For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

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Friday, 27 March 2009

Cross faces at Crosstown as composers get their copyrights back

Here's a tricky case.  A couple of songwriters assign their copyrights to a company that is obliged to exploit those copyrights commercially.  The deal contains a clause that enables the songwriters to get their copyright back if the company is in material breach of its obligations.  The company then assigns the copyrights to another company, following which the songwriters want their copyright back. Do they get it? Yes, according to Crosstown Music Company v Rive Droite Music Ltd and others [2009] EWHC 600 (Ch), a decision of Mr Justice Mann (Chancery Division, England and Wales) on Wednesday,

Crosstown took an assignment of 119 copyrights owned by Rive Droite. Some of those copyrights related to songs written by Taylor and Barry, who assigned the copyright in their compositions to Rive Droite so that the latter could exploit the copyright and pay them royalties under an agreement which provided (in clause 18(a)) that, if Rive Droite were to be in material breach of its terms and failed to take all reasonable action to remedy that breach within 45 (in Taylor's case) or 60 (in Barry's case) days of written notification of a 'cure notice', the assigned copyright would revert to the writers.

Taylor and Barry later considered that a reversion-triggering breach had occurred, with the consequence they again owned the copyright in their various compositions. In April 2007 they served cure notices on Rive Droite, giving notice to Crosstown, relying on various alleged breaches -- including failure to cough up all the royalties on Cher's song Believe -- and asserting that they now owned thir copyrights again. Faced with those notices, Crosstown sued Rive Droite for specific performance of the sale agreement. Taylor and Barry counterclaimed for copyright infringement. The action involves determining (among other things) (i) whether the copyrights re-vested in Taylor and Barry; (ii) whether clause 18(a) bound the claimant as assignee of the copyrights and (iii) whether Taylor and Barry had lost any right to reversion of the copyrights through waiver, acquiescence or estoppel.

The main question before Mann J in these proceedings whether Taylor and Barry were correct in saying that there had been breach of clause 18(a). On a close analysis of the facts, he concluded that clause 18 provided for an automatic revesting of the copyrights, the cure notices were unassailable and that, therefore Crosstown's attack on their validity must fail. The judge discussed one legal issue of substantial interest: did clause 18 take effect differently in respect of different national copyrights? On that matter he had this to say:

"89.... I refuse to allow Crosstown to contend that the effect of clause 18 might be different in relation to different national copyrights. Although it might not be strictly relevant, I would add that this conclusion produces a much more satisfactory (if not conveniens) litigation picture, because if the position were otherwise the point might have to be determined in as many jurisdictions as there are copyrights in this case. I have not totted up the number of jurisdictions involved, but I think there are at least half a dozen if not twice that. That prospect is unsatisfactory. In the present case it is not appropriate to inflict that on the Writers. I reach the conclusion that I do without having to consider the strength of the submission that it would be wrong to assume that foreign copyright law is the same as English law. That submission would only become relevant if there were an issue as to different jurisdictions, and I have held that there is no such issue in this case because of the manner in which the case has proceeded hitherto. I also do not have to consider the extent to which foreign copyright issues can be litigated in this country (see, for example, Lucasfilms Inv v Ainsworth [noted here by the IPKat]), because again that only arises where there is a properly formulated issue as to the point, which again in this case there is not".
The IPKat wonders how many businesses taking assignments of copyright take the trouble to root around for clauses that may have the effect of undermining their commercial expectations, or whether they are merely happy to rely on warranties that their title will be secure.  Merpel moans, I still don't get it: if Crosstown has taken an assignment of the copyright from Rive Droite, surely Rive Droite doesn't have any copyright title to the works that can revert to the songwriters? Or have I missed something?

9 comments:

Francis Davey said...

To attempt to answer Merpel's question: I think the idea is that the copyright (as a form of property) is somehow encumbered with a reversion on condition subsequent. So that it reverts to its original owners regardless of the person it has been assigned to.

Its an interesting and potentially important point. I had a read of Palmer's "interests in goods" to see if that clarified anything, but I'm still unsure whether and how that should work. Tentatively I'd suggest you can attach conditions to copyrights in this way.

If that's right, then (as Jeremy says) that does imply that rather more enquiries should be made about copyrights on assignment which would bring back the heady days of unregistered conveyancing 8-).

I'd be interested to know what wiser and more experienced heads think of it.

Derek Freyberg said...

