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January 15, 2018

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Copyright Societies- The Continuing Limbo


- Jaya Mandelia, Senior Associate [ Singh & Singh Law Firm LLP ]
- Isha Tyagi, Associate [ Singh & Singh Law Firm LLP ]

jayamandelia_ishatyagi

Entities such as IPRS, PPL, and Novex cannot be permitted to hide behind the garb of being companies under Section 30 of the Act while performing all functions of a Copyright Society, thereby escaping provisions contained in Chapter VII of the Act as well as Chapter XI of the Copyright Rules

Copyright is a ‘negative right’ - a monopoly granted to an author/creator as a reward for his/ her creation of an artistic, literary, musical, dramatic work, cinematographic film, or sound recording. It confers upon the owner the right to prohibit others from using his/her copyrighted work. It also offers an incentive for future creation. This right is highly prized by all civilized nations to such a degree that it is protected by both national laws as well as international conventions.

A copyright owner, interested in the protection of his/her work as well as commercial exploitation of his/her work, i.e., to monetize the same, can administer his/her rights in two ways: either individually or collectively. Since individual administration of certain kinds of works such as songs is neither practically nor economically feasible, “Collective Management Organization” came into being sometime in the early 1900s. Collecting Societies, also known as ‘Copyright Societies’, act as intermediaries between the copyright holder and the person(s) seeking to use the work. These Copyright Societies are involved in collective administration of copyright, more specifically, the business of granting licenses in consideration of a tariff fee. The function of Copyright Societies is to administer t h e rights of the copyright owner - they not only grant licenses but also institute legal proceedings to curb infringement and for recovery of amounts due. Most importantly, these Copyright Societies are statutorily obligated to distribute the royalty fee collected from the licenses granted to the copyright owners, after making the necessary administrative deductions. It is, after all, in lieu of receipt of this royalty fee that copyright owners grant their rights to receive royalties to such Copyright Societies. These societies have been granted a position of de facto or de jure monopoly in various jurisdictions. Under the Indian Copyright Act, 1957, registration per the provisions of Section 33 is mandatory for a Copyright Society to conduct the business of issuing/granting licenses.

Much like their English counterparts PRS (Performing Rights Society) and PPL (Phonogram Performance Limited), in India, the primary Copyright Societies were the Indian Performing Rights Society (IPRS), which dealt with licensing literary/musical works on behalf of authors/publishers; Phonogram Performance Limited (PPL), which dealt with licensing sound recordings on behalf of record labels/producers; and the recently formed Indian Singer Rights Association (ISRA) primarily for licensing Performers’ Rights on behalf of singers/performers.

The Copyright Act was amended in 2012 incorporating a series of changes, streamlining the functioning and regulation of Copyright Societies. The 2012 amendments also granted a right to royalty in favor of the authors and owners of copyright. They also stipulated previously registered copyright societies to re-register themselves and furnish full accounts before the copyright board on or before June 21, 2013. IPRS and PPL applied for registration. Thereafter, on account of the several alleged irregularities in the functioning of both, IPRS and PPL, the Ministry of Human Resources Development issued show cause notices to the 2 Copyright Societies in August 2012.

However, IPRS and PPL continued to be embroiled in controversy. Several complaints to the HRD Ministry eventually resulted in the appointment of Justice Mukul Mudgal (Retd.) in 2014 as an enquiry officer to conduct an enquiry into the myriad allegations leveled against IPRS & PPL. In 2014, IPRS and PPL withdrew their application for re-registration and declared themselves as companies not governed by the provisions contained in Chapter VII of the Copyright Act. Having rescinded from their application for reregistration, IPRS and PPL could no longer operate as Copyright Societies and also the provisions contained in Chapter VII, which contains the relevant provisions governing Copyright Societies, could no longer be applied to them. Later, an Inquiry Officer was appointed in October 2015 under Section 33(4) of the Act to inquire into the non-distribution of royalties to authors and composers and suggest measures for the improvement of the administration of IPRS. However, having rescinded from their reregistration as Copyright Societies, IPRS and PPL have attempted to circumvent these inquiries. Pertinently, this withdrawal of re-registration application has not been accepted by the Central Government in view of the larger interest involved of the Society members.

Thereafter, despite there being no clarity from the government, both the entities claimed to operate as Private Limited Companies along with Novex. They continued to engage in the business of issuing licenses by claiming to be authorized under the provisions of Section 30 of the Act, which inter alia permits copyright owners to grant licenses through their duly authorized agents. Neither of these “Companies” appear to be acting as authorized agents of copyright holders and have instead been issuing licenses in their own name.

