Nat'l Peregrine, Inc. v. Capitol Fed. Sav. & Loan Ass'n (In re Peregrine Entm't) - 116 B.R. 194 (C.D. Cal. 1990)

Rule:

The Copyright Act provides for national registration and specifies a place of filing different from that specified in Article Nine for filing of the security interest. Cal. Com. Code § 9-302(3)(a). Recording in the United States Copyright Office, rather than filing a financing statement under Article Nine, is the proper method for perfecting a security interest in a copyright.

Facts:

Appellee extended to appellant's predecessor a line of credit, which was secured by the film library of appellant's predecessor. Appellee filed its financing statements in the applicable state offices, but appellee did not record its security interest in the United States Copyright Office. Upon filing a petition in bankruptcy under Chapter 11, appellant filed an action against appellee, contending that its security interests in the film library were unperfected because appellee failed to record its security interest with the Copyright Office. The parties filed cross-motions for summary judgment. The bankruptcy court granted appellee's motion. Appellant challenged the judgment.

Issue:

Was the security interest in a copyright perfected by a UCC-1 financing statement filed with the relevant secretary of state?

Answer:

No.

Conclusion:

On appeal, the appellate court reversed the bankruptcy court's judgment and remanded the action, reasoning that the federal Copyright Act's recording provisions supported the view that federal law preempted state methods of perfecting security interests in copyrights and related accounts receivable. According to the court, recording in the United States Copyright Office, rather than filing a financing statement under Article Nine, was the proper method for perfecting a security interest in a copyright. The appellate court further determined that pursuant to 17 U.S.C.S. § 205(d), appellant was a transferee who took in good faith and, therefore, as a debtor in possession could avoid appellee's unperfected interest and preserve it for the benefit of the bankruptcy estate.