To respond to Merpel, and following Francis Davey, I think the answer must surely be that Crosstown can acquire from Rive Droite no greater right than Rive Droite acquired from the authors, so that the assignment by Rive Droite to Crosstown is subject to any conditions imposed by the authors on Rive Droite (including presumably the right of reversion on breach).

Derek Freyberg said...

To restate my earlier comment, I do not believe that Rive Droite can convey to Crosstown any greater right than it (Rive Droite) acquired from the authors, so that the assignment to Crosstown could not extinguish the right of reversion.

Mark Anderson said...

What a bizarre case, with bizarre arguments being raised and Merpel's copyright point seemingly being overlooked. Everyone seems to have assumed that Crosstown acquired the copyright subject to the terms of the original agreements. Please could the case be re-run with a different legal team and simpler facts?

When I got to paragraph 64, I thought we might have a discussion of the copyright vs contract point, but we (and the judge) were led down a blind alley by the foreign copyright point, followed by the point about ownership of chattels being indivisible in time (!)

One bit of the judgment that I particularly dislike - the idea that copyright could have reverted automatically, without a re-assignment document. How does that square with the requirement under section 90(3) CDPA that assignments must be in writing signed by the assignor? Surely s. 90(2)(b), which Mann J cites, isn't relevant to this point? Isn't the concept of "automatic reverter" based on a contingent event (ie breach), in circumstances where the IP has been assigned on to someone else, really bad law? It blows a major hole in the concept of acquiring good title to property.

Did anyone else find the judge's treatment of the waiver point (or whatever you choose to call it - equitable forebearance, etc) a bit unsatisfactory? As a general proposition (and without getting into the circumstances here), surely you can't leave it 5 years to complain of a breach (paragraph 166)?

The judgment has some useful dicta on what the term "material breach" means in contracts.

Mark Anderson said...

Responding to Francis and Derek's points, Barker v Stickney [1919] 1 KB 121 (CA) indicates that royalty obligations in a copyright assignment are not binding on a subsequent assignee. Therefore, I don't think Crosstown should be bound by any obligations to Taylor and Barry. Conditional assignment was explored by Megarry V-C in Tito v Waddell (no 2) [1977] Ch 107. His view was that the "pure benefit and burden principle" might have produced a more just result in Barker v Stickney. However, Lord Templeman in Rhone v Stephens [1994] 2 AC 310 (HL) poured cold water on this would-be principle of law. These cases are discussed in my article in next month's JIPLP "Assignments and Royalties Don't Mix".

Francis Davey said...

@Mark thank you for the push towards your article which I have enjoyed reading.

Like you I was troubled by the idea that one could assign personal property with a reversion. The usual orthodoxy is that ownership of personal property is indivisible. Land is different since it is divided up into estates which could (before 1926) be conditional in all sorts of ways and one could have reversions and remainders with some complexity.

One of the policies of the 1925 legislation was to greatly simplify such things so that the work of the conveyancer would be simplified. Hence my remarks about the prospective purchaser of IP being in the same sort of position as an old-style unregistered conveyancer if this decision is right.

But I realise my knowledge of personalty is a bit limited (having come to IP from a real property background) and I may be quite wrong. I'd certainly appreciate a thorough analysis of this case.

Hugo Cox said...

It appears that the RD–Crossfire agreement was attempting to assign contracts and copyrights. Mann J says the copyrights revert because the contractual obligation to respond to the cure notices didn’t pass to Crossfire as there had not been a novation. However, if the copyrights were successfully assigned, which they seem to have been, then either Crossfire had no obligations towards the songwriters or they did have obligations and discharged them by responding to the notices. Either way, the judgment produced the wrong result.

Hugo Cox said...

On second thoughts, I suspect the rules relating to assignment of copyright are not material if the contracts were assigned. Without a novation the reversion clause takes effect.

Mark Anderson said...

Mann J may well be right that if the contractual obligations have not been novated, the obligation remains with RD, and therefore the notice of breach goes to RD.

But this shouldn't affect the more fundamental question, which is that if the copyright has already been validly assigned to Crossfire, Crossfire should take free of any contractual obligations between RD and the authors. Only if the contractual obligations had been novated to Crossfire should the authors have any remaining rights over the IP.

Alternatively, perhaps the authors have a charge over the copyright, but in that case the charge may be invalid if not registered. There is nothing in the judgment about this aspect, so presumably it wasn't considered.

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