WARNER MUSIC MOVES BOMBAY HIGH COURT AGAINST SPOTIFY IN FURTHERANCE OF ITS STATUTORY LICENSING APPLICATION [READ ORDER]

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Warner Chappel Music (WCM), the music publishing division of Warner Music Group (WMG) filed a suit in the Bombay High Court against Spotify, to prevent the music streaming service from using its catalogue of songs in India. WCM has a catalogue of more than one million copyrights worldwide and represents prominent songwriters like Katy Perry, Beyonce, Madonna and Rihanna among others.

The Copyright office issued a public notice dated February 25, 2019 wherein it stated that it was in receipt of the notice from Spotify under Section 31D of the Copyright Act, 1957, which deals with ‘statutory license for broadcasting of literary and musical works and sound recording.’

As per the notice, Spotify intends to invoke the Statutory License to use the musical works and associated literary works (the ‘Works’), the rights in which are owned/controlled by WCM and other performing rights organisations including Performance Right Limited. Spotify also clarified that it was invoking the license only with respect to the Works and they did not intend to broadcast any sound recordings owned by WMG, in India. The license is intended for a period of twelve months from February 26, 2019 via the Internet (wire or wireless) for the territory of India.

Spotify also stated that WCM had initially clarified that it was willing to grant Spotify a voluntary license for India, but that it suddenly and shortly prior to Spotify’s planned India launch refused to grant the license “without providing any reasonable grounds whatsoever”.  Moreover, it went on to claim that the statutory license, which allows for application to internet-based services, would ensure that all rights holders would be compensated fairly for the use of their works and that payment rates were “in-line” with those agreed with leading music labels and publishers in India.

However, Warner Music accused Spotify of abruptly changing course after months of negotiations and falsely asserting the statutory license for its songwriters’ music publishing rights in India, due to which they had no choice but seek an injunction to prevent this.

In response to this, reportedly, Spotify issued a statement accusing WMG of filing the injunction “in an attempt to leverage WCM’s local Indian publishing rights, to extract concessions in WMG’s global renewal negotiations for musical recordings.” Further, Spotify also went on to state that Warner had revoked a previously agreed upon publishing license for reasons wholly unrelated to Spotify’s launch in India.

Facts of the suit (updated):

WCM filed a quia timet action against Spotify AB who owns and operates Spotify, an interactive and on demand music streaming service. The suit was filed to prevent the music streaming service from using its catalogue of songs in India. WCM is the music public division of Warner Music Group (“WMG”) and the owner of copyrights in a diverse repertoire which consists of more than one million musical works (“Repertoire”). It is engaged in the business of acquiring, owning, publishing, licensing of its rights and copyrighted musical works.

On November 18, 2016, WCM along with Performing Rights Society (“PRS”) as the licensor and International Copyright Enterprises Services Ltd entered into a Licensing Agreement known as the ‘PEDL License Agreement’ with Spotify AB where Spotify was granted a license to (a) exploit the “Online Digital Rights” which included reproduction and; (b) store and reproduce the Licensed Works (as defined in the Agreement) on its servers for certain territories. However, no license for exploitation of WCM’s rights was granted for India. Further, under the agreement, Spotify also obtained a license from WCM of reproduction rights in the Repertoire, as while providing the streaming and conditional download features, it reproduces the musical works and exploits the reproduction rights in the said musical works.

Subsequently. the PEDL License Agreement was amended by side letters and extension letters and around March 2018, negotiations commenced over a third extension letter in which Spotify sought to include India. Since this was a material amendment to the license agreement, approval was required from WMG. However, WMG refused to grant authorization for the same as the music group accused Spotify of violating provisions of existing agreements with WMG’s recorded music division. Finally in November 2018, the third extension letter was executed for licensing WCM’s repertoire of musical works and negotiations for the license in India continued till January 2019.

Since Spotify was persistent in providing its services in India, it addressed a letter to WCM in which they stated that they would attempt to exploit the Repertoire in India through the device  of a statutory licence under Section 31 D of the Copyright Act, 1957,  which deals with ‘statutory license for broadcasting of literary and musical works and sound recording.’ Spotify was also admittedly aware that WCM was the owner of the mechanical/reproduction rights in the Repertoire and without obtaining a license for the same; it could not exploit the repertoire of musical works.

