Second Circuit Fortifies Authors’ Termination Power: Exclusive Rights in Underlying Works Do Not Survive under § 304(c)(6)(A)

Introduction

In Atticus Ltd. Liability Co. v. The Dramatic Publishing Co. (2d Cir. July 29, 2025), the Second Circuit delivered a sweeping clarification of the Copyright Act’s termination regime. The dispute involved dueling stage adaptations of Harper Lee’s classic To Kill a Mockingbird: the long-standing Sergel Play, licensed by The Dramatic Publishing Company (“Dramatic”), and the later Aaron Sorkin adaptation licensed by Atticus Ltd. Liability Company (“Atticus”). After Harper Lee terminated Dramatic’s 1969 grant, Dramatic claimed that the derivative works exception in 17 U.S.C. § 304(c)(6)(A) preserved not only its right to continue licensing the Sergel Play but also an exclusive right to all future non-first-class (amateur and stock) stage productions of the novel. Atticus sought a declaratory judgment that such exclusivity no longer existed and that its own performances would not infringe Dramatic’s interests.

The district court sided with Atticus; the Second Circuit now affirms, articulating a bright-line rule: After an author’s statutory termination becomes effective, any exclusive rights in the underlying work revert to the author, and § 304(c)(6)(A) preserves only the ability to exploit the existing derivative work, not a continuing monopoly over new derivative ventures. The court also vacated and remanded a partial award of attorney’s fees, refining the standards for fee-shifting where some, but not all, defenses are deemed objectively unreasonable.

Summary of the Judgment

Declaratory Relief: Dramatic’s claimed exclusivity over non-first-class stage rights expired with Harper Lee’s 2016 termination; Atticus and Aaron Sorkin may mount non-first-class U.S. performances without infringing Dramatic’s interests.
Derivative Works Exception Narrowed: § 304(c)(6)(A) allows continued exploitation of the Sergel Play itself but does not confer a right to bar others from creating or performing different adaptations.
Other Defenses Rejected:
- Lee’s 2015 re-grant to Rudinplay/Atticus could not undermine Atticus’s position because Dramatic’s exclusivity had already lapsed.
- Statute of limitations and res judicata arguments failed; the former was “nearly unintelligible,” the latter unsupported by evidence of Atticus’s control over the Lee Estate in arbitration.
Attorney’s Fees: Fee award for post-April 27 2023 work vacated and remanded: district court may award fees only to the extent based on defenses that were objectively unreasonable, not on alleged procedural forfeiture.

Analysis

1. Precedents Cited and Their Influence

Mills Music, Inc. v. Snyder, 469 U.S. 153 (1985) – Previously recognized that § 304(c)(6)(A) preserves contractual terms governing an existing derivative work, but ownership of the underlying copyright still reverts. The Second Circuit distinguished Mills, explaining that Dramatic conflated its right to exploit the Sergel Play with a right to control Harper Lee’s novel going forward.
Stewart v. Abend, 495 U.S. 207 (1990) – Reaffirmed that copyright in new material belongs to derivative author, while the underlying material remains subject to the original author’s rights. This buttressed the distinction between the Sergel Play (Dramatic’s property) and the future exploitation of To Kill a Mockingbird.
Woods v. Bourne Co., 60 F.3d 978 (2d Cir. 1995) – Emphasized that the derivative-works exception is limited and does not permit creation of new derivative works post-termination.
Ownership/statute of limitations cases – Kwan v. Schlein, 634 F.3d 224 (2d Cir. 2011); Petrella v. MGM, 572 U.S. 663 (2014). The court used them to refute Dramatic’s single-accrual theory.

2. The Court’s Legal Reasoning

Textual Construction of § 304(c)(6)(A):
• The phrase “may continue to be utilized under the terms of the grant” is tethered to the specific derivative work already prepared.
• It does not resurrect an exclusive license in the author’s underlying work; such exclusivity is itself a “right under the copyright” that reverts upon termination under § 304(c)(6).
Separation of Two Distinct Properties:
• Derivative work (the Sergel Play) – Dramatic retains its own copyright in new material and may keep licensing it.
• Underlying work (Mockingbird novel) – All rights except those needed to exploit the Sergel Play revert to the author’s successors.
Policy Alignment: Congress intended termination to free authors from “ill-advised and unremunerative grants”; a perpetual exclusivity clause would frustrate that design. Dramatic’s reading would create a “dead-hand” restraint—no one could ever stage a new adaptation. The court found this outcome “absurd.”
Limitations & Preclusion Defenses:
- Statute of limitations – The claim was about infringement, not ownership; limitation period restarts with each alleged infringement.
- Res judicata – Non-party Atticus had neither agreed to be bound nor controlled the Lee Estate in arbitration; none of the Taylor v. Sturgell exceptions applied.
Attorney’s Fees Analysis: • Objective unreasonableness of Dramatic’s limitations & preclusion defenses justified some fees.
• But the court erred in treating those defenses as automatically forfeited; on remand it must segregate permissible from impermissible grounds.

3. Likely Impact of the Judgment

Termination Strengthened: Authors (or heirs) regaining rights can now rely on a clear Second Circuit precedent that exclusive “umbrella” licenses do not survive termination.
Entertainment & Licensing Markets: Producers, publishers, and dramatists must distinguish between:
1. rights to keep exploiting an existing adaptation;
2. rights to stop others from preparing or performing new ones.
Contract drafters are likely to revisit termination-related clauses.
Fee-Shifting Jurisprudence: The panel refines how district courts should parse § 505 factors—objective unreasonableness vs. procedural forfeiture—and encourages precise articulation of the basis for awards.
Potential Supreme Court Interest: The Seventh Circuit is concurrently reviewing confirmation of the same arbitration award. A circuit split on the derivative works exception could prompt certiorari, but the Second Circuit’s thorough textual approach may carry persuasive weight.

Complex Concepts Simplified

Derivative Work – A new work that recasts or adapts an existing work (e.g., a play based on a novel). It contains two copyright layers: the original material (belonging to the author) and new material (belonging to the adapter).
Termination Right (§ 304(c)) – Allows authors (or heirs) to “take back” rights they granted decades earlier, giving them a second chance to exploit their works.
Derivative Works Exception (§ 304(c)(6)(A)) – After termination, the grantee can keep exploiting the exact derivative work it already created, but gains no power to block new adaptations.
First-Class vs. Non-First-Class Productions – Industry shorthand: “first-class” usually refers to Broadway/West End, large-scale tours; “non-first-class” covers amateur, stock, regional, school, or community theatre.
Objective Unreasonableness – A litigation position so weak that a reasonable lawyer would not expect it to succeed; pivotal in fee awards.

Conclusion

Atticus v. Dramatic provides the clearest appellate roadmap to date on how the Copyright Act balances the continued exploitation of existing derivative works with the author’s reclaimed freedom to authorize new ones. By drawing a sharp line—preservation of use, not of exclusive control—the Second Circuit vindicates Congress’s intent behind the termination mechanism, curtails “perpetual licenses by the back door,” and affirms the vitality of creative re-interpretations of iconic works. Contract drafters, licensors, and litigants must now treat post-termination exclusivity claims with great caution, and lower courts have explicit guidance on parsing fee petitions when multiple defenses span the spectrum from meritless to colorable. The decision ultimately enriches the public domain of theatrical expression while respecting the vested interests attached to established adaptations—a balance squarely in line with the constitutional purpose of copyright law.