## Facts

- A music publisher acquired musical compositions from multiple composers under materially identical contracts.
- Each contract used language of absolute assignment, transferring the composition and copyright rights to the publisher, its successors, and assigns.
- In exchange, the publisher agreed to pay ongoing royalties on sales, with advance royalties recoupable from future royalty payments.
- The publisher was adjudicated bankrupt, and the bankruptcy trustee sought to sell the copyrights as estate property.
- The trustee advertised the copyrights for sale on terms suggesting purchasers would take “free and clear” of the composers’ royalty claims.
- The composers petitioned in the bankruptcy proceeding for (1) rescission and reassignment of the copyrights, or (2) an order requiring any sale to be subject to their royalty rights.
- The district court ordered rescission and directed reassignment of the copyrights to the composers, conditioned on repayment of any unearned advances.
- The trustee appealed.

## Issues

1. Whether the trustee could sell the copyrighted compositions as property of the bankruptcy estate despite the composers’ rescission request.
2. If a sale could occur, whether the trustee could convey the copyrights free of the composers’ continuing contractual royalty rights.

## Decision

- The court of appeals reversed the district court’s rescission order and remanded.
- The trustee was permitted to sell the copyrights as estate assets.
- Any sale had to be subject to the composers’ contractual rights to future royalties; the trustee could not convey the copyrights free and clear of those obligations.

## Legal Principles

- An absolute assignment of a copyright transfers title to the assignee, and the copyright becomes property of the bankruptcy estate upon the assignee’s bankruptcy.
- A bankruptcy trustee generally may sell estate property to the same extent the debtor could have sold it, but only subject to valid contractual burdens attached to the property interest sold.
- Where continuing royalties are the bargained-for consideration for an assignment, a purchaser of the assigned copyright takes subject to the ongoing duty to pay royalties under the contract.
- Bankruptcy, without a contractual reversion clause or comparable basis, does not justify rescission of an absolute assignment solely to restore the assignor’s ownership.

## Conclusion

The trustee could liquidate the bankrupt publisher’s copyrights, but the copyrights remained burdened by the composers’ royalty contracts; rescission and reassignment were improper, and purchasers had to take subject to future royalty obligations.


In re Waterson, Berlin & Snyder Co., 48 F.2d 704 (2d Cir. 1931)