                 FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

CLASSIC MEDIA, INC.,                  
       Plaintiff-counter-defendant-
                                            No. 06-55385
                          Appellee,
                 v.                          D.C. No.
                                          CV-05-00452-RGK
WINIFRED KNIGHT MEWBORN,
      Defendant-counter-claimant-
                         Appellant.
                                      

CLASSIC MEDIA, INC.,                  
       Plaintiff-counter-defendant-
                                            No. 06-55704
                         Appellant,
                 v.                          D.C. No.
                                          CV-05-00452-RGK
WINIFRED KNIGHT MEWBORN,
                                             OPINION
      Defendant-counter-claimant-
                          Appellee.
                                      
       Appeals from the United States District Court
           for the Central District of California
        R. Gary Klausner, District Judge, Presiding

                  Argued and Submitted
          October 15, 2007—Pasadena, California

                    Filed July 11, 2008




                           8525
8526             CLASSIC MEDIA, INC. v. MEWBORN
Before: Ferdinand F. Fernandez and Kim McLane Wardlaw,
   Circuit Judges, and Raner C. Collins,* District Judge.

                   Opinion by Judge Wardlaw




  *The Honorable Raner C. Collins, United States District Judge for the
District of Arizona, sitting by designation.
                CLASSIC MEDIA, INC. v. MEWBORN             8529


                         COUNSEL

Marc Toberoff (argued), Nicholas C. Williamson, Law
Offices of Marc Toberoff, PLC, Los Angeles, California, for
the plaintiff/counterclaimant/defendant-appellant.

Bonnie E. Eskenazi, Aaron J. Moss (argued), Greenberg
Glusker Fields Claman & Machtinger LLP, Los Angeles, Cal-
ifornia, for the defendant/counterclaimant-appellee.


                          OPINION

WARDLAW, Circuit Judge:

   Winifred Knight Mewborn (“Mewborn”), daughter of Eric
Knight, the author of the world-famous children’s story and
novel, Lassie Come Home (collectively, the “Lassie Works”),
appeals the district court’s grant of summary judgment in
favor of Classic Media, Inc. (“Classic”) and denial of Mew-
born’s partial summary judgment motion. Each party sought
declaratory relief as to their respective copyright interests in
the Lassie Works, works that were in their renewal copyright
terms on January 1, 1978 when the Copyright Act of 1976
(the “Act” or the “1976 Act”) took effect. This appeal
requires us to determine whether the Act’s termination of
transfer right, 17 U.S.C. § 304(c), can be extinguished by a
post-1978 re-grant of the very rights previously assigned
before 1978. Because we conclude that such a result would
8530            CLASSIC MEDIA, INC. v. MEWBORN
circumvent the plain statutory language of the 1976 Act, as
well as the congressional intent to give the benefit of the addi-
tional renewal term to the author and his heirs, we hold that
the post-1978 assignment did not extinguish Mewborn’s stat-
utory termination rights.

         I.   Factual and Procedural Background

   Eric Knight authored the beloved children’s story, “Lassie
Come Home,” about a boy and his dog who, when sold to a
rich duke by the boy’s poverty-stricken family, makes an
arduous journey to return home to her original owner.
Inspired by the harsh realities of life during the Great Depres-
sion, the story of the fearless collie, Lassie, and the boy who
loved her was first published in the December 17, 1938 issue
of The Saturday Evening Post, and was registered in the U.S.
Copyright Office that year. Knight later developed the story
into a novel, which was published and registered in the U.S.
Copyright Office in 1940. Knight granted the rights to make
the popular Lassie television series to Classic’s predecessors-
in-interest, but died in 1943, before the renewal rights had
vested. Under section 24 of the 1909 Copyright Act, the inter-
est in the renewal term of the copyrights reverted to Knight’s
wife, Ruth, and their three daughters, Jennie Knight Moore,
Betty Knight Myers and Winifred Knight Mewborn. Each
heir timely filed a renewal of copyright with the U.S. Copy-
right Office in each of the works between 1965 and 1967.
Because Classic’s predecessors-in-interest had an agreement
only with Knight’s widow as to the television series, it
became necessary to secure agreements from the three daugh-
ters for the renewal term of motion picture, television and
radio rights. Thus, Lassie Television, Inc. (“LTI”) approached
Mewborn and her sisters, Moore and Myers, to obtain the nec-
essary rights.

  In a written agreement dated July 14, 1976, Mewborn
assigned her 25 percent share of the motion picture, television
                CLASSIC MEDIA, INC. v. MEWBORN                   8531
and radio rights in the Lassie Works to LTI for $11,000
(“1976 Assignment”). The contract states, in relevant part:

    I, Winifred Knight Mewborn, . . . hereby sell, grant,
    and assign to [LTI] all of the following rights in and
    to the story entitled LASSIE COME-HOME written
    by Eric Knight and published in the Saturday Eve-
    ning Post on December 17, 1938 and the novel or
    book based thereon also written by Eric Knight and
    published by John C. Winston Co. in 1940 . . . :

       All motion picture (including musical motion pic-
    ture), television and radio rights in and to the said lit-
    erary work[s] . . . throughout the world for the full
    period of the renewal copyrights in the work[s] and
    any further renewals or extensions thereof.

