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A shocking order delivered by the Delhi HC on 4th January in IPRS v. ENIL and PPL v. CRI Events, only days after the landmark radio royalty statutory license order, has held that underlying works incorporated in sound recordings are not utilized and do not incur royalty when the sound recording is used! The order goes on to interpret the 2012 Amendment in a manner that almost completely extinguishes the rights of authors of underlying works.
Underlying Works and Royalty Rights
Section 17(b) and (c) of the Copyright Act, 1957, which borrow from the ‘Work-For-Hire’ doctrine in US copyright law, provide for automatic assignment of copyright in works created under a ‘contract for service’ to the person who pays for their creation, i.e., the producer. A problematic Supreme Court judgment in 1977 pronounced that underlying works incorporated in song tracks or films come under these provisions, thus preventing their authors from staking claim in their own creations that went on to earn crores in the market. Following decades of struggle (Prof. Basheer discusses this here), an Amendment in 2012 gave statutory recognition to authors’ right to receive royalty from underlying works.
The Delhi High Court Decision
The first suit concerned a number of agreements dating back to 2001 between IPRS and ENIL (owner of Radio Mirchi FM) under which the latter had been licensed music to be broadcasted in 7 cities. ENIL then broadcasted the said music in 3 additional cities, against which IPRS brought an infringement claim seeking permanent injunction and damages. The second suit was filed by IPRS and PPL in 2009 against an event management company which played music without obtaining licenses from the plaintiffs in events organized in its banquet hall.
The arguments advanced by the IPRS and PPL were straightforward: That music had been played without authorization, amounting to infringement, and thus, damages were owed. They claimed that playing of songs utilized the sound recordings, as well as the underlying musical and literary works, and thus separate licenses were to be taken for all categories of works. The defendants countered that broadcast of sound recordings only affects the copyright therein, because when the underlying works are incorporated in the sound recording, they integrate into the latter with only a single resultant work: the sound recording.
The question before the court was thus twofold:
- Does communication of sound recordings amount to communication of underlying works as well?
- Has there been any change in the position of law in this regard due to the 2012 Amendment?
Both were answered in negative.
Court’s Analysis
The defendants drew strength from the 1977 decision in IPRS v. Eastern India Motion Pictures (referred above) to argue that when underlying works are used to make a sound recording, they merge into it and the only surviving copyright is that of the author of the sound recording (the producer). They also rely on the 2011 decision in IPRS v. Aditya Pandey, which had been criticised for misinterpreting rights in underlying works even as they stood before the 2012 Amendment, to argue that a musical or literary work in itself, without the other elements of the sound recording, is not commercially viable! Surely they could not have forgotten that different set of lyrics (literary work) and music (musical work) can be combined to put together a completely different product, or even sold independently? Accepting this flawed argument, the court goes on to state (para 22):
‘It is the owner of the sound recording who transforms the literary work which otherwise is a mere collection of words into a sound, capable of phonetic pleasure and who gives the composition of music a sound of various musical instruments’.
In an interview to SpicyIP back in 2010, Achille Forler had rightly questioned: How can ownership of a work be attributed to the one who has the idea (to create) and not to its creator?
The defendant had also argued that copyrighted works are mutually exclusive as understood from Section 2(y) and the exploitation of copyright in one class of work cannot amount to exploitation of any other work (page 17) – an argument that challenges the very concepts of derivative work and infringement. If works are necessarily mutually exclusive, then a work which, in a small portion consists of a substantial part of another copyrighted work cannot be infringing as the latter must have lost its independent existence upon incorporation?
Accepting this argument (!!!), the court held that utilization of a song recording does not constitute the utilization of underlying works and thus, no authorisation is required from the authors of the underlying works, nor is any royalty owed to them.
This is a complicated issue. The authorisation requirement and royalty do not necessarily go hand in hand. The 2012 Amendment added a proviso to Section 17, declaring that literary, musical, dramatic or artistic work incorporated in a cinematograph work is exempt from the provisions of 17(b) and (c). This means that the automatic assignment does not take place and independent copyright subsists in these underlying works alongside the fresh copyright in the film. Thus, in case of film songs, multiple copyrights subsist simultaneously and the underlying works do not get assigned unless specifically done through contract. So theoretically, if any film song recordings contain underlying works that have not been assigned to the producer or anyone else; a broadcaster would require the author/copyright owner’s authorisation to communicate the same.
