IPRS VS ENIL: DELHI HIGH COURT DECISION- DEATH TO MUSIC PUBLISHING ROYALTIES IN INDIA? [READ JUDGEMENT]

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The end of 2020 and beginning of 2021 saw two landmark decisions which would change the face of music industry in India, the first one being of IPAB’s decision on radio royalties in the first statutory licensing case (Music Broadcast Limited vs Tips Industries Limited & Ors) under Section 31D for fixation of royalties for radio broadcasting. Read here. And second one being a diametrically opposite decision of the Delhi High Court in the case of Indian Performing Rights Society vs Entertainment Network India Limited tagged along with Phonographic Performance Ltd & Anr vs CRI Events Private Limited & Ors. Read here.

For the purpose of this post, I would be delving only on the issue of publishing royalties.

IPAB decision qua publishing royalties:

In the IPAB radio royalty case, the radio broadcasters had applied for statutory license only in relation to sound recording works, their interpretation being that radio broadcasters do not require a separate underlying works license when a sound recording is communicated to the public in view of several court decisions including IPRS vs Aditya Pandey. On 20 September 2016, the decision in International Confederation of Societies of Authors and Composers v. Aditya Pandey &Ors. 2016 (68) PTC 472 (SC) was passed by the Hon’ble Supreme Court affirming the Aditya Pandey single bench and division bench decisions while acknowledging that the 2012 amendments have come into force after the first two decisions and that the said decisions being interim orders are of no legal effect in so far as the merits of the suit was concerned.

Thereafter IPRS filed an intervention application before the IPAB which was allowed by IPAB and impleaded IPRS as a respondent. While delving into the issues qua IPRS, the IPAB was faced with the question as to whether IPRS is entitled to royalties when a radio broadcaster broadcasts sound recordings. If so, then from whom and what is the impact of the Section 18 provisos? Whether two separate licenses are required to be taken under Section 31D for sound recording and underlying works? Whether two royalties are needed to be paid under Section 31D, one for sound recording and other for underlying literary and musical works?

On the issue w.r.t to whether two separate royalties are required to be paid, the IPAB went into the legislative intent behind the 2012 Amendment, statement of objects and reasons, standing committee report  and concluded that separate royalties are required to be paid for sound recording on one side and underlying works on the other as the objects behind the 2012 amendment make it clear that the rights of the authors and music composers are independent in the cinematograph films and their rights to receive royalty from the commercial exploitation along with film is recognized by way of amendment. It further observed that:

  • One of the objectives of the the 2012 Amendment behind bringing Section 31 D was to “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”
  • That the amendment detached the underlying works ownership right of the sound recording/ cinematograph film (whichever is applicable) belonging to the producer procured by way of assignment or commissioned work and has made this later assigned right as shared right between the assignors i.e. authors on the one side with that of the assignee/ producers (whichever is applicable) on the other for the purposes of the receiving the royalties. So, this detachment/ bifurcation or independent recognition of the rights from that of the producers allowed the rights in sound recording and rights of the authors of literary works and musical composers to operate independently in their own field as per the operation of amended provisions.
  • This appears to be to one of the mischief relating deprivation of the economic benefit arising out of the utilization of rights of the authors of literary works and musical works in sound recording or in cinematograph film which is sought to be remedied that can be evinced from the reading of the circumstances prevailing at the time of the amendments, existing case laws, the statement of the objects and reasons and also the standing committee reports.

With respect to the issue on who is required to pay these royalties, the IPAB observed that:

  • the provision of Section 31 D is concerned with the broadcasting organization desirous of gaining access to the sound recording, of which the literary and musical work form are embodied work.
  • The broadcast is obviously one form of the utilization as the operation of Section 18 (1) third proviso and fourth proviso as well as Section 19 (9) & (10) is not restricted to one form. But rather, the right to receive royalty of the composers and authors accrue with the assignee for the utilization in “any form” which are the wordings used in the said provisions. Therefore, the broadcasting on radio is one such form of utilization within the meaning of Section 31 D or communicating the work to the public by way of broadcast shall be deemed to be utilizing the said works of the authors, owners or assignees respectively.
  • It is evident from the reading of Section 31D(1) that the broadcasting organization is the sole beneficiary of the statutory license and the license cannot be conferred upon anyone else.
  • Therefore, the broadcasting organization alone is statutorily obliged to make payment of the royalty to the owners of the works.
  • The person who enjoys the benefit has to make payment. In this way, the broadcasters are utilizing the said work for commercial benefit and the said liability of the broadcasters cannot be shifted or imposed on any other participant. Therefore, the person who is to pay is the broadcasting organization alone.