It was not until March 1978 that LTI was able to obtain simi-
lar assignments from Mewborn’s two sisters. On March 17,
1978 and March 22, 1978, Myers and Moore, respectively,
assigned their motion picture, television and radio rights to
LTI, as well as ancillary rights such as merchandising, dra-
matic, recording and certain publishing rights. They each
received $3,000 in exchange. To conform the grant of rights
among the sisters, on March 16, 1978, Mewborn signed a sec-
ond agreement, furnished by LTI (“1978 Assignment”). The
assignment reads:

    I, Winifred Knight Mewborn, . . . hereby grant,
    assign and set over unto [LTI] and its successors and
    assigns forever, all the following rights in and to the
    literary work entitled “LASSIE COME-HOME” . . .
    (a) [a]ll motion picture (including musical motion
    picture) rights, television rights, radio rights, record-
    ing rights, and dramatic rights on the legitimate stage
    . . . and all merchandising, commercial tie-up and
    related rights, and certain publication rights . . . .
8532           CLASSIC MEDIA, INC. v. MEWBORN
The 1978 Assignment contained the identical transfer of
motion picture, television and radio rights as the 1976 Assign-
ment, but added language assigning ancillary rights to LTI,
including recording and dramatic rights, all merchandising,
commercial tie-up and related rights and certain publication
rights, as well as language stating:

    [a]ll of the foregoing rights are granted to [LTI]
    throughout the world in perpetuity, to the extent such
    rights are owned by me, as hereinafter provided. . .
    . The rights granted herein to [LTI] are in addition
    to the rights granted by me to [LTI] under and pursu-
    ant to an assignment dated July 14, 1976, recorded
    with the United States Copyright Office on July 12,
    1976 in Volume 1589 at Pages 258-259 . . . .

(emphasis added). In exchange, LTI also paid Mewborn
$3,000. Apart from references to the 1976 Assignment, which
only Mewborn had entered into, the three sisters’ 1978 assign-
ments were identical.

   On April 12, 1996, Mewborn served a notice of termination
(“Termination Notice”) within the five-year period required
by § 304(c) on Palladium Limited Partnership (“Palladium”),
LTI’s then successor-in-interest in the Lassie Works. Mew-
born sought to recapture her motion picture, television and
radio rights by terminating the 1976 Assignment effective
May 1, 1998. This began the Lassie Works’ difficult journey
home, as counsel on behalf of the parties—but predominantly
Classic—spewed acrimonious charges, threats and demands
over the rights to the works in a series of correspondence of
not much relevance, but nonetheless included in the record
before us. On April 1, 1998, counsel for LTI’s then successor-
in-interest, Golden Books Family Entertainment, wrote to
Mewborn, “rejecting and repudiating” Mewborn’s Termina-
tion Notice, and threatening suit against Mewborn. Mewborn
discovered in the autumn of 2004 that Classic was preparing
to produce a motion picture entitled Lassie Come Home,
                  CLASSIC MEDIA, INC. v. MEWBORN                  8533
based on her father’s works. On March 23, 2005, Mewborn’s
counsel wrote to Classic, the subsequent successor-in-interest
to the Lassie Works, and its production partners demanding
that Classic account for and pay to Mewborn her share of
profits from Classic’s exploitation of the Lassie motion pic-
ture, television and radio rights pursuant to the 1996 Termina-
tion Notice, and that Classic cease the unauthorized
exploitation of the works in the United Kingdom. Classic’s
counsel responded with a vituperative gem of a letter dated
March 29, 2005, accusing Mewborn of “extortion,” threaten-
ing to sue Mewborn and her counsel “personally,” and claim-
ing that “[t]he damages to which Classic will hold you
accountable are enormous . . . [and] irreparable.” The letter
asserted that the 1976 Assignment was a “complete irrelevan-
cy” and advised that Mewborn should “govern [herself]
accordingly.” This bombastic correspondence did little to fur-
ther communication or deter litigation.

   As a result, on May 27, 2005, Classic filed a declaratory
relief action in the Central District of California against Mew-
born seeking a declaration that Mewborn has no interest in the
Lassie film or in any of the rights she previously assigned to
LTI in the 1978 Assignment, and that Mewborn’s Termina-
tion Notice was ineffective. On June 29, 2005, Mewborn
counterclaimed seeking a declaration that, in fact, Mewborn
had recaptured some of her previously assigned rights, and
requesting an accounting of Classic’s profits as of May 1,
1998, the effective termination date under the Termination
Notice.1

   The parties filed cross-motions for summary judgment. On
February 9, 2006, the district court granted Classic’s motion
for summary judgment and denied Mewborn’s motion as
moot. Interpreting the § 304(c) termination right to be inalien-
  1
   Mewborn also included a claim alleging violation of the Lanham Act.
The district court dismissed the Lanham Act claim with prejudice on Sep-
tember 28, 2005, and the dismissal of that claim has not been appealed.
8534            CLASSIC MEDIA, INC. v. MEWBORN
able but subject to waiver or relinquishment, the district court
found that the parties intended that the 1978 Assignment
“give away” all of Mewborn’s additional rights not trans-
ferred in 1976, which included her newly acquired § 304(c)
right to terminate the 1976 Assignment. Accordingly, Mew-
born had relinquished her termination right, and the 1996
Notice of Termination was ineffective because Mewborn no
longer had any interest in the rights transferred in 1976 and
1978. The district court also found that the 1978 Assignment
did not substitute for or revoke the 1976 Assignment and that
the 1976 Assignment remained intact.

