The Court of Appeal has confirmed the effectiveness of a copyright assignment clause in a music rights agreement stating that a breach by the assignee would trigger automatic reverter of the rights to where they came from. Stephen Groom asks whether this is food for thought for those involved in drafting contracts for the provision of advertising and marketing services.
Topic: Intellectual property
Who: Crosstown Music Company 1 LLC v Rive Droit Music Ltd and others  EWCA Civ 1222 2 November 2010
Where: Court of Appeal
When: November 2010
Law stated as at: 9 November 2010
The Court of Appeal upheld a High Court ruling which confirmed the validity of an automatic rights reverter clause in a music rights assignment.
Joint composers of various songs ("Composers") including Cher's song "Believe" , assigned copyright in the lyrics, musical compositions and original arrangements to Rive Droit Music Ltd ("Rive Droit") for 25 years. The assignment stated that the assigned rights could revert to the Composers before the 25 years were up if the assignees were at any time in material breach of the agreement ("Reverter Clause").
Rive Droit subsequently assigned its rights under the assignment to Crosstown Music Company ("Crosstown"). Following an audit of Rive Droit's books, the Composers gave Rive Droit and Crosstown formal notice that there had been various breaches of the assignment including failure to pay the due royalties on "Believe".
The Composers stated in the "cure notice" that unless these breaches were remedied, under the Reverter Clause the copyright would, on expiry of the period for remedy given in the notice, automatically revert to the Composers.
Crosstown disputes "uncertain" reverter clause's effectiveness
The alleged breaches were not remedied, but Crosstown disputed the effectiveness of the Reverter Clause, applying to the court for a declaration that despite the alleged breaches, it retained the copyright in all the songs.
Crosstown's argument was that under the assignment provisions at s.90 (2) of the Copyright, Designs and Patents Act 1988, there could be no effective re assignment of the copyright under the Reverter Clause. They said this was because s.90 (2), although it permitted partial re-assignment of copyright, required that an agreement to re-assign was for a fixed and certain period. Because the Reverter Clause provided for re-assignment contingent on an uncertain future event, Crosstown argued, it did not meet these requirements and was therefore ineffective to pass the copyright back to the Composers.
The Court of first instance disagreed. Mann J. held that the Reverter Clause was not an agreement to re-assign in the future at all, but an automatic reverter provision, so that the reverter occurred immediately once the conditions set out in the Reverter Clause were fulfilled, without the need for Crosstown to execute any formal re-assignment back to the Composers.
Crosstown appealed but the Court of Appeal upheld Mann J's judgment and the rights were therefore back in the hands of the Composers.
Why this matters:
What happens to intellectual property rights in creative deliverables supplied by an advertising or marketing agency to its client is often a matter of intense debate when it comes to negotiating the ad services agreement.
The client's going-in position is often perhaps understandably that it requires unconditional assignment of all rights for the full term of copyright. In the other corner, agencies say that an out and out giveaway of the full rights for life of the author plus 75 years (the standard term of copyright for literary and artistic material) is inequitable and excessive and some form of exclusive user licence is more appropriate.
Perhaps this verdict might provide food for thought in these scenarios and a suitable half way house which is acceptable to both parties, provided of course that agreement can be reached on the terms of the initial assignment and the conditions which will trigger reverter!