Compulsory Licensing and Royalties for Music Industry
It appears that the long running controversy between the radio broadcasting companies and music companies is not going to rest for some more time. Recently, the radio broadcasters have moved a transfer petition before the Supreme Court to consolidate all the appeals against the Compulsory Licensing decision, of the Copyright Board, before the Supreme Court. There are at least four petitions pending in different high courts on this issue.
This paper aspires to provide some insights with respect to compulsory licensing in Copyright in different jurisdictions.
International Conventions
Article 11(bis) of Berne Convention deals with Broadcasting and Related rights and provides exclusive right of authorization to Authors of literary and artistic works for the purpose of
Article 12 of the Rome Convention states that, “If a phonogram published for commercial purposes, or a reproduction of such phonogram is used directly for broadcasting or for any communication to the public, a single equitable remuneration shall be paid by the user to the performers, or to the producers of the phonograms, or to both. Domestic law may, in the absence of agreement between these parties, lay down the conditions as to the sharing of this remuneration.”
In India, The Copyright Act, 1957 seeks to maintain a balance between interest of the owner of the copyright and the interest of the public to have access to the works. The Act gives exclusive rights to the owners of the copyright. The provisions relating to grant of compulsory license must be viewed having regard to the competing rights i.e. exclusive rights of copyright holder and right of public to have access to the works, and an appropriate balance has to be stuck.
The underlying philosophy of the Copyright Act is that the owner of the copyright is free to enter into voluntary agreement or licenses on terms mutually acceptable to him and the licensee. Although Copyright Act aspires to make freedom to contract a primary tool by which copyright owner undergo a voluntary licensing to reap the fruits of their work, it follows an exceptions to voluntary licensing in cases when works withheld from the public. Section 31 of Copyright Act talks about Compulsory license in works withheld from public.-
The Copyright Board, after giving to the owner of the copyright in the work a reasonable opportunity of being heard and after holding such inquiry as it may deem necessary, may, if it is satisfied that the grounds for such refusal are not reasonable, direct the Registrar of Copyrights to grant to the complainant a license to republish the work, perform the work in public or communicate the work to the public by broadcast, as the case may be, subject to payment to the owner of the copyright of such compensation and subject to such other terms and conditions as the Copyright Board may determine; and thereupon the Registrar of Copyrights shall grant the license to the complainant in accordance with the directions of the Copyright Board, on payment of such fee as may be prescribed.
Section 31A, empowers the Copyright Board to issue a compulsory license in respect of an unpublished Indian work or a translation thereof in any language, whose author is dead or unknown or cannot be traced or the owner of copyright in such work cannot be found.
In case of broadcasting of musical works the tariff was Rs. 2400 per needle hour or 20% of the net advertising revenue, whichever is higher. This was challenged in the case of M/s Music Broadcast Pvt. Ltd. vs. M/s Phonographic Performance Ltd. before the Copyright Board. The expert witness produced by both sides agreed to the fact that that the rate of Rs. 2400 per needle hour was “exorbitant and unreasonable”. On the basis of examination of expert witnesses he Copyright Board fixed the royalty at “2% of net advertisement earnings of each FM radio station accruing from the radio business only for that radio station shall be set apart by each complainant for pro rata distribution of compensation to all music providers”.
However, appeals have been filed against this order of Copyright Board in Delhi and Madras High Courts respectively and are still pending. An another petition has been filed by the radio broadcasters in Supreme Court to consolidate all appeals against the Compulsory Licensing decision, of the Copyright Board, before the Supreme Court.
The appeal before Delhi and Madras High Court is filed by T-series and SIMCA (South Indian Music Companies Association) on the grounds that, since they were not made party to the litigation thus, the order of Copyright Board is not applicable on them. Delhi High opined that the order of Copyright Board is not applicable against T-series as it was not the party to the suite and the cannons of natural justice enumerates that a party must be heard before a order is passed. The court said that the principles of natural justice are non-negotiable. SIMCA might be expecting a similar kind of order from Madras High Court.
