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Contrasting Orders on Statutory Licensing for Broadcasting of Sound Recordings and Underlying Works

The Hon’ble Intellectual Property Appellate Board (“IPAB”), on the 31st of December, 2020, passed a landmark ruling (“IPAB Order”) in a proceeding under section 31D of the Copyright Act, 1957 (“Act”) wherein it fixed separate statutory royalty rates to be payable to owners of sound recordings and underlying works for the radio broadcast of musical works and sound recordings, and underlying works.

However, in less than a week since the IPAB order, the Hon’ble Delhi High Court acted in stark contrast to the above IPAB order, when it disposed-off two long-pending disputes of statutory licensing of sound recording and underlying work i.e., The Indian Performing Right Society Ltd (“IPRS”) vs. Entertainment Network (India) Ltd (“Radio Mirchi”) [CS(OS) 666/2006] AND Phonographic Performance Ltd (“PPL”) & IPRS vs. Cri Events (P) Ltd & Ors [CS(OS) 1996/2009].

The said order ruled that the Act recognizes separate copyright in a sound recording besides the copyright in the literary (lyrics) and musical works (“music notes”) (collectively referred to as the “underlying works”), and when sound recordings are broadcasted, the underlying works are not considered to be utilized independent of the sound recording, therefore, a separate license for communicating the underlying works is not required.

Brief Facts of the Case

IPRS vs Radio Mirchi

Radio Mirchi acquired a license from IPRS to broadcast sound recordings in seven cities, however, apart from the seven cities for which Defendant had acquired a license, it also started broadcasting in three new cities. It was the case of the IPRS that Radio Mirchi infringed the public performance rights of IPRS by broadcasting in three new cities without obtaining a license to do so.

IPRS & PPL vs Cri Events

This was a rather straightforward case, where IPRS and PPL jointly sued Cri Events, an event management company for playing music without obtaining a license from the Plaintiffs.

The contention of the Plaintiff(s)

The primary contention of the IPRS was that it is a registered society for authors, composers, and publishers of Indian literary and musical works, whereas, PPL is a registered society for music companies. Since, both the societies are registered for different categories, and exploitation of the sound recordings also implies exploitation of literary and/or musical works forming part thereof, license for both the work i.e., sound recording as well as the underlying work needs to be acquired.

The Plaintiff also contended that copyright in the underlying work runs parallel to the copyright in a sound recording and hence the exploitation of such sound recording would necessarily invoke the right in the underlying works as well.

Plaintiff also contended that the 2012 Amendment to the Act which granted the right of continuous royalties to the author of underlying works irrespective of the assignment of the sound recording, is retrospective in nature.

Observation of the Court

Underlying works are part and parcel of Sound Recording – Not exploited separately

With respect to the claim that the copyright subsists in the underlying work independent of the sound recording, the Hon’ble Court ruled that the sound recording is not merely a sub-total of lyrics and musical notes alone, and it includes a voice, lyrics, musical notes, arrangement of all three elements in a certain way to sound appealing to the human ear, making the Sound Recording in an entirely new set of works that incorporates many works, including lyrics and musical notes. The Court further held that even the statute under Section 2(z) of the Act recognizes sound recording as the work of joint authorship of multiple authors and the Act recognizes separate copyright in a sound recording besides the copyright in the underlying works.

2012 Amendment to the Copyright Act is merely clarificatory in nature – Section 19 (10) does not change the interpretation and application of the law

The provision of law as existed before the amendment was that once the authors of the underlying work consented to the incorporation of their works in the sound recording and agree to vest separate copyright in a sound recording, no infringement of the underlying work can be claimed for communication of the sound recording to the public. In the view of the Court, this provision remained unchanged even after the amendment of 2012 since the transfer of ownership and economical rights were the very basis of assignment.

At this point, it is necessary to refer to section 19 (10) of the Act which provides that assignment of copyright in any work to make a sound recording that does not form part of any cinematograph film shall not affect the right of the author of the work to claim an equal share of royalties and consideration payable for any utilization of such work in any form.

The Court while interpreting “any form” as any form other than sound recording ruled that the provision does not mean that utilization of the work as embodied in the sound recording also entitles the owner of the copyright in underlying work to demand an equal share of royalties and consideration payable for the sound recording. The Court opined that to interpret the provision otherwise would make other provisions of the Act redundant which authorizes the owner of sound recordings to communicate it with the public without any license and/or permission from the authors of underlying marks. Hence, section 19 (10) of the Act to be read as to mean right to receive royalties for the exploitation of underlying work in any form other than sound recording.

What came to the aid of the Court’s interpretation was that Section 19 (10) of the Act only covers sound recording not being part of a cinematographic film, whereas, the Plaintiff has explicitly submitted that the sound recordings form a major part of the Indian film industry. However, the reasoning doesn’t hold good since similar provision has been added under Section 19 (9) of the Act in relation to cinematographic films.