IPAB further observed that The provisions of Section 13(4) read with Section 14(a)(iii), Section 18 (third and fourth proviso), Section 19(9) and (10) of the Act along with Section 31D clearly mandate a separate rate of royalty to be fixed for underlying works. Section 13(4) of the Act, separate copyright in literary works and musical works not affected. Right for communication of literary works and musical works to the public under Section 14(a)(iii) of the Act are separate rights. When a song is communicated to the public, the literary work and the musical work, embodied in sound recording are also simultaneously performed/communicated to the public along with the sound recording and this position remains the same regardless of the mode or medium of communication to the public. In this respect, radio broadcast is no different. Every time a song is broadcast on a radio channel, each of the three separate works which are part of the song namely sound recording, the literary work and the musical work, is communicated to the public. Section 31D also contemplates separate payment to Owners of i) rights in underlying works and (ii) rights in sound recordings. Fixing rates for underlying works is consistent with S.31D and Rule 31. The prevailing practice for underlying work is that the fee for the same is payable is in addition to and separate from the sound recording fee. The second proviso to Section 17 was inserted in 2012 to protect the rights of the author. The said proviso states that in relation to a work included in a cinematograph film, nothing under Section 17(b) or (c) shall affect the rights of the authors in their underlying works under Section 13(1)(a).”

On the issue of whether the relief should be granted in the form of a licensed only under the head “sound recording” the IPAB concurred with arguments for counsels representing the music labels that its merely a matter of semantics whether there exists a two licenses separately issued under Section 31 D and/ or whether there exists a one composite license containing two distinct rates, one for the producer/ assignee and another for the exercise of the shared right between the assignee and authors of the literary works and musical works. It accordingly concluded that the rates in composite form, out of which some rate is applicable to exercise of joint right between the authors and assignee, the tribunal is ultimately providing access to single unit or work only viz Sound Recording for which, the license is sought for by the Petitioners.

In summary, IPAB held:

  • When a sound recording is broadcasted on radio, separate royalties are payable for sound recording and underlying works.
  • Such royalties are required to be paid by the radio broadcaster, as the utilization of the work occurs when the radio broadcaster communicates the work to the public and because radio broadcaster is the beneficiary under Section 31D.
  • Whether license under one head of sound recording or different heads of underlying work, is inconsequential as the end result is the same that separate royalties are payable.
  • Accordingly, separate rates for sound recording and underlying works have been fixed by IPAB.

 

ENIL vs IPRS

After judgement being reserved for almost over three years, the Delhi High Court on January 4, 2021 pronounced the judgement in the long-standing case of IPRS vs ENIL clubbed along with PPL vs CRI Events Private Limited.

In 2006, IPRS had filed a case against ENIL (Radio Mirchi) alleging that in the year 2001, ENIL had entered into agreements with IPRS for broadcast of music in seven cities in India and though ENIL commenced broadcasting in three new cities in India it did not obtain a license from IPRS thereby repudiating its rights and that such broadcast in three new cities without procuring permission from IPRS amounts to infringement of the public performance rights of IPRS. IPRS accordingly sought permanent injunction and damages against ENIL.

Another suit was filed in 2009 by PPL and IPRS against CRI Events Private Limited pleading that CRI, an event management company, was organising events, also at the Nitish Kunj banquet hall, where music was played, without obtaining license from PPL or IPRS and were thereby infringing the copyright held by PPL and IPRS and seeking the reliefs of, (a) permanent injunction restraining them from causing communication to the public of sound recordings of PPL’s repertoire by way of mechanical devices or any other means and from communicating to the public the literary works and/or musical works of IPRS’s repertoire; and, (b) recovery of damages.

These matters kept getting adjourned or dragged for over a decade. They were at some stage dragged due to the parallel proceedings in the IPRS vs Aditya Pandey case which went right till the Supreme Court and then back to the Delhi High Court. Covered here.

Broadly, the Delhi High Court held as under:

  • If a separate copyright exists in a sound recording, the radio diffusion of the sound recording cannot be violation of the copyright in the literary work and the copyright in the musical works which by themselves are not being communicated to the public by radio diffusion but are being communicated as part of another whole having an independent statutory existence.
  • Once the Copyright Act as existing prior to amendment of the Act of the year 2012 has been interpreted as vesting an independent copyright in the owners of the sound recording including to communicate the sound recording to the public, once the owners of the copyright in the literary and musical works have consented to incorporation of their works in the sound recording, they cannot claim infringement, by communication to the public by the owner of the sound recording or its licensees, of their literary and musical works as part of the sound recording; the provision even if any to the contrary in their agreements with the owner of the sound recordings is thus of no avail.
  • That the owners of copyright in literary and musical works, are not entitled to claim infringement only when their work is communicated to the public as part of sound recordings which they have authorised. Else, they retain the right to restrain others from communicating their work to public, otherwise than by way of sound recording, as held in the judgment on the application for interim relief in CS(OS) No.1996/2009 [e. CRI Events case] and upheld by the Division Bench of the Delhi High Court as well as the Supreme Court in the Aditya Pandey case. Thus, if there is 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, licence from IPRS will be necessary.
  • The 2012 amendment does not alter the provisions of the Act, on interpretation whereof in the judgments cited it was held that communication to the public of underlying literary and musical works as part of sound recording, under authorisation/licence from owner of the copyright in the sound recording, does not require authorisation/permission from the owner of the copyright in the underlying literary and musical works of the sound recording. Thus when Section 19(10) provides that assignment of copyright in any work to make a sound recording which does not form part of any cinematograph film shall not affect the right of the author of the work to claim equal share of royalties and consideration payable for any utilisation of such work in any form, it cannot mean that utilisation of the work as embodied in the sound recording also entitles the owner of the copyright in such work to demand equal share of royalties and consideration payable for the sound recording. To read the same otherwise would make the other provisions, on interpretation whereof it was held that no authorisation is required to be taken from owners of copyright in underlying works of the sound recording, while communicating the sound recording under authorisation of copyright in sound recording, otiose. Any interpretation which makes another provision of the statute redundant or otiose, is to be avoided and the rule of harmonious construction has to be applied. Thus Section 19(10) has to be read as not affecting the right of the author of the underlying works in sound recording, to claim share in royalty payable for utilisation of such works though identically as in the sound recording but in any other form, as had earlier also been held by the Single Judge in the judgment on interim relief in CS(OS) No.1996/2009. To the said extent, the amendment of the year 2012, is clarificatory.
  • The amendment of the Act of the year 2012, even if were to be applied, does not change the legal position as already enunciated in the judgments aforesaid.
  • Thus held (i) that in case the defendants wish to perform the sound recordings in public, i.e. play them, a license from PPL is essential; (ii) in case the musical works are to be communicated or performed in the public, independently, through an artist, the licence of IPRS is essential; (iii) in case the defendants wish to hold an event involving performances or communication of works of both kinds to the public, the licence or authorisation of both, PPL and IPRS is essential; and, (iv) of permanent injunction restraining the defendants from acting contrary to the aforesaid directions, and leaving the parties to bear their own costs.

