Crosstown Music Company 1, Llc v Rive Droite Music Ltd & Ors

A contractual clause providing that assigned copyrights shall forthwith revert on specified unremedied material breaches can operate as an automatic reverter, rather than merely as an obligation to reassign. For copyright, a partial assignment limited to part of the copyright period is permitted by section 90 of the 1988 Act, and an earlier contingent reverter is capable of taking effect.

“Material breach” means a breach of significance, assessed in its full contractual and factual context. It need not be repudiatory or go to the root of the contract. The assignee’s commencement of proceedings against the original publisher did not constitute reasonable action to remedy the breaches. The notices were valid, save that one paragraph was insufficiently particularised.

The claimant acquired 119 musical copyrights and related contractual rights from the first defendant, which had obtained assignments from the second and third defendants, the songwriters. The songwriters later served notices under clause 18(a), alleging material and unremedied accounting and royalty breaches.

The claimant sought declarations that the copyrights had not reverted. The songwriters counterclaimed for declarations that the notices were valid and sought consequential relief. The issues included the construction and legal effect of clause 18, the meaning of material breach, the effect of the assignment, the adequacy of the notices, reasonable remedial action, delay, election, waiver, acquiescence and estoppel.

1. Automatic reverter. Clause 18(a), read in its contractual context, provided for automatic vesting when the specified conditions were met. The words “forthwith revert” were the language of automatic vesting, reinforced by the wording of clause 18(b). The clauses relied on by the claimant did not alter that construction (paras [63]–[70]).
2. Copyright capacity. The general proposition that legal ownership of chattels is indivisible in time was rejected. Section 90(2) of the 1988 Act permits an assignment limited to part of the copyright period. Clause 18(a) was therefore capable, at least for English copyrights, of operating according to its terms to re-vest the copyrights (paras [71]–[80]).
3. The claimant could not introduce, for the first time in final submissions, a case that foreign copyrights had to be treated differently. The parties had pleaded and conducted the case on the basis that the copyrights could be treated alike. The court therefore declined to permit that late issue to be raised (paras [81]–[90]).
4. Material breach. Materiality meant significance rather than triviality. It was to be assessed in context, including the breaches, their consequences, the explanation for them and the consequences of treating the agreement as determined or continuing. It did not require repudiation or a breach going to the root of the contract (paras [96]–[100]).
5. The accounting breaches concerning withholding tax, exchange rates, incorrect shares, audit costs, missing United States income and missing territorial income were established and material. The alleged black-box income breach was not proved. Paragraph 4 of the notices failed to specify a breach in reasonable detail and could not be relied on (paras [102]–[142]).
6. The relevant “Publisher” for the remedy condition was RD, the party in breach, not Crosstown merely as assignee. In any event, commencing proceedings to compel RD to account was not reasonable action to remedy the breaches. The claimant took the acquired asset subject to its flaws and the consequences of RD’s breaches (paras [143]–[149]).
7. No implied term required service of a notice within a reasonable time, and no general election doctrine barred the notices. The doctrines of waiver, equitable forbearance, acquiescence and estoppel were not established. Clause 18 was not inherently a one-shot provision, although the facts of a particular case might engage those doctrines (paras [150]–[191]).
8. The attacks on the notices failed. The notices were valid. Consequential counterclaim relief was left for further argument or agreement, probably after a stay for negotiations (paras [192]–[193]).