   After final judgment was entered, Classic moved for attor-
neys’ fees. On April 13, 2006, the district court denied Clas-
sic’s motion, concluding that Classic is not entitled to fees
under either the Copyright or Lanham Acts. With respect to
the claim for attorneys’ fees under the Copyright Act, the dis-
trict court found that, although Mewborn was unsuccessful,
her claim presented a close question in an unsettled area of
the law and was not objectively unreasonable or improperly
motivated, and an award of fees would not advance the dual
goals of compensation and deterrence. Similarly, the district
court concluded that the Lanham Act claim was not ground-
less or unreasonable.

                 II.   Standards of Review

   We review a district court’s decision on cross motions for
summary judgment de novo. Bader v. N. Line Layers, Inc.,
503 F.3d 813, 816 (9th Cir. 2007) (citing Arakaki v. Hawaii,
314 F.3d 1091, 1094 (9th Cir. 2002)). We review a district
court’s decision whether to award attorneys’ fees under the
Copyright Act for an abuse of discretion. See Ets-Hokin v.
Skyy Spirits, Inc., 323 F.3d 763, 766 (9th Cir. 2003). We simi-
larly review the decision whether to award fees under the
Lanham Act for an abuse of discretion. Earthquake Sound
Corp. v. Bumper Indus., 352 F.3d 1210, 1216 (9th Cir. 2003).
Whether the circumstances are “exceptional”—a prerequisite
                CLASSIC MEDIA, INC. v. MEWBORN                8535
to an attorneys’ fees award pursuant to the Lanham Act—is
a question of law that is reviewed de novo. Id.

                        III.   Discussion

   Despite (1) the express statutory language that termination
of a pre-1978 transfer “may be effected notwithstanding any
agreement to the contrary,” 17 U.S.C. § 304(c)(5); (2) Con-
gress’s clear intent to benefit authors and their heirs with
additional years of copyright protection in the 1976 Act, as
recognized by the Supreme Court; and (3) the omission of any
language transferring termination rights in the 1978 Assign-
ment or even a mention of the right of termination, the district
court concluded that Mewborn intended to relinquish and
impliedly waived her “newly acquired right of termination”
when she executed the 1978 Assignment. The district court
reasoned that by virtue of the 1976 Assignment, “Mewborn
had already transferred her interest in all motion picture, tele-
vision and radio rights” and that “the only reasonable inter-
pretation of the 1978 contract language is that she intended to
give away any additional motion picture, television and radio
rights not given away in 1976, thus relinquishing her newly
acquired right of termination.” We disagree.

   [1] On October 19, 1976—between the dates that Mewborn
executed the two assignments—Congress enacted the 1976
Copyright Act, which took effect on January 1, 1978. The Act
extended the length of copyright protection for copyrights in
existence on January 1, 1978 by 19 years, from 56 years to 75
years (the “Extended Renewal Term”). See 17 U.S.C.
§ 304(a). The Act also created a right of termination, under
§ 304(c), which allows an author, if he is living, or his widow
and children, if he is not, to recapture, for the Extended
Renewal Term, the rights that had previously been transferred
to third parties. The rights thus revert to the author or his stat-
utory heirs. The termination of transfer right, as applied to the
widow and children, is limited to transfers executed before
January 1, 1978. See id. § 304(c). The termination of transfer
8536               CLASSIC MEDIA, INC. v. MEWBORN
may be effected only during a five year window beginning at
the end of what would have been the copyright’s original and
renewal terms (the end of 56 years from the date the copyright
was originally secured), or beginning on January 1, 1978,
whichever is later. Id. § 304(c)(3). Thus, the five-year termi-
nation window for the Lassie copyrights opened in 1994 for
the 1938 story, and 1996 for the 1940 novel.

   [2] Under § 304(c)(4)(A), advance notice of termination
must be served not less than two or more than ten years before
the effective termination date. Most significantly, under
§ 304(c)(5), “[t]ermination of the grant may be effected not-
withstanding any agreement to the contrary, including an
agreement to make a will or to make any future grant.”
(emphasis added). Under 17 U.S.C. § 101, the term “includ-
ing” is “illustrative” not “limitative” and thus we must inter-
pret the term “agreement[s] to the contrary” under § 304(c)(5)
as inclusive of agreements other than the two examples Con-
gress explicitly mentioned.2

   Congress enacted the inalienability of termination rights
provision in § 304(c)(5) to resurrect the fundamental purpose
underlying the two-tiered structure of the duration of copy-
rights it originally adopted: to award to the author, and not to
the assignee of the right to exploit the copyright during its ini-
tial term, the monetary rewards of a work that may have been
initially undervalued, but which later becomes a commercial
success. As reported in the House Report for the 1909 Act :
  2
    In Milne v. Stephen Slesinger, Inc., 430 F.3d 1036, 1043 (9th Cir.
2005), we accorded some evidentiary weight, however, to the fact that the
agreement there at issue was not a will or a future grant in concluding that
the agreement was not “an agreement to the contrary.” We reasoned that
“[t]he undisputed fact that the 1983 agreement does not fall into either cat-
egory supports the district court’s finding that the 1983 agreement is not
‘an agreement to the contrary.’ ” Id. We discuss the sui generis nature of
the agreement at issue in Milne, infra, at 8543-46.
                   CLASSIC MEDIA, INC. v. MEWBORN                      8537
      It not infrequently happens that the author sells his
      copyright outright to a publisher for a comparatively
      small sum. If the work proves to be a great success
      and lives beyond the term of twenty-eight years,
      your committee felt that it should be the exclusive
      right of the author to take the renewal term, and the
      law should be framed as is the existing law, so that
      he could not be deprived of that right.

