With online platforms dominating the content circulation around the world, the ambit of protection granted to such platforms becomes an essential issue. This debate was only divided by opinions of various lawyers and scholars, however, the issue got controversial when Department of Industrial Policy & Promotion, Ministry of Commerce and Industry (Government of India) issued an Office Memorandum dated September 05, 2016 stating that following:

“In view of the above, the words “any broadcasting organization desirous of communicating to the public..” may not restrictively interpreted to be covering only radio and TV broadcasting as definition of ‘broadcast’ read with ‘communication to the public’ appears to be including all kind of broadcast including internet broadcasting. Thus, the provisions of Section 31D are not restricted to radio and television broadcasting organizations only, but cover internet broadcasting organizations also.”

With the Ministry making a clarification statement with respect to a stand on Internet Broadcasting and Section 31D, it became essential to identify the validity of the clarification and thereby deciding on whether internet broadcasting organizations are covered under the ambit of Section 31D. In this regard, the Hon’ble Bombay High Court in the landmark judgment of Tips Industries Ltd. vs. Wynk Music Ltd. & Anr. (Commercial Suit IP (L) No. 114 of 2018 and Commercial Suit IP (L) No. 113 of 2018), has addressed various issues / questions raised with respect to internet broadcasting organizations and their scope under Section 31D. However, in order to understand the discussion by the Hon’ble Court, let us try to understand a brief on the important conceptual understanding that is leading to the said case:

1. What are Broadcasting Organizations?

As per Section 2(dd) of the Copyright Act 1957, “broadcast” is defined as communication to the public by any means of wireless diffusion (whether in any one or more of the forms of signs, sounds or visual images; or by wire, and includes a re-broadcast. Therefore, any organization providing broadcast services, are covered under the ambit of broadcasting organizations.

2. The issue revolving Section 31D of the Copyright Act 1957?

Pursuant to Section 31D, broadcasting organization which wants to broadcast a literary, musical or sound recording already published may do so subject to various conditions mentioned in the Section. The questionable portion of the Section 31D, which acts as a special treatment for the broadcasting organization, is that it does away with a hearing to the copyright owner. In view thereof, the broadcasting organizations can give prior notice of its intention to broadcast the work stating the duration and territorial coverage of the broadcast and can pay royalties at the rate fixed by the Appellate Board to the owner of rights in each work.

3. Criticism from the Right Owners?

The provision under Section 31D of the Copyright Act 1957 has been heavily criticized for the following reasons:

  • Not allowing commercial negotiations to determine royalty rates favors broadcasters at the expense of the copyright owners
  • The copyright owners are not given the authority to negotiate terms of royalties with the broadcasters
  • The provision is violative of Art. 19 (1) (g) of the Constitution as it provides the Appellate Board the power to fix rates for radio broadcasting. This is not a reasonable restriction.

Case Laws on Section 31D of the Copyright Act 1957

The Hon’ble Madras High Court in South Indian Music Companies vs Union Of India (W.P.No.6604 of 2015), while deciding the constitutional validity of Section 31 and 31D, observed that “Section 31 and 31D provides for a mechanism to deal with the public interest vis-a-vis the private interest. It has been introduced by way of a public policy. It has got an in-built mechanism to take care of the interest of the owner. Guidelines have been provided for the purpose of fixing royalty under Rule 31(7) and (8). The owner would be given reasonable opportunity of being heard. There has to be satisfaction that the refusal is not reasonable. 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. It was meant to support the development and growth of private radio broadcasting. The object is also to strike at the monopoly to the detriment of the general public. While doing so, the provisions also take care of the interest of the owner.” The Hon’ble High Court referred to the observation made by the Hon’ble Supreme Court in Entertainment Network (India) Limited Vs. Super Cassette Industries Limited, ((2008) 13 SCC 30), wherein the court analysed the essential features of Copyright Act, as under:

1. The Act seeks to maintain a balance between the interest of the owner of the copyright in protecting his works on the one hand and the interest of the public to have access to the works, on the other.

2. Whereas the Act provides for exclusive rights in favour of owners of the copyright, there are provisions where it has been recognized that public has also substantial interest in the availability of the works.

3. The freedom to contract is the foundation of economic activity and an essential aspect of several Constitutional rights including the freedom to carry on trade or business guaranteed under Article 19(1)(g) and the right to property under Article 300A of the Constitution of India. But the said right is not absolute. It is subject to reasonable restrictions.

