Justice Ravindra Bhat of the Delhi High Court has – through several important judgments – helped advance the understanding of intellectual property law in the country. While his judgments need not necessarily be seen as the only correct point of view, they at least have helped stimulate debate on several important issues. On this blog itself, his decisions have been the subject of much discussion, as evidenced in posts linked here. His recent judgment in CS(OS) No. 1692/2006, Warner Bros. v. V.G. Santosh, is another instance of a well-reasoned judgment which may well give rise to great debate. The case deals with parallel imports and the doctrine of international exhaustion of rights, and Justice Bhat held that the principle is not applicable to cinematographic works. But before going on to examine the learned Judge’s reasoning; a brief look at the facts of the case…
Facts:
The Plaintiffs carried on the business of film production. The films in which they claimed copyright were first published in the
The Plaintiffs alleged that these acts of import and hiring out amounted to an infringement of their copyright. The Defendant stated that the DVDs were bought legally – there was no copy of those particular DVDs. That being the case, it was contended that no infringing copy had been made. Further, relying on the “first-sale doctrine”, the Defendant argued that once a DVD has been legally sold to them by the Plaintiffs, the plaintiffs’ rights in that particular DVD were exhausted. Accordingly, the Plaintiffs could not exercise control over the particular DVDs after the first sale had been completed.
The question then arose before Justice Bhat as to whether the defendants actions of importing the DVDs, as also the giving on rent of the DVDs, amounted to infringement of copyright.
The Court’s reasoning:
Justice Bhat began by noting that whether or not the principle of exhaustion of rights applies, is a matter dependant on the particular statute before the Court. Among the points raised by the Defendant was that the Explanation to, Section 14 of the Copyright Act states, “For the purposes of this Section, a copy which had been sold once shall be deemed to be a copy already in circulation”. On this basis, it was urged that the doctrine of first sale applies in
However, as Justice Bhat noted Section 14(d) of the Act stated that in respect of cinematographic works, “copyright” would mean the doing or authorizing the doing of the following:
i. Making a copy of the film
ii. Selling or giving on hire or offer for sale or hire any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions
iii. Communicating the film to the public
Thus, the content of copyright in case of cinematographic works is different from that in the case of literary works, dramatic works etc. The phrase “copy in circulation” was found in describing the copyright vis-à-vis literary, musical and dramatic works. It found no application in cinematographic works. On a plain reading of Section 14, the phrase was used to limit the copyright in the case of literary, musical and dramatic works only. In defining copyright vis-à-vis cinematographic works, the phrase was not used at all. Thus, Justice Bhat noted that while the exhaustion principle would perhaps be applicable to literary, musical and dramatic works; that would not mean that the principle also applied to cinematographic works.
Under Section 14(1)(d), in the case of cinematographic works, the right is “regardless of whether such copy has been sold or given on hire on earlier occasion”. This is in express contrast to the position regarding literary works. Hence, the nature of the bundle of rights which make up the copyright is different in the two cases; and the wording of the statute did not leave any room for the principle to be applied to cinematographic works. As the Judge put is, “…Parliament having intervened in one category of copyrights to grant a limited kind of exhaustion and consciously chosen not to extend it to others, sleight of judicial reasoning cannot extend its application…” Furthermore, on the question of parallel imports of cinematographic works, the Proviso to Section 51(b)(iv) states that importation for private use of the importer is not deemed to be an infringement. The very fact that this proviso was inserted into the statute would indicate that importation for commercial, non-private use would be tantamount to infringement.
On the face of it, therefore, a plain reading of the statute indicated that the Defendant’s arguments could not succeed. In order to get over this hurdle, the Defendant raised two ingenious pleas. They contended that as a matter of interpretation, there should be no disconnect between various intellectual property laws, and Courts should try to move towards a uniform interpretation and application of such laws. Section 30 of the Trademarks Act, 1999, and Section 107-A of the Patents Act, 1970, permit certain types of use and importation analoguous to that in the present case (see here for the previous discussions on ‘parallel imports’). It was therefore argued that the same should be extended over copyright so as to ensure uniformity between the different laws. Justice Bhat however turned the argument over, and said that if a specific provision allowed such use and import under the Trademarks Act and Patents Act, the absence of the provision in the Copyrights Act is a sure indication that the legislative intent was to not have the same treatment in this respect for copyrights. The other argument raised was that unless the interpretation put forth by the Defendant was accepted, the Copyright Act would be ultra vires the freedom to carry out trade under Article 19 of the Constitution. The Court rejected this argument as well. It was stated, “There is no public interest in insisting that such copies should be permitted, on the ground that the cinematographic films are not made available in the country. If that is the position, the defendant is always free to negotiate the terms of a license, in such of the films as are not available, for the purpose of their publication or performance in
Accordingly, the Court came to the conclusion that the defendant’s actions would amount to infringement of copyright.
