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Collective Rights Management under the Indian Copyright Act

Balaji Subramanian (balaji.s@nalsar.ac.in)is a law student at the NALSAR University of Law, Hyderabad.

Collective rights management by copyright societies has proven to be a unique policy challenge in India, at least in part due to the inextricable link between popular music and Bollywood movies. The regulatory system has failed to design sufficient incentives for copyright societies to play by the rules in the Copyright Act, enabled large players to capture the licensing market, and failed to provide adjudicatory mechanisms to prevent the exploitation of artists. These problems may be solved by fragmenting of rights monopolies through competition, reviving the Copyright Board, and adopting a system similar to extended collective licensing, a representative licensing system prevalent in several European markets.

The copyright regime exists not to minimise illegitimate access to protected works, but to maximise legitimate access. Perhaps, no development in the history of copyright law exemplifies its core mission better than the rise of collective management organisations (CMOs). For a large part, CMOs have performed this function admirably, reducing friction in the market and making content available to the retail consumer at the lowest possible price, while simultaneously ensuring that the rights holder is not short-changed (Band 2012). For much of the previous century, CMOs played a vital role in ensuring that the average person on the street was able to listen to the latest chartbuster, even if they did not have the disposable income to purchase a record, a cassette or a compact disc.

Do the entities that shaped the 20th century’s copyright regime continue to hold relevance in today’s digital economy? The idea that the digital age marks the death of copyright has led to considerable debates (Lunney Jr 2001; Denicola 2000), but even some of the more cautious commentators have argued that the CMO is increasingly becoming obsolete. Two broad arguments are made in support of this contention. The first line of reasoning relies on the fact that mass distribution mechanisms do not occur on the internet. Owing to the fact that online content consumption overwhelmingly consists of “single use” transactions rather than the licensing of entire repertoires, some commentators argue that the era of blanket licences has ended (Ficsor 2016).

The second justification is based on the premise that access control is the primary function of a CMO. Given that we now have anti-circumvention and other technological means through which the terms of a licence can be enforced, some authors believe that online distribution methods now allow publishers to directly reach consumers, without the mediation of radio stations or other similar intermediaries. A somewhat more conservative form of this argument has been made by the advocates of a metadata-based solution to royalty distribution (George 2016). Finally, since large CMOs typically pose significant antitrust concerns and have been seen as “necessary evils” that must be tolerated, these commentators argue that sounding the death knell for these entities will entail benefits for the market as a whole (Yee 2014).

Time has taught us that the validity of these claims is dubious, at best. Much as the cyberlibertarians of the late 20th century realised that the internet’s regulation was an inevitable reality, the rise of massive online intermediaries, such as YouTube and Spotify (Gaana and Saavn, closer to home), has shown us that there still exists a huge market for the mass licensing of copyrighted work even within these “alternative” distribution mechanisms. While self-publication has doubtless seen a tremendous rise, with some artists (most notably, Thom Yorke) reaching out directly to their consumers through their own websites or through peer-to-peer (P2P) file-sharing services, the majority of legitimate content consumption over the internet takes place through streaming services (IFPI 2016) that act as intermediaries in much the same way as radio stations mediated the public’s musical experience in the last century.1

CMOs in Status Quo

Chapter VII of the Copyright Act, 1957, deals with CMOs, which the Indian law refers to as “copyright societies.” The approach of the Indian legislator to collective rights management seems to be strongly informed by a desire to remedy the country’s troubling history of artistic exploitation, especially in the context of Bollywood composers and lyricists.2

Indian law prohibits entities from carrying on the business of licensing copyrighted work unless they are registered with the central government. The law also provides that there shall ordinarily be only one copyright society for any given class of works. Additionally, the act requires copyright societies to publish their tariff schemes, and allows users aggrieved by such schemes to approach the Copyright Board to fix a royalty rate.

The CMOs in India are subject to two distinct lines in the sand. First, they must exist under the collective control of the authors and other rights owners that comprise their membership. The phrase, “collective control of the authors and other owners of rights,” was substituted into Section 35 by the 2012 amendment, in order to modify earlier language which did not specifically mention authors. The amendment is an emphatic affirmation of the statutory intent to ensure that all members of a CMO shall have equal rights to control it, and that there be no discrimination between the authors (typically, small players such as individual artists) and owners (usually, larger players such as labels) (Thomas 2012). Section 35, in essence, was intended by Parliament to act as a statutory bulwark against the exploitation of small rights owners by CMOs.

