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Upon rescission of a contract for the assignment of economic rights, can the economic rights in the work be automatically restored? — Commentary on the Intellectual Property and Commercial Court 2025 Civil Judgment No. 6
I. Facts of the Case
1. The Interventor, Chen Wei-Hsiang, together with Jima Records & Tapes Co., Ltd. ("Jima Company"), Daishin Music, and Jen Shan Mei Audio & Video Co., Ltd. ("Jen Shan Mei Company"), on January 25, 2006, entered into an assignment agreement ("Assignment Agreement") with the appellee, Tianli Technology Co., Ltd. ("Tianli Company"). Chen Wei-Hsiang also separately signed an assignment agreement, assigning the economic rights of 46 musical works ("Economic Rights") to Tianli Company.
2. Chen Wei-Hsiang claimed that Tianli Company failed to pay the balance and did not return the NT$20 million check. After his attorney issued a demand letter on October 4, 2007, without result, he, through his attorney, notified Tianli Company on October 17 of the same year that, pursuant to Article 254 of the Civil Code, he was rescinding the Assignment Agreement and requested Tianli Company to return all previously received consideration. Tianli Company replied in writing, denying the effectiveness of the rescission.
3. Subsequently, on July 1, 2017, Chen Wei-Hsiang granted an "exclusive license" of the Economic Rights to a third party, Chen Li-Chen (license period until December 31, 2027). Chen Li-Chen then exclusively licensed the rights to the appellant, Maosen International Multimedia Co., Ltd. ("Maosen Company"). Based on this, Maosen Company authorized the Taiwan Music Collective Management Association (TMCA) to manage the Economic Rights and registered itself as the rights holder (with a rights share of 100% or 50%).
4. On July 24, 2024, Tianli Company notified Maosen Company to remove the disputed works from TMCA, but was refused. Consequently, Tianli Company initiated this lawsuit, seeking confirmation that it owns the Economic Rights, and, pursuant to Articles 184 and 767 of the Civil Code and Article 84 of the Copyright Act, requested Maosen Company to remove its rights holder registration with TMCA. The original trial ruled in favor of Tianli Company. Dissatisfied, Maosen Company filed an appeal and, in the second instance, filed a counterclaim, primarily requesting Tianli Company to return the Economic Rights to Chen Wei-Hsiang, and alternatively requesting confirmation that Tianli Company is obliged to express consent to restoration to status quo ante. The appellate court overruled both Maosen Company's appeal and counterclaim.
II. Key Issues
1. Whether the assignment of economic rights in a work (a quasi-real right act) shall, due to the rescission of the underlying obligatory contract (the Assignment Agreement), automatically revert to the assignor?
2. Where one party to a contract consists of multiple persons, if only one of them (Chen Wei-Xiang) issues a demand and declares rescission of the contract, does such declaration have the legal effect of a valid rescission?
3. If a co-owner of economic rights in a work assigns his/her share to another person without the consent of the other co-owners, what is the legal effect of such assignment pursuant to Article 40-1 of the Copyright Act?
4. May Tianli Company request Maosen Company to remove its registration as a rights holder with TMCA in accordance with Article 84 of the Copyright Act?
III. Court’s Holdings
1. The assignment of economic rights is independent and abstract; even if the underlying contract is rescinded, the rights do not automatically revert to the assignor
The court, citing the reasoning of Supreme Court 2024 Tai-Shang-Zi No. 719 and 2019 Tai-Shang-Zi No. 1654 judgments, pointed out that the assignment of intangible property rights such as patent rights, copyright, and trademark right results in a change of rights upon the mutual assent of the assignor and assignee. Such assignment agreement constitutes a quasi-real right contract, which is distinct from the underlying obligatory contract, and is, in principle, independent and abstract. The relevant provisions regarding the right of rescission under the General Principles of Obligations of the Civil Code do not apply. Even if the underlying relationship is retroactively extinguished due to the exercise of the right of rescission, the quasi-real right contract does not thereby lose its effect. The assignee is only obligated, pursuant to Article 259 of the Civil Code, to “consent to transfer the right to another to restore to status quo ante,” and the right that has already been transferred does not automatically revert to the assignor.
In this case, the Economic Rights in the work were assigned to Tianli Company on January 25, 2006. Tianli Company has never subsequently expressed any intention to reassign said rights to Chen Wei-Hsiang. Therefore, even if the Assignment Agreement is deemed to have been lawfully rescinded, the Economic Rights in the work still belong to Tianli Company. When Chen Wei-Hsiang exclusively licensed the Economic Rights in the work to Chen Li-Chen in 2017, such license was unauthorized, and Maosen Company could not thereby acquire the status of exclusive licensee through subsequent transfer.
2. Where there are multiple parties on one side of a contract, rescission (and demand for performance) must be effected by all such parties or addressed to all such parties.
The court indicated that, pursuant to Paragraphs 1 and 2, Article 258 of the Civil Code, the exercise of the right of rescission must be effected by a declaration of intent to the other party; where there are multiple parties on one side, it must be effected by all such parties or addressed to all such parties. A demand for performance constitutes a notice of intent (a quasi-juristic act) and the aforementioned provisions shall apply by analogy. In the Assignment Agreement, in addition to Chen Wei-Hsiang, the assignors also included Jima Company, Daishin Music, and Jen Shan Mei Company, three companies. On October 17, 2007, Chen Wei-Hsiang unilaterally engaged a lawyer to send a letter of rescission, without having obtained license or consent from the three companies, nor did the letter indicate that it was made on behalf of the three companies (at the time of rescission, the responsible person of the three companies had already changed to Li Chun- Hsiang). This does not comply with Paragraph 2, Article 258 of the Civil Code and does not give rise to the effect of rescission of the contract.