The above situation has led to a string of litigations challenging the locus of entities such as IPRS, PPL, and ISRA to demand royalty fee on behalf of copyright owners. For instance, due to the alleged exorbitant demands of license fees on hotels and restaurants, the National Restaurant Association of India filed several suits against PPL, IPRS, ISRA, and Novex. The common contention of IPRS, PPL, ISRA, and Novex has been that they function as companies under the aegis of Section 30 of the Act and have been authorized by the copyright owners to administer their rights on their behalf. It is trite that an agent ought to issue licenses in the name of the principal and not its own name. However, the licenses granted to third parties by these entities are in their private capacity as copyright owners and not authorized agents. The Hon’ble Court in the case of M/s Leopold Café Stores v. Novex Communications Pvt. Ltd. restrained Novex from engaging in the business of issuing/granting licenses and collecting license fees. The Court observed that the bar contained in Section 33 against any entity not being a registered Copyright Society engaging in the business of issuing or granting licenses cannot preclude the express permission contained in Section 30 for a copyright owner to appoint an agent. The Court, however, clarified that the factum of agency ought to be disclosed to the licensee - the license must be issued in the name of the principal and not the agent.

Similarly, M/s. Event and Entertainment Management Association (EEMA) in December 2016 had filed a writ petition against IPRS, PPL, and Novex for alleged violation of Section 33 of the Act praying inter alia to restrain IPRS, PPL, and Novex from issuing licenses. The Hon’ble Court, while refusing to get into the controversy of whether PPL, IPRS, and Novex are engaging in the business of issuing licenses in contravention of Section 33 of the Act, held that since these entities are not registered Copyright Societies, they would not come within the ambit of Section 33 altogether. Therefore, no enquiry under Section 33(4) can be directed against them.

The non-constitution of the Copyright Board till date has only confounded the issue further. In fact, through the Finance Bill 2017, the Copyright Act has been amended and the functions and roles of the Copyright Board have been merged into the Intellectual Property Appellate Board (IPAB), effective by end of 2017. The above chain of events has led to widespread uncertainty as to the legal status of IPRS and PPL.

The anomalous situation which has emerged today is that although PPL, and Novex appear to be performing the functions of Copyright Societies, the provisions governing the conduct of Copyright Societies are not applicable to them. Therefore, as such, these entities are no longer regulated by the Copyright Act. By declaring themselves to be private companies, these entities have in effect defeated the entire objective behind the 2012 Amendments of bringing more transparency into the functioning of Copyright Societies. IPRS on the other hand has recently, on 28.11.2017, been granted a Certificate of Registration under Section 33 of the Copyright Act by the Copyright Office (this registration is however subject to certain conditions as laid down in the registration certificate). However, the fate of the licenses issued by IPRS between the years 2012 to November 2017 is still under question. It is also uncertain whether the inquiries previously conducted under the supervision of the Hon’ble Mumbai High Court into the functioning of IPRS will be re-agitated since it is has again become a Copyright Society and ought to function in accordance with Copyright Act.

It is a well-settled principle of law that “Quando aliquidprohibit ex directo, prohibetur et per obliquum” viz., when something is prohibited directly, it is also prohibited indirectly. By necessary implication, in order to continue to engage in the business of granting/issuing licenses, entities such as PPL, and Novex need to be registered as Copyright Societies as per proviso to Section 33 of the Act. Conversely, if these entities insist on continuing to act in the capacity of private companies and not Copyright Societies, they ought to issue licenses as agents and not as owners of copyright. These entities cannot be permitted to continue to hide behind the garb of being companies under Section 30 of the Act while performing all functions of a Copyright Societies, thereby escaping the provisions contained in Chapter VII of the Act as well as Chapter XI of the Copyright Rules.

There is, therefore, an urgent need for clarity whether the granting of licenses and collection of royalty fees by entities such as IPRS, PPL, and Novex, in the capacity of a company, run afoul of the Copyright Act or are legitimate business activities. The same shall remove existing ambiguities qua the legitimacy of licenses granted by these entities and also throw light upon which provisions regulate their conduct and activities. Resultantly, the system of exploitation of copyrighted works can function properly without any irrational terms being imposed or unreasonable license fees being demanded. Until then, the following questions shall remain hanging - what will be the fate of the licenses entered into by users with the likes of IPRS, PPL, and Novex while they functioned as Companies and not Copyright Societies? How will proper license fee be determined if these entities are not regulated by Chapter VII of the Act read with Chapter XI of the Rules therein? How will it be ensured that the royalty fee paid to these entities rightfully reaches the creators across the industry? In the interest of all stakeholders involved, we can only hope for an expedient resolution to the existing state of limbo.

Disclaimer – The views expressed in this article are the personal views of the author(s) and are purely informative in nature.

 

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