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Recording Security Interests in Copyrighted Works: Recordation v. Indexing, and Constructive Notice

By: Maryna Koberidze, COGENCY GLOBAL INC. on Thu, May 25, 2017

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To perfect the creditor’s interest, a security interest in a registered copyrighted work must be recorded with the U.S. Copyright Office (“Copyright Office”), whereas a security interest in an unregistered work can be perfected by filing a financing statement with the Secretary of State under a state law version of Article 9 of the Uniform Commercial Code.

This post focuses on recordation of security interests with the Copyright Office, and some of the peculiarities of the process for doing so.

Recording Security Interests with the Copyright Office

As noted in our previous article, “Tips for Recording Assignments at the U.S. Copyright Office”, recording a document pertaining to a copyrighted work provides several benefits. One such benefit is that recordation establishes priority between conflicting conveyances involving the same copyrighted work. Another benefit entails constructive notice, meaning that upon recordation of the document with the Copyright Office, members of the public are presumed to have knowledge of the facts stated in the recorded document and cannot claim otherwise.

Both priority and constructive notice are intended to protect purchasers, licensees and secured creditors from the risk of losing their interests in case of conflicting assignments or the copyright owner’s bankruptcy. To get the advantage of either, certain conditions must be met.

Conditions for Priority

When two conflicting conveyances involve the same work, the one that was executed first will prevail, but only if the document is recorded: (1) within one month after execution (if executed in the U.S.), (2) within two months after execution (if executed outside the U.S.), or (3) at any time before the other document was recorded with the Copyright Office.

Otherwise, the later conveyance will prevail if: (1) taken in good faith, for valuable consideration or on the basis of a binding promise to pay royalties, (2) taken without notice of the earlier conveyance, and (3) recorded in a manner required to give constructive notice.

(For discussion of priority between a conflicting transfer and a nonexclusive license, see 17 U.S.C. § 205(e)).

Conditions for Constructive Notice

Recordation of a document gives all persons constructive notice, provided that: (1) the document specifically identifies the work to which it pertains so that, after the document is indexed by the Copyright Office, it would be revealed by a reasonable search under the title or registration number of the work; and (2) the work has been registered with the Copyright Office.

Recordation Process

The Copyright Office’s Circular 12, Recordation of Transfers and Other Documents,  explains that the recordation process generally includes the following: (1) receiving the copyright-related document for recordation and providing a return receipt if requested by the remitter; (2) reviewing the document to determine its eligibility for recordation; (3) numbering, cataloging, imaging and storing the document in the Copyright Office’s electronic recordation system, so that it is available to the general public for inspection and copying upon request; (4) indexing the document in the Copyright Office’s online public catalog under the names of the parties involved, the titles of works listed in the document, and the registration numbers for the works associated with the document (where applicable); and (5) returning the original document to the remitter along with a certificate of recordation bearing the date of recordation and the volume and document number identifying the recorded document.

Currently, the Copyright Office does not require that a copyright-related document submitted for recordation include registration numbers associated with the works, but only suggests the format for such numbers should the remitter chose to supply them. Unfortunately, the Copyright Office’s public catalog, the online index for registrations and recordations, provides no formal linkages between registrations and recorded documents, which makes searching the index very challenging.

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Indexing and Electronic Title Lists

Indexing is an important part of recordation process, as well as the most labor-intensive one. It involves creating an online public record in the Copyright Office’s public catalog. This record contains information about the recorded document and all the titles it concerns, and is searchable through the Copyright Office’s website.

As a general practice, the Copyright Office manually transcribes the information from paper title lists submitted with a document for recordation into its online public catalog. In 2014, however, the Copyright Office made changes to its recordation practices. The Office now officially offers an option for submission of electronic title lists where a document concerns 100 or more titles of works.

Given the Copyright Office’s backlog (the Office is currently processing January 2016 submissions), submission of electronic lists may help to speed up the processing of the documents. Nevertheless, one should keep in mind that submission of an electronic title list does not eliminate the need for submission of a paper title list. Nor is the electronic title list considered part of the recorded document. Rather, it is used by the Copyright Office only as a means to facilitate the indexing of submitted documents, by allowing clerks to cut and paste the entries from the electronic list into the catalog. More importantly, if an electronic list is inconsistent with the information provided in the paper document and such discrepancies result in corresponding inaccuracies in the Copyright Office’s public catalog, the remitter bears the legal consequences of any such inaccuracies, including losing the benefits of priority and constructive notice.