3. Where a co-owner of economic rights assigns his/her share, the assignment is effective due to the principle of abstraction, even without the consent of the other co-owners; only issues of claim for damages may arise among the co-owners.
Regarding the argument raised by Maosen Company that the assignment of part of the works is in violation of Article 40-1 of the Copyright Act and should therefore be invalid, the court found as follows: Chen Wei-Hsiang assigned to Tianli Company only the proportion of economic rights he himself held, and such assignment is effective per se; the other co-owners, for over 20 years since the assignment, have never expressed any objection (passive consent also constitutes consent), and according to the latter part of Paragraph 1, Article 40-1 of the Copyright Act, a co-owner may not refuse consent without just cause. Even if it is deemed that consent was not obtained, based on the quasi-real right contractual nature and the principle of abstraction of the assignment act, only tortious liability arises between Chen Wei-Hsiang and the other co-owners. The other co-owners may claim for damages pursuant to Article 90 of the Copyright Act, which does not affect the validity of the assignment to Tianli Company.
4. Request for removal of TMCA registration pursuant to Article 84 of the Copyright Act
The right to claim for exclusion of infringement under Article 84 of the Copyright Act does not require the infringer to have intent or negligence. Since Maosen Company has neither acquired the economic rights nor obtained an exclusive license to the work in dispute, its registration as the rights holder in TMCA constitutes an infringement of Tianli Company's economic rights. Therefore, Tianli Company's request for removal of the registration is legally justified.
IV. Lessons Learned from This Case
1. "Termination of contract" does not equate to "automatic restoration to status quo ante" of rights; restoration to status quo ante in transactions involving intangible property rights requires either an assignment act by the assignee or a declaration of intent by the assignor as ordered by the court.
The judgment in this case reiterates the consistent position in practice: the separation of obligatory contracts and quasi-real right contracts. After the contract giving rise to the obligation is terminated, the assignor only acquires a claim under Article 259 of the Civil Code, and restoration of rights requires the assignee's "consent to transfer." Therefore, if the assignee refuses, the assignor must, in their own name, file a lawsuit requesting the assignee to make a declaration of consent to the assignment. Upon obtaining a final and binding judgment in their favor, the assignor may, pursuant to Article 130 of The Compulsory Enforcement Act, have the declaration of intent deemed made. In this case, Chen Wei-Hsiang has asserted termination since 2007 for nearly 20 years, yet has never established the attribution of rights through this approach. Instead, he has directly acted as the right holder and granted licenses externally, ultimately causing the entire chain of licenses (Chen Li-Chen → Maosen → TMCA) to fail. For assignors, more secure transaction structures in practice include: installment payments corresponding to phased assignments of rights, making full payment of the balance a condition precedent to assignment, payment trusts or performance guarantee mechanisms, and expressly stipulating the procedure for restoration of rights after termination in the contract. These mechanisms are all more economical and efficient than relying on litigation to exercise the claim for restoration to status quo ante after termination.
2. The rescission of a contract involving multiple parties must be conducted "by all parties, towards all parties"; attention should be paid to the risk of changes in parties due to the passage of time.
When one party consists of multiple persons, both the demand for performance and the rescission must be made by all members or towards all members; otherwise, such actions shall not be effective. In this case, when Chen Wei-Hsiang rescinded the Assignment Agreement, he did so without the consent or license of the other three assigning companies, and thus had no authority to exercise the right of rescission on behalf of those three companies. Therefore, the rescission was not legally effective. Before exercising the right of rescission, the current status of each party should be individually confirmed and the relevant power of attorney or license documents should be duly prepared, so as to avoid procedural defects that may invalidate substantive claims.
3. Assignment of the proportionate share of economic rights in jointly owned works: although the judgment in this case adopts a position that protects the counterparty in the transaction, it is still advisable to obtain the written consent of all co-owners.
The court, based on the principle of abstraction and the concept of "tacit consent," held that the assignment of a proportionate share without the consent of other co-owners remains valid, and only gives rise to claims for damages among the co-owners. This view is favorable to the assignee in terms of transactional security. However, the latter part of Paragraph 1, Article 40-1 of the Copyright Act, which states, "Each economic rights holder shall not refuse to give consent without just cause," expressly restricts the assignment of a proportionate share to others without the consent of other co-owners. In academic theory, there are also opinions that acts in violation thereof are either of indeterminate effect or void. In this case, the court inferred tacit consent from the fact that no one had raised objections for over twenty years; whether this can be generally applied remains to be observed. In practice, when assigning jointly owned works, it is still necessary to obtain the written consent of all co-owners or to appoint a representative (Paragraph 2, Article 40-1 of the Copyright Act) to avoid disputes.
4. The importance of due diligence in the chain of title; collective management organization registration itself may constitute infringement
The source of rights for Maosen Company is based on the following chain: "Chen Wei-Hsiang's contract termination → restoration of rights → exclusive license to Chen Li-Chen → sub-license to Maosen." If any link in this chain is invalid, the entire chain fails. Assignees or licensees (especially those intending to register and exercise rights with a collective management organization) should require the assignor/licensor to provide complete documentation of the source of rights, and should verify all previous assignments/licenses, disputes regarding termination, and litigation records. Furthermore, since Article 84 of the Copyright Act excludes the requirement of intent or negligence for a claim of exclusion of infringement, even if the assignee/licensor is relied upon in good faith, the registration may still be ordered to be revoked. Good faith cannot be used as a defense to exempt from a claim of exclusion of infringement, and this should be duly noted.