This piece has been authored by Pranshu Gupta, 2nd year student at National Law School of Indian University, Bangalore and Harshal Chhabra, 2nd year student at Gujarat National Law University.
Keywords: Copyright Act, Re-Assignment, Termination, Separateness, Contractual Autonomy.
I. INTRODUCTION
The Bombay High Court, in its recent order in Super Cassettes v. RBEP and Hungama Digital Media v. RBEP dated 5 June 2023, has held that the mere termination of an agreement for copyright re-assignment would not trigger re-assignment of copyright to the original assignor. While the Court primarily dealt with questions of legal interpretation and copyright assignment, its implications stretch far beyond the law and require an in-depth analysis.
Thus, this article shall analyze the ruling in Super Cassettes by examining it in light of copyright law principles and predicting its impact on contractual drafting and industry practices. To that end, the article has been divided into 5 parts, including the Introduction as Part I. Part II contains a brief summary of the case, highlighting the important issues and their analysis by the Court. The latter half of the article looks at broader implications which lie beyond the specific facts of the case. Part III is an analysis of the application of section 19 of the Copyright Act 1957 (“the Act”) by the Court, in light of its procedural requirements and statutory purpose. Part IV examines its disruptive consequences, using the case as a focal point to evaluate its impact on industry players and contractual agreements at large. Part V is Conclusion.
II.SUPER CASSETTES IN A NUTSHELL: THE RULING DECODED
The dispute in Super Cassettes involved a Long Form Agreement (‘LFA’) accompanied by the requisite ancillary assignment deeds. In 2009, RBEP, Super Cassettes and Hungama Ltd. entered into an LFA for the joint ownership of existing and future music catalogues through the assignment of rights in the ratio of 40:40:20, thereby entitling them to exclusive and proportional copyright and publishing rights. The root of the dispute was the termination clause which stipulated re-assignment on certain grounds, such as non-payment of dues.
The dispute arose in 2022 when Super Cassettes did not pay its dues to RBEP and ignored a notice sent by ‘defendant no. 2’ (who claimed to be RBEP’s constituted attorney) for non-payment of dues. Subsequently, defendant no. 2, invoking power of attorney, sent a notice of termination to Super Cassettes and RBEP ratified it. Thus, it terminated the LFA and re-assigned the copyright to Zee Entertainment Ltd. RBEP claimed that re-assignment of the rights in the music catalogues had occurred automatically post the termination of the LFA and consequently, it possessed the right to assign the copyright to third parties, having resumed ownership in the copyrighted works. Super Cassettes, along with Hungama Ltd., thus filed suits for interim injunction and relief contesting the validity of such termination and the mode of subsequent re-assignment.
The plaintiff Super Cassettes relied on section 19 of the Act to argue that re-assignment would require a separate express deed. On the other hand, the defendant RBEP relied on the termination clause of the agreement to argue for automatic re-assignment and claimed that the LFA fulfilled the requirement of “written document” under section 19.
The Court framed the issue in the form of the question: “whether termination of a copyright assignment agreement would result in automatic re-assignment, or whether, such assignment must occur through a separate express deed as per section 19 of the Act.”
Decoding the Court’s Judgement:
The Court, in its analysis, clarified the scope of “power of attorney”, explained the procedural requirements under section 19, and discussed the concept of equitable assignment. This article shall emphasize the latter two concepts.
- Interpretation of Section 19:
The court utilized the principle of “harmonious interpretation ”, to interpret the termination clause of the agreement by reading it with the plain meaning of section 19, which stipulates express deeds for assignment. The principle of harmonious interpretation requires the court to read contractual clauses in totality, in a manner which is consistent with the other clauses and with the relevant provisions of the law. Thus, it held that the usage of “shall be re-assigned” implies express and separate re-assignment and cannot be conflated with “stands assigned” to mean automatic re-assignment on termination. The court determined that the requirement of a separate writtendocument was essential for a valid re-assignment under section 19 of the Act, and this would override contractual terms even if they permit automatic re-assignment upon termination of the contract. Based on the precedent set forth in Yennes Infotech (P) Limited v. Managing Director, eNoah Solution Pvt. Ltd., the Court ruled that even if the conditions specified in clauses 6 and 6.1 are met, the execution of a re-assignment deed remains a necessary requirement despite the existence of a pending money claim.
2. Equitable Assignments:
RBEP contended that an “equitable assignment ” was established through the language used in clause 6.1 of the LFA, relying on Sunil Aggarwal and another vs. Kum Kum Tandon and others (“Sunil Aggarwal”). Super Cassettes argued that RBEP could not legitimately claim an equitable assignment of the copyright and the holding of Sunil Aggarwal was not applicable in the present case. The Court concurred and clarified that the application of the concept of equitable assignment in Sunil Aggarwal was based on the assignor’s refusal to honor a legal assignment despite full payment. In the present case, the facts did not allow a claim for equitable assignment as there was an ongoing dispute over amounts due. It couldn’t be asserted that one party had taken all necessary steps while the opposing party refused to act accordingly, given the unresolved dispute before the court regarding the outstanding amounts.