RECOMMENDED CONSIDERATION:
Although, the reasoning of Delhi High Court is sound on the grounds of natural justice, this order might create lot confusion and discrepancy as adopting different parameters to govern same subject matter is against the principles of Justice, Equity and Good Conscience. Thus, the best possible way to end up this controversy might be by making the rules administering royalty to music companies in cases of “free to air broadcast”, uniform. In general, royalty for “free to air broadcast” is paid in the form of revenue sharing in different jurisdictions. The revenue sharing generally ranges between 0.4-5percent depending upon the market conditions. Since, radio is one of the cheapest modes of entertainment an exorbitant and unreasonable royalty might affect the public benefit at a large. Besides that, free to air broadcasts make songs popular amongst the masses and increase the sale of music cassettes, CDs and digital sale, thus indirectly contributing in revenue generation for music companies and societies.
CONCLUSION:
The ruling delivered by the Copyright Board appears to be reasonable in Indian context, so a blanket ruling by the Supreme Court making the order of Copyright Board applicable on all music companies and free to air broadcasters might play an effecting role in settling down the controversy.
It appears that the long running controversy between the radio broadcasting companies and music companies is not going to rest for some more time. Recently, the radio broadcasters have moved a transfer petition before the Supreme Court to consolidate all the appeals against the Compulsory Licensing decision, of the Copyright Board, before the Supreme Court. There are at least four petitions pending in different high courts on this issue.
This paper aspires to provide some insights with respect to compulsory licensing in Copyright in different jurisdictions.
International Conventions
Article 11(bis) of Berne Convention deals with Broadcasting and Related rights and provides exclusive right of authorization to Authors of literary and artistic works for the purpose of
- broadcasting of their works or the communication thereof to the public by any other means of wireless diffusion of signs, sounds or images;
- any communication to the public by wire or by rebroadcasting of the broadcast of the work, when this communication is made by an organization other than the original one;
- the public communication by loudspeaker or any other analogous instrument transmitting, by signs, sounds or images, the broadcast of the work.
Article 12 of the Rome Convention states that, “If a phonogram published for commercial purposes, or a reproduction of such phonogram is used directly for broadcasting or for any communication to the public, a single equitable remuneration shall be paid by the user to the performers, or to the producers of the phonograms, or to both. Domestic law may, in the absence of agreement between these parties, lay down the conditions as to the sharing of this remuneration.”
- Regulations in some of the countries In Australia a free to air broadcaster requires a license - however to commence broadcast, all a broadcaster has to do is to give an undertaking to pay a reasonable sum which in the event of dispute will be decided by a competent tribunal. The additional feature of the law is that the royalty for broadcasting of published sound recording is frozen at a ceiling of 1% of the gross earnings of the broadcaster during the specified period. There are also provisions for compulsory licensing.
- China follows the Berne Convention for International recordings. These domestic recordings can be broadcasted on the radio or television without any license or payment.
- In Japan the Director General of the Cultural Affairs Agency determines the compensation required to be paid by a Broadcaster. Non-profit transmission of works already made public is exempted from paying any royalty.
- In U.K., for a statutory license the rate is fixed by law, in the case of a compulsory license the rate is left to be negotiated.
Division 4 (45) of Australian Copyright Act 1968 states:
Reading or recitation in public or for a broadcast
The reading or recitation in public, or the inclusion in a sound broadcast or television broadcast of a reading or recitation, of an extract of reasonable length from a published literary or dramatic work, or from an adaptation of such a work, does not constitute an infringement of the copyright in the work if a sufficient acknowledgement of the work is made.
In India, The Copyright Act, 1957 seeks to maintain a balance between interest of the owner of the copyright and the interest of the public to have access to the works. The Act gives exclusive rights to the owners of the copyright. The provisions relating to grant of compulsory license must be viewed having regard to the competing rights i.e. exclusive rights of copyright holder and right of public to have access to the works, and an appropriate balance has to be stuck.
