Assignments of future copyright extend to rights that writers “may” own

Posted: February 18, 2014

The Court of Appeal has confirmed that the Performing Right Society owns rights in a piece of film music that the satellite broadcaster B4U had purported to own.   The composers assigned rights generally in future works to the collecting society, but later agreed to transfer rights in future works to the film producers that commissioned the music.  The court found that copyright in future works vested in the PRS under section 91(1) of the Copyright, Designs and Patents Act 1988 (CDPA) because the PRS agreement covered music that the composers “may” own.  There was no requirement for the composers actually to own the rights once the music was created.  The case usefully confirms that prospective ownership of copyright is sufficient for an assignment of future copyright under English law – an important practical point for entertainment contracts, which often rely on assignments of future rights from writers.

Background

In 2004 two well-known composers of Bollywood music, Salim and Sulaiman Merchant, entered into an agreement with the PRS, assigning to the PRS “absolutely for all parts of the world the rights which belong to you on the date of this agreement or which you may acquire or own whilst you remain our member”.

In 2008 the composers were commissioned by Dharma Productions Private Limited to write music for the Bollywood film Kurbaan.  Under the commissioning agreement, the composers agreed that the entire copyright in “all present and future work arising” out of the composers’ services, including the music (which had not yet been written), would vest in Dharma “as the first owner”. 

By a chain of licensing agreements (which were not material to the case), the satellite television broadcaster B4U acquired video rights to broadcast the song Shukran Allah from the score for Kurbaan.  B4U aired it in April 2010, and the PRS claimed infringement of its copyright.  In 2012 the High Court gave summary judgment in PRS’s favour, on the basis that B4U had no real prospect of successfully defending the claim.  

B4U appealed to the Court of Appeal, claiming that the copyright was in fact owned by Dharma under section 91(1) of the CDPA.  B4U contended that the rights in the song fell outside the scope of the rights assigned to the PRS under the 2004 agreement, as the composers never actually owned the rights in the song and so could not assign them.

Decision

The Court of Appeal rejected the appeal.  Lord Justice Moses, giving the leading judgment, considered the effect of section 91(1) of the CDPA.  This states that (with emphasis added):

“Where by an agreement made in relation to future copyright, and signed by or on behalf of the prospective owner of the copyright, the prospective owner purports to assign the future copyright (wholly or partially) to another person, then if, on the copyright coming into existence, the assignee or another person claiming under him would be entitled as against all other persons to require the copyright to be vested in him, the copyright shall vest in the assignee or his successor in title by virtue of this subsection.”

Moses LJ explained that, without a statutory provision, “a work must be in existence before ownership in the rights can be assigned at law”.  Equity, however, would “decree specific performance of the contract, provided it was for value and sufficiently specific”.   So, before section 91(1) came into effect, where a composer assigned the copyright in unwritten works: “… the assignment took effect only in equity as an agreement to assign future copyright in those works, should they be created.  Once the work was created, the legal title would have to be dealt with by a separate assignment.”   Section 91(1) ensures that legal title is vested in the assignee as soon as that work is created, meaning that there is no need for a separate assignment of legal ownership.

The parties accepted that both agreements took effect as equitable assignments of future copyright.  So the question for the court was whether the song Shukran Allah came within the scope of the 2004 assignment to the PRS.  If it did, the parties agreed that that assignment, as the first in time, took priority over the purported assignment to Dharma.

Moses LJ noted that the PRS agreement was designed to include future rights that “the composer may own”.  The category of future rights assigned to the PRS did not contain any requirement that, once the work is created, the rights “must be owned by the composer”.  It did no more than refer to rights “capable of being owned by the composer”.   The question posed by the PRS agreement was not whether the composers became owners, but whether, at the time the agreement was made, they “could have done so”.   Rights capable of being owned by the composers included music that they were yet to write, since an author is generally the first owner of copyright under sections 9 and 11 of the CDPA.

The High Court had taken the view that the composers had become first owners of the music when it was first written.  But Moses LJ found it unnecessary to consider the relationship between section 11 and 91, or whether the composers ever became owners of the copyright, even for a fleeting moment: section 91 is “concerned with a ‘prospective’ owner”, i.e. someone who is not an owner but “may become” an owner.   Accordingly, there was no need “to posit an owner for the purposes of section 91”.

Moses LJ recognised that it was strange to conceive of an assignor of a copyright who never became owner, but recalled that “the very concept of copyright, its ownership and its assignment is entirely statutory”.   He also considered it absurd “to suggest that a reasonable person would have understood the parties to have intended only to transfer rights in works of which they became owner once the works had been composed”: to do so would “turn the priority rules in relation to equitable assignments topsy-turvy”.

In conclusion, the Court of Appeal held that the rights came within the scope of the PRS agreement, and so vested in the PRS.  In the view of Moses LJ, that conclusion gave: “… full effect to the words of the 2004 agreement, without addition or substitution.  At the time of the agreement the composers could have become owners of the song.  As prospective owners, their assignment took effect under section 91 once the song had been composed.”

Comment

The decision is relevant to any writer’s grant of future rights in entertainment content under English law.  While the judgment is technical in nature, it has wider application in affirming that a writer need not actually own a future copyright (even for an instant) in order to pass good title to a publisher or other rights-owning entity.  That will be a comfort to investors in music, who rely on obtaining good title in building their catalogues – and so ultimately to acquirers of catalogues, who will want to ensure a clear chain of title, free of any third-party claimants with later purported grants of rights. 

Equally, it will assure administrators of copyright works, such as the collecting societies.  At the same time, it will be problematic for any producer or broadcaster attempting to rely, as in this case, on an alleged effectiveness of a later grant of rights – although it must be said that B4U’s stance is a highly unusual position to take, and most audiovisual companies accept music collecting societies’ customary prior rights as a matter of industry practice.

The case serves as a reminder to practitioners to draft present assignments of future copyright carefully, avoiding any potential gaps in the assignment.  One way to achieve this is, in the usual way, for the writer to assign all right, title and interest of any kind (whether vested, future or contingent) in  both existing and future works created by the writer, i.e. not to draft purely by reference to rights that are or will be owned by the writer – which could create a subtle lacuna of the type that B4U attempted to exploit, and one that would also be hard to bridge effectively through warranties of non-assignment to third parties.

In common-sense terms, the judgment places rather artificial emphasis on “may” [own] in the PRS agreement in this case – reading it in the sense of “could” [own], rather than its more natural subjunctive sense (in the context of the sentence) of “will (perhaps)” [own] – a reading that would have been awkward for the PRS as a matter of contractual interpretation, if construed over-literally (as B4U tried to do) as only passing future rights to the PRS if in fact acquired or owned by the composer – a problem at first sight if the composers never ultimately acquire ownership of the future rights.

But this convoluted logic surely reinforces Moses LJ’s intuition about what was really meant by the PRS agreement and what is meant by section 91(1) of the CDPA: the whole point of both is precisely to allow the present passing of ownership in works that do not yet exist – a paradox that works only by operation of law and is supremely useful for entertainment companies and administrators that need certainty at the time of contracting about their rights to exploit future works.

Ed Baden-Powell and Beth Lawson

Partner and Trainee Solicitor, Michael Simkins LLP

Article written for Entertainment Law Review