Concluding, the court held that RBEP could advance a money claim but could not claim re-assignment on mere notice of termination. Further, itheld that the LFA was not an umbrella document and the subsequent assignment deeds were independent of it. Thus, the court ruled in favour of the plaintiff, Super Cassettes, and granted interim relief to it.
III.SUPER CASSETTES AND SECTION 19: A LEGAL ANALYSIS
The plaintiff in Super Cassettes primarily relied on section 19 of the Copyright Act in its argument. While section 18 discusses the assignment of copyright, section 19 of the Act lays down specific requirements for a valid assignment. Clause 1 mandates the assignment to be in the form of a written instrument signed by the assignor. This is essentially a safeguard against ambiguous claims and any disputes which may arise from oral assignments. Expanding upon this, clause 2 requires clear identification of the assigned work and specification of the rights being assigned. The section also emphasizes the duration and territorial limits of such rights. Clause 3 ensures fair compensation to the author by ensuring royalty and other consideration to be specified in the assignment. Lastly, it imposes certain restrictions as well, while creating room for flexibility by allowing for revision, extension, and termination of assignment through mutual agreement. The objective behind such strict procedural requirements is to promote clarity and certainty in copyright assignments, reduce ambiguity and prevent unnecessary litigation. Mandating a written deed protects the interests of both the parties; while the assignor retains the ownership of rights not explicitly transferred, the assignee gains defined rights over the work.
As explained in detail in Part II, the Court in Super Cassettes upheld the formalistic sanctity of section 19 by basing its approach on two prongs: an adherence to a “plain reading” interpretation of the law, and subsequently harmonizing the law with the language of the contract. Thus, the court upheld the core objectives of section 19, that is, promotion of clarity, prevention of fraudulent claims and safeguarding against potential disputes. A more liberal interpretation of the law might have compromised on these principles. Moreover, such strict formalities make sense while considering the potentially higher risk of disputes and abuse of law during re-assignment, which is much more common than in cases of initial assignment of rights. At the first glance, the Court’s reasoning appears legally sound. However, the Court has interpreted “written assignment” within section 19 to mean a “separate written assignment”, introducing an additional condition not explicitly stated in the provision. This not only restricts the range of acceptable assignment documents but also raises doubts about whether such a condition aligns with the original legislative intent behind the provision. The ensuing risks and limitations associated with this approach will be examined in greater detail in the next section.
IV. SUPER CASSETTES BEYOND THE LAW: A LOOK AT ITS DISRUPTIVE IMPLICATIONS
While the ruling in Super Cassettes primarily deals with questions of legal interpretation, it has far-reaching consequences for contractual practices and industry realities as well. We shall now examine the same.
Although the court upheld the clarity and certainty of assignment procedure, it inadvertently compromised on the need for flexibility in commercial agreements. This could lead to stricter drafting practices which would involve reliance on separate deeds for re-assignment. While this would reduce contractual ambiguity and litigation risks, at the same time, it increases procedural complexity for contracting parties by necessitating additional paperwork and imposing additional costs. The court appears to have read unnecessary formalities into the statute, thereby invalidating pre-agreed termination mechanisms. Instead of allowing parties the freedom to choose the mode of re-assignment of rights upon termination, it mandated a specific “statutory form” of reassignment through a separate deed. This imposition restricts the parties’ contractual autonomy to craft agreements tailored to their specific needs and preferences, thereby impeding the dynamic nature of copyright law and curtailing the diversity of approaches available for the termination of assignments.
Moreover, by discouraging automatic re-assignment, the Court indirectly removed a convenient option of re-assignment for the industry. This would reduce the usage of standardized clauses which were designed for efficiency and allowed parties to navigate the complexities of copyright termination. The court’s departure from this convenience-based approach undermines the predictability and standardization that these clauses offer to the entertainment industry.
Thus, the Super Cassettes ruling poses wide ramifications beyond copyright law and contractual drafting as well,casting a shadow on the future course of the Indian entertainment industry. It could discourage innovative forms of partnership due to the complex legal formalities and rigid procedural requirements mandated by the Court. This could stifle creative experimentation and hinder the dynamism that defines the entertainment industry in India.
V. CONCLUSION: THE WAY FORWARD
Super Cassettes, while upholding the sanctity of copyright assignment procedures, inadvertently compromises contractual flexibility and the principle of contractual autonomy. The court’s emphasis on a separate deed for re-assignment introduces procedural complexity, potentially leading to stricter drafting practices and adverse consequences for the entertainment industry. Thus, an approach which preserves the procedural requirements of the law and simultaneously accommodates the practical concerns of stakeholders is required. Potential solutions include a broader interpretation by Courts to include LFAs within the scope of “written instrument” in Section 19, and legislative reform to incorporate implied terms within the Copyright Act. Super Cassettes serves as a stark reminder of the tension between legal formality and industry dynamism. As the copyright landscape evolves with technologies like Distributed Ledger Technologies (DLTs) and smart contracts, finding a balanced approach that safeguards rights while fostering innovation will be crucial.