H.R. Rep. No. 2222, 60th Cong., 2d Sess., at 14 (1909). It is
plain that the renewal process was intended to give an author
and his heirs a second chance to benefit from the fruits of his
labors. Professor Nimmer explains that this special treatment
was accorded owners of copyright—as compared to owners of
other property rights—because “the form of property desig-
nated copyright, unlike real property and other forms of per-
sonal property, is by its very nature incapable of accurate
monetary evaluation prior to its exploitation.” 3 M. Nimmer
& D. Nimmer, Nimmer on Copyright, § 9.02, p. 9-8 (hereinaf-
ter Nimmer), quoted with approval in Stewart v. Abend, 495
U.S. 207, 218-219 (1990). However, the Supreme Court did
not believe that the statute itself established a regime that was
quite so restrictive of authors and their ability to protect them-
selves and, therefore, it eliminated the restraints-upon-the-
author (as opposed to his heirs) rationale when in 1943, it
decided Fred Fisher Music Co. v. M. Witmark & Sons, 318
U.S. 643 (1943), a case involving the popular ballad “When
Irish Eyes Are Smiling.” The song’s author had assigned both
his original and renewal rights in the copyright to a music
publisher, and lived to the time of vesting of the right to
renew the copyright for its second term. Id. at 645-46. The
Supreme Court held that the assignment of the contingent
renewal right was valid and enforceable, despite the rationale
underlying the renewal structure itself of providing a second
chance for authors.3 See id. at 653-57.
  3
    The Court did, nevertheless, later decide that if the author had trans-
ferred his renewal right but did not survive to the time of vesting, then the
renewal interest would revert to his statutory successors, largely his
widow or children, and the assignee of the contingent renewal interest
would receive nothing. Stewart v. Abend, 495 U.S. 207, 219-21 (1990).
8538           CLASSIC MEDIA, INC. v. MEWBORN
   [3] The 1976 Act, and in particular its twin termination of
transfer provisions, were in large measure designed to assure
that its new benefits would be for the authors and their heirs.
Thus, with the termination of transfer provisions, authors or
their heirs are able to negotiate additional compensation for
previously granted rights. Without such a right of termination,
the Extended Renewal Term would constitute a windfall to
grantees. As stated in the 1976 Act House Report: “[T]he
extended term represents a completely new property right,
and there are strong reasons for giving the author, who is the
fundamental beneficiary of copyright under the Constitution,
an opportunity to share in it.” H.R. Rep. No. 94-1476, at 140
(1976), reprinted in 1976 U.S.C.C.A.N. 5659, 5756. As the
Supreme Court has explained:

       The extension of the duration of existing copy-
    rights to 75 years, the provision of a longer term (the
    author’s life plus 50 years) for new copyrights, and
    the concept of a termination right itself, were all
    obviously intended to make the rewards for the cre-
    ativity of authors more substantial. More particu-
    larly, the termination right was expressly intended to
    relieve authors of the consequences of ill-advised
    and unremunerative grants that had been made
    before the author had a fair opportunity to appreciate
    the true value of his work product. That general pur-
    pose is plainly defined in the legislative history and,
    indeed, is fairly inferable from the text of § 304
    itself.

Mills Music, Inc. v. Snyder, 469 U.S. 153, 172-73 (1985). The
Court elaborated further on the need for the termination provi-
sion:

       In explaining the comparable termination provi-
    sion in § 203, the House Report states: “A provision
    of this sort is needed because of the unequal bargain-
    ing position of authors, resulting in part from the
                CLASSIC MEDIA, INC. v. MEWBORN               8539
    impossibility of determining a work’s value until it
    has been exploited. Section 203 reflects a practical
    compromise that will further the objectives of the
    copyright law while recognizing the problems and
    legitimate needs of all interests involved.” H.R. Rep.
    No. 94-1476, at 124, U.S. Code Cong. & Admin.
    News 1976, p. 5740.

Id. at 173 n.39. The termination of transfer provision in § 203
of the 1976 Act concerns the termination of transfers and
licenses granted by the author after 1978 and, significantly,
includes language identical to that provided in § 304(c):
“[t]ermination of the grant may be effected notwithstanding
any agreement to the contrary, including an agreement to
make a will or to make any future grant.” 17 U.S.C.
§ 203(a)(5). In analyzing this close counterpart to § 304(c),
the Supreme Court has held that “[t]he 1976 Copyright Act
provides a single, fixed term, but provides an inalienable ter-
mination right.” Stewart, 495 U.S. at 230 (emphasis added).

   To provide additional protection for authors and their heirs
from unremunerative transfers and a repeat of Fred Fisher,
under 17 U.S.C. § 304(c)(6)(D), “a further grant of a termi-
nated right, as well as an agreement to make such a further
grant, is valid only if made after the effective date of termina-
tion.” 3 Nimmer § 11.07, p. 11-41. “The [Fred Fisher] effect
is avoided by invalidating agreements for post-reversion
grants until the reversion has occurred.” Id. § 11.01[A], p.
11-4. Thus, only once a copyright grant is terminated and the
right has reverted to an author or his statutory heirs may the
reverted copyright interest be effectively assigned.

