Copyright as an Object of Transactions: From Transfer of Rights to Enforcement

In the Japanese legal system, copyright is not merely a right to protect creative activities. It is a vital intangible asset at the core of corporate activities and a property right subject to active trading. The Japanese Copyright Law adopts the principle of ‘formality-free acquisition,’ where rights automatically arise at the moment a work is created without any formal procedures. While this principle contributes to the promotion of creativity, it also necessitates a sophisticated legal framework to clarify rights and ensure transactional security when these rights become the subject of trade. This article provides a detailed explanation, based on Japanese statutes and case law, of the key legal aspects of copyright as an object of transaction, including the transfer of rights (assignment), granting of licenses, establishment of security interests, trusts, and enforcement. These legal mechanisms are not mere legal concepts but practical tools for executing corporate strategies such as fundraising, mergers and acquisitions (M&A), business partnerships, and risk management. At the foundation of Japanese Copyright Law are two important policy objectives: to protect the rights of authors and contribute to the development of culture, and to facilitate the smooth circulation of these rights to support industrial development. Understanding this dual structure is essential for maximizing the value of copyright as an asset and avoiding potential risks when conducting business in the Japanese market.

Transfer (Assignment) of Copyright Under Japanese Law

As a type of property right, copyright can be transferred (assigned) in whole or in part to another party through a contract. Article 61, Paragraph 1 of the Japanese Copyright Law explicitly provides for this transferability, forming the legal foundation for an active market involving copyrights. The transfer of copyright is fundamentally different from selling the physical object of a painting. Even if the ownership of the physical work is transferred, the accompanying copyright does not automatically transfer with it. Similarly, it is distinct from a license, where the copyright holder retains rights while granting permission for others to use the work.

When concluding a copyright transfer agreement, the most critical provision to be aware of is Article 61, Paragraph 2 of the Japanese Copyright Law. This clause presumes that unless rights to create derivative works, such as translation and adaptation rights (under Article 27 of the Japanese Copyright Law), and the original author’s rights concerning the use of derivative works (under Article 28), are specifically enumerated as the object of the transfer, these rights are retained by the transferor (the original copyright holder). This means that a general statement like “all copyrights concerning the work in question are transferred” is legally insufficient for transferring the rights under Articles 27 and 28. To ensure the acquisition of these important rights, they must be individually and clearly listed in the contract. This provision serves a protective function to prevent creators from unintentionally relinquishing future significant revenue opportunities, while also being a critical point of attention for companies aiming to acquire rights during contract drafting.

A notable legal case that involved the interpretation of this “specific enumeration” clause is the “Hikonyan Case” (Osaka High Court decision, March 31, 2011). In this case, the creator of the popular mascot personality “Hikonyan” entered into a contract with Hikone City to transfer “all rights, including copyright.” However, the contract did not specifically enumerate the rights under Articles 27 and 28. Later, the creator produced new illustrations of Hikonyan in different poses and claimed that the adaptation rights were reserved to them. The court, while recognizing the absence of specific enumeration in the contract, considered the purpose of the contract to use the personality for extensive tourism promotion, the amount of consideration paid, and the history of negotiations between the parties. It concluded that there was an intention between the parties to transfer all copyrights, including the rights under Articles 27 and 28. As a result, the “presumption” under Article 61, Paragraph 2 was overturned, and the city’s rights were acknowledged. This case demonstrates the Japanese courts’ approach to prioritizing the substantive content of transactions and the true intentions of the parties over the literal wording of statutes. However, this was a case of post-facto relief through litigation, which involves the risk of disputes that require significant time and expense. Therefore, the Hikonyan Case should not be seen as an easy workaround but rather as a lesson that underscores the importance of clear contract drafting.

Licensing of Copyrights Under Japanese Law

Licensing of copyrights, also known as a license, is an act where the copyright holder retains the rights but permits another party (the licensee) to use the copyrighted work within the scope, duration, and territory stipulated in the contract. This is based on Article 63, Paragraph 1 of the Japanese Copyright Law.

There are mainly two types of licensing agreements. One is the “non-exclusive license,” which allows the copyright holder to grant permission to multiple licensees to use the same work and also continue to use it themselves. Unless otherwise specified in the contract, this type of license is generally assumed. The other is the “exclusive license,” which obligates the copyright holder to not grant permission to any third parties other than the specified licensee. Depending on the contract, it may also prohibit the copyright holder from using the work themselves.

