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Compulsory Licensing of Copyrights: Public Interest and the Entertainment Industry
This article looks into the law relating to compulsory licensing of copyrighted works, the recent royalties disputes between radio operators and record - |
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labels, the impact of the decision by the copyright board, and the future of the music industry in India write Karandeep Makkar and Daksh Mitra. |
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INTRODUCTION
Having a pluralistic culture with people belonging to diverse religious and linguistic backgrounds, India has a unique demography. Music is an essential part of the Indian culture, and the country is known for having a rich heritage of folk and classical music. While the Copyright law in India which provides protection to literary, musical and artistic works has its origins in the British legislation, the law has evolved with changes in international scenario.
The market of music recordings in India is different from the West, as most of the music is produced for movies, and the sales are dominated by the film music. The recording industry in India has been dominated by a few players, and the modern times have seen an increase in the role of collecting societies which are authorized to collect royalties on behalf of the music companies.
Indian copyright law, which is based on the Berne Convention, includes certain provisions for compulsory licensing of copyrights in respect of certain works, which are withheld from the public. The authority for entertaining complaints on such matters has been given to the Copyright Board, a statutory body established under the Act. The purpose behind the provision is to prevent the abuse of monopolies granted by copyrights, and to create a balance between individual rights and public interest. The Copyright Board has also been given the authority to adjudicate disputes relating to issue of compulsory licenses in copyrighted works.
After the liberalization of the economy, the FM radio sector was opened for operation by the private sector companies. A number of radio operators who got licenses to operate the stations approached certain music labels for licensing of copyrighted sound recordings, for the purpose of broadcast on radio. As the royalties demanded were not acceptable to the radio operators, they considered these as unreasonable and approached the copyright board for grant of compulsory licences in respect of those works, contending that demanding unreasonably high royalty rates amounted to withholding of the recordings from the public.
This project looks into the law relating to compulsory licensing of copyrighted works, the recent royalties disputes between radio operators and record labels, the impact of the decision by the copyright board, and the future of the music industry in India.
AN OVERVIEW OF THE MUSIC INDUSTRY IN INDIA
The Indian music industry is over a century old. The size of the industry is estimated to be about Rs.670 crores and is expected to touch Rs.777 crores by 2009. The turnover of the industry steadily declined from Rs 1,150 crore in 1990s to Rs 450 crore in 2005 , as rampant piracy has adversely affected the revenues. According to a study done by Ernst and Young, music is one of the worst hit sectors of the Indian entertainment industry, with 64 per cent of the market estimated to be pirated and the total loss to the industry being estimated at $325 million. There are many peer to peer networks and websites that allow illegal download of digital music. Users are increasingly relying on P2P networks over individual websites.
The Indian music market is very different from other markets like USA or Asian markets, and the sales are highly dominated by film and devotional music.
From the early 1900’s, one company, namely, the Gramophone Company of India which was a subsidiary of the Gramophone Company Ltd., London, had a virtual monopoly over the record market. The GCI released its recordings under the HMV (His Master’s Voice) label.
In 1961, the arrival of Polydor dented HMV’s monopoly, but HMV still maintained hegemony with 60% of the market. In the late 1970s, audio cassettes and cassette players flooded the country, and became popular very quickly. These cassettes were cheap to reproduce and could be easily distributed, and this created the piracy industry in India, a significant part of which was owned and operated by a new record label, T-Series. The company quickly emerged as the biggest competitor to GCI, which even came close to winding up its operations. By the mid 1980s, T-Series had reportedly stopped the pirated recording business and 'shifted' completely to the legitimate businesses. Today, T-Series is the largest record label in India, which has more than 80% market share in the music industry.
There are a number of other record labels in the country, and 160 of these are members of Phonographic Performance Ltd. (PPL), is a Copyright Society which is entrusted with the task of administering the Broadcasting / Telecasting and Public Performance Rights on behalf of these companies. Another registered society, SIMCA (South Indian Music Companies Association), is an association of 86 music companies set up in 1996 to look after the common problems faced by the Industry in South India.
Thus, the music market in India has been dominated by a very few number of record labels. The collection of royalties for music recordings is entrusted to societies like PPL and SIMCA. There have been multiple allegations of abuse of dominant position on record labels and collecting societies. The disputes relating to royalties between broadcasters and music companies have been increasing; this is discussed in the following part.