This interpretation, effectively meant that, in the case of a live performance of songs incorporating the literary and musical works of members of IPRS, even if such songs also have a sound recording, for such live performance, a licence from IPRS will be necessary. Hence, in the case of CS (OS) 1996/2006, Defendant’s act of communicating the underlying work through live performance in the event amounted to infringement of the Plaintiff’s copyright.

Final Order: Right to Receive Royalties made Redundant?

In light of the above reasoning, the Court dismissed the first case in favour of the Defendant and the second case in favour of the Plaintiff by holding that:

  • In case the sound recordings are to be communicated to the public, i.e., play them, or broadcast them, a license from PPL is essential;
  • In case the underlying works are to be communicated to or performed in the public, independently, through an artist, the license of IPRS is essential; and
  • in case there is an event involving performances or communication of works of both kinds to the public, the license or authorization of both, PPL and IPRS is essential;

The Delhi High Court’s Interpretation of Section 19 (10) defeats the purpose of the Amendment

The Hon’ble High Court Order neglect the very basis for which the 2012 Amendments were introduced, which is evident from the ‘Statement of objects and reasons’ appended to the Copyright Act (Amendment) Bill 2010 to be read as:

  1. Clarify that the authors would have rights to receive royalties and the benefits enjoyed through the copyright societies;
  2. Ensure that the authors of the works, in particular, author of the songs included in the cinematograph films or sound recordings, receive royalty for the commercial exploitation of such works; and
  3. introduce a system of statutory licensing to broadcasting organisations to access to literary and musical works and sound recordings without subjecting the owners of copyright works to any disadvantages.

Hence it is within the legislative intent to treat the underlying works and the sound recording independent from one another, and interpreting otherwise will only defeat the purpose of the Amendment.

The Delhi High Court’s Interpretation of Section 19 (10) makes Section 31D Redundant

The provisions of Section 13(4) read with Section 14(a)(iii), 4th proviso to Section 18, Section 19(10) of the Act along with Section 31D clearly mandate the author’s right to receive royalties for the exploitation of underlying work by third parties, irrespective of any assignment. The reading of section 31D (2) of the Act is clear, i.e., The broadcasting organisation… shall pay to the owner of rights in “each work” royalties in the manner and at the rate fixed by the Appellate Board. Even on a plain reading of the heading of Section 31D and the provision of Section 31D (2), we can understand that the sound recording, and the underlying works are treated separately for the purpose of statutory licensing. Hence, again, it is the interpretation of the Hon’ble Delhi High Court, which makes the 2012 Amendment, redundant.

Appropriate to say single License to exploit but separate Royalties payable.

The IPAB in its analysis of Section 19 (10) of the Act held that the amendment resulted in the bifurcation of the underlying works embodied in the sound recording into independent and distinct rights, allowing in rights in sound recording and rights of the authors of the underlying works to operate independently in their own field as per the operation of amended provisions. It follows that while only the Producer can exploit the distinct rights existing in the sound recording, the authors can exploit the underlying work as a shared right.

Conclusion: The Puzzle Ahead

The contrasting orders of the Hon’ble Delhi High Court and the IPAB in less than 5 days have unevenly painted the author’s statutory right to receive royalties under section 31 D of the Act. Going forward, the orders will only cause hurdles for Music Companies, Authors, Artists, Copyright Societies, and any other interested parties to such music agreements.

It was ruled in M/s. Shreedhar Milk Foods Pvt. Ltd. vs. Mr. Vikas Tyagi and The Registrar of Trade Marks, 2013 (55) PTC 247 (IPAB) that the IPAB’s powers in relation to its original and appellate jurisdiction are parallel to that of High Court as enshrined by Article 227 of the Constitution of India, 1950. Hence, in principle, neither of the order can prevail over the other, and since the orders are passed by a Single Judge Bench, we await to see if the interpretation of either the order is challenged before a larger bench of the Hon’ble Delhi High Court or even before the Supreme Court in the coming days.

Apart from this, another viable solution shall be a further amendment to the language of Section 19 (10) of the Act either ratifying the interpretation of the Hon’ble Delhi High Court, or confirming its initial intent that the author’s right to receive royalties for the exploitation of underlying works, in any form, including “sound recording” remains unaffected by any assignments.

The contrasting orders of the Hon’ble Delhi High Court and the IPAB in less than 5 days have unevenly painted the author’s statutory right to receive royalties under section 31 D of the Act. Going forward, the orders will only cause hurdles for Music Companies, Authors, Artists, Copyright Societies, and any other interested parties to such music agreements.

Image Credits: Photo by freestocks on Unsplash

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