Consequently, on February 20, 2019, a notice was addressed to WCM, where Spotify purported  to invoke Section 31 D on the basis that the service provided by Spotify would amount to “internet broadcast” and also additionally sought to exploit WCM’s repertoire of musical works from February 26, 2019. Spotify also claimed that pursuant to the requirements of the statutory license, upon making a payment of 5,28,000 Euros to WCM via International Copyright Enterprises Services Ltd, it was entitled to exploit WCM’s copyrights in the Repertoire.  However, a copy of Spotify’s purported application to the Intellectual Property Appellate Board had not been provided to WCM.

WCM, in the suit, alleged that Spotify was not legally entitled to invoke Section 31D as the section was applicable exclusively to television and radio broadcasting and Spotify was not a broadcasting organization. Furthermore, they also stated that the section was restricted only to the right to communicate the works to the public and did not grant a right to ‘reproduce’ the works (in respect of which the license was sought) in any material form. They also went on to allege that Spotify had not made a public declaration of its intention to launch their services in India.

In light of all this, WCM contended that Spotify’s intended exploitation of the Repertoire did not fall within the scope of statutory licence contemplated by Section 31 D and such exploitation, in the absence of a licence from WCM would amount to infringement of WCM’s copyrights in the Repertoire under Section 51 of the Copyright Act, 1957.

WCM, therefore sought an injunction restraining Spotify from exploiting WCM’s copyright in its musical works as accessible through www.spotify.com and WAP/mobile sites or through any other websites.

Order: In the suit before the Bombay High Court, the High Court vide order February 26, 2019, firstly, directed Warner Music to instruct the International Copyright Enterprises Services Limited to return the amount of 5,28,000 Euros to Spotify and asked Spotify to deposit the same in Court in addition to such amounts such that the aggregate deposited amount would be to the tune of INR 6.5 crores. Secondly, the Court also asked Spotify to maintain a complete record of the use of WCM’s musical works as well as the advertisement and subscription revenue. Thirdly, the Court also instructed Spotify not to pursue proceedings for their claim to Statutory License before the Intellectual Property Appellate Board (IPAB) for a period of four weeks.  [Read order here]

The Court also further ruled that in the event Spotify’s application under Section 31D of the Copyright Act, 1957 is not maintainable, the Court will decide what order would have to be passed with regard to exploitation of WCM’s musical works. The Notice of Motion is further placed for directions on March 25, 2019.

This Order is passed without prejudice to the rights and contentions of the parties regarding the jurisdiction of the Intellectual Property Appellate Board under Section 31-D of the Copyright Act, 1957 regarding statutory license as claimed by Spotify.

Correction:Spotify officially launched in India on February 27, 2019 after a long wait and reports of delay in its launch.

For the past several months, Spotify has been in licensing discussions with major US record labels like Warner Music, Universal Music Group and Sony Music, as well as publishers, indies and local labels that dominate the domestic market. Spotify stated that the major labels have already agreed to license their music, however, Warner has been unable to agree terms.

Statutory licensing saga continues:

Section 31D has been a bone of contention between the radio and internet broadcasters on one side and the music labels on the other. The challenge to Section 31D by SIMCA had failed before the Madras High Court in 2016 and the petition filed by Lahari Music before the Supreme Court is still pending (read details here).

The DIPP had vide an office memorandum in 2016 extended the interpretation of “any broadcasting organization desirous of communicating to the public” to include internet broadcasting within the scope of Section 31D of the Copyright Act thereby not restricting Section 31 D to radio and television broadcasting organizations but covering internet broadcasting organizations as well.

In November last year, IPAB had issued a notice in the Section 31 D application filed by Radio Next Webcasting Pvt. Ltd [Read details here]. The issue is still pending before the IPAB and does not seem to have moved forward due to absence of technical member in IPAB. As per information received, certain labels and PPL have intervened in the said matter before IPAB.

It would be interesting to see how these matters proceed further and hopefully bring in some clarity on this contentious issue.

Image source: here