Distinction between IPAB and Delhi HC decisions: 

IPAB

Delhi High Court

·       When a sound recording is broadcasted on radio, separate royalties are payable for sound recording and underlying works.

·       Such royalties are required to be paid by the radio broadcaster, as the utilization of the work occurs when the radio broadcaster communicates the work to the public and because radio broadcaster is the beneficiary under Section 31D.

 

·       When a sound recording is broadcasted on radio, separate royalties are not payable for underlying works as the underlying works get communicated as a part of the sound recording and do not have their own independent existence.

·       Royalties are payable only when the underlying works are utilized other than in the form of a sound recording, for instance in live performances. 2012 Amendment in Section 19(10) is only clarificatory.

 

What does this mean for the publishing industry in India? 

In India, master rights (sound recording rights) and publishing rights (rights in underlying works), both are typically owned by the music labels who either produce songs on their own or acquire it from third parties such as film producers. There are however few entities who deal solely in publishing rights. For instance, Universal Music Publishing Pvt. Ltd., Turnkey Music & Publishing Pvt. Ltd, etc who deal only with publishing rights and have nothing to do with master rights owned by record labels.

The difference between the two decisions is as under:

Under the IPAB decision, every time the song is played on radio, royalties towards underlying works get paid to authors and owners of the underlying works as per the rates set by the IPAB in paragraph 210 of the IPAB decision. Per contra, under the Delhi HC decision, no royalties get paid to the authors and owners of the underlying works for such radio broadcast.

It would have to be seen if this decision is applied only to radio broadcasting or extended to other mediums of exploitation as well which may have a catastrophic impact on the music publishing royalties in India.

In several jurisdictions across the world, publishing rights have more value than master rights and get a higher royalty share as against India where publishing share is of comparatively miniscule value.

Mr. Atul Churamani, Managing Director of Turnkey Music & Publishing Private Limited which recently locked the sub-publishing deal with Kobalt, one of the leading publishers in the world, had to say the following about the Delhi High Court judgement:

The judgement by the Delhi High Court reinforces my belief that copyright matters should be adjudicated only by a Copyright Tribunal, in our case this being the IPAB.
The latter delivered an excellent judgement in the radio royalty case, recognising the rights to both the sound recording and underlying works, which was the whole point of the 2012 Amendment. Judgements like Delhi High Court one cause confusion, more litigation and prevent the music industry from unlocking its true potential. Judgements like this also vindicate my stand that the current Copyright Act needs to be rewritten completely instead of making more amendments to it, which will cause further confusion. it’s like a car manufacturer trying to keep improving the model he created in 1957 instead of making a new one!

The most unfortunate part remains that it took over eight years for a decision to come interpreting these provisions post 2012 Copyright Amendment and the two contradictory decisions have taken us back to square one with only more ambiguities and anomalies to deal with. The Delhi High Court decision miserably fails to deal with the legislative intent behind the 2012 Amendment and go into sound reasoning behind the decision laid by it.

Although the intent behind the 2012 Amendment was to act as a welfare legislation for the benefit of authors, the drafting of the 2012 Amendment Act has led to nothing but an interpretation nightmare for the entertainment industry and beneficiaries of the 2012 Amendment. For instance, instead of clearly setting out the mechanism in which royalties will be distributed without affecting the copyright owners’ right to undertake unhindered exploitation of the works, the 2012 Amendment has only resulted in impediments in successful exploitation of the works, which has not only resulted in losses for the copyright owners but has also resulted in delayed or no royalty payments to the authors for whom the 2012 Amendment was brought about. One can only hope that the Government takes heed of the situation and brings a clearer legislation into place.

Image source: here

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