Considering the legal status of the licensee, the copyright law amendment in 2020 (Reiwa 2) is extremely important. Before the amendment, a license was merely a contractual right (claim) between the copyright holder and the licensee, and if the copyright holder transferred their rights to a third party, the new copyright holder was not necessarily bound by the original licensing agreement. This posed a significant business risk for licensees, who could suddenly lose their rights to use the work. To resolve this issue, the revised Copyright Law, which came into effect on October 1, 2020 (Reiwa 2), introduced Article 63-2. This provision, known as the “automatic confrontation system,” allows a once validly established license to assert its effectiveness against a third party who later acquires the copyright, without any special registration procedures. This amendment significantly strengthens the position of the licensee and enhances the stability of license transactions, carrying economic policy significance for the development of Japan’s content market.

Furthermore, a court case that demonstrates the strength of an exclusive licensee’s rights is the “Investment Software Case” (Tokyo District Court, December 17, 2020). In this case, the court recognized that an exclusive licensee could directly claim damages from a third-party copyright infringer. The judgment, while assuming that the license is a contractual right, determined that the infringing act by the third party illegally violated the economic benefits that the exclusive licensee should have obtained from their exclusive position. As a result, the exclusive licensee is positioned not just as a contractual party but as an important economic entity that can directly seek legal remedies against infringement.

Securing Copyrights as Collateral Under Japanese Law

Since copyrights possess economic value, they can be used as collateral for obligations such as loans in Japan. If a debtor defaults, the creditor can liquidate the copyrighted material held as collateral and recover the debt from the proceeds. In Japan, the two main methods used for creating a security interest in copyrights are “pledge” and “transfer with security interest.”

A pledge is a security interest based on the Japanese Copyright Law and Civil Code. It is established through a pledge agreement between the parties and gains the ability to be enforced against third parties by registering the pledge with the Copyright Registry at the Agency for Cultural Affairs. Article 77, Paragraph 1, Item 2 of the Japanese Copyright Law stipulates that this registration is necessary for enforceability against third parties.

On the other hand, a transfer with security interest is an atypical form of security established by Japanese case law, without explicit provisions in the law. In this method, the debtor (copyright owner) formally transfers the copyright to the creditor as security, with the understanding that the copyright will be returned to the debtor once the debt is fully paid. The major advantage of a transfer with security interest is its flexibility. Typically, the debtor can continue to use the copyrighted work and generate revenue from the business even after providing the collateral. Furthermore, the execution of the security interest in the event of default can be carried out through private sale or other methods stipulated in the contract, rather than through court procedures required for a pledge under the Civil Execution Law, allowing for a faster and more cost-effective process. To enforce a transfer with security interest against third parties, it must be registered not as a pledge but as a “transfer registration.”

These two methods have significant differences in their legal nature and practical application, so it is essential to understand their personalityistics and choose the appropriate method according to the purpose in financing situations.

Copyright Trusts Under Japanese Law

A copyright trust is a legal framework designed to manage and utilize copyrights more flexibly and efficiently. Under Japanese Trust Law, the copyright owner, known as the ‘settlor,’ legally transfers their copyright to a trusted ‘trustee,’ who then manages and disposes of the copyright in accordance with the purposes set out in the trust agreement, for the benefit of a specific ‘beneficiary.’ Often, the settlor also acts as the beneficiary.

The most common application of copyright trusts is the centralized management by copyright management organizations. For example, organizations like the Japanese Society for Rights of Authors, Composers and Publishers (JASRAC) receive trusts of music copyrights from numerous lyricists, composers, and music publishers (settlers), and as trustees, they centrally handle licensing to domestic and international users, as well as the collection and distribution of royalties. This system enables the extensive management that would be difficult for individual rights holders to perform and is regulated by the Japanese Copyright Management Business Law.

Another sophisticated application is the securitization of assets. For instance, a film production company might use its film library copyright portfolio as trust property, and securitize the rights to future licensing revenues (beneficiary rights) arising from the trust, selling them to investors. This allows copyright owners to monetize future earnings at present value and raise substantial funds. The trust mechanism enables the legal ‘ownership’ and economic ‘benefit’ of copyrights to be separated, providing the foundation for such advanced financial techniques.

For the establishment of a trust involving the transfer of copyrights to have legal effect against third parties, it is essential to register the trust with the Agency for Cultural Affairs as ‘trust registration.’ Article 77, Paragraph 1, Item 1 of the Japanese Copyright Law stipulates that this registration is a requirement for opposing third parties.

