With online platforms dominating the content circulation aroundthe world, the ambit of protection granted to such platformsbecomes an essential issue. This debate was only divided byopinions of various lawyers and scholars, however, the issue gotcontroversial when Department of Industrial Policy & Promotion,Ministry of Commerce and Industry (Government of India) issued anOffice Memorandum dated September 05, 2016 stating thatfollowing:
"In view of the above, the words "any broadcastingorganization desirous of communicating to the public.." maynot restrictively interpreted to be covering only radio and TVbroadcasting as definition of 'broadcast' read with'communication to the public' appears to be including allkind of broadcast including internet broadcasting. Thus, theprovisions of Section 31D are not restricted to radio andtelevision broadcasting organizations only, but cover internetbroadcasting organizations also."
With the Ministry making a clarification statement with respectto a stand on Internet Broadcasting and Section 31D, it becameessential to identify the validity of the clarification and therebydeciding on whether internet broadcasting organizations are coveredunder the ambit of Section 31D. In this regard, the Hon'bleBombay High Court in the landmark judgment of TipsIndustries Ltd. vs. Wynk Music Ltd. & Anr. (Commercial Suit IP(L) No. 114 of 2018 and Commercial Suit IP (L) No. 113 of2018), has addressed various issues / questionsraised with respect to internet broadcasting organizations andtheir scope under Section 31D. However, in order to understand thediscussion by the Hon'ble Court, let us try to understand abrief on the important conceptual understanding that is leading tothe said case:
As per Section 2(dd) of the Copyright Act 1957,"broadcast" is defined as communication to the publicby any means of wireless diffusion (whether in any one or more ofthe forms of signs, sounds or visual images; or by wire, andincludes a re-broadcast. Therefore, any organization providingbroadcast services, are covered under the ambit of broadcastingorganizations.
Pursuant to Section 31D, broadcasting organization which wantsto broadcast a literary, musical or sound recording alreadypublished may do so subject to various conditions mentioned in theSection. The questionable portion of the Section 31D, which acts asa special treatment for the broadcasting organization, is that itdoes away with a hearing to the copyright owner. In view thereof,the broadcasting organizations can give prior notice of itsintention to broadcast the work stating the duration andterritorial coverage of the broadcast and can pay royalties at therate fixed by the Appellate Board to the owner of rights in eachwork.
The provision under Section 31D of the Copyright Act 1957 hasbeen heavily criticized for the following reasons:
The Hon'ble Madras High Court in South Indian MusicCompanies vs Union Of India (W.P.No.6604 of 2015), while decidingthe constitutional validity of Section 31 and 31D, observed that"Section 31 and 31D provides for a mechanism to deal withthe public interest vis-a-vis the private interest. It has beenintroduced by way of a public policy. It has got an in-builtmechanism to take care of the interest of the owner. Guidelineshave been provided for the purpose of fixing royalty under Rule31(7) and (8). The owner would be given reasonable opportunity ofbeing heard. There has to be satisfaction that the refusal is notreasonable. Section 31D was introduced taking note of Article 11(2)and 13 of Berne Convention and Article 15(2) of the Rome Convention(for sound recordings) and Article 9(1) of the TRIPS Agreement. Itwas meant to support the development and growth of private radiobroadcasting. The object is also to strike at the monopoly to thedetriment of the general public. While doing so, the provisionsalso take care of the interest of the owner." TheHon'ble High Court referred to the observation made by theHon'ble Supreme Court in Entertainment Network (India) LimitedVs. Super Cassette Industries Limited, ((2008) 13 SCC 30), whereinthe court analysed the essential features of Copyright Act, asunder:
The Hon'ble Supreme Court with the above observations hasstated that right to contract is not an absolute right and that thelegislations can make provisions to balance the interest of theowners of right and the public at large. Copyright legislation isone such legislation where the Act recognizes the substantialinterest of the public, in the work of owners of copyright.
The Hon'ble High Court relying on the judgment ofEntertainment Network (India) Limited (supra.), held that"Thus, the Apex Court has taken note of the variousfactors by adopting principles governing the interpretation ofstatutes including the doctrine of purposive construction, readingdown and contextual interpretation. There is no legislativearbitrariness involved and the classification, being reasonable,has nexus to the object sought to be achieved. Hence we do not findany reason to hold that the provisions contained in Section 31 and31D of the Copyright Act as unconstitutional.".
