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Statutory Licensing – A Boon to One and an Axe for Another

24

DEC

2019

Introduction

Did you ever convert a music video into an mp3 version with the help of a random unauthorized site on the internet? If yes, then that’s ‘stream ripping’ which is a copyright infringement which now has been termed as illegal, and it has definitely not stopped anybody from accessing music and audios without paying a monetary consideration in exchange. But how? A situation when torrent downloads are peaking even when the cyber watch dogs are super alert, these domains eventually get blocked until the techies come up with an alternative domain for illegal downloads. Thus, this vicious cycle continues to function. Hence, with the continuing advancement in technology, people are finding various ways to keep themselves entertained for free. The music and film industry had its pivotal moment with the introduction of web streaming of films and music or any performance for that matter. With easy access to internet and availability of technological hacks, the issue of copyright infringement has continued to increase. Unlike in 90s and early 2000s, these days nobody bothers to fill their storage cards or their internal memories of devices with audio files. Audios are easily accessible to the public because of the music streaming applications that provide services of purchase and download or online streaming of music on subscription- be it free or for a minimal fee. As the trend of stream ripping declines, accessing music online through streaming applications has boomed. The ongoing concern of copyright infringement is pertaining to the application of Section 31-D of the Copyright Act, 1957 (herein after referred to as ‘the Act’) on such cases of internet broadcasting. With multiple contradictory views on this section, whether the online music streaming applications can take the refuge of this provision is a matter to be scrutinized. However, developments on Sec. 31-D since 2016 portrays different perspectives.

Section 31-D of the Copyright Act, 1957 states Any broadcasting organization desirous of communicating to the public by way of a broadcast or by way of performance of a literary or musical work and sound recording which has already been published may do so subject to the provisions of this section. Clause (3) of Section 31-D states that the rates of royalties for radio broadcasting shall be different from television broadcasting and the Appellate Board shall fix separate rates for radio broadcasting and television broadcasting.

The literal interpretation of these clauses convey that this section is applicable only for the radio and television broadcasters since it mentions that the rates of royalties for radio broadcasting shall be different from the television broadcasting while it doesn’t provide for royalties in the event of internet broadcasting. However, what led to the debate is absence of definition of ‘broadcasting organization’ and the ambiguity being caused with reference to clause 3. Thus, a question arises whether the internet broadcasters will be included under the ambit of the broadcasting organization. To resolve this ambiguity, the Department of Industrial Policy and Promotion (DIPP) released a memorandum in 2016 that stated that broadcasting organization may not be restrictively interpreted to include only radio and television broadcasting since the section read with the definition of broadcast under section 2 (dd) of the Act appears to include all types of broadcasting for the purpose of communication to the public. However, the concerned memorandum was a mere suggestion and lacked statutory authority.

When an online music streaming app is about to be launched, the application provider is required to take a license from the repertoire or the artists. However it has been witnessed from the recent disputes brought before the courts that the online music streaming applications that provide services of download and purchase of the music alongside the online streaming of music, on failing to enter into a license agreement or negotiate, usually take a recourse of Section 31-D to get a statutory license from the opposite party.

Statutory License to the Broadcaster

Section 31-D was inserted in the Act after its amendment in 2012. However, the said amendment has created a controversy as there has been a conflict between publishers and broadcasters with respect to the provision of statutory licensing. Section 31-D states that a broadcasting organization which desires to communicate to the public through a way of broadcast any performance of a literary or musical work or sound recording which is already published; they can do it by giving a prior notice to the owner of the work stating the intention to do so along with the duration and territorial coverage of the broadcast. The licensor is entitled to earn the royalty in the manner and rate as fixed by the Copyright Board.

The section 31-D enables the broadcaster to take rights of published work without any permission of the owner and only on prior intimation. The royalty rates for such licenses are determined by the Copyright Board and the owners have no discretion in determining the amount of these rates. However, the broadcasters cannot alter or make changes to the work of the owner after getting its rights unless and until it is limited to shortening the span of the work for convenience of the broadcast. Moral rights of the owner of the work should be held in high regard like in any other license agreements.

No Shield of Statutory Licensing for the Online Music Streaming Applications–

(Tips Industries vs Wynk Music)

Recently, Hon’ble Bombay High Court in its judgment delivered in February 2019, in the case Tips Industries vs Wynk Music[1], held that the online music streaming services cannot take a recourse of section 31-D of the Copyright Act that allows broadcasters to broadcast the work of publisher without any permission just on the basis of the prior intimation through a notice and on paying royalty as determined by the Copyright Board. This case contradicts the decision of same court as given in the case of Warner Music vs Spotify[2] decided in 2018. The summary of latter case is as follows-

Spotify case Facts

In 2019, Swedish music streaming app Spotify, on the verge of launching its services in India faced plethora of challenges. Major concern for this company was the failed negotiation with the giant music label Warner Music that holds copyrights of maximum performers and singer. Since the failed negotiation would have led the company to face the losses in India by not acquiring potential market due to absence of catalogue of the Warner Music Group, Spotify invoked provisions of Section 31-D to get a statutory license from the music label. In order to prevent Spotify from doing so, Warner Music applied for injunction at the Bombay High Court.

