Songwriting Copyright Royalties & The PPSA

The facts in this scenario are based on those in Crosstown Music Company 1, LL C v Rive Droite Music Limited, Mark Taylor & Paul Barry [2010] EWCA Civ 1222.

A music publishing company entered into several agreements with songwriters between 1994 and 1998 and acquired ownership of the copyright to their songs. The agreements are described in [12]:

“The Writers assigned to [the Publisher] the copyright in the relevant songs “throughout the universe” for an initial 2 year period, followed by a 25 year “Retention Period”, after which the rights reverted to the respective writer “without further formality” (clause 4(b)).”

Relevantly the songwriting agreements contained the following clause:

“In the event that the Publisher … shall be in material breach of the terms of this Agreement and shall fail to take all reasonable action to remedy such breach within [x] days of written notification in reasonable detail of such breach from the Writer, all rights assigned to the Publisher hereunder shall forthwith revert to the Writer.”

The automatic reverter clause was a partial assignment of the interests of the songwriters (see [39]). It secured the obligation of the publisher to pay royalties to the songwriters. Accordingly under the PPSA it would be a security interest in relation to the copyright (see s 12(1) of the PPSA)).

In 2006, the purchaser took an assignment of the subject copyright from the publisher. The songwriting agreements were not novated to the purchaser. They remained in place between the songwriters and the publisher, notwithstanding the assignment of copyright by the publisher to the purchaser.

In April 2007, the songwriters served “cure notices” on the publisher. Various breaches were identified and the publisher was required to take reasonable action to remedy the breaches. Should the publisher fail to do so, the writers claimed there was an automatic reversion of the copyright to them. The publisher did not pay.

The purchaser commenced proceedings against the publisher and the writers.

The court found that:

• The reverter clause operated as an automatic reverter.
• The re-vesting of ownership took place forthwith on the fulfillment of the conditions.
• A re-assignment or other transfer to the writers was not necessary (see [34]).
• The title of the publisher was always subject to the automatic reverter.

Therefore, the purchaser was an unsecured creditor in the estate of the publisher.

Applying The PPSA to These Facts
In order to protect their interests under the PPSA the writers would need to:

• Perfect that security interest by filing a financing statement on the  Personal Property Securities Register (PPSR), (as a purchaser for value of the copyright via the automatic reverter)  ; and
• Give the publisher notice of their registered security interest in the prescribed form. (s 157(1 ) of the PPSA)

If the writers failed to do so, the purchaser would take the copyright free of the unperfected security interest of the writers (s 43 of the PPSA).