The other main necessity for regulatory intervention in respect of CMOs arises in their interaction with the users of the copyrighted work. Thus, the second line in the sand consists of controls against the possibility of a CMO abusing its monopoly over a given class of works. Monopoly abuse was intended to be prevented by governmental oversight through the registration requirement on the one hand, and by a mechanism to prevent unreasonable pricing through the Copyright Board on the other.

The ground realities of the copyright licensing industry in India could not have strayed further from the ideals espoused in the act. In 2011, an investigation revealed that the Indian Performing Right Society (IPRS) (the CMO for underlying works such as lyrics and musical work) and the Phonographic Performance Ltd (PPL) (the CMO for sound recordings) had agreed that the PPL, rather than the IPRS, would collect royalties on ringtones (Reddy 2011a). Since the PPL predominantly consisted of large music producers, while the IPRS’s membership also included smaller players such as lyricists and composers, the agreement effectively denied small players crores of rupees in royalties arising from the use of their work as ringtones (Reddy 2011b). The IPRS has since made several attempts to resist investigations into its activities ordered by the central government (Reddy 2012a; Basheer 2014). The 2012 amendment did not translate into greater authorial control in the administration of the IPRS (Reddy 2014). Post 2012, the IPRS continued carrying on the business of licensing copyrighted works despite the fact that its registration had lapsed in 2013, making no attempt to re-register itself.3 Perhaps, the most egregious development in this sordid saga is the overnight transformation in the legal nature of the IPRS and PPL. In at least one court proceeding, the IPRS has asserted that it no longer functions as a “copyright society” under Section 33, but that it owns all the rights in its repertoire, which it secured through Deeds of Assignment from rights holders and authors, and licenses them under Section 30 (Subramanian 2016). The PPL has taken an identical approach (Agarwal 2015). In essence, the actions of the IPRS and PPL obliterate the Indian legal regime governing CMOs by undermining the statutory monopoly provided for in Section 33. In so doing, these entities have also been able to circumvent the first line in the sand: they can function entirely outside the control of the authors, while still enjoying a monopsony with respect to their works. The IPRS and PPL have exposed Chapter VII of the Copyright Act, its inept drafting, and the gaping loophole in the statute.

Defining a CMO

Any workable definition of a CMO must account for two characteristic features. The first is that a CMO must necessarily mean an organisation that carries on the business of licensing out copyrighted works. The second is that the CMO itself does not own the rights that it licenses out, and consequently does not perform its licensing function for its own benefit. It is this element that is missing from Chapter VII’s one-dimensional understanding of a “copyright society.” The Indian statute is an outlier even when compared with its peers and predecessors. In their zeal to nail down the registration requirement, the drafters of the Indian statute seem to have overlooked the need to lay down a holistic definition of a CMO. The Canadian Copyright Act defines a “collective society” as an entity that “carries on the business of collective administration of copyright … for the benefit of those who … authorise it to act on their behalf in relation to that collective administration.” In the United States (US), 17 US Code §101 defines a “performing rights society” as “an entity that licenses the public performance of non-dramatic musical works on behalf of copyright owners of such works.” It is this element of trusteeship that the Indian act lacks in its characterisation of CMOs, and it is here that the statute fails to account for agglomerations of large rights owners that engage in licensing transactions to the detriment of authors and small rights owners. For an entity to fall within any operational definition of a CMO, its repertoire must consist of works that are owned by its members. In Europe, Directive 2014/26/EU (the “Collective Rights Management Directive”) best encapsulates the trust function by providing that a CMO “means any organisation which is authorised by law or by way of assignment, licence or any other contractual arrangement to manage copyright or rights related to copyright on behalf of more than one right-holder, for the collective benefit of those right-holders” (emphasis added).4

The drafters of Chapter VII seem to have made a conscious choice to condition the beneficial nature of CMOs on the registration requirement,5 rather than on the very meaning of the term “copyright society,” and this choice has proved vital to the legal strategies of the IPRS and PPL. While the exposure of bad draftsmanship is the reason that erstwhile CMOs have been able to exploit authors, the responsibility for allowing these entities to unfairly exploit users must rest squarely with the administration. The Copyright Board, tasked by the act to adjudicate disputes over tariffs set by CMOs, has been mired in controversy for almost six years. Music producers have assailed the constitutional validity of the board on the grounds that it violates the doctrine of separation of powers (Reddy 2011c), with the court prescribing measures to remedy the infirmities in the board’s structure. Staffing woes have left the board non-functional for years now (Basheer 2016a), and even those positions in the board that were staffed have seen members refusing to attend proceedings, leading frustrated attorneys to request an intervention from the Delhi High Court (Reddy 2011d). Where members of the board have found it convenient to attend proceedings and pass orders, these have been held by high courts to be egregiously wrong in law (Reddy 2010; Mohanty 2011). In the absence of a functional and reliable adjudicatory framework, users find themselves unable to contest the rates set by monopolistic CMOs, even if they find such terms objectionable.