THE LAW RELATED TO COMPULSORY LICENSING IN COPYRIGHTED WORKS
Compulsory license is the term generally applied to a statutorily license to do an act covered by an exclusive right, without the prior authority of the right owner. Compulsory license provisions afford the facility of using protected material in certain circumstances, as provided by statute, without seeking the prior permission of the right owner. Some of the terms (for instance those regarding rates of payment) may be fixed by the court, or a tribunal, outside the provisions of the statute. The legislator, in introducing such provisions, has often sought a means to establish a fair rate for the royalties to be charged, and a system for avoiding abuse of exercise of rights in a monopoly situation.
Article 9 of the Berne Paris Text provides the basis for the provisions concerning compulsory licensing. This provision provides the Convention’s exclusive basis for equitable remuneration and provides for the conditions which should be met before a member country can entirely excuse a use which includes the equitable remuneration and not prejudicing the reasonable interests of the author.
Section 31(1) provides for the compulsory license of the Indian work and provides the authority to the Copyright Board in this regard. The Copyright Board, a quasi-judicial body, was constituted in September 1958. Adjudication of disputes pertaining to grant of Licenses in respect of works withheld from public falls within the jurisdiction of Copyright Board. The Copyright Board was reconstituted under the Chairmanship of Dr. Raghbir Singh for a period of five years with effect from 5thApril, 2006 till the year 2011.
The section provides that after the publication of any Indian work, on satisfaction of certain conditions, the Copyright Board may direct the Registrar of Copyrights to grant a license for that particular work subject to the payment of compensation to the holder of copyrights license (which may be fixed by the Copyright Board).
The conditions that need to be satisfied are:
(1) The work for which the copyright is being claimed must have been published or performed in public.
(2) The author must have refused to allow the publication or performance of the work in public or in case of sound recording has laid down unreasonable conditions.
(3) The work is held from the public by reason of such refusal.
The objective behind the section is to provide for the mechanism to prevent the abuse of monopoly by the copyright holder and to ensure that the general public is not deprived of the copyrighted work, solely because of the unreasonable demands of the copyright holder.
The Copyright Board has been conferred certain powers under this section:
- The Copyright Board may hold an enquiry as to whether a compulsory license may be issued to the complainant to republish the work, perform the work in public or communicate the work to the public by broadcast, the Copyright Board is to direct the Registrar of Copyrights to grant such a license on its being satisfied that the grounds for such refusal are not reasonable;
- The Copyright Board has been authorized to fix the amount of compensation to be paid to the owner of the copyright for republishing the work, or for performing the work in public or for communicating the work to the public by broadcast, and the board may determine such other terms and conditions which would be applicable for granting such license to the complainant.
Thus, the justification of compulsory licensing is based on drawing a mid line on a spectrum where the market domination is one side and the incentive-less intellectual property system is on the other side.
LITIGATION BETWEEN FM STATIONS AND MUSIC LABELS IN INDIA
Certain private companies, who obtained licenses in 1999 for establishing FM Broadcasting Services, approached M/s. Phonographic Performance Ltd. (PPL), which holds copyright in sound recording for grant of licence. But the terms or rate demanded by PPL were not acceptable to these persons and therefore, they presented their complaints under Section 31 of the Act before the Copyright Board for grant of compulsory licence for broadcasting sound recording.
According to the complainants, PPL had refused to grant licence to the complainants on reasonable terms. The Defendant PPL raised an objection to the jurisdiction of the Copyright Board to entertain these complainants on the ground that the sound recordings had not been withheld from the public by the PPL as licence in relation to these sound recordings had been granted by the PPL to All India Radio.
The Copyright Board overruled the objection raised by the PPL to its jurisdiction to entertain the complaint. In so far as fixation of the amount of compensation was concerned, it held that it has power to fix the amount of compensation according to its own valued judgment and proceeded to fix the amount of compensation. Being aggrieved by the order, both the complainants and defendant filed an appeal before the Bombay High Court.
A number of similar complaints were filed by several radio operators under Section 31(1)(b) of the Copyright Act, 1957, before the Copyright Board praying for a compulsory license in relation to the "sound recordings" held by certain record labels. These orders subsequently went in appeal to the High Courts and were finally taken up by the Supreme Court in Entertainment Network (India) Limited v Super Cassette Industries Limited.
In the case, the jurisdiction of the Copyright Board under Section 31 of the Copyright Act, 1957, to direct the owner of a copyright in any Indian work or a registered copyright society to issue compulsory licences to broadcast such works was questioned, where such work is available to the public through radio broadcast. While PPL argued that a compulsory license could issue only if the “work” had never been made available to the public earlier, the radio stations argued for an almost automatic Compulsory licence ground i.e. it was to be granted upon request and the only point for consideration was a determination of “reasonable royalty”. In an elaborate judgment, Justice Sinha held in favour of the latter interpretation.