Enforcement of Copyrights Under Japanese Law

When a creditor possesses a definitive judgment or a notarized deed, known as a “title of obligation,” yet the debtor fails to make payment, the creditor can petition the court to forcibly seize the debtor’s assets to recover the debt. Copyrights, being intangible property rights, are subject to enforcement as “other property rights” under Japan’s Civil Execution Law.

The enforcement procedure begins with the creditor filing a petition for a seizure order at the district court with jurisdiction over the debtor’s residence. If the court approves the petition, it issues a seizure order to the debtor. This legally prohibits the debtor from transferring, licensing, or using the copyright as collateral. Unlike the seizure of physical assets, this legal prohibition ensures the protection of rights. The seizure order can also be served on third-party debtors, such as licensees with an obligation to pay royalties, allowing the creditor to directly collect the royalties.

The monetization (conversion into money) of the seized copyright is primarily carried out through the following methods:

• Transfer Order: The court orders the direct transfer of the seized copyright to the creditor after determining its value.
• Sale Order: The court instructs the enforcement officer to sell the copyright to a third party, usually through an auction.
• Collection: If royalty income is subject to seizure, the creditor directly receives payment from the licensee.

This system signifies that a debtor’s copyright portfolio can be a potent asset for creditors to target for recovery. Conversely, for the debtor, the risk of losing vital intellectual property rights can be a strong incentive to fulfill their obligations. Thus, the copyrights held by a company not only constitute business assets but also form part of the company’s credit risk profile.

Securing Transaction Safety with the Copyright Registration System in Japan

Understanding the fundamental purpose of the Japanese Copyright Registration System is crucial when engaging in copyright transactions. Unlike patent or trademark rights, copyright does not arise from registration. Rights are automatically generated at the moment of creation. So why does the registration system exist? It serves to publicly demonstrate legal facts and changes in rights related to copyright (public notice function) and to ensure the ‘safety of transactions’ when rights are transferred.

The most powerful legal effect of registration is the fulfillment of the ‘requirements for opposition to third parties.’ Article 77 of the Japanese Copyright Law stipulates that important changes in rights, such as the transfer of copyright, changes due to trust, or the establishment of a pledge right targeting copyright, cannot be opposed to third parties unless registered. For example, if a company (Company A) sells copyright to another company (Company B) and then fraudulently sells the same copyright to a third company (Company C) in a double transfer, Company B can legally assert its rightful ownership against the later-appearing Company C if it has promptly completed the transfer registration. If neither Company B nor Company C has registered, the rights relationship becomes uncertain. Thus, the registration system functions as an indispensable infrastructure in the copyright market, clarifying the attribution of rights and preventing potential disputes with subsequent rights claimants or other third parties.

Beyond this requirement for opposition to third parties, the Copyright Law also establishes several registration systems for specific purposes:

• Registration of Real Name (Article 75): A system for authors to register their real names for works published anonymously or under a pseudonym. This extends the copyright protection period from ’70 years after publication’ to the standard ’70 years after the author’s death.’
• Registration of the First Publication Date (Article 76): A system to register the date when a work was first published or issued. This legally presumes that the registered date is when the work was first published or issued.
• Registration of the Creation Date (Article 76-2): A system limited to computer program works, allowing the registration of their creation date. This presumes that creation occurred on the registered date.

In conclusion, the Japanese Copyright System adopts a non-formalistic approach at the ‘generation’ stage of rights, requiring no procedures, while at the ‘transaction’ stage, it ensures the safety of transactions and legal stability through the formal procedure of registration. Understanding this structure is fundamental and most crucial knowledge for all companies conducting copyright-related business in Japan.

Conclusion

As detailed in this article, copyright under the Japanese legal system is a dynamic economic asset that should be protected. It is also subject to transactions such as transfers, licensing, collateralization, trusts, and even enforcement actions. The legal framework governing these transactions is intricately designed and its proper utilization is directly connected to enhancing corporate value. Particular attention must be paid to the ‘specific mention’ requirement of Article 61, Paragraph 2, and the function of the registration system as a ‘third-party opposition requirement’ in various rights transfers, which are critical points in contract practice and rights management. Adhering to and strategically utilizing these legal demands is key to maximizing the value of copyright as an intangible asset and effectively managing legal risks.

Monolith Law Office has a wealth of experience in providing legal services related to the theme of this article, namely copyright as an object of transactions, to a diverse range of clients within Japan. Our firm boasts not only attorneys well-versed in Japanese intellectual property law but also includes several English-speaking members with foreign legal qualifications, enabling seamless communication and precise legal support within the context of international business. If you require specialized assistance with the strategic use of copyright, related contracts, or dispute resolution, please do not hesitate to consult with our firm.