The Second Circuit held that EMI publishing owned rights to the song "Santa Clause Is Comin' To Town" under a 1981 grant, not a 1951 grant, and accordingly that a 2007 termination notice terminates EMI's interest in 2016, reversing the lower court's entry of summary judgment for EMI. The case details the complex statutory scheme under the 1976 Copyright Act which gave authors and their statutory heirs the right to terminate previously made grants of copyright under certain circumstances, and thereby to recapture some of the value associated with the works. 17 USC 203 and 304(c)-(d). Plaintiff sought a declaration that either a notice of termination served on the publisher in 2007 or another served in 2012, will, upon becoming effective, terminate EMI's rights to the song. The Second Circuit concluded that EMI owned rights to the song not under a 1951 agreement but instead under a subsequent 1981 contract, and that that the 2007 termination notice will terminate the 1981 agreement in 2016. Accordingly, plaintiff (the author's heirs) were entitled to a declaratory judgment.
The Court detailed the various rights of reversion under the Copyright Act, which permits the author of certain earlier works to terminate a grant of copyright (e.g., to a publisher, like EMI's predecessor). It then found that a 1981 Agreement not only granted EMI the future interest scheduled to revert to the author upon termination, it also replaced an earlier 1951 agreement as to the source of EMI's existing rights to the song. Applying New York common law, the Court held that the parties intended for the new contract to substitute for the old one. "Section 1 of the contract shows that they chose not only to have EMI receive the future interest that vested in [the author] upon service of the termination notice, but also to replace the 1951 Agreement as the source of EMI's existing rights in the Song." Thus, the failure to record a 1981 termination notice under the 1951 agreement was irrelevant to the question whether EMI presently owned the copyright in the Song under either agreement. Its rights to the renewal term were traceable to the 1981 agreement. Thus, that was all that matters for decided plaintiffs' termination notices pursuant to section 203.
The Court concluded that Plaintiff could terminate the 1981 agreement under section 203 (section 304 did not control), and that the 2007 termination notice terminated the 1981 agreement. Publication is a one time event that occurred in the 1930s. Because the 1981 grant was executed by the author and does not cover the right of publication, it was terminable under section 203 starting on December 15, 2016, which is the effective date of termination stated in the 2007 notice.