Court’s rulings

The Hon’ble High Court of Bombay dismissed plea of injunction filed by the music label and allowed Spotify to make use of the statutory provision under section 31-D. However the court asked the Defendants to deposit an amount of Rs.6.5 Crores and stated that in the event if Intellectual Property Appellate Board (IPAB) refuses the statutory license to be given to Spotify then Court will hear both the parties and decide the matter accordingly.

Eventually, the High Court of Bombay did not get into the intermediaries of the case and only dismissed the plea of injunction thereby implying that the statutory provision under Section 31-D is applicable for internet broadcasters as well.

Although this decision by the Court is in consonance with the memorandum released by DIPP stating that the internet broadcasting falls within the ambit of broadcasting organisations and the same are under the privilege to get statutory licenses from owner of the work, the same court in Tip’s case decided in contradiction.

Learned. Justice Kathawalla was the judge who had presided in the case of Spotify, he also passed judgment on similar issue in case of Wynk[3]. However, in Wynk’s case, the court ruled that internet broadcasters cannot apply for statutory license under section 31-D. Brief summary of the case is as follows-

Wynk-Tips case Facts

Wynk Music, an online music streaming application owned by Airtel India failed to negotiate the renewal of their license agreements with Tips Industries as a result of which they would have had to remove the entire catalogue of music owned by Tips from their application. However, Wynk like Spotify, applied for the statutory license from Tips under Section 31-D of the Copyright Act. In order to oppose the same, Tips Industries approached the Bombay High Court.

Court’s rulings

Justice Kathawalla while dealing with this dispute took into consideration intention of the legislature towards the provision of statutory licensing. The judge held that the legislature did not intend to cover internet broadcasting under the ambit of broadcasting organisations to apply for the statutory licensing to the Copyright Board. This provision is available only for the radio and television broadcasters. The court while deciding on this issue reasoned that since statutory licensing deals with the rights of the copyright owner, it is necessary to give strict interpretation to the section in question. Since language of the provision doesn’t mention about internet broadcast, such licenses cannot be allowed to the music streaming application

Further, the court supported its decision by pointing out that Copyright Board is not authorised to determine rates of royalty for internet broadcasting thus power given to the Board is only limited to radio and television broadcasting. Rules 29 and 30 of the Copyright Rules do not provide for determination of royalty rates for internet broadcasting through statutory licensing. Had the legislature intended to include internet broadcasters in the ‘broadcasting organisation’ as mentioned in the section, the same would have been conveyed explicitly through clear language since amendment to the Act took place in 2012, same time when digital media was game leader. The court also shared a view that even if the section 31-D provided for statutory licenses to the internet broadcasters, the same could not have been applied for since the Board has no power to determine the royalty rates in such cases.

Conclusion

Through this recent decision of Wynk’s case, the court has set a strong precedent that online broadcasters cannot forcibly use the catalogue of the music labels under guise of having a statutory license. The questions remain in case of Spotify. Will Warner Music contend against the decision passed in its case after this judgment? Will Spotify withdraw the catalogue? Copyright law practitioners and beneficiaries shall look forward to answers of these issues.

However, after these cases and similar issues pertaining to statutory license, the loophole in the Copyright Act and Rules has become prominent. After such repeated scenarios and disputes, the Government proposed to amend the Copyright Rules. The amendment intends to make each mode of broadcast eligible for statutory licensing. Thus, it replaces the words “by way of radio broadcast or television broadcast” with words “for each mode of broadcast”. This amendment will bring internet broadcasting within the domain of Sec 31-D, thereby not restricting ways of broadcasting to only radio and television[4] thus making it applicable to music streaming applications to stream music as against the right of the owners.

The question that still remains is - how fair is it to allow the internet broadcasters to use the shield of statutory license? Since this will lead to concentration of power in the hands of the broadcasters. Subsequently, compulsory and statutory licensing pertain to the rights of the owner of work, increasing the ambit of ‘broadcast’ to include all broadcasting organisations will definitely lead to more options and better performances for the audience to enjoy. Whether this prevents rights of the owners at the same time is a debatable question. Also, another query which rises to one’s mind is because substantial emphasis has been placed on intention of the legislature while passing the judgment in the case of Tips vs Wynk, will the proposed amendment (if passed) uphold the same? Thus, this conundrum shall be solved when the Government succeeds in enforcing legislation that encompasses and imbibes the modernisation of music industry, while simultaneously upholding the rights of the owners.


[1] COMIP (L) No.256 of 2019

[2]Notice of Motion (L) No. 197 of 2018 in Commercial Suit IP (L) No. 114 of 2018, decided on 23-04-2019

[3] Supra 1

[4] Aryan Babele, Summary-Copyright Amendment Rules 2019, Medianama, June 18, 2019, last accessed on November 16,2019. https://www.medianama.com/2019/06/223-highlights-copyright-amendment-rules-2019/

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