   In 1998, Congress reaffirmed its objectives with respect to
the 1976 Act’s termination provisions. The Sonny Bono
Copyright Term Extension Act of 1998, effective October 27,
1998, extended the term of protection for works created prior
to January 1, 1978 from 75 to 95 years. 17 U.S.C. § 304(d).
This term extension was intended, once again, to benefit
8540            CLASSIC MEDIA, INC. v. MEWBORN
authors and their heirs, and not to serve as a windfall for
grantees. Accordingly, Congress coupled the extended term
with a new termination right for authors and their statutory
heirs, provided they had not already exercised their termina-
tion right under § 304(c). The same broadly worded “notwith-
standing any agreement to the contrary” proviso in
§ 304(c)(5) applies to the termination provision in the Sonny
Bono Copyright Term Extension Act. See id. § 304(d)(1); see
also 3 Nimmer § 9.11[B][1], pp. 9-152 to 9-153.

   Decisions from the Second Circuit and the Southern Dis-
trict of New York inform our analysis. In 1999, Joe Simon,
author of the Captain America Comics, served a termination
notice on Marvel pursuant to § 304(c). Marvel Characters
Inc. v. Simon, 310 F.3d 280, 284 (2d Cir. 2002). The notice
sought to terminate a 1969 settlement agreement whereby
Simon assigned his rights in Captain America Comics and the
Captain America character to Marvel’s predecessor. See id. at
283-84. Marvel argued that the termination notice was inef-
fective because Simon had unambiguously acknowledged in
the 1969 agreement that the works, many years after their cre-
ation, were “work[s] made for hire” thus making them ineligi-
ble for termination under § 304(c). See id. at 285. The Second
Circuit found that to the extent that the retroactive recharac-
terization of the works in the 1969 agreement was construed
to extinguish the termination right long before vesting, it was
void as an “agreement to the contrary” under § 304(c)(5). Id.
at 298-92.

   [4] In finding for Simon, the Second Circuit affirmed that
“the clear Congressional purpose behind § 304(c) was to pre-
vent authors from waiving their termination right by con-
tract.” Id. at 290 (citing Stewart, 495 U.S. at 230). The court
reasoned that ruling otherwise would allow “litigation-savvy
publishers” to use their superior bargaining power to compel
authors to similarly recharacterize their works, thus rendering
§ 304(c) a “nullity.” Id. at 290-91. According to the court, the
“notwithstanding any agreement to the contrary” language
                CLASSIC MEDIA, INC. v. MEWBORN             8541
was intended to protect against attempted contractual circum-
vention of the termination right. See id. at 284, 290-91.

   More recently in Steinbeck v. McIntosh & Otis, Inc., 433 F.
Supp. 2d 395 (S.D.N.Y. 2006), the Southern District of New
York addressed the § 304(c) termination right. During his life-
time, John Steinbeck made several transfers of his copyrights,
including a 1938 transfer to the Viking Press, the predecessor
of Penguin Group. See id. at 400-01. Upon his death in 1968,
Steinbeck devised the copyrights in his early works to his
third wife, Elaine. Id. at 399. In 1994, Elaine entered into an
agreement with Penguin whereby Penguin retained the same
rights in the early works as it held under the 1938 agreement,
but at an increased price. Id. at 401. The 1994 grant expressly
cancelled and superseded the pre-1978 agreement. Id. The
1994 agreement also expressly preserved the § 304 termina-
tion rights and acknowledged that they “could be exercised in
the future.” Id. at 402 n.23. The court found that because the
rights were assigned to Penguin in the earlier agreement that
“[a]t no point did Penguin lose or gain any rights other than
those originally granted to it under the 1938 Agreement.” Id.
at 401-02. The court further concluded that so far as the effect
of the later agreement may be to preclude the exercise of
inalienable termination rights by Steinbeck’s heirs, “it [was]
void as an ‘agreement to the contrary’ pursuant to 17 U.S.C.
§ 304(c)(5)” and “must be set aside as contrary to the very
purpose of the termination statute.” Id. at 402 & n.23.

   [5] We conclude that insofar as Classic urges us to hold
that the 1978 Assignment transferred the motion picture, tele-
vision and radio rights subject to Mewborn’s termination
rights, we cannot so hold because such an assignment would
be void as an “agreement to the contrary” pursuant to
§ 304(c)(5). Moreover, all that Mewborn had at the time of
the 1978 Assignment was future rights that would revert upon
8542               CLASSIC MEDIA, INC. v. MEWBORN
termination of the grant and the 1978 Assignment does not
purport to grant those rights.4

   [6] The 1976 Assignment transferred all of Mewborn’s
motion picture, television and radio rights to the Lassie Works
in exchange for $11,000 and, as the district court correctly
concluded, was not substituted or revoked by the 1978
Assignment but remained intact. Because LTI owned the
motion picture, television and radio rights to the Lassie Works
in 1978, Mewborn had nothing to transfer by virtue of the
1978 Assignment other than the additional ancillary rights she
transferred for $3,000. Therefore, the language in the 1978
Assignment purporting to assign the motion picture, television
and radio rights is a nullity.5

