Interpretation of Long-Form Agreements in case of conflicting claims

In a significant joint order passed on June 5, 2023, the Bombay High Court delivered a pivotal clarification regarding copyright ownership in cases of agreement termination due to non-payment of dues. The court, in its ruling on the cases of Super Cassettes v. RBEP and Hungama Digital Media v. RBEP, firmly established that the termination of an agreement does not automatically result in the reassignment of copyright to the original assignor. The Court stressed the significance of a written document, namely the re-assignment deed, as a prerequisite for the re-assignment of copyright. This landmark decision sheds light on a contentious issue, providing clarity and guidance for copyright holders and stakeholders involved in similar contractual disputes.

Case Background and Factual Overview:

On December 5, 2009, a Long Form Agreement (“LFA”) was signed between T-Series, Hungama, and RBEP through a Memorandum of Understanding (“MOU”). The purpose of the MOU was to establish joint copyright ownership among RBEP, T-Series, and Hungama, granting them the rights to the existing music titles and future unreleased music titles of the specified films. According to the LFA, RBEP was obligated to assign 40% and 20% of the copyright and publishing rights of the films to T-Series and Hungama, respectively. Additionally, T-Series obtained an exclusive, irrevocable, perpetual license to fully exploit the music rights of the films covered by the LFA. The LFA explicitly prohibited RBEP from licensing or assigning its rights to any third party. In terms of termination, the LFA specified that the rights to the Fresh Music Catalogue would be reassigned to RBEP after a valuation process.

Between 2014 to 2016, T-Series and RBEP executed separate ancillary assignment deeds, resulting in T-Series acquiring 100% copyright and rights for promotional exploitation of the music from six films by making a specified payment to RBEP. Furthermore, T-Series also obtained 100% copyright ownership of the musical, literary, and sound recordings from three additional films based on assignment deeds.

However, in 2022, a dispute arose when RBEP terminated the LFA, claiming that the termination was due to T-Series' failure to make the required payment and failure to furnish statement of accounts as stipulated in the LFA. Subsequently, the a public notice was issued declaring that the rights to the films were "re-assigned" to RBEP and Hungama following the LFA termination. Interestingly, the public notice also mentioned that this re-assignment included not only the films covered by the LFA but also nine additional films that had been previously assigned to T-Series over time. After a series of legal correspondence between RBEP AND T-Series, Eventually, the rights to these films were assigned to Zee Entertainment Ltd. by the defendants. Following this, T-Series filed a claim for interim relief in respect of the nine films, which pertained to separate and independent agreements executed.

Unravelling the intricate web of facts, the court granted an interim injunction in favour of the plaintiff T-Series regarding the nine films, as T-Series and RBEP had entered into separate and distinct agreements for these films, independent of the LFA. Questions also arose about whether the act of terminating the LFA can potentially trigger the reassignment of copyright to RBEP for the films covered under it.

To that, the main question arises is that does termination of LFA triggers re-assignment of copyright?

T-Series submitted that in accordance with the Copyright Act of 1957 (“Act”), Section 19, the re-assignment of copyright in the films would solely occur upon the execution of a valid written document between the involved parties. In the absence of such a document, by mere termination of the LFA, the copyright in the films could not be re-assigned to the plaintiff.

While RBEP presented arguments regarding the clauses of the LFA, specifically clauses 6 and 6.1, which deal with the termination of the LFA, it was asserted that the only possible interpretation of these clauses is that upon the termination of the LFA, the copyright automatically assigned to RBEP and that the LFA itself fulfilled the criteria outlined in Section 19 of the Act. They further contended that, based on the particular circumstances of the case, there was no requirement for a separate document to be executed to re-assign the copyright.

The court highlighted that the re-assignment of copyright in favour of the original assignor could not occur solely based on providing notice of termination of the LFA. Despite the provisions in clauses 6 and 6.1 of the LFA, which indicated that upon termination, the copyright would be re-assigned to RBEP, the Court considered the requirement of a written document under Section 19 to be of utmost importance. By focusing on the specific phrase "copyright shall be re-assigned" in clause 6.1 of the LFA, the Court clarified that it should not be interpreted as "copyright stands assigned." This aspect suggests that there is a requirement to complete a deed of re-assignment once the conditions outlined in clauses 6 and 6.1 of the LFA have been fulfilled. The court thus held that “A specific re-assignment deed has to be executed in writing even if a claim of money may lie in such circumstances.”

Our perspective

The LFA sets forth the requirement of "re-assignment" that the involved parties have mutually agreed upon. However, by applying the conditions outlined in Section 19 regarding the methods of assignment and emphasizing the need for a "deed of re-assignment," the court has clarified that the mandatory conditions under Section 19 of the Act take precedence over any existing agreement. It's important to note that the interim order serves as a preliminary step, and the case itself is still pending.

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