With the increase of internet access and usage, especially afterthe telecom disruption caused by Reliance Industries' Jio, hasmade the musicophiles switch to modern and latest musical platformssuch Wynk Music, Amazon Prime Music, Ganna, etc. The legislatureswere well aware about the latest technological developments and inview thereof carried out amendments to the Copyright Act, 1957(hereinafter referred to as "Act"). One such amendmentwas the insertion of Section 31D, which was the main contention ofdispute in the case of Tips Industries Ltd. v. WynkMusic Ltd. & Anr. that provides statutory licensefor broadcasting organisations.
This judgment passed by Justice S. J. Kathawalla of the BombayHigh Court has resolved the confusion and uncertainty regarding theapplicability of Statutory Licensing to online broadcasting /streaming organisations.
Section 31D provides for any broadcasting organisation whichwishes to communicate to the public by way of a broadcast,performance or sound recording, which has already been published,can do so by completing the following procedures1:
The debate until now was whether online streaming andbroadcasting organisations come within the category of broadcastingorganisations or not. Since Section 31D starts with the wordings"Any broadcasting organisation" the firstinterpretation was that it de facto included online broadcastingorganisations. Due to such uncertainty, the Department ofIndustrial Policy and Promotion in consultation with the concernedministries / departments issued an "Office Memorandum" on5th September, 2016 bringing online broadcasting within the ambitof Section 31D. The relevant part of the memorandum has beenreiterated below:
"In view of the above, the words "any broadcastingorganization desirous of communicating to the public..." maynot be restrictively interpreted to be covering only radio and TVbroadcasting as definition of 'broadcast' read with'communication to the public', appears to be including allkind of broadcast including internet broadcasting. Thus, theprovisions of Section 31D are not restricted to radio andtelevision broadcasting organizations only, but cover internetbroadcasting organizations also."
The said memorandum was much criticized not just because of itsflawed logic but also for its lack of competence and statutorybacking. This strikingly incapacitated the royalty negotiation andcontractual freedom of the Copyright owners, especially the musicright holders, which in turn led to the present case at hand.
The Plaintiff, Tips Industries is the Copyright owner of about25,000 sound recordings ("Repertoire"). The Defendants,Wynk Music Ltd. are the owners of Wynk, an OTT (Over the Top)online music streaming application. In 2014, the Plaintiff hadgiven contractual license to the Defendant on its repertoire forits online streaming service at a license fee of Rs. 1. 31 Croresper year. After the aforesaid contract expired, the Parties to thesuit started re-negotiating for a fresh / renewed license. Due tounacceptable pricing the said deal could not be finalized andsubsequently failed. Thereafter, the Plaintiffs issued a cease anddesist notice to the Defendants asking them to deactivate / removePlaintiff's repertoire from its Wynk Platform. In reply to thesaid notice, the Defendants took recourse under Section 31D of theAct, 1957 by claiming themselves to be a broadcasting organisationby virtue of which are entitled to statutory license.
Thereafter, Tips Industries sued Wynk Music Ltd., primarily onthe grounds of challenging the Defendant's right under Section31D and the copyright infringement of sound recordings belonging toTips which Wynk was storing the sound recordings that belonged toTips on its music library, where the users can listen and downloadthem for a subscription fee, even after the expiry of the licensingagreement.
While handling the present dispute, the Bombay High Court hasalso streamlined certain ambiguities of prime importance in thefield of Copyright. The issues of the case are discussed belowchronologically.
Issue A: Whether the Defendants are infringing upon thePlaintiff's copyright in the Plaintiff's Repertoire asprovided for in Section 14(1)(e) of the Act?
The Hon'ble High Court has opined that storing files of thePlaintiff's sound recordings in electronic medium by theDefendants is the same as making of another sound recordingembodying the Plaintiff's sound recording which right is anexclusive right granted to the owner. Therefore, the Defendantscannot be allowed to continue the same without any permission orauthorization of the Plaintiff.
The feature on the Defendant's application which providesoutright purchase of the sound recording amounts to sale. Thisamounts to violation of the Copyright of the Plaintiff andtherefore the Defendants do not have any right to sell or offer forsale the Plaintiff's sound recordings without any authorizationor permission of the Plaintiff.