The Hon’ble Supreme Court with the above observations has stated that right to contract is not an absolute right and that the legislations can make provisions to balance the interest of the owners of right and the public at large. Copyright legislation is one such legislation where the Act recognizes the substantial interest of the public, in the work of owners of copyright.

The Hon’ble High Court relying on the judgment of Entertainment Network (India) Limited (supra.), held that “Thus, the Apex Court has taken note of the various factors by adopting principles governing the interpretation of statutes including the doctrine of purposive construction, reading down and contextual interpretation. There is no legislative arbitrariness involved and the classification, being reasonable, has nexus to the object sought to be achieved. Hence we do not find any reason to hold that the provisions contained in Section 31 and 31D of the Copyright Act as unconstitutional.”

The Landmark Judgment by Hon’ble Bombay High Court

With the increase of internet access and usage, especially after the telecom disruption caused by Reliance Industries’ Jio, has made the musicophiles switch to modern and latest musical platforms such Wynk Music, Amazon Prime Music, Ganna, etc. The legislatures were well aware about the latest technological developments and in view thereof carried out amendments to the Copyright Act, 1957 (hereinafter referred to as “Act”). One such amendment was the insertion of Section 31D, which was the main contention of dispute in the case of Tips Industries Ltd. v. Wynk Music Ltd. & Anr. that provides statutory license for broadcasting organisations.

This judgment passed by Justice S. J. Kathawalla of the Bombay High Court has resolved the confusion and uncertainty regarding the applicability of Statutory Licensing to online broadcasting / streaming organisations.

Background:

Section 31D provides for any broadcasting organisation which wishes 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 procedures[1]:

1. Giving Prior notice of its intention to broadcast the work stating the duration and territorial coverage. 2. Pay Royalties in the manner and rate fixed by the Appellate Board[2]

The debate until now was whether online streaming and broadcasting organisations come within the category of broadcasting organisations or not. Since Section 31D starts with the wordings “Any broadcasting organisation” the first interpretation was that it de facto included online broadcasting organisations. Due to such uncertainty, the Department of Industrial Policy and Promotion in consultation with the concerned ministries / departments issued an “Office Memorandum” on 5th September, 2016 bringing online broadcasting within the ambit of Section 31D. The relevant part of the memorandum has been reiterated below:

“In view of the above, the words “any broadcasting organization desirous of communicating to the public...” may not be restrictively interpreted to be covering only radio and TV broadcasting as definition of ‘broadcast’ read with ‘communication to the public’, appears to be including all kind of broadcast including internet broadcasting. Thus, the provisions of Section 31D are not restricted to radio and television broadcasting organizations only, but cover internet broadcasting organizations also.”

The said memorandum was much criticized not just because of its flawed logic but also for its lack of competence and statutory backing. This strikingly incapacitated the royalty negotiation and contractual freedom of the Copyright owners, especially the music right holders, which in turn led to the present case at hand.

Facts of the Case:

The Plaintiff, Tips Industries is the Copyright owner of about 25,000 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 had given contractual license to the Defendant on its repertoire for its online streaming service at a license fee of Rs. 1. 31 Crores per year. After the aforesaid contract expired, the Parties to the suit started re-negotiating for a fresh / renewed license. Due to unacceptable pricing the said deal could not be finalized and subsequently failed. Thereafter, the Plaintiffs issued a cease and desist notice to the Defendants asking them to deactivate / remove Plaintiff’s repertoire from its Wynk Platform. In reply to the said notice, the Defendants took recourse under Section 31D of the Act, 1957 by claiming themselves to be a broadcasting organisation by virtue of which are entitled to statutory license.

Thereafter, Tips Industries sued Wynk Music Ltd., primarily on the grounds of challenging the Defendant’s right under Section 31D and the copyright infringement of sound recordings belonging to Tips which Wynk was storing the sound recordings that belonged to Tips on its music library, where the users can listen and download them for a subscription fee, even after the expiry of the licensing agreement.

While handling the present dispute, the Bombay High Court has also streamlined certain ambiguities of prime importance in the field of Copyright. The issues of the case are discussed below chronologically.

Issue A: Whether the Defendants are infringing upon the Plaintiff’s copyright in the Plaintiff’s Repertoire as provided for in Section 14(1)(e) of the Act?