In summary, three distinct problems characterise the Indian licensing market today. First, there exist at least two large rights owners, the IPRS and PPL, whose portfolios command a significant portion of the underlying works in the market. Second, there are no legitimate CMOs within the meaning of the act, meaning that authors and other owners do not have credible alternatives for rights clearance. Third, the Copyright Board is dysfunctional, meaning that even if a hypothetical CMO were to be formed to cater to these demands, users would still be vulnerable to monopolistic rate-setting.

Searching for Solutions

Some commentators have argued that the remedy to the woes surrounding collective management in India can be solved by opening up the CMO market to competition, and allowing authors and users to choose from a range of alternatives (Padmanabhan 2016). Others have argued that CMOs, regardless of their legal character, ought to be brought under the ambit of judicial scrutiny as “quasi-public” parties under Article 226 of the Constitution (Basheer 2016b). I argue that the first solution is unworkable, since it conflicts with the statutory ethos of the Indian Act. The legislative decision to regulate CMOs as monopolies reflects a careful policy choice that must weigh the costs and benefits of tolerating a monopoly against those of a fragmented and inefficient rights regime. More importantly, the mere opening up of the market to new CMOs would not solve the first problem, that of the erstwhile CMOs asserting rights over a large number of works. The second solution rests on an optimistic (to say the least) view of a hypothetical high court ruling to the effect that the actions of a private company that benefit its shareholders must be called into question merely because it is able to command a high price from its consumers. Even if large copyright assertion entities (CAEs) such as the IPRS and PPL (I am tempted to call them copyright trolls) are held to be subject to the scrutiny of Article 226, the level of intervention sought in respect of private bargains is far more intrusive here than in other scenarios in which the Supreme Court has previously refused to intervene.6

The solution that I propose to remedy the ills that plague the music licensing industry today consists of three discrete parts, each aimed at solving one of the problems outlined above.

First, I argue that the central government must actively invite bids for registration as copyright societies for licensing underlying works in sound recordings. A proactive engagement with lyricists and composers is necessary to build credible alternatives to the IPRS and PPL from the bottom up. Second, the Copyright Board must be resuscitated in a constitutionally valid manner, and provided with the funding and staffing that a tribunal of its importance deserves. Third, we must address the fact that the CAEs are likely to continue asserting their rights, at least those that they already possess through Deeds of Assignment, against smaller players with much lower legal awareness such as restaurants and nightclubs. This is the most difficult question, and one that is left unanswered by the proposal to simply open up the CMO market to competition by lowering entry barriers.

How does a policymaker react to a situation in which two entities claim to own (rather than merely administer) a large part of Bollywood’s music across the decades? No matter how many new CMOs the government registers from this point on, the works already owned by these CAEs (or claimed to be owned, at any rate) represent a significant portion of the music market that can never be captured by new entrants (unless they acquire these rights by paying a hefty premium). How do we prevent the fragmentation of rights in this manner?

The answer lies in an elegant licensing system that has served the Nordic copyright regime for over half a century now, and is increasingly being exported the world over. Extended collective licensing (ECL) is a scheme through which the copyright statute gives an “extension effect” to a privately negotiated agreement between a CMO and its users, enlarging the scope of the licence from merely the CMO’s repertoire to the works of rights holders in the same class who are not represented by the contracting CMO (Koskinen-Olsson and Sigurdardottir 2016). Norway, Finland, Iceland, Denmark and Sweden have legislated ECL in some form since the 1960s, and the system has come into vogue in the recent past with its adoption by the United Kingdom (UK),7 and endorsement in European Union legislation.8

