# Penguin v. Steinbeck: How a Renegotiated Contract Erased a Termination Right

> The Second Circuit held that a 1994 deal superseding Steinbeck's 1938 grant left no pre-1978 grant to terminate, defeating his heirs' Section 304(d) notice.

Topic: Copyright  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/penguin-v-steinbeck-termination-agreement-to-contrary/


Congress gave authors and their heirs a powerful second chance: the right to terminate old copyright grants and reclaim rights they had signed away, notwithstanding any agreement to the contrary. *Penguin Group (USA) Inc. v. Steinbeck*, 537 F.3d 193 (2d Cir. 2008), decided August 13, 2008, tested how easily that right can be lost. The United States Court of Appeals for the Second Circuit held that when John Steinbeck's widow renegotiated his original 1938 publishing contract in 1994, replacing it wholesale, she left no pre-1978 grant for his descendants to terminate a decade later. Their statutory termination notice was therefore ineffective.

The decision is a cautionary landmark. It shows that the termination provisions of the Copyright Act, for all their protective force, do not reach a grant that no longer exists. And it draws the practical line between a permissible renegotiation and a forbidden "agreement to the contrary" under 17 U.S.C. § 304(c)(5), a line that estate planners and literary heirs have wrestled with ever since.

## At a glance

- **Case:** *Penguin Group (USA) Inc. v. Steinbeck*, 537 F.3d 193 (2d Cir. 2008).
- **Decided:** August 13, 2008; Second Circuit; reversed the district court and ruled for Penguin.
- **Holding:** A 1994 agreement that canceled and superseded Steinbeck's 1938 grant left no pre-1978 grant to terminate, so the heirs' Section 304(d) termination notice was ineffective, and the renegotiation was not a prohibited "agreement to the contrary."
- **Significance:** The leading authority on how a renegotiated grant can extinguish statutory termination rights, defining the Section 304(c)(5) limit.

## The termination bargain Congress struck

Copyright's termination provisions exist because Congress recognized that authors often sell rights early, before a work's value is known, and from a position of weakness. The 1976 Act and its later amendments let authors, or after their death their statutory heirs, undo those transfers during defined windows. For grants executed before January 1, 1978, Section 304(c) permits termination during a five-year window opening 56 years after copyright was secured, and Section 304(d) adds a later window for those who did not exercise the earlier one.

The right is deliberately hard to waive. Section 304(c)(5) provides that termination may be effected "notwithstanding any agreement to the contrary, including an agreement to make a will or to make any future grant." That phrase is the shield: a publisher cannot simply insert a clause promising never to terminate, because such a clause is void. The question in *Steinbeck* was whether a full renegotiation of the underlying grant is the kind of "agreement to the contrary" that the statute nullifies, or instead a legitimate act that changes what there is to terminate.

## The facts: two contracts, decades apart

In 1938, John Steinbeck signed an agreement with The Viking Press covering many of his best-known works, including *Of Mice and Men*, *Tortilla Flat*, *The Long Valley*, *Cup of Gold*, *The Pastures of Heaven*, *To a God Unknown*, and *In Dubious Battle*. A 1939 extension added later works, among them *The Grapes of Wrath*. These were pre-1978 grants, squarely within the reach of Section 304's termination provisions.

Steinbeck renewed the copyrights during his lifetime, and when he died in 1968 he bequeathed his interest in them to his widow, Elaine Steinbeck. She also held a one-half share of the statutory termination interest under Section 304(c)(2). In 1994, she renegotiated the publishing arrangement with Penguin, Viking's successor. The 1994 agreement improved her economic terms substantially, providing a much larger guaranteed annual advance and higher royalties calculated on retail rather than wholesale prices. Critically, the new agreement stated that, once signed, it would "cancel and supersede the previous agreements, as amended, for the [works] covered hereunder." In 2004, Steinbeck's son and granddaughter, descendants entitled to exercise termination, served a Section 304(d) notice purporting to terminate the 1938 grant. Penguin sued for a declaration that the notice was ineffective.

## The court's reasoning: you cannot terminate what no longer exists

The Second Circuit reversed the district court and ruled for Penguin. Its logic followed the statutory text with precision. Section 304(d), like Section 304(c), reaches only grants "executed before January 1, 1978." The 1994 agreement, by its own terms, canceled and superseded the 1938 grant. Once that happened, the operative agreement governing the works was the 1994 contract, a post-1978 grant that Section 304 does not reach. Because the 1938 grant had been extinguished by mutual agreement, there was no pre-1978 grant left for the 2004 notice to terminate.