Issue A (i): Whether use of the Plaintiff'sRepertoire by the Defendants' customers be considered"fair use" under Section 52(1)(a)(i) of theAct?
In this regard the Defendant contended that permitting acustomer to retain an electronic copy of a sound recording copy fortheir personal use or enjoyment on the WYNK application constitutes"fair dealing" with such work for private or personaluse, and does not constitute an infringement of copyright underSection 52(1)(a)(i) and Section 52(1)(b). of the Act.
The Plaintiff in reply to this stated that the two English caselaws, namely, Hubbard v. Vosper 1972 2Q.B. 84 and Ashdown v. Telegraph Group2002 1 Ch. 149 determine the standards of "fair dealing".Therefore, for a work to be fair must not:
In view thereof, the Defendant's usage of thePlaintiff's repertoire falls under the first and the thirdfactor. The act of selling and renting competes with thePlaintiff's business and would in-turn compete with thePlaintiff's exclusive right.
The purpose of providing the said feature is purely commercialand to earn revenue for itself. This would usurp the potentialmarket for the Plaintiff's sale / rent of its works. If thesaid act of the Defendant falls within "fair dealing" itwould greatly render the Plaintiff's copyright nugatory.Further, the Plaintiff would be unable to recover the economicpotential of its works in respect of which it has expendedsignificant resources. The Plaintiff would also be unable tofurther license its work to others since they too would carry outthe same acts as the Defendants in the present case.
Therefore, with reference to the Plaintiff's contentions theCourt opined that the defence provided under Section 52(1)(a)(i) ofthe Act is not available to the Defendants. The Defendant'sactivities are purely for commercial benefit and not for anyprivate or personal use, including research.
Issue A (ii): Whether the storage of sound recordingsupon the Defendants' customers' devices can be consideredtransient or incidental to the services provided by the Defendantsas provided in Section 52(1)(a) (b) of the Act?
The Court opined that the nature of the Defendant'sactivities of offline storage permanent or temporary is the uniqueselling point of the Defendant's business. The said activitycan neither be termed as transient or incidental and neither doesit occur purely in the technical process of technical transmissionor communication to the public. It also noted that Section 52(1)(b)would generally be applicable in case of Internet Service Providersand not to the activities of the Defendants. Therefore, the defenceunder the aforesaid Section would be not available to theDefendants.
Issue A (iii): Whether the Defendants can invoke Section31-D of the Act to exercise a Statutory License in respect of theirdownload/purchase business?
The Court observed that the right to commercial rent / saleofCopyrighted sound recordings is a separate and distinct right asagainst the right to communicate the sound recording to the public.The Court categorically noted that the exclusive right granted tothe owner of Copyright in sound recording under Section14(1)(e)(ii) does not overlap with the exclusive right ofcommunication of the sound recording to the public provided underSection 14(1)(e)(iii) of the Act. Further, a bare reading ofSection 31D reveals that the said provision is only applicable tobroadcasting organisations which are desirous of communicating tothe public by way of broadcast. The Court also mentioned that theLegislature was well aware of the distinction between the right tocommercial rental or sale and right to broadcast and that had thelegislature intended to include rental and sale within its ambit,it would have employed express language to that effect underSection 31D. Therefore, the Defendants cannot exercise a statutorylicense under Section 31D in respect of download and purchasefeatures.
Issue B: Whether the Defendants can invoke Section 31-Dof the Act to exercise a Statutory License in respect of thePlaintiff's Repertoire for internet broadcasting?
The Court stated that this issue of the judgment is of primeimportance in the current subject matter. The Court stated thatstatutory licensing provided under Section 31-D is an exception tothe owner's exclusive right and is therefore expropiratory innature. Therefore, Section 31-D being an expropriatory legislationmust be construed strictly in conformity with the specific purposefor which it was enacted. It was further stated that thelegislature was well aware of the existence of prevalent digitaltechnologies and trends (including sharing, streaming anddownloading of music over the internet) during the time ofCopyright Amendment.
Therefore, the act of omittance on the part legislature forproviding Statutory Licensing in respect of internet streaming and/ or downloading shows that Section 31-D cannot be construed toinclude the same within its ambit. Further, the Rules 29 and 31 ofthe Copyright Rules, 2013 also indicate that the statutorylicensing regime is only meant for radio and television and notinternet broadcasting.
