Guest Post: Waxing Lyrical on Royalties – An Analysis of the Author-Centric Amendments Proposed to the Indian Copyright Act

I’m pleased to bring to you yet another fascinating guest post from Nikhil Krishnamurthy, Senior Partner of Krishnamurthy & Co. on the proposed author-centric amendments proposed to the Copyright Act, 1957.

To provide a very brief background to Nikhil’s post I refer you to one of our earlier posts outlining the clash between Aamir Khan and Javed Akhtar on the importance or lack therefore of lyricists to the sucess of a movie.

WAXING LYRICAL ON ROYALTIES – AN ANALYSIS OF THE AUTHOR-CENTRIC AMENDMENTS PROPOSED TO THE INDIAN COPYRIGHT ACT“I love you from the bottom, of my pencil case …
I love you in the songs, I write and sing …
Love you because, you put me in my rightful place …
And I love the PRS cheques, that you bring …”
Beautiful South – Song for Whoever
Introduction

For those of you who haven’t heard “Song for Whoever” by the Beautiful South, it is one of my favourites and I highly recommend that you go now and listen to it over here. This article can wait.

Make sure you read the lyrics over here, as you listen, to fully appreciate the song.

The line about receiving PRS (Performing Right Society) cheques is something that foreign author-composers take for granted. This is not, apparently, the case in India, and for a variety of reasons.

Recently, an ugly war of words erupted between the author/ composer community on the one side and Indian film producers on the other. The author/ composer community, reportedly fed up with constantly having to sign away all their rights in Indian film music, and consequently losing out on sharing royalties in both the old and the new streams of exploitation such as ring tones, digital downloads and so on, petitioned the Ministry of HRD to introduce amendments into the Copyright Act 1957 with a view to protecting their interests. These amendments supposedly prevented the absolute assignment of authors’ rights in works incorporated in cinematograph films with a view to ensuring that author composers receive music publishing income.

The film producer community immediately expressed its fears that the amendments would not only undermine the value of the publishing rights they acquired from author-composers, but would also affect the substantial minimum guarantees paid by music companies to acquire the rights to film music, which in turn, would affect the funding required for producing their films. The film producers argued that they spent much production money in hiring the right star for the film, in the production of the audio-visual film songs, in providing inputs to the author composers as to the settings etc. of the song, and that their input cannot be lightly brushed aside.

For the genesis of the present dispute, one has to go back a few years. It appears that in 2005, the publisher (music company) members of IPRS decided that since they allegedly owned all rights to underlying works, the portion of royalty paid by IPRS to its author-composer members, must be distributed to them and not the author composers.

Consequently, a letter was sent to author composers in 2005 whereby they were asked to substantiate their copyrights in any music written by them, failing which public performance royalty payments previously being distributed by the IPRS to author composers would be stopped.

Prior to this, most author composer members of IPRS were receiving public performance royalties for their works. The author (lyricist) received 20%, the composer received 30% (both received as an “encouragement” fee) and the remaining 50% was given to the music publisher or music company.So for example if a song from a Hindi film was aired on radio, two royalties were payable by the radio station. One was paid to PPL towards the public performance of the sound recording, and a second was paid to IPRS towards the public performance of the underlying works, i.e. the lyrics and the tune. It is this second royalty that IPRS used to split 20:30:50 as already explained.

As author composer members did not substantiate their rights for one reason or another, it led to a cessation in royalties paid to them for public performance of works authored by them. Note that till 2005, they were only receiving public performance royalties and were generally not receiving any mechanical royalties on cassettes and CD sales (presumably because the ‘publishers’ were the record labels themselves) or synchronization fee (when the song is re-used in a film or advertisement).

Consequently, post 2005, the only source of income for any author composer hired for a film project became the one-time lump-sum paid by the film producer and that was it. In the meantime, the multi-crore deals between film producers, music companies and content aggregators for music they had composed raised questions as to why they were not entitled to a share in such royalty amounts.It was not always this way. I have seen agreements from past film production houses where clauses like the ones below had been inserted in favour of the composer.

We further irrevocable agree to pay you 50% share of Royalty which we get from the Gramophone Company on the sale of the Gramophone Records of the above said picture for which we will give you a separate letter in the name of Gramophone Company authorizing them to pay the 50% share of Royalty amount, directly to you. [Mechanical Royalties]

We further irrevocably agree to give you 50% share of the Royalty amount we get from All India Radio (Vividh Bharti) or any other Radio Station in any part of the world for the broadcast of the songs of the above picture from any station of the above mentioned Radios (Broadcasting Stations). [Public Performance Royalties]

That we further agree and confirm irrevocably that under Copyright Act any kind of Royalty from any part of the World for the Music and the Tunes of the above said picture shall belong to you in full and we shall have no claim to share that amount. [Other Publishing Income]

So, it appears that in the past, composers had a pretty good hold over their copyrights. How they lost their control must be the subject of another blog.

