Merrill, and a book by Isobel Lennart. In 1963, just before the musical opened, the lyricist, Merrill, made a side deal with Eliot Hyman, an executive at the production company. In return for an upfront payment of $82,000, the lyricist agreed to grant the executive two-thirds of all his future royalties from the musical. But it turned out to be a bad deal for the lyricist, as the revenues generated by the musical over the ensuing decades—indeed, a revival opened on Broadway just this past April—far outweighed the initial payment.

In 2016, the lyricist’s widow purported to terminate the 1963 agreement, claiming a right to do so under federal law. The descendants of the production company executive, of course, rejected the termination. The parties sued one another and cross-moved for summary judgment, leading to this opinion.

Termination of royalty agreement. The court sided with the family of the production company executive. The Copyright Act indeed gives authors the right to terminate contracts after the passage of a certain amount time. But that provision, the court noted, allows only the termination of agreements constituting a “transfer or license” of the copyright. The royalty agreement between the lyricist and the executive was neither. The contract nowhere said that the executive could sell, copy, adapt, perform, or display the lyrics, the court observed. Instead, the court noted, the contract gave the executive only a financial right—“his cut of future royalties.” Because “the right to receive royalties is not a copyright interest,” the court reasoned, an agreement concerning royalties “does not constitute a transfer of copyright ownership.”

Nor could any other provision in the contract be read, the court concluded, to constitute a transfer of a copyright interest. The contract did contain a clause in which the lyricist promised to transfer a share of his “royalties, percentage compensation, rights and other compensation” from the musical. The widow argued that the reference to “other” compensation embraced a copyright interest. But the court was not persuaded. The contract never identified a specific right under the Copyright Act that the executive had supposedly purchased. “A true copyright deal would,” the court noted.

The Case is No. 3:21-cv-00551-JAM.

Attorneys: Alan Neigher (Alan Neigher, Attorney at Law) for Suzanne Merrill. Ari J. Hoffman (Cohen & Wolf, PC) for Frederick L. Hyman.

Cases: Copyright ConnecticutNews GCNNews