A second issue was whether such a compulsory license can be issued to more than one complainant in the light of Section 31(2)? Here again, although a literal reading of the section made clear that there could only be one such applicant, the court held that, “Sub-section (2) of Section 31 would lead to an anomalous position if it is read literally. It would defeat the purport and object of the Act. It has, therefore, to be read down. Purposive construction therefore may be resorted to.” The case was referred back to the copyright board for determining "appropriate" royalties.
While the judgment faced some criticism , it came as a positive development for the FM radio industry. The decision also put the ball back in the Copyright Board’s court for deciding royalties, a decision on which would alleviate the need for any future negotiations between radio stations and the record labels or collecting societies.
The dispute between the Copyright Society PPL & radio stations was decided by the Copyright Board on the 25th of August, 2010, and the board ordered all music owners in the country to compulsorily licence all of their music to the radio station/applicants at a fixed 2% royalty. This was immediately challenged in a number of petitions and appeals.
CHALLENGE TO THE CONSTITUTIONALITY OF COPYRIGHT BOARD: THE ROAD AHEAD
Soon after the order fixing royalty rates was passed by the Copyright Board, T-Series and SIMCA filed appeals praying that the Order of the Copyright Board not be enforced against them since they were not made parties by the radio stations in the compulsory licensing applications filed before the Copyright Board. The Delhi High Court ruled that the Order of the Copyright Board could not be made applicable against T-series.
The Madras High court passed an interim stay on the order with respect to the SIMCA , only to later vacate this stay in a later order. It was held that since SIMCA is not a registered Copyright Society under the Copyright Act, it cannot represent a collective action on behalf of all of its members. The Madras High Court however refused to grant such a stay to PPL since PPL was unable to convince it of the need for such a stay.
PPL filed an appeal against the order in the Madras High Court under Section 72, which was admitted by the Madras High Court. A challenge to the appointment of the chairman of the copyright board was also filed in the Delhi High Court.
Later, SIMCA petitioned the Madras High Court challenging the constitutional validity of the copyright board itself. The petition, presently being heard by the Court bases its arguments on a judgment of a Constitutional Bench of the Supreme Court in the case Union of India v. R. Gandhi , which struck down key provisions pertaining to the creation of the National Company Law Tribunal (NCLT).
If the chairman's appointment is held illegal or irregular on some grounds, or if the challenge to the constitutional validity of the copyright board is upheld, this will not impact the earlier decision given by the board. It has been suggested that under the de facto doctrine and the doctrine of necessity, courts are likely to uphold the validity of the proceedings, notwithstanding any irregularity in the appointment of members adjudicating the dispute/proceedings.
With multiple appeals pending before the courts, the royalty dispute is yet to see a final outcome, and the judgment may have a far-reaching impact on the future of music industry in India.
CONCLUSION
As the music industry faces declining profits, the dispute between radio stations and music companies relating to royalties is yet to see a final outcome. With multiple appeals pending in this regard, there is a need for the legislature to ensure that the Copyright Board is constituted as per certain minimum legal standards, so that the questions on its integrity come to rest. This is essential as the dispute has continued for almost a decade now, and its conclusion will have impact on a large number of interests in the industry, as well as the general public.
The growth of such statutory tribunals in India has been sporadic, and devoid of a uniform pattern. The decisions given by these tribunals as well as their constitutional validity have been questioned in a number of cases. This has led to doubts being raised about the transparency in their working as well as fairness in the approach adopted by these tribunals. The method of appointment of the members as well as the structure of the tribunals has been struck down by the Courts from time to time.
It must be accepted that the tribunals have come to stay, as the Supreme Court has pointed out that it is well within the power of the legislature to constitute such bodies and these are not per se violative of the doctrine of separation of powers. However, efforts must be made to regularise the procedures, compositions, and review/ appeal of decisions of tribunals. The qualifications for the membership for these tribunals must be laid down so as to ensure their independence from the executive.
There is also a dire need for the Indian music industry to reinvent itself and overhaul its operating model if it is to stay competitive in an ever-changing global scenario. As more and more means of digital distribution of music increase, finding alternative revenue streams for various delivery platforms is a must. The rapid growth of the telecom sector in India has helped the industry by providing ways of getting revenue apart from traditional sources like sales of physical CDs. Websites that offer streaming audio services and digital music downloads have recently gained popularity in the west, and similar business models have a great potential to save the dying art in India as well. However, an efficient mechanism to settle copyright disputes and to prevent abuse of monopolies by the record labels must be put in place, if we want this noble art to support the cultural and economic growth of the country.
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| KARANDEEP KAMMAR and DAKSH MITRA are both law students pursing B.A. LL.B (Hons.) from Hidayatullah National Law University, Raipur. |
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