The heirs argued that the 1994 renegotiation was an "agreement to the contrary" barred by Section 304(c)(5), an attempt to contract around the termination right. The court disagreed. It declined to read "agreement to the contrary" so broadly that it would cover any agreement having the effect of eliminating a termination right, because Section 304 itself contemplates that the right can be lost, as when a majority in interest simply declines to exercise it. The court also pointed out that the 1994 agreement took nothing away from the descendants at the time: Section 304(d) would not exist for another four years, and in 1994 the descendants could not have terminated in any event, since they did not own more than one-half of the author's termination interest. As the court put it, Elaine Steinbeck renegotiated and canceled the 1938 Agreement "while wielding the threat of termination," and that kind of renegotiation "appears to be exactly what was intended by Congress." She extracted materially better terms in exchange for a new grant. Replacing an old grant with a new, more favorable one through arm's-length renegotiation is an exercise of the copyright owner's rights, the court held, not a prohibited circumvention of them.

## The tension with Mewborn

*Steinbeck* did not settle the field. Only weeks earlier, in *Classic Media, Inc. v. Mewborn*, 532 F.3d 978 (9th Cir. 2008), the Ninth Circuit had reached what many read as the opposite result, holding that a post-1978 re-grant did not extinguish an heir's earlier termination right. The cases are distinguishable on their facts, since the timing and structure of the re-grants differed and the *Steinbeck* renegotiation expressly canceled the prior contract while giving new consideration. But together they framed a genuine tension: when does a later agreement replace a pre-1978 grant so completely that the termination right disappears, and when does it merely layer new terms atop a grant that remains terminable? Practitioners must brief both cases, because the answer can turn on drafting details as subtle as whether the new agreement recites that it cancels and supersedes the old one.

## Open questions

- **How explicit must cancellation be?** *Steinbeck* leaned on language that the 1994 deal would "cancel and supersede" the earlier grant. It is unresolved how a court would treat a renegotiation that changes terms without expressly nullifying the prior contract.
- **What counts as sufficient leverage?** The court emphasized that the widow held the threat of termination when she renegotiated. Whether a re-grant made without meaningful termination leverage would be treated as an "agreement to the contrary" is not fully answered.
- **Does the identity of the negotiating heir matter?** The 1994 deal was struck by the widow, while the 2004 notice was served by other descendants. The decision leaves open how conflicts among statutory heirs affect the durability of a renegotiated grant.

## Implications for creators and businesses

- **Renegotiation can be a hidden trap.** Authors and heirs who reopen an old grant should understand that a new agreement canceling and superseding the pre-1978 contract may destroy the very termination right that gave them leverage. Sometimes preserving the original grant is worth more than better royalties.
- **Publishers can use renegotiation defensively.** For rights holders, *Steinbeck* offers a template: a genuine, better-terms renegotiation that expressly replaces the old grant can foreclose a future termination, provided it is not a naked waiver.
- **Draft the supersession clause deliberately.** Whether a new agreement "cancels and supersedes" the old one is not boilerplate. That language did real work in *Steinbeck* and should be negotiated with the termination consequences in mind.
- **Map the heir structure early.** Because termination rights pass through statutory heirs on fixed rules, and because one heir's renegotiation can bind the copyright, families should coordinate before anyone signs a new deal.

## Frequently asked questions

**Why couldn't the Steinbeck heirs terminate under Section 304(d)?**
Because the 1994 agreement expressly canceled and superseded the 1938 grant. Section 304(d) allows termination only of a grant executed before January 1, 1978. Once the 1994 deal replaced the 1938 grant, there was no surviving pre-1978 grant left to terminate.

**Wasn't the 1994 renegotiation an "agreement to the contrary"?**
The Second Circuit said no. Section 304(c)(5) voids agreements that contract away termination rights, but the court held that a genuine renegotiation, entered when the widow could wield the threat of termination, is a permissible exercise of the copyright owner's rights, not a prohibited waiver.

**What is the practical lesson for authors and heirs?**
Renegotiating an old grant can be a trap. If a new contract cancels and replaces the pre-1978 grant, it can extinguish the statutory termination right that the original grant carried. Heirs should weigh whether to preserve, rather than replace, the original agreement.

## Authorities and sources

- [Penguin Group (USA) Inc. v. Steinbeck, 537 F.3d 193 (2d Cir. 2008) (CourtListener)](https://www.courtlistener.com/opinion/1450643/penguin-group-usa-inc-v-steinbeck/)
- [Penguin Group (USA) Inc. v. Steinbeck (CaseMine)](https://www.casemine.com/judgement/us/5914b28fadd7b049347609e3)
- [Loeb & Loeb, "Penguin Group (USA) Inc., et al. v. Steinbeck, et al."](https://www.loeb.com/en/insights/publications/2008/08/penguin-group-usa-inc-et-al-v-steinbeck-et-al)
- [Cowan, Liebowitz & Latman, appellate reversal in the Steinbeck publishing-rights case](https://www.cll.com/newsroom-news-CLL-Obtains-Important-Appellate-Court-Reversal-in-Steinbeck-Publishing-Rights-Case)
- [17 U.S.C. § 304(c) and (d), termination of transfers (Cornell LII)](https://www.law.cornell.edu/uscode/text/17/304)