Bollywood, the Hindi-language film industry based in Mumbai, is also the home of the largest music labels in India. These music labels license the public performance rights of their repertoire to various businesses, particularly restaurants and hotels.

Recently in M/s Leopold Café Stores v Novex Communications Pvt Ltd the Bombay High Court passed an interim order on the legitimacy of Novex Communications licensing public performance rights on behalf of certain music labels, despite not being a registered collecting society under the Copyright Act 1957. The court restrained Novex from threatening to sue anyone for copyright infringement on the grounds that it was not a registered collecting society. This finding came with the caveat that Novex could continue to assist in the licensing of performance rights as an agent, provided that the firm adhered to the court’s definition of ‘agent’.

Law on registered collecting societies

Since the enactment of the first Copyright Law in independent India, the regulation of collecting societies has changed with successive amendments. The 1994 amendments to the Copyright Act required all collecting societies to be registered and with the proviso that the government would usually register only one copyright society per class of works. As a part of the registration process, these copyright societies are required to be under the control of copyright owners, maintain certain registers to ensure basic norms of transparency and impose a cap on administrative expenses.

Following these amendments, the registrar of copyrights registered two collecting societies for music: the Indian Performing Rights Society (IPRS) for underlying works such as lyrics and melodies, and Phonographic Performance Ltd (PPL) for sound recordings. Since their inception, both societies – particularly IPRS – have come under fire for allegedly lacking transparency. There have also been complaints by members about the distribution of royalties, particularly for unlogged performances. As a result, several music labels, including some of the biggest, prefer to license their music directly or to hand this right over to companies such as Novex.

Dispute

In the case under discussion the issue before the Bombay High Court pertained to whether companies such as Novex could perform the function of collecting societies in light of certain restrictions contained in Section 33 of the Copyright Act. In pertinent part, Section 33 states that:

No person or association of persons shall, after coming into force of the Copyright (Amendment) Act, 1994 commence or, carry on the business of issuing or granting licences in respect of any work in which copyright subsists or in respect of any other rights conferred by this Act except under or in accordance with the registration granted under sub-section (3).

Section 33(3) provides for the registration of collecting societies.

In its defence Novex argued that it could license music as an agent of music labels, since Section 30 of the Copyright Act allows the copyright owner or its agent to grant an interest in any work by way of a licence.

The Bombay High Court partially accepted this argument, but found that Novex was not acting as an agent. It reached this conclusion based on a prima facie scrutiny of the language contained in business documents produced by Novex. Specifically, the court observed that Novex was issuing licences in its own name rather than in the name of the copyright owner, and as such the invoicing took place in its own name. In the court’s opinion, this proved that Novex was not acting as an agent. The court stated that to qualify as an agent, it was necessary for the agent to declare this in its dealings with clients and disclose that it is acting on behalf of the copyright owner. To not do so when licensing music would attract the prohibitions under Section 33.

Comment

The Bombay High Court's judgment will affect the licensing of music through third parties such as Novex. In theory, it is easy for such companies to reclassify themselves as agents in line with the court's ruling, but this may seriously hamper their ability to initiate legal proceedings because Section 55 of the Copyright Act allows only owners or exclusive licensees of copyrighted work to initiate legal proceedings for the infringement of a copyright. Therefore, as an agent, such companies cannot initiate legal proceedings. Such a conclusion will significantly disrupt the licensing models currently followed by several Indian music labels, which are not members of collecting societies.

This article first appeared in IAM magazine. For further information please visit www.iam-magazine.com.