The Hon’ble High Court has opined that storing files of the Plaintiff’s sound recordings in electronic medium by the Defendants is the same as making of another sound recording embodying the Plaintiff’s sound recording which right is an exclusive right granted to the owner. Therefore, the Defendants cannot be allowed to continue the same without any permission or authorization of the Plaintiff.

The feature on the Defendant’s application which provides outright purchase of the sound recording amounts to sale. This amounts to violation of the Copyright of the Plaintiff and therefore the Defendants do not have any right to sell or offer for sale the Plaintiff’s sound recordings without any authorization or permission of the Plaintiff.

Issue A (i): Whether use of the Plaintiff’s Repertoire by the Defendants’ customers be considered “fair use” under Section 52(1)(a)(i) of the Act?

In this regard the Defendant contended that permitting a customer to retain an electronic copy of a sound recording copy for their personal use or enjoyment on the WYNK application constitutes “fair dealing” with such work for private or personal use, and does not constitute an infringement of copyright under Section 52(1)(a)(i) and Section 52(1)(b). of the Act.

The Plaintiff in reply to this stated that the two English case laws, namely, Hubbard v. Vosper 1972 2 Q.B. 84 and Ashdown v. Telegraph Group 2002 1 Ch. 149 determine the standards of “fair dealing”. Therefore, for a work to be fair must not:

1. Commercially compete with the owner’s exploitation of the copyright work or be a substitute for the probable purchase of authorized copies and the like.

2. Publish a work that has not already been published.

3. Take an excessive amount of the copyrighted work. The taking of even a small amount on a regular basis may negate fair dealing.

In view thereof, the Defendant’s usage of the Plaintiff’s repertoire falls under the first and the third factor. The act of selling and renting competes with the Plaintiff’s business and would in-turn compete with the Plaintiff’s exclusive right.

The purpose of providing the said feature is purely commercial and to earn revenue for itself. This would usurp the potential market for the Plaintiff’s sale / rent of its works. If the said act of the Defendant falls within “fair dealing” it would greatly render the Plaintiff’s copyright nugatory. Further, the Plaintiff would be unable to recover the economic potential of its works in respect of which it has expended significant resources. The Plaintiff would also be unable to further license its work to others since they too would carry out the same acts as the Defendants in the present case.

Therefore, with reference to the Plaintiff’s contentions the Court opined that the defence provided under Section 52(1)(a)(i) of the Act is not available to the Defendants. The Defendant’s activities are purely for commercial benefit and not for any private or personal use, including research.

Issue A (ii): Whether the storage of sound recordings upon the Defendants’ customers’ devices can be considered transient or incidental to the services provided by the Defendants as provided in Section 52(1)(a) (b) of the Act?

The Court opined that the nature of the Defendant’s activities of offline storage permanent or temporary is the unique selling point of the Defendant’s business. The said activity can neither be termed as transient or incidental and neither does it occur purely in the technical process of technical transmission or communication to the public. It also noted that Section 52(1)(b) would generally be applicable in case of Internet Service Providers and not to the activities of the Defendants. Therefore, the defence under the aforesaid Section would be not available to the Defendants.

Issue A (iii): Whether the Defendants can invoke Section 31-D of the Act to exercise a Statutory License in respect of their download/purchase business?

The Court observed that the right to commercial rent / saleof Copyrighted sound recordings is a separate and distinct right as against the right to communicate the sound recording to the public. The Court categorically noted that the exclusive right granted to the owner of Copyright in sound recording under Section 14(1)(e)(ii) does not overlap with the exclusive right of communication of the sound recording to the public provided under Section 14(1)(e)(iii) of the Act. Further, a bare reading of Section 31D reveals that the said provision is only applicable to broadcasting organisations which are desirous of communicating to the public by way of broadcast. The Court also mentioned that the Legislature was well aware of the distinction between the right to commercial rental or sale and right to broadcast and that had the legislature intended to include rental and sale within its ambit, it would have employed express language to that effect under Section 31D. Therefore, the Defendants cannot exercise a statutory license under Section 31D in respect of download and purchase features.

Issue B: Whether the Defendants can invoke Section 31-D of the Act to exercise a Statutory License in respect of the Plaintiff’s Repertoire for internet broadcasting?

The Court stated that this issue of the judgment is of prime importance in the current subject matter. The Court stated that statutory licensing provided under Section 31-D is an exception to the owner’s exclusive right and is therefore expropiratory in nature. Therefore, Section 31-D being an expropriatory legislation must be construed strictly in conformity with the specific purpose for which it was enacted. It was further stated that the legislature was well aware of the existence of prevalent digital technologies and trends (including sharing, streaming and downloading of music over the internet) during the time of Copyright Amendment.