Amendments to Sections 18 and 19 further entrench this position. The provisos 3 and 4 to Section 18(1) hold that the right to receive an ‘equal share of royalties’ for non-cinema uses in case of underlying works in films, and all uses for those in non-film sound recordings, cannot be assigned or waived. Sections 19(9) and (10) further declare that even if the works themselves are assigned away, the inalienable right to receive royalty shall remain with the author. Therefore, in case the authors have assigned away the copyright in their works, they would still be entitled to a share in royalty under Section 18.
The court then goes on to hold that sound recordings are works of joint authorship under Section 2(z). This is questionable on multiple grounds. Firstly, joint authorship occurs when a work is created through the close and active intellectual collaboration of parties such that their individual contributions are indistinguishable (Najma Heptullah v. Orient Longman Ltd.). The lyrics and music embodied in a song are arguably far too distinguishable and separately attributable to meet this standard. Secondly, even if it is to be treated as a jointly authored work, courts have repeatedly held that a single joint author cannot individually exploit a work without the consent of the other authors, as Anupriya explains here. Following this interpretation, communication of sound recordings would require authorisation from and compensation to the authors of underlying works as well. This is wholly incompatible with the argument that authors lose all rights in the underlying works.
The Effect of 2012 Amendment
It is necessary to note that both of these infringement suits predate the 2012 Amendment, and thus their treatment hinges on the question of whether 2012 Amendment has a retrospective effect. In case there is no retrospective effect, these suits may be bound by the pre-2012 legal position, as dictated by the Supreme Court’s interim order in this matter.
IPRS argued that 2012 Amendment has retrospective effect, and the additions to the law are merely clarificatory. This is a bit difficult to accept, because while the proviso to Section 17 can be argued to be a clarifying provision, the right to receive royalty clearly carves out an exception that was previously non-existent. Moreover, the IPAB in its recent statutory license order relies on the use of the word ‘shall’ in Sections 17, 18 and 19 to accord the amendments a future effect.
The court though, took a completely different view, and this is the most problematic part of the judgment. It held that the 2012 Amendment has no effect on the legal position, because even if applied, it does not entitle the owners of copyright in literary and musical works to claim infringement when their work is communicated as part of sound recordings they have authorized! Instead, the right is available when their work is being communicated otherwise than by way of sound recording (see para 29-32) – presumably referring to communication through public performance. This interpretation goes against the literal words of the statute which preserve the author’s copyright unless specifically assigned, and for any utilization (refer Sections 18 and 19). [One might also wonder, if the contributions in a sound recording are indistinguishable by virtue of being jointly authored, and lack independent commercial viability, how can a lyricist or musician exploit the work otherwise than by way of sound recording?].
Concluding thoughts
This absurd interpretation leaves authors to claim shares only from non-sound recording uses of their work, which would mean live performances at events. Surely this could not have been the intention of the legislature, which amended the Copyright Act specifically to bring economic justice to the authors of works incorporated in films – a fact which is clear from a bare perusal of the Statement of Objects and Reasons to the Copyright (Amendment) Bill 2010 and the Parliamentary Standing Committee Report (PDF). If the authors have no claim on the royalties accrued from the use of sound recordings which gathers the lion’s share of the profit through radio, TV and online broadcast, ringtones, as well as physical sale of CDs and cassettes, their situation is hardly any better than it was 44 years ago.
Aside from being fraught with self-contradictions, this judgment does blatant injustice to the authors who already suffer from limited legal protections and lack collective bargaining power to secure their rights. It also completely fails to consider legislative intent behind the 2012 Amendment and renders an interpretation that effectively obliterates its effect. These authors, who had secured a victory of sorts through the radio broadcast statutory license earlier, will likely face trouble once again as this decision empowers the producer-oriented entertainment industry to deprive authors of their rewards. Fortunately, an appeal against this has been admitted by a division bench of the Delhi high court. One can only hope that this decision is overruled, and as soon as possible.