Maryland Bar Bulletin
Publications : Bar Bulletin : March 2007

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 Bar Bulletin Focus

Intellectual Property     

The Intersection of IP Law and Estate Planning

A creative individual may spend a lifetime composing books, software code, songs, movie scripts and other creative works. Although he may understand that these creative works are subject to copyright protection and may even pursue such rights, he may not foresee what will happen to his works upon his death and may not understand that decisions early in life can drive the final outcome. If he transfers or licenses his rights early on, it may be difficult – if not impossible – to recover those rights for his heirs. The resolution of these issues occurs at the intersection of intellectual property law and estate planning. Recently, in Milne v. Stephen Slesinger, 430 F.3d 1036 (9th Cir. 2005), the granddaughter of the creator of the Winnie-the-Pooh® series of books and characters found herself at such crossroads.

A.A. Milne created the Winnie-the-Pooh characters and books in the 1920s. At that time, the duration of the copyrights in the Winnie-the-Pooh works was for an initial period of 28 years and a renewal period of an additional 28 years. In 1930, Milne entered into a contract with Stephen Slesinger to grant merchandising and other rights in exchange for royalties. Slesinger subsequently created Stephen Slesinger, Inc. (SSI), to which he assigned his rights in the Winnie-the-Pooh works.

Milne died in 1956, survived by his wife, Dorothy, and one child, Christopher Robin. Milne's will bequeathed all interests in his Winnie-the-Pooh works to a trust for Dorothy's benefit for her lifetime. Subsequently, Walt Disney Productions was granted SSI's and certain of Dorothy's rights in exchange for royalties. Walt Disney Productions subsequently turned Winnie-the-Pooh into the multi-billion-dollar-per-year business that it is today. After Dorothy's death, her interest in the Winnie-the-Pooh works went into another trust, whose beneficiaries included Christopher Robin and, ultimately, Christopher Robin's only child, Clare.

In 1976, an amendment to the Copyright Act extended the duration of the existing copyrights in the Winnie-the-Pooh works for an additional 19 years. The amendment to the Copyright Act also enabled a copyright holder or his heirs to terminate a grant of rights in copyrighted works made to a third party prior to January 1, 1978. In implementing the termination rights, Congress was attempting to protect authors, who are often at a disadvantage when entering into contracts with publishers and other licensees. The termination rights run somewhat contrary to established contract law in that these rights give authors an escape from a previous unfavorable contract. In 1998, the Copyright Act was amended again to extend the duration of copyrights for an additional 20 years.

Fearing that Christopher Robin would exercise the option to terminate the grant of rights his parents had made in the Winnie-the-Pooh works, Walt Disney Productions approached him in 1983 to negotiate a new agreement, which Christopher accepted. As a result of the new agreement, the Milne family received double SSI's share of the royalties, which amounted to a net gain of hundreds of millions of dollars, but still less than desired.

In 2002, while SSI and Walt Disney Productions were embroiled in litigation over royalties, Clare Milne served SSI with notice of termination of the 1930 agreement into which her grandfather had entered. Clare then sought a declaratory judgment that her termination notice was valid under the Copyright Act. SSI argued that Clare did not have any rights because her father had terminated the 1930 agreement when he entered into the new agreement. The court agreed with SSI and found that the 1930 agreement was terminated when Christopher Robin executed the 1983 agreement. The right to terminate that Clare was seeking applied only to copyright transfers or licenses executed before January 1, 1978, and there was no pre-1978 agreement to be terminated.

Clare later petitioned the U.S. Supreme Court to hear her case. However, the Supreme Court declined, and now Clare is left with no recourse. In the meantime, SSI and Walt Disney Productions continue to market Winnie-the-Pooh products before the copyrights enter the public domain in the 2020s. Perhaps if Clare had discussed her feelings about the rights to the Winnie-the-Pooh works with her father before he signed the 1983 agreement, Christopher Robin might have served a termination notice instead of signing the agreement, thereby possibly allowing the Milne family to negotiate a better deal for their rights to the Winnie-the-Pooh works.

One should be aware of what copyrights he owns, what copyrights are owned by his family and whether any part of such rights have been granted to any third party. Because copyright protection generally lasts for the life of an author plus 70 years, copyrights can span across multiple generations. Planning appropriately now will help avoid pitfalls in the future, including those that came to plague A.A. Milne's granddaughter.

Vasilios Peros is a member at Hodes, Pessin & Katz, P.A. and chairs of the firm's Technology & Intellectual Property practice group. Ruth Vadi is an associate at Hodes, Pessin & Katz, P.A. and focuses her practice on technology transactions, intellectual property and litigation.

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Publications : Bar Bulletin: March 2007