Therefore, the act of omittance on the part legislature for providing Statutory Licensing in respect of internet streaming and / or downloading shows that Section 31-D cannot be construed to include the same within its ambit. Further, the Rules 29 and 31 of the Copyright Rules, 2013 also indicate that the statutory licensing regime is only meant for radio and television and not internet broadcasting.

The Court also stated that a prior determination of royalty rates by the Appellate Board is a necessary precondition for exercise of rights in respect of a statutory license under Section 31-D. In view thereof, the Defendants could not have exercised statutory licensing under the said Section in the absence of pre-fixation of the rate of royalty by the Appellate Board.

Issue C: Whether Rule 29 of the Copyright Rules, 2013 and the third proviso thereto are invalid?

The Court opined that Section 31-D is expropriatory in nature and is to be construed strictly. Further, prior fixation of rate for broadcasting the work helps the copyright owner to keep check and manage its finances accordingly given that fact that the interests of the expropriated owner must be considered while interpreting this Section. In view thereof, the Court stated that Rule 29 (including its third proviso) benefits the expropriated copyright owner affected by Section 31-D and therefore the same are valid.

Issue D: What is the bearing of the Government of India’s office Memorandum dated 5th September, 2016 on the present matter?

The Court opined that the said Memorandum does not draw its power from any legislation. The Court while citing the case of State of Haryana v. Mahender Singh[3] stated that guidelines without any statutory aid are merely advisory in nature. Further, the Court held that the said Memorandum lacks ‘statutory flavour’ and is inconsistent with the interpretation drawn by the Court and therefore has no bearing in the present matter.

Issue E: Whether pending the suit, the defendants may be permitted to use the plaintiff’s repertoire upon payment of deposit?

In this regard, the Court opined that although Section 31-D of the Act is not applicable to internet broadcasting, however, for argument sake if it were to be considered as applicable even then the Defendants cannot be permitted to do so, since the manner and the royalty for internet broadcasting was not fixed by the Appellate Board till date. Further, the Court in light Music Choice India Pvt. Ltd. v. Phonographic Performance Ltd.[4] and Radio One Ltd. v. Phonographic Performance Ltd.[5] held that an order directing the Defendants to deposit a sum with the Court and permit to use the Plaintiff’s Repertoire for their commercial activities would tantamount to a grant of compulsory license which as per the Copyright Act the Court does not have the jurisdiction to grant.

Issue F: Whether the plaintiff is only interested in money and thus injunction should not be granted?

The Court held that even after the negotiations between the parties failed the Defendant continued to use the Plaintiff’s Repertoire without paying for the same. Further, the Plaintiff did not claim any monetary damages in the said suit and therefore the Plaintiff’s action for infringement cannot be termed a motivated by money. As regards the balance of convenience the order against the Defendant would not bring the Defendant’s business to a standstill or cause any irreparable injury, however, on the other hand the exploitation of the Plaintiff’s entire Repertoire without payment of royalty tilts the balance of convenience in the favour of the Plaintiff. In view of the aforesaid, the Court held that since the Defendants are knowingly infringing upon the Plaintiff’s copyright without payment of any royalty a grant of interim injunction is the appropriate remedy.

The Observation

With the rise in online streaming, downloading and sharing of music, providers such as the Defendant in the present case have started to seek refuge under Section 31-D and thereby exploit the Copyrighted works without obtaining prior license from the owners. Use of a copyrighted work under such expropriatory law tantamount to usurpation of the exclusive right granted to the owner of such work. The Court gave immense importance to the fact that Section 31-D being expropriatory in nature needed to be construed strictly and that inclusion of internet broadcasters under Section 31-D would give unfettered rights to all internet broadcasters and erode the entire purpose of copyright protection being granted to the copyright owner. Further, the decision that only upon fixing of rate of royalty by the Appellate Board, a party has the right to statutory license, acts as a gatekeeper to Statutory Licensing in India.

The decision of the court that Section 31-D does not apply to internet broadcasters makes a huge impact on several other online music providers. It not only gives the copyright owners an upper hand in negotiating any broadcasting deal further on but also brings all other agreements under scrutiny for similar violations. This decision of the Hon’ble High Court is of prime importance and a salvation to the copyright owners.