A few questions:
The decision itself is rather lengthy, but contains a detailed discussion of the principle of exhaustion of rights, as well as parallel importation. However, was the Court a bit too ‘literal’? Would accepting the defendant’s arguments really have been a case of “sleight of judicial reasoning”, or would it perhaps have been a legitimate exercise of interpretation? Should cases of this kind be decided – as a matter of policy – simply on the question of interpretation of the transaction as to whether a ‘sale’ has really taken place? Once a ‘sale’ takes place, ownership in the particular copy passes. Once admittedly the transaction is a ‘sale’, would it be possible to hold that all rights of the plaintiff in that copy are exhausted; not as a matter of interpretation of statute, but as a matter of the contract between the parties? I look forward to what our readers have to say on these issues…
Mihir,
Had the Court not interpreted the statue as they did, then the very purpose of granting Regional Licences and Rights in Movies would be defeated.
If commercial use of non-infringing copies of cinematographic films was allowed by appling Doctrine of First Sale, then the film industry would literally collapse!!!! Most of their profits are made out of regional licencing fees!!!!
Sneha
Mihir, thats a stretched imagination.
I think I should clarify my questions a bit. I am not saying that the Judge was wrong – I would probably agree that the statute left him with little choice. The question of interpretation is a separate one; perhaps I will touch on it again a bit later. But – as a matter of policy – is there a reason for the statute being the way it is?
My point is – assuming that the true nature of a transaction is a “sale”; then what principle gives the seller rights to control what I do with the thing sold? On the other hand, if the seller retains some right in the particular DVD he has ‘sold’ to me,has there really been a sale? Or is it only some kind of license/right to use which has been transferred?
Let us take the case of software – which raised particularly thorny issues on the applicability of sales tax. Branded software is goods. Sinha J’s obiter in TCS suggests that unbranded seoftware is also goods. But the question of whether there has been a “sale” of goods is unclear – when I receive a customised software, it will often only be licensed to me and not sold. The transaction between the parties is clear on this aspect (the transaction is a license transaction and not a sale)
Now, let us take the case of a movie DVD. The transaction is clearly (and admittedly) a sale. On policy, why should I get less rights than a buyer in the case of other goods? Why should I be treated as a “licensor” when I have paid consideration for the “sale” of the particular physical manifestation?
Also what is the basis for differentiating between literary and cinematographic works?
Now if a regional license is being granted, that is a case where there is no sale at all. I am not saying that everytime I get a DVD, it must have been sold to me. It might well have been only licensed – that is what I mean by saying that the issue is one of interpretation of the contractual transaction between the parties. But – take the case where it is admittedly a sale – why restrict the seller’s rights?
About the point of the film industry collapsing – the filmmaker can well choose not to sell DVDs but only license them. Also, jurisdictions where the first sale doctrine has been applied have not, I guess, seen any collapse of the film industry. So why not leave the issue to be treated as one between the parties – let the parties egotiate what kind of rights they wish to be transferred…
Can a movie-maker transfer a DVD to me for valuable consideration; impose a condition on me that I do not sell the DVD in Maharashtra; and yet claim that the original transaction itself was a “sale”? Is there any particular reason for the statute to take away this option (of an actual sale)? If parties did really sell, why not let them suffer the disadvantages and enjoy the advantages which a “Sale” typically entails?
An Advocate practicing in the Bombay High Court who wishes to be anonymous wrote the following mail:
Mihir,
I wonder why you concede the issue of interpretation. First, let us begin by understanding that Court’s will not necessarily refuse to fill up a cassus omissus. The cassus omissus rule used to be applied strictly. The present understanding is – however – that the rule is not an absolute one, and Courts can well step in. Kindly refer to D. Auchie, “The Undignified Death of the Cassus Omissus Rule”, published in the Statute Law Review for the relevant case-law.
Now, let us turn to 14(1)(d)(ii). “to sell OR give on hire, OR offer for sale OR hire, any copy… regardless of whether such copy has been sold OR given on hire before…” First, note that the right is to sell or give on hire; not sell and give on hire. After selling, the copyright-owner cannot claim to have the right to give on hire. As for the latter part of the sentence… does it mean that the right is to sell regardless of whether the copy has been sold before? It cannot be… the statute can hardly be encouraging people to trick others! If I sell a disc to A, I can hardly be entitled to sell the same disc to B. Therefore, the words must necessarily be read as “sell… regardless of whether the copy has been sold before (assuming that the saleable interest is recovered by the copyright owner)” Thus, the provision only specifies that once I sell a copy; I cannot be prevented from repurchasing it and reselling it… The other interpretation would lead to a situation where the same copy can be sold by A to B and by A to C; without any re-purchase from B by A. That is an absurdity contrary to all notions of sale.