The Court also stated that a prior determination of royaltyrates by the Appellate Board is a necessary precondition forexercise of rights in respect of a statutory license under Section31-D. In view thereof, the Defendants could not have exercisedstatutory licensing under the said Section in the absence ofpre-fixation of the rate of royalty by the Appellate Board.
Issue C: Whether Rule 29 of the Copyright Rules, 2013and the third proviso thereto are invalid?
The Court opined that Section 31-D is expropriatory in natureand is to be construed strictly. Further, prior fixation of ratefor broadcasting the work helps the copyright owner to keep checkand manage its finances accordingly given that fact that theinterests of the expropriated owner must be considered whileinterpreting this Section. In view thereof, the Court stated thatRule 29 (including its third proviso) benefits the expropriatedcopyright owner affected by Section 31-D and therefore the same arevalid.
Issue D: What is the bearing of the Government ofIndia's office Memorandum dated 5th September, 2016 on thepresent matter?
The Court opined that the said Memorandum does not draw itspower from any legislation. The Court while citing the case ofState of Haryana v. MahenderSingh3stated that guidelines without anystatutory aid are merely advisory in nature. Further, the Courtheld that the said Memorandum lacks 'statutory flavour' andis inconsistent with the interpretation drawn by the Court andtherefore has no bearing in the present matter.
Issue E: Whether pending the suit, the defendants may bepermitted to use the plaintiff's repertoire upon payment ofdeposit?
In this regard, the Court opined that although Section 31-D ofthe Act is not applicable to internet broadcasting, however, forargument sake if it were to be considered as applicable even thenthe Defendants cannot be permitted to do so, since the manner andthe royalty for internet broadcasting was not fixed by theAppellate Board till date. Further, the Court in lightMusic Choice India Pvt. Ltd. v. PhonographicPerformance Ltd.4and RadioOne Ltd. v. Phonographic Performance Ltd.5held that an order directing the Defendants to deposit a sum withthe Court and permit to use the Plaintiff's Repertoire fortheir commercial activities would tantamount to a grant ofcompulsory license which as per the Copyright Act the Court doesnot have the jurisdiction to grant.
Issue F: Whether the plaintiff is only interested inmoney and thus injunction should not be granted?
The Court held that even after the negotiations between theparties failed the Defendant continued to use the Plaintiff'sRepertoire without paying for the same. Further, the Plaintiff didnot claim any monetary damages in the said suit and therefore thePlaintiff's action for infringement cannot be termed amotivated by money. As regards the balance of convenience the orderagainst the Defendant would not bring the Defendant's businessto a standstill or cause any irreparable injury, however, on theother hand the exploitation of the Plaintiff's entireRepertoire without payment of royalty tilts the balance ofconvenience in the favour of the Plaintiff. In view of theaforesaid, the Court held that since the Defendants are knowinglyinfringing upon the Plaintiff's copyright without payment ofany royalty a grant of interim injunction is the appropriateremedy.
With the rise in online streaming, downloading and sharing ofmusic, providers such as the Defendant in the present case havestarted to seek refuge under Section 31-D and thereby exploit theCopyrighted works without obtaining prior license from the owners.Use of a copyrighted work under such expropriatory law tantamountto usurpation of the exclusive right granted to the owner of suchwork. The Court gave immense importance to the fact that Section31-D being expropriatory in nature needed to be construed strictlyand that inclusion of internet broadcasters under Section 31-Dwould give unfettered rights to all internet broadcasters and erodethe entire purpose of copyright protection being granted to thecopyright owner. Further, the decision that only upon fixing ofrate of royalty by the Appellate Board, a party has the right tostatutory license, acts as a gatekeeper to Statutory Licensing inIndia.
The decision of the court that Section 31-D does not apply tointernet broadcasters makes a huge impact on several other onlinemusic providers. It not only gives the copyright owners an upperhand in negotiating any broadcasting deal further on but alsobrings all other agreements under scrutiny for similar violations.This decision of the Hon'ble High Court is of prime importanceand a salvation to the copyright owners.
Footnotes
[1] Section 31D, Copyright Act, 1957
[2] Substituted for "Copyright Board" by TheFinance Act, 2017
[3] (2007) 13 SCC 606
[4] 2010 112 (1) BOM LR 0470
[5] 2013 4 Mh.L.J. 643
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