   [7] Under § 304(c)(4)(A), a termination notice “shall be
served not less than two or more than ten years before [the
effective date of the termination].” The “effective date of the
termination” must “fall within the five-year period” “begin-
ning at the end of fifty-six years from the date copyright was
originally secured, or beginning on January 1, 1978, which-
ever is later.” 17 U.S.C. § 304(c)(3), (4)(A). In Mewborn’s
case, the fifty-six year term of copyright was set to expire in
  4
     Although we need not reach this question, it may be possible for an
author or heir to transfer the future rights scheduled to revert upon service
of a termination notice, subject to surviving until the time such rights
vested in the author or heir. See 17 U.S.C. § 304(c)(6)(B); cf. Stewart, 495
U.S. at 219-21.
   5
     The district court misapprehended the nature of the termination right
when it characterized it as an additional motion picture, television and
radio right newly acquired by Mewborn. These rights are distinct. Copy-
right subsists in “original works of authorship,” 17 U.S.C. § 101, such as
the literary works at issue here. Id. § 102(a)(1). The copyright proprietor
may contract with third parties to exploit those rights in various media
such as in motion pictures, television series or over radio. These
agreements—whether they are called grants, assignments or licenses—are
subject to the right of authors, widows and heirs to terminate under the
1976 Act. See 17 U.S.C. §§ 203, 304(c)—(d); 3 Nimmer §§ 11.02[A], pp.
11-10 to 11-16; 11.02[B][1], p. 11-17.
                CLASSIC MEDIA, INC. v. MEWBORN             8543
the story in 1994 and in the novel in 1996. Mewborn could
not have filed a notice of termination of the assignment of
rights to exploit the story any earlier than 1984 or any later
than 1997; she could not have done so for the novel any ear-
lier than 1986 or any later than 1999. Therefore the future
rights that would revert upon termination of the grant could
not have vested any earlier than 1984 for the story and 1986
for the novel.

   [8] Mewborn was entitled to effect the termination of the
1976 grant during the five year window commencing in 1994
for the story rights and 1996 for the novel rights. She was
required to serve advance notice no less than two and no more
than ten years before the effective date of the termination. She
chose as the effective date May 1, 1998, a date that was
within the termination window for both of the works—1994
to 1999 for the story rights and 1996 to 2001 for the rights in
the novel. As of May 1, 1998, she validly terminated the
rights she granted to LTI in the 1976 Assignment.

   The district court misrelied upon Milne v. Stephen Sles-
inger, Inc., 430 F.3d 1036 (9th Cir. 2005), cert. denied, 126
S. Ct. 2969 (2006). Milne presented quite a distinct factual
scenario with very different statutory implications. Whereas
Mewborn in 1978 did not even have the right to serve an
advance notice of termination so as to vest her termination
rights as to the Lassie Works, and could not have served
advance notice for another six years as to the story and eight
for the novel, the heir in Milne had the present right to serve
an advance notice of termination, and could exercise it at any
moment. Thus when the Milne heir chose to use the leverage
of imminent vesting to revoke the pre-1978 grant and enter
into a highly remunerative new grant of the same rights, see
id. at 1044-45, it was tantamount to following the statutory
formalities, and achieved the exact policy objectives for
which § 304(c) was enacted.
8544              CLASSIC MEDIA, INC. v. MEWBORN
   Milne involved the copyright interests in four Winnie-the-
Pooh works, most significantly the book House at Pooh Cor-
ner, authored by A.A. Milne, for which he secured United
States statutory copyright protection between 1924 and 1928.
Copyrights in the works were duly renewed between 1952
and 1956. Id. at 1039. Two pre-1978 grants of rights to
exploit the copyrighted works were executed.6 Id. Congress
then enacted the termination of transfer provision set forth in
17 U.S.C. § 304(c). Id. at 1040.

   Under § 304(c), the heirs, specifically Christopher Milne,
received the right to terminate the 1930 and 1961 grants, upon
serving a notice of an effective date of termination within five
year windows following the expiration of the first and
renewal terms of copyright. 17 U.S.C. § 304(c)(3)-(c)(4)(A).
But, under the Copyright Act, the advance notice of termina-
tion was required to be served “not less than two or more than
ten years” before the effective date. Id. § 304(c)(4)(A). Thus,
although the five year window for setting an effective date of
termination for the work copyrighted in 1924 extended to
1985, for the “future rights that [would] revert upon termina-
tion of the grant [to] become vested” in Christopher, he was
required to serve the advance notice no later than 1983 for
that work. See id. § 304(c)(6)(B). If he failed to serve advance
notice by that date, he would lose his right to terminate the
grant for the original works, from which the later works
derived. See id. § 304(c)(6)(F). As to the latest of the copy-
righted works, Christopher similarly was required to serve
advance notice no later than 1987 or lose his right of termina-
tion. In 1983, the studio, recognizing Christopher’s existing
right to terminate the grant of rights to exploit the original
work, chose to renegotiate the pre-1978 agreements. Christo-
pher, in turn, chose to avoid the statutory formalities whereby
the rights would actually vest in him and then he would have
  6
    A.A. Milne passed away in 1956 after executing the first grant in 1930;
his widow passed away after executing the second grant together with the
executor of the Milne Trust in 1961.
                  CLASSIC MEDIA, INC. v. MEWBORN                   8545
to renegotiate with the studio. The new agreement revoked
those earlier transfers and re-granted to the studio the very
same rights. In return for Christopher’s agreement not to exer-
cise his termination rights, which would have invested in him
the copyright interests in all the works at issue, the deal
resulted in a net gain of hundreds of millions of dollars to
Christopher and the remaining heirs, landing the studio and
Christopher in the same place had he followed the formalities.
Milne, 430 F.3d at 1040-41.

