Shukran Allah: when it pays to get there first

B4U Network (Europe) Ltd v Performing Right Society Ltd is a decision last week from the Court of Appeal (Civil Division) for England and Wales. You can find it at [2013] EWCA Civ 1236. This was an appeal by B4U against the decision  of Mr Justice Vos at [2012] EWHC 3010 (Ch) to grant summary judgment in favour of the PRS in its copyright infringement claim which was noted on the 1709 Blog here.

In 2004 the PRS, being a society formed to protect the copyright in musical works, had entered into a written agreement with two composers of songs for Bollywood films, Salim and Suleiman Merchant. By this agreement, copyright that the Merchants "may acquire or own" while remaining members of the society was assigned to it. In 2008 the Merchants were commissioned by Indian producers Dharma Productions to compose the music and lyrics for the film Kurbaan. Under that agreement, the rights in relation to musical works composed for the film vested in the film's producer and included all present and future works arising out of the contract and covered all territories of the world.

B4U admitted that it had broadcast a song, Shukran Allah, from Kurbaan on its UK music channel; the PRS inevitably proceeded against it for infringement on the basis that copyright had vested in it by virtue of its agreement with the Merchants.  Vos J granted summary judgment on the basis that B4U had no prospect of successfully defending the claim in relation to the song.  B4U was not particularly happy at this sudden outcome, maintaining that the copyright in the song was nothing to do with the PRS at all.  Said B4U, at the very moment that Kurbaan was composed, ownership of the copyright was instantly transferred to Dharma by virtue of the Copyright, Designs and Patents Act 1988 s.91(1) -- the bit that deals with assignment of future copyrights.  Since copyright in the song was never owned by the Merchants, argued B4U, it fell outside the scope of those works that were assigned to the PRS by the 2004 agreement.

The Court of Appeal (Lords Justices Moses, Kitchin and Underhill) dismissed B4U's appeal. How so?

 When the Merchants entered into their arrangement with the PRS in 2004 and their subsequent commissioning agreement with Dharma in 2008, the song had not yet been composed. Both agreements -- as the parties accepted -- accordingly took effect as equitable assignments of a future copyright.

If the song came within the scope of the equitable assignment to the PRS under the 2004 agreement, under the rules of priority that assignment, being the first in time, took priority over the purported assignment under the 2008 agreement with Dharma.

What rights were assigned to the PRS? The answer was future rights, namely those which the Merchants "may" own. That category of future rights which the Merchants assigned was not weighed down by any requirement that, once the work was created, the rights must be owned by them, since the 2004 agreement did no more than refer to rights capable of being owned by them -- and, at the time the agreement with the PRS was struck, it was beyond argument that the Merchants' rights in music they were yet to compose might be owned by them.

On a historical note, in every Copyright Act since 1911, the author had always in general been the first owner of the copyright, which would make it unnecessary to be concerned as to whether the Merchants ever became owners of the copyright. However, the court was prepared to accept that the effect of s.91(1) was to vest both legal and equitable title to the rights in the song, on its creation, in the first assignee in time. On that basis, those rights now vested in the PRS since they were rights which, as at the date of assignment, the Merchants might have owned.

Kurbaan here
Shukran Allah here

Can you pre-empt an assignment of future copyright?

Performing Right Ltd v B4U Network (Europe) Ltd is a Chancery Division decision dating back to 22 October, but this blogger has only just got round to dealing with it.  The judge, Mr Justice Vos, is now one of the regular IP judges in England and Wales.  The analysis below is based on a note published on subscription-only service Lawtel; the decision is an extempore one which is not available on BAILII.

The PRS had entered into contracts with two song composers under which, inter alia, copyright which the composers "may acquire or own" while remaining a member was assigned to the PRS. After entering that agreement, the composers entered into a commissioning agreement with Indian producers to compose the music and lyrics for a film. It was accepted by all that the commissioning agreement was a contract for the song writers' services as composers. Under that agreement, the rights in relation to musical works composed for the film (i) vested in the film's producer, (ii) included all present and future works arising out of the contract for services and (iii) covered all territories of the world.

The composers subsequently notified the PRS of the composition of a song which had, as B4U conceded, been broadcast on its United Kingdom music channel. The PRS claimed that, as copyright had vested in it under the Copyright, Designs and Patents Act 1988 (CDPA) s.91(1) by virtue of a future assignment, B4U's broadcast infringed its copyright because B4U did not hold a valid licence from it.

In proceedings before Vos J in which the PRS sought summary judgment, the court had to construe the assignment clause in the PRS agreements and to determine whether there was a material difference between an assignment of future rights and a present assignment of copyright in all future musical works. Said the PRS, this was a distinction without a difference: the relevant words in the PRS agreement dealt with the present assignment of future or prospective copyright. No, said B4U: the distinction was one of significance.  In this case, the argument went, the assignment to the PRS was subject to a condition precedent, this being the acquisition of ownership -- which could not take place until after the song rights had been assigned to the film's producer -- and that the copyright in the song therefore passed to the film's producer under the commissioning agreement without ever vesting in the PRS at all.

If you have had to read this paragraph several times to satisfy yourself either (i) that you have understood it or (ii) that this argument is unintelligible nonsense, don't worry, you are not alone ...

Vos J must have taken a deep breath before deciding that this was something he could decide. After all, as he observed, if the court was satisfied that it had all of the evidence necessary for the proper determination of a point of law, and that the parties had had an adequate opportunity to address it in argument, the court should jolly well grasp the nettle and decide it.  But how?

The court's task was to construe the two assignments: the agreements with the PRS agreements and the commissioning agreement. In doing so, it could be said that, unless the later-in-time commissioning agreement had already whisked away the copyright from under the noses of the PRS, the PRS agreements, being the first assignments in time, would prevail.

In reality, Vos J found, the commissioning agreement did not whisk away any copyright in the song. The relevant words in the PRS agreements were not a condition precedent but a present valid assignment of future rights and, as the PRS maintained the defence was based on a difference without a difference. Taking a look at the CDPA's s.11 (which dealt with ownership of authors' works) and s.91 (which dealt with assignment), he affirmed that there was an effective assignment to the PRS of future copyright where it vested in the two composers under s.11, where the first in precedence was the first in time. This result was not commercially absurd, as had been suggested, but rather was the outcome that was to be expected. The PRS agreements were contracts to allow the PRS to collect royalties for music in the UK as first owners of copyright; they did not contain a condition precedent.

Since there was no real prospect that B4U could defend that part of the infringement claim, judgment was given for PRS.