The underlying philosophy of the Copyright Act is that the owner of the copyright is free to enter into voluntary agreement or licenses on terms mutually acceptable to him and the licensee. Although Copyright Act aspires to make freedom to contract a primary tool by which copyright owner undergo a voluntary licensing to reap the fruits of their work, it follows an exceptions to voluntary licensing in cases when works withheld from the public. Section 31 of Copyright Act talks about Compulsory license in works withheld from public.-
- If at any time during the term of copyright in any Indian work which has been published or performed in public, a complaint is made to the Copyright Board that the owner of copyright in the work-
- has refused to republish or allow the republication of the work or has refused to allow the performance in public of the work, and by reason of such refusal the work is withheld from the public; or
- has refused to allow communication to the public by broadcast of such work or in the case of a sound recording the work recorded in such sound recording on terms which the complainant considers reasonable,
The Copyright Board, after giving to the owner of the copyright in the work a reasonable opportunity of being heard and after holding such inquiry as it may deem necessary, may, if it is satisfied that the grounds for such refusal are not reasonable, direct the Registrar of Copyrights to grant to the complainant a license to republish the work, perform the work in public or communicate the work to the public by broadcast, as the case may be, subject to payment to the owner of the copyright of such compensation and subject to such other terms and conditions as the Copyright Board may determine; and thereupon the Registrar of Copyrights shall grant the license to the complainant in accordance with the directions of the Copyright Board, on payment of such fee as may be prescribed.
Section 31A, empowers the Copyright Board to issue a compulsory license in respect of an unpublished Indian work or a translation thereof in any language, whose author is dead or unknown or cannot be traced or the owner of copyright in such work cannot be found.
In case of broadcasting of musical works the tariff was Rs. 2400 per needle hour or 20% of the net advertising revenue, whichever is higher. This was challenged in the case of M/s Music Broadcast Pvt. Ltd. vs. M/s Phonographic Performance Ltd. before the Copyright Board. The expert witness produced by both sides agreed to the fact that that the rate of Rs. 2400 per needle hour was “exorbitant and unreasonable”. On the basis of examination of expert witnesses he Copyright Board fixed the royalty at “2% of net advertisement earnings of each FM radio station accruing from the radio business only for that radio station shall be set apart by each complainant for pro rata distribution of compensation to all music providers”.
However, appeals have been filed against this order of Copyright Board in Delhi and Madras High Courts respectively and are still pending. An another petition has been filed by the radio broadcasters in Supreme Court to consolidate all appeals against the Compulsory Licensing decision, of the Copyright Board, before the Supreme Court.
The appeal before Delhi and Madras High Court is filed by T-series and SIMCA (South Indian Music Companies Association) on the grounds that, since they were not made party to the litigation thus, the order of Copyright Board is not applicable on them. Delhi High opined that the order of Copyright Board is not applicable against T-series as it was not the party to the suite and the cannons of natural justice enumerates that a party must be heard before a order is passed. The court said that the principles of natural justice are non-negotiable. SIMCA might be expecting a similar kind of order from Madras High Court.
RECOMMENDED CONSIDERATION:
Although, the reasoning of Delhi High Court is sound on the grounds of natural justice, this order might create lot confusion and discrepancy as adopting different parameters to govern same subject matter is against the principles of Justice, Equity and Good Conscience. Thus, the best possible way to end up this controversy might be by making the rules administering royalty to music companies in cases of “free to air broadcast”, uniform. In general, royalty for “free to air broadcast” is paid in the form of revenue sharing in different jurisdictions. The revenue sharing generally ranges between 0.4-5percent depending upon the market conditions. Since, radio is one of the cheapest modes of entertainment an exorbitant and unreasonable royalty might affect the public benefit at a large. Besides that, free to air broadcasts make songs popular amongst the masses and increase the sale of music cassettes, CDs and digital sale, thus indirectly contributing in revenue generation for music companies and societies.
CONCLUSION:
The ruling delivered by the Copyright Board appears to be reasonable in Indian context, so a blanket ruling by the Supreme Court making the order of Copyright Board applicable on all music companies and free to air broadcasters might play an effecting role in settling down the controversy.
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