A very rough timeline of author composer royalties for works incorporated into films would read as under: –
Post – 2005 – only lump-sum one-time payment from the film producer
1980 to 2005 – lump-sum payment from the film producer + performance royalties
Pre – 1980 – lump-sum payment from the film producer + performance royalties + possibly other publishing income

In fact, if one sees some of the standard form agreements of The Gramophone Company with film producers during the 1970’s, one sees that the term of the assignment effectively lasted 25 years and post that period, the rights actually returned to the film producer. This was held to be so in Saregama India Ltd. v Suresh Jindal, AIR 2006 Cal 340 where the Learned Judge found that“The intention to limit the agreement is clearly expressed in Clauses 6, 7-A(d), 14 of the agreement. The negative covenant contained in Clause 6 makes it clear that the respondent No. 1 shall not infringe the copyright assigned in favour of the petitioner for the period of twenty-five years. If the grant was intended to be for an unlimited period, there could not be any negative covenant for a limited period. Even the royalty as required to be paid under the agreement is limited till twenty-five years. … In the instant case, the harmonious construction of the clauses leave no manner of doubt that the parties intended to limit the agreement for a period of 25 years at the most. … In the instant case, the negative covenant restraining the respondent from utilising to whole or any part of the sound-track or any works performance relating to the subject-matter of the agreement is restricted for a period of 25 years, therefore, after the period of 25 years the respondent would be free to do otherwise. This clearly suggests that the agreement was not intended to continue for the full statutory period as contended on behalf of the petitioner.”

There is presumably a vast body of copyright work where the copyrights may have actually returned to the film producers in view of the 25 year term of assignment but in the absence of any due diligence conducted by such film producers, they will not know if this is indeed the case. This is all the more pertinent because in 1993 IPRS derecognised film producer members in favour of record labels as Publisher members.

In the light of the Calcutta High Court decision cited above, it may be that some film producers continue to be entitled to remain IPRS members and receive performance royalties as rights have reverted to them. This is also another topic for discussion in itself and I will not dwell further on this.

In this view of the matter, let us now examine some “amendments” (in bold below) which have been brought to my attention as those supposedly proposed by the Ministry of HRD in the Copyright Act (Amendment) Bill, 2009 to protect the rights of author-composers to see if they do indeed live up to the hype.

The Amendments: –

[Section 17 (b) subject to the provisions of clause (a), in the case of a photograph taken, or a painting or portrait drawn, or an engraving or a cinematograph film made, for valuable consideration at the instance of any person, such person shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein;

Provided that in case of any works incorporated in cinematograph work, nothing in clause (b) shall affect the right of the author in the work referred to in clause (a) subsection (1) of section 13.

Section 17 © in the case of a work made in the course of the author s employment under a contract of service or apprenticeship, to which clause (a) or clause (b) does not apply, the employer shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein;

Provided that in case of any works incorporated in cinematograph work, nothing in clause © shall affect the right of the author in the work referred to in clause (a) of subsection (1) of section 13.]

Examining the amendments proposed to Section 17 (b) and (c), we see that the copyrights of the author in works made under a work for hire, which are incorporated in a film, are sought to be preserved and this seems to be merely a reiteration of Section 13 (4) of the Act which says that copyright in a cinematograph film or sound recording will not affect the separate copyright of the works incorporated in such film or recording.

It would therefore appear that in Section 17 (b) where a work is commissioned for a film, the author would retain copyright over his work and even a contract to the contrary will not help the commissioner.

It would further appear that in Section 17 (c) under employment contracts generally, the employer would be the first owner of copyright of any work, but if the employer is a film producer, the author’s rights are preserved. Even a contract to the contrary will not help the film producer.

This seems to meet with the general objective of the proposed amendments.

Moving to the next amendment.

[Section 18: The owner of the copyright in an existing work or the prospective owner of the copyright in a future work may assign to any person the copyright either wholly or partially and either generally or subject to limitations and either for the whole term of the copyright or any part thereof: …

Provided further that the author of the literary or musical work included in cinematograph film or sound recording shall not assign the right to receive royalties from the utilization of such work in any other form other than as part of cinematograph film or sound recording except to the legal heirs or to a copyright society for collection and distribution and any contract to contrary shall be void.]

Reading the newly proposed Proviso to Section 18, it appears: –

That there is a distinction sought to be made between an assignment of copyright and the assignment of the right to receive royalties though what this nuance entails is still unclear.

That the assignment by an author of the right to receive royalties in a literary or musical work incorporated in a film is restricted to the utilization of that work in a film or sound recording.

That the assignment by an author of the right to receive royalties in a literary or musical work for the utilization of the work in any other form can only be made to a legal heir or copyright society.

One immediately sees the problem with this proposed amendment. Music publishing is concerned with the utilization of the work in as many forms as possible, be it in films, sound recordings, live performances, sheet music (which is no business in terms of Indian film music anyway), and so on, so as to maximize the royalty collection in relation to a work.