   In concluding that the renegotiated deal was not an “agree-
ment to the contrary,” the court relied on the facts that the
new grant was more lucrative for the author’s heirs, that it
was freely and intelligently entered into by the parties and that
“[t]he beneficiaries of the Pooh Properties Trust were able to
obtain considerably more money as a result of the bargaining
power wielded by the author’s son, Christopher, who was
believed to own a statutory right to terminate the 1930 grant
under section 304(c) of the 1976 Copyright Act.” Id. at
1044-45.

   Our court in Milne did not find waiver or relinquishment of
any right. What it did conclude was that the particular negoti-
ated deal before it was not “any agreement to the contrary;”
it was an agreement consistent with, and which fully honored
Christopher’s right of termination which could vest immedi-
ately if he served notice. As we noted, “[a]lthough Christo-
pher presumably could have served a termination notice, he
elected instead to use his leverage to obtain a better deal.” Id.
at 1045. The avenue chosen by Christopher and the studio
secured the exact equivalent result for him and his fellow
heirs, and in no way subverted the termination rights and the
congressional purpose underlying them.7
  7
    A.A. Milne’s sole grandchild and Christopher Milne’s daughter, Clare,
was a “prime beneficiary” of the 1983 agreement entered into by her
father. Still, on November 4, 2002, “motivated by the recent enactment of
the [Sonny Bono Copyright Term Extension Act of 1998] and its favor-
8546               CLASSIC MEDIA, INC. v. MEWBORN
   Mewborn’s predicament is a far cry from Christopher
Milne’s. Milne had—and knew that he had—the right to vest
copyright in himself at the very time he revoked the prior
grants and leveraged his termination rights to secure the bene-
fits of the copyrighted works for A.A. Milne’s heirs. Mew-
born, on the other hand, would not have the right to serve the
advance notice that would vest her rights under
§ 304(c)(6)(B) until at the very earliest six years later. Thus,
unlike Milne, Mewborn had nothing in hand with which to
bargain.

   Examining the language of Milne’s 1983 revocation and re-
grant of rights in comparison to Mewborn’s 1978 Assignment
further underscores the different nature of the intended agree-
ments. Unlike Christopher Milne’s 1983 assignment, which
expressly revoked the earlier 1930 and 1961 assignments and
simultaneously re-granted the same rights, Mewborn’s 1978
Assignment explicitly stated that it granted rights “in addition
to” the rights granted in the 1976 Assignment and confirmed
that the 1976 Assignment had been recorded in the U.S.
Copyright Office. And while Mewborn’s 1978 assignment
was silent on the issue, the post-1978 assignment in Milne
expressly stated that it was made in exchange for non-exercise
of the immediately investative termination right.

   Nor is there any evidence in the record to support a finding
that Mewborn or LTI, when entering into the 1978 Agree-

able treatment of authors’ heirs, Clare set out to recapture the rights to the
Pooh works.” Milne v. Stephen Slesinger, Inc., 430 F.3d 1036, 1039, 1041
(9th Cir. 2005). The Sonny Bono Copyright Term Extension Act of 1998,
codified in 17 U.S.C. § 304(d), expanded the term of copyright protection
by another 20 years and provided authors and heirs with a second termina-
tion right with respect to pre-1978 copyright grants if the first right had
expired without being exercised. Joined by the studio, which agreed to
fund the litigation, Clare sought a declaration that her termination notice
was valid. Id. at 1041. Because the pre-1978 grants had already been
expressly revoked and Congress’s purpose with respect to the termination
of transfers provision had been satisfied, we found that the grants could
not be terminated, affirming the district court. Id. at 1042-44, 1046.
                   CLASSIC MEDIA, INC. v. MEWBORN                     8547
ment, considered Mewborn’s termination rights under
§ 304(c), or that Mewborn intended to waive or relinquish
them. Rather, the evidence suggests that Mewborn did not
intend to waive her termination rights. There is no evidence
in the record that Mewborn was even aware of her termination
rights in March 1978, just two months after § 304(c) became
effective. And if LTI had entered into the 1978 Assignment
intending that the termination right was on the bargaining
table, the contract language fails to reflect this intention or
provide any consideration for that right. There is also no evi-
dence that either party intended to revoke and replace (or even
modify) the 1976 Assignment. Rather, the 1978 Assignment
explicitly affirms the 1976 Assignment. Finally, Mewborn’s
deposition testimony suggests that she had no conversations
with LTI regarding the 1978 Assignment, and that she signed
the contract “as is” without the advice of counsel and without
negotiating any of its terms.

   Mewborn did not intend to relinquish a known termination
right. Because we conclude that the 1978 Assignment did not
expressly or impliedly transfer Mewborn’s termination right
as to the 1976 Assignment, and that the circumstances here
are not even close to those in Milne, the district court improp-
erly concluded that the 1978 Assignment included a grant of
Mewborn’s termination right. The 1978 Assignment simply
assigned to Classic’s predecessor-in-interest the additional
enumerated rights that Mewborn had not assigned in 1976.8
The 1996 Termination Notice was properly served not less
than two years and not more than ten years before the effec-
tive termination date of May 1, 1998, which itself fell within
the five year window of termination for both the story and the
  8
    It is undisputed that the 1978 Assignment is valid and enforceable with
respect to any rights Mewborn actually assigned in that agreement. This
is because the Termination Notice neither referenced nor terminated any
rights granted in 1978, nor could it have, because under § 304(c), the ter-
mination right exists for author’s heirs with respect to only transfers made
before the effective date of the Act, January 1, 1978.
8548            CLASSIC MEDIA, INC. v. MEWBORN
novel. We thus find the Termination Notice to have been
valid and effective.