ECL essentially allows CMOs tasked with administering a given class of works to represent all rights holders qua that class of works, and burdens them only with the duty to equitably distribute revenues to non-member rights holders. In the past, ECL has been posited as a cure to several copyright challenges, such as educational use and orphan work protection (Xalabarder 2007). I will not focus on these aspects of the ECL solution, for, if these ends are achieved, they will only be positive externalities to the core objective of streamlining rights clearance in the music industry. Consequently, the implementation of the ECL that I suggest here will be geared to those objectives. While UK law requires CMOs desirous of issuing ECL to show that they represent a substantial segment of rights holders in the class of works (Mendis and Stobo 2014), this obligation is redundant in an environment where the government approves only one CMO per class. Further, most legislation guarantees two forms of protection to non-member rights holders. The first is an opt-out, and the second is a right to claim individual remuneration for their work. The provision of an opt-out is not an essential feature of the ECL system. Indeed, the UK government admitted during pre-legislative consultation that the only reason it was constrained to include an opt-out right for non-members was to comply with its international obligations owed to foreign rights holders,9 especially those from within the EU. Given the nature of the problem in the Indian market, it is easy to envision an ECL scheme that grants opt-out rights only to foreign rights holders without unfairly prejudicing the core aim of the policy: the prevention of fragmentation by domestic CAEs holding valuable portions of the Bollywood repertoire. With regard to individual remuneration and the right to equal treatment, these measures can be extended without modification to the Indian context. An additional feature of the Nordic ECL is a requirement that ECL-related disputes be subject to mediation, sometimes referred to a public authority such as the Ministry of Culture. In the case of India, such disputes can be referred to the Copyright Board, which can be vested with the authority to adjudicate these disputes.

As previously stated, an ECL system will undoubtedly have positive externalities that extend far beyond the immediate problem posed by the CAEs. The general streamlining of rights clearance will mean that information costs are drastically lowered for users, especially in cases of mass use of large repertoires. However, the biggest spillover benefit of implementing an ECL scheme willaccrue to online users. Since ECL will necessarily entail a high degree of consolidation in respect of foreign-owned works, rights clearance for the global broadcast of a global repertoire will be greatly simplified, thus benefiting music streaming websites immensely. This is an area that the government has recognised as uncertain, and its current attempts to fill the statutory gap on online broadcasting have hinged on an incongruently expansive interpretation (Bajaj 2016) of Section 31D, which deals with statutory licences for radio and television broadcasting. Apart from being an inelegant kludge, this approach has been argued to be an unconstitutional overreach by the central government (Basheer 2016c). The streamlining of rights clearance through ECL would serve to increase avenues for foreign CMOs to enter reciprocal agreements with their sole Indian counterpart, thus allowing Indian streaming services to easily procure global rights without having to approach dozens of CMOs around the world.

Notes

1 This analogy, however, has been questioned. The German CMO, GEMA and YouTube have disagreed on whether YouTube must pay a blanket licence fee (like a radio station), or whether it must pay a fixed amount for every music video streamed (like a distributor of recorded media, who pays per CD sold). This conflict has led to the prolonged unavailability of a large amount of content to German YouTube users (Wragge 2012).

2 There have been other legislative efforts to correct the imbalance between authors and publishers (Reddy 2012b).

3 Letter from IPRS to the Registrar of Copyrights dated 2 June 2014, https://artistiklicense.files.wordpress.com/2016/08/iprs-letter-to-centr.... See also Chitra Jagjit Singh v Indian Performing Rights Society, CS (Comm.) 193/2016 at the Delhi High Court on 14 March 2016, http://delhihighcourt.nic.in/dhcqrydisp _o.asp?pn=62530&yr=2016.

4 The CRM Directive also provides that CMOs must necessarily be non-profit entities.

5 According to Section 33(4), “The Central Government may, if it is satisfied that a copyright society is being managed in a manner detrimental to the interests of authors and other owners of rights concerned, cancel the registration of such society after such inquiry as may be prescribed,” thus conditioning continued registration of the society on its acting in the interests of authors.

6 Zoroastrian Co-operative Housing Society v District Registrar Co-operative Societies, (2005): 5 SCC 632.

7 The Copyright and Rights in Performances (Extended Collective Licensing) Regulations, 2014, http://www.legislation.gov.uk/uksi/2014 /2588/regulation/4/made.

8 See Directive 2001/29/EC (“InfoSoc Directive”) at paragraph 18; Directive 93/83/EEC (“Satellite and Cable Directive”) at Article 3.2; Directive 2014/26/EU (“Collective Rights Management Directive”), preamble at recital 12.

9 See government response to question 19, government response to the technical consultation on draft secondary legislation for extended collective licensing (ECL) schemes, UK Intellectual Property Office,https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil....

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Updated On : 26th Nov, 2018

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