Next, the judge argues that the parallel import provision is present in the Patents Act and the Trademarks Act; so he cannot bring it in to the copyright act. Might have been true if the Copyright Act was enacted after the other two… But here the question is of construction of the 1957 act. What principle allows the interpretation of a statute to be effected by later enactments? Why can it not be argued that the specific mentions in the later enactments are only clarificatory? As for the argument that 51(b) exempts only private non-commercial uses. Now, under the section, it is an infringement to import into India any “infringing copy” of the work. Now the Explanation says – “the reproduction of a literary, dramatic, musical or artistic work in the form of a cinematographic film shall be an infringing copy.” Does the Judge mean to say that every DVD is an infringing copy? If the explanation is given effect as the Judge wants to, will every movie DVD be an infringing copy? Even if it is produced by the filmmaker? Assume I have produced a film, and I make a DVD of the film. So, now, that DVD is also an infringing copy? If not, under the judge’s reasoning, how will my copy be saved from being an infringing copy?
Finally the freedom of trade argument. The learned Judge says that there is no public interest involved; and if at all, the defendant could have negotiated a license agreement with the producer. Umnn, under the Judge’s reasoning; I am not free to do what I want to with my property. I cannot hire out something which I have bought legally. So, effectively, my right to alienate my property is being taken away by the statute without compensation…
Let us get one thing clear. If I am sold 10 kgs of rice, and I legally import it into India, I cannot be prevented from selling that rice to someone else. I cannot be prevented from doing exactly what I want with that rice. Reference may be made – to understand the entire bundle of rights which constitute ownership – to A.M. Honore’s wonderful essay in the Oxford Handbook of Jurisprudence. Then, why the difference with a DVD? If a buy a book, you cannot prevent me from selling it to another person. You cannot prevent me from donating that book to the ;library. Then, why the difference with movie DVD? The answer cannot be that “intellectual property” is involved. INtellectual property is involved in books too, But you cannot prevent me from lending a book which you have sold to me. You cannot prevent me from chargng a library fee before I let my friend use it. Why the difference with movies? Catastrophic financial consequences? So let movie-producers stop selling it and instead let them license it to me. They cannot have the cake and eat it too. They cannot expect sale consideration from me and then give me the rights of a licensee. And, if anything, enact a law saying that reading books out aloud in public / screening movies in public is illegal. Again, what is the rationale for distinguishing between literary works and movies? If there is no rationale, then the alleged cassus omissus must be filled in to prevent absurdity…
I look forward to responses; and apologise for typing this out in a bit of haste
Very interesting comments.
However, I think we are reading too much into the interpretation. Its evidently clear from a reading of Section 14 (d) that a producer of a movie shall retain the rental rights unless the same have specifically been licensed. The sale confines to personal use only in the case of cinematograph films. It would rather be unfair and illogical and completely against business principles to allow the buyers of these movie to time and again make movie out of rentals without the producer getting a bite into the money so made. The law has to be interpretted to suit the situation prevalent in the socitey at large and the judgement supports this.
The problem can be appreciated by marking the difference between a sale, an assignment and a license.
Mr. A buys a movie DVD from the market. What transaction has taken place? Sale of goods, license of copyright or assignment of copyright? Let us assume that there is no notice on the packaging of the DVD about a license being there. It indeed is sale of goods. Now, just because it is a sale of good, can we say that the buyer is free to do whatever with the DVD—because now he owns the DVD? If yes, Mr. A will be able to lend the movie to others, run it in a public place, run the same DVD in a theatre where fee is charged from those who come to watch. All this just because Mr. A is the proud ‘owner’ of the DVD.
Many of the above cited uses are in the form of rights reserved only to the ‘owner of copyright’ in the film. If Mr. A wants to exploit the DVD in the above stated or other possible ways, he requires something called a license or an assignment of copyright and not a sale of goods. And there has been no license or assignment of copyright in this case—it is ‘merely’ a sale. Assignment or license of copyright is a specialised contract for which certain parameters have been laid down under the Act—like writing, signing, etc. and they have not been fulfilled. There seems to be no need to bring in grand doctrines of first sale, etc. in this. So, my understanding is that the statute as well as its interpretation has been correct in this case.
Completely agree with the logic and explanantion given by Raman Mittal