   [9] In conclusion, as a matter of law, Mewborn did not
relinquish her termination right via the 1978 Assignment.
Accordingly, because we find that the 1996 Termination
Notice was effective, any rights assigned to LTI by the 1976
Assignment reverted to Mewborn as of the effective termina-
tion date, May 1, 1998. We thus reverse the district court’s
order granting Classic’s motion for summary judgment and
direct the district court to enter partial summary judgment in
favor of Mewborn on her claim for declaratory relief. Seventy
years after Eric Knight first penned his tale of the devoted
Lassie who struggled to come home, at least some of the fruits
of his labors will benefit his daughter.

   [10] Because we reverse the district court’s decision on the
cross-motions for summary judgment, Classic is not the pre-
vailing party in its claim for declaratory relief under the
Copyright Act and is not entitled to attorneys’ fees. See Wall
Data Inc. v. L.A. County Sheriff’s Dep’t, 447 F.3d 769, 787
(9th Cir. 2006) (quoting 17 U.S.C. § 505). Because we can
affirm on any ground supported by the record, see Forest
Guardians v. U.S. Forest Serv., 329 F.3d 1089, 1097 (9th Cir.
2003), we affirm the denial of attorneys’ fees under the Copy-
right Act.

   Classic also argues that the district court’s decision to deny
its motion for attorneys’ fees under the Lanham Act should be
reversed because Mewborn’s claim was foreclosed by estab-
lished Supreme Court precedent under Dastar Corp. v. Twen-
tieth Century Fox Film Corp., 539 U.S. 23 (2003), and was
therefore groundless and unreasonable. Classic did prevail on
the merits of the Lanham Act claim and Mewborn did not
appeal.

  A district court has discretion to award attorneys’ fees to a
prevailing party under the Lanham Act, but only in “excep-
                CLASSIC MEDIA, INC. v. MEWBORN                  8549
tional cases.” See 15 U.S.C. § 1117(a) (“The court in excep-
tional cases may award reasonable attorney fees to the
prevailing party.”); Gracie v. Gracie, 217 F.3d 1060, 1071
(9th Cir. 2000). We construe the “exceptional circumstances”
requirement narrowly. Id. (noting that we have interpreted the
“exceptional circumstances” requirement “rather narrowly” in
our decisions). “Exceptional circumstances can be found
when the non-prevailing party’s case is groundless, unreason-
able, vexatious, or pursued in bad faith.” Id. (internal quota-
tion marks omitted); see also Horphag Research Ltd. v.
Pellegrini, 337 F.3d 1036, 1040 (9th Cir. 2003); Cairns v.
Franklin Mint Co., 292 F.3d 1139, 1156 (9th Cir. 2002). Fur-
thermore,

    [a] party alleging that the district court erred by fail-
    ing to award attorneys’ fees under § 1117 faces an
    uphill battle. The text of section 1117 places a heavy
    burden of an attorney arguing that the district court
    abused its discretion in refusing to award attorneys’
    fees . . . . First, the remedy is available only in
    ‘exceptional cases.’ Second, the statute provides that
    the court ‘may’ award fees; it does not require them.
    Finally, the Senate Report expressly commends this
    decision to the discretion of the [trial] court.

Gracie, 217 F.3d at 1071 (internal quotation marks and cita-
tions omitted).

   [11] As the district court correctly found, Mewborn’s claim
involved close questions in an unsettled area of the law. The
Supreme Court’s decision in Dastar was limited to the first
prong of § 43(a)(1), 15 U.S.C. § 1125(a)(1), which concerns
false designation of origin. Dastar Corp., 539 U.S. at 31 (“At
bottom, we must decide what § 43(a)(1)(A) of the Lanham
Act means by the ‘origin’ of ‘goods.’ ”), 38 (noting that “one
or more of the respondents might have a cause of action—not
for reverse passing off under the ‘confusion . . . as to the ori-
gin’ provision of § 43(a)(1)(A), but for misrepresentation
8550            CLASSIC MEDIA, INC. v. MEWBORN
under the ‘misrepresents the nature, characteristics [or] quali-
ties’ provision of § 43(a)(1)(B)”). However, Mewborn dis-
claimed any Lanham Act claim other than one under
§ 43(a)(1)(B), the false advertising prong. Despite Classic’s
argument to the contrary, Mewborn’s Lanham Act claim was
not so obviously foreclosed by Dastar such that her claim was
groundless or unreasonable. The district court properly denied
Classic’s request for attorneys’ fees under the Lanham Act.
We, accordingly, affirm the district court’s decision.

                      IV.   Conclusion

   For the reasons stated, we reverse the district court’s order
granting Classic’s motion for summary judgment and direct
the district court to enter partial summary judgment in favor
of Mewborn on her declaratory relief claim. We affirm the
district court’s denial of attorneys’ fees under the Copyright
Act and Lanham Act.

   In No. 06-55385, Mewborn’s appeal of the district court’s
decision on cross-motions for summary judgment is
REVERSED and REMANDED for further proceedings con-
sistent with this opinion. In No. 06-55704, Classic’s appeal of
the district court’s denial of its motion for attorneys’ fees is
AFFIRMED.