If time is of essence, the Copyright Office’s special handling service may be a reasonable alternative to submission of electronic lists to expedite processing of documents submitted for recordation. Documents submitted with “special handling” are returned to the remitter with a certificate of recordation in about six weeks after submission, or even sooner.  Indexing also occurs faster as a result. The cost for this expedited service is $550, and is subject to the Copyright Office’s approval.

Recordation and Constructive Notice

The date of recordation is the date when the Copyright Office receives the accepted document in proper form and the proper fee, regardless of when the recordation specialist reviews and records the document.

However, priority vests and constructive notice attaches only upon recordation of the document with the Copyright Office. Thus, the question arises – when is such a document deemed to be properly recorded for constructive notice purposes? Is the copyright-related document recorded when it is received by the Copyright Office, when it is imaged into a volume open to public inspection, when it is indexed in the Copyright Office’s online public catalog, or when it is returned to the remitter with a recordation certificate? It is also unclear what comes first—indexing or returning the document to the remitter.

As stated in the Copyright Office’s Circular 12, indexing comes first. Likewise, the Report on Transforming Document Recordation at the United States Copyright Office notes that the Copyright Office creates a recordation certificate for a document only after a document has been imaged and indexed. According to the Compendium of U.S. Copyright Office Practices, however, indexing comes after the Copyright Office returns the original document to the remitter.

Our experience shows that the latter is often the case. Moreover, we have seen a growing “time gap” open between the receipt of a recordation certificate and the actual indexing of the titles in the catalog. The gap grows longer when a submission concerns longer lists of titles. Most recently, we have seen the Copyright Office’s online public catalog provide a “shell record” of the submission listing only the first title, but noting that “Titles associated with this document not yet indexed in the Public Catalog.” (See a sample image of such a record below).

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This seems to confirm the Copyright Office’s practice of indexing after returning the recordation certificate, but does not answer the question at what point in time does recordation give constructive notice to the public. Since the Copyright Act ties constructive notice to indexing by the Copyright Office, one would expect that constructive notice occurs only when indexing is complete. At the time of publication, we were unable to obtain confirmation of this from the Copyright Office, so it remains an open question.

We hope that once the Copyright Office concludes its announced IT modernization and develops an electronic recordation system, the recordation process will be handled in a more efficient and speedy manner so there will little or no time gap between issuing a recordation certificate and indexing all the titles associated with the recorded document. In addition, the Copyright Office has recently proposed to amend its regulations (including a requirement of including registration numbers) in anticipation of the development of an electronic system for submission of documents for recordation. The proposed rulemaking touches upon constructive notice requirements and electronic submission under the to-be-developed system. If you are interested in providing public input to the Copyright Office, written comments are due on July 17, 2017, at 11:59 p.m. and can be submitted here.

This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Sources used:

  1. 17 U.S.C. § 101, 205, 705(a).
  2. 37 C.F.R. § 201.4.
  3. Circular 12: Recordation of Transfers and Other Documents, U.S. Copyright Office, 1-2, 5-6 (rev. Sept. 2016), available at https://www.copyright.gov/circs/circ12.pdf.
  4. The Compendium of U.S. Copyright Office Practices, ch. 2300, sec. 2304.1(B), 2309.3, 2309.3(A)-(E) (3d ed. 2014), available at https://www.copyright.gov/comp3/chap2300/ch2300-recordation.pdf.
  5. Report of the U.S. Copyright Office: Provisional Information Technology Modernization Plan and Cost Analysis, U.S. Copyright Office, 54-56 (Feb. 29, 2016), available at https://www.copyright.gov/reports/itplan/technology-report.pdf.
  6. Modernizing Copyright Recordation, 82 Fed. Reg. 22,771, 22,777-78 (May 18, 2017), available at https://www.gpo.gov/fdsys/pkg/FR-2017-05-18/pdf/2017-09810.pdf.
  7. David Muradyan, How to Perfect a Security Interest in Intellectual Property (Copyrights, Trademarks and Patents), The IP Law Blog (May 13, 2011), http://www.theiplawblog.com/2011/05/articles/copyright-law/how-to-perfect-a-security-interest-in-intellectual-property-copyrights-trademarks-and-patents/.
  8. Reagan Fibbe, Perfecting Security Interests In Intellectual Property, Law 360 (July 10, 2007), https://www.law360.com/ip/articles/29111/perfecting-security-interests-in-intellectual-property.
  9. John F. Hornick, Security Interests in Intellectual Property, Finnegan, Henderson, Farabow, Garrett & Dunner, LLP (Oct. 2003), http://www.finnegan.com/resources/articles/articlesdetail.aspx?news=4c698bab-7284-48a2-a8bd-12e04b5bf9ef.

Topics: Intellectual Property Due Diligence