If an author can assign away the right to receive royalties to a film producer when the work is used as a part of a film or sound recordings, nothing prevents a film producer from insisting on seeking such an assignment in relation to any film and any sound recording in which the work is utilized. In such a case, the producer will be entitled to collect royalties when the work is utilized in any subsequent film (even an ad film) or sound recording (cover versions), including the original film and sound recordings.

As ring tones these days are most popularly true tones, i.e., the original sound recordings themselves, this entitles the film producer/ music company to all royalties on the utilization of the work in ring tones and other new media/ digital forms of exploitation of the sound recording.

So what does this supposed amendment leave for the author ? The right to collect royalties for live performances and for sheet music. Maybe a translation here and there. Little else really. This is a situation worse off than the existing position under the law, though maybe not industry practice.

Had the language been restricted to assign the right to collect royalty for utilization of the work in the cinematograph film and sound recording in which it was first utilized, that may have served to meet the supposed objectives of the amendments. However, one must consider that if author composers had a decent bargaining position today, they could, under even the existing law, negotiate for royalties for the use of their works in the first film or recording itself by way of synchronization and mechanical licenses. The amendment is therefore regressive in that sense.

[Section 19 (8) Any assignment of copyright in any work contrary to that of the terms and conditions of the rights already assigned to a copyright society in which the author of the work is a member, shall be deemed to be void.

Section 19 (8) is really unnecessary as any assignment contrary to what has already been assigned will in any event be void under law. The said situation is covered by the legal maxims Nemo Dat Quod Non Habet – meaning, no one can give what he does not have, and Assignatus Utitur Jure Auctoris – meaning, an assignee is clothed only with the right of his principal.

In the past, film producers have negotiated the fact of prior assignment of copyright by authors of their present and future works to IPRS by claiming that since the works are created under conditions of work for hire they (the film producers) are first owners of copyright in the said work, and that therefore the question of assignment, or assignment in contravention of the author’s prior assignment to IPRS does not arise.

However, as I have argued elsewhere (see http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1306223), composers are not usually employees of film producers for first ownership of copyright to vest in the producers and moreover, where a work is commissioned, copyright in only certain types of works, which are restricted to certain types of artistic works and films (and DO NOT include musical or literary works (lyrics) which are treated separately under the Act), will vest in the person commissioning the work.

Therefore copyright in lyrics and music commissioned for a film do not automatically belong to the producer as first owner under Section 17 (b) since the provision does not cover all types of copyright works like Section 17 (c) does. For works created under a 17 (b) situation and which does not fall into any of the types of works specified by Section 17 (b), the commissioner will have to seek an assignment of rights from the author.

[Section 19 (9) No assignment of copyright in any work to make a cinematograph film or sound recording shall affect the right of the author of the work to claim royalties in case of utilization of the work in any form other than as part of cinematograph film or sound recording.]

I have already stated my view above that such a carve out in favour of the author is really not an effective carve out at all and in fact serves to confuse the issue further.

Conclusion
In the words of CISAC’s president, ex-Bee Gee Robin Gibb, “If you’ve ever had the pleasure of watching a Bollywood movie, you know what a central role music plays in Indian cinema. Music adds true value to Indian film productions and the fact that the authors of these musical works have had their rights taken away and received no subsequent royalties is unconscionable. The Indian Cabinet has taken a major step towards resolving this problem. Let’s hope that the Indian Parliament will follow suit. Movie music in India is a big business and it’s unacceptable that the composers and lyricists who make the music don’t benefit from the success of their works because of an outdated system. Indian producers and record companies clearly don’t want to share their royalties with creators, but the Indian Parliament needs to know that this is not the norm elsewhere.”

CISAC’s Director-General Eric Baptiste has stated that “Composers and authors in other key filmmaking markets like the United States, the European Union, Canada, Hong Kong, Japan and Taiwan do not lose their right to a share in the royalties when their creations are used in films, even though, like their Indian colleagues, they have been paid to compose or write for film or sound recording companies.”

While the Government’s intention behind these amendments is praiseworthy and should be welcomed, I do not see the amendments, in their current wording, as either greatly benefiting the authors or being greatly detrimental to film producers. As analysed, the payment of royalties to authors may become limited, effectively, only to earnings from live performances and consequently, will never be at par with international standards.

It seems that the Government has tried to fashion the amendments along the lines of some European countries which restrict the assignment of copyright by an author, under a publishing agreement, for a lump-sum. Such models impose obligations on the publisher to render periodic accounts to the author and limit the instances where any lump-sum is payable, but in trying to adapt these principles by way of a home-brewed formula, much has been lost in translation.

This is a historic opportunity to align our Copyright Act with the best in the world and it is hoped that there is better application of mind in framing the amendments. Till such time, PRS cheques will only be enjoyed and immortalized in song by the foreign counterparts of Indian author composers.