We have for our readers today, a very detailed guest post by my friend Chaitanya Ramachandran, analysing the argument made by T-Series in its constitutional challenge against Section 31(1)(b) and Section 31D of the Copyright Act, as amendment by the Copyright (Amendment) Act, 2012.
Chaitanya, graduated from the National Law School of India University in 2009. At NLS, he was the Chief Editor of the Indian Journal of Law and Technology. On graduating from law school, he worked for the law firm, Clifford Chance in London. He is presently studying towards his LLM Degree at Stanford Law School, where we are classmates.
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| Image from here |
T-Series’ Constitutional Challenge to ss. 31(1)(b) and 31D of the Copyright Act
By
Chaitanya Ramachandran
As Prashant indicated in a previous post, Super Cassettes Industried Ltd. (“T-Series”) has filed a writ petition (W.P.(C) No. 2316 of 2013) in the Delhi High Court challenging the constitutionality of two of the compulsory licensing provisions of the Copyright Act, 1957 affected by the Copyright (Amendment) Act, 2012 – the amended s.31(1)(b) and the newly-introduced s.31D (and the rules corresponding thereto). In this post, I summarize and comment on T-Series’ challenges to these two provisions – Prashant has pithily recapped the challenges to the Copyright Board here.
Section 31(1)(b) sets out the regime for the compulsory licensing of works that have been withheld from the public, while s.31D creates a statutory licensing regime that allows compliant broadcasters to broadcast any literary and musical works or sound recordings. T-Series challenges both sections as being violative of Arts. 14, 19(1)(g), 21, and 300A. For context, here are links to the original Copyright Act, 1957 (here) and the Copyright (Amendment) Act, 2012 (here).
T-Series’ contentions are as follows:
I. Section 31(1)(b)
T-Series argues that this provision privileges the interests of broadcasters (who it claims have previously abused it for financial gain at the cost of copyright owners). Its arguments can be classified under the two broad headings of natural justice and unconstitutionality.
Natural justice: T-Series objects to the 2012 Amendment’s expansion of compulsory licenses to persons other than the complainant as being unreasonable and contrary to principles of natural justice, on the ground that the reasonableness of the copyright owner’s refusal to grant a voluntary licence can only be judged vis-à-vis the complainant, and thus any remedy should accordingly be restricted to the complainant alone (especially as third parties are not involved in any hearing under this provision).
Unconstitutionality: T-Series also argues that the provision is ultra vires the following constitutional provisions:
1) Art. 14: T-Series contends that while the object of s.31 is to ensure that the public is not deprived of access to copyrighted works, subsection 1(b) doesn’t require the “withholding of” or “denial of access to” a work, thus creating a disconnect between the object of the provision and the means of achieving it. This is a rather weak argument, as the words “has refused to allow communication to the public by broadcast” seem to concord with the object of ensuring public access.
T-Series also argues that an arbitrary and discriminatory distinction has been made between (a) the exclusive right to broadcast a work and (b) the other exclusive rights available to a copyright owner. While the right to broadcast does serve the goal of ensuring public access more than, say, the right to adapt, the right to reproduce or the right to perform could arguably also serve that goal. So perhaps T-Series isn’t being entirely unreasonable when it claims that broadcasters are getting special treatment.
2) Arts. 19(1)(g) and 21: T-Series complains that the provision unreasonably fetters its freedom of contract by destroying third parties’ incentives to enter into voluntary licenses. It also makes the interesting argument that the compulsory license is effectively a price control/royalty subsidization mechanism that has no legal justification, as (a) copyrighted works are not essential commodities and (b) there is no primary public purpose associated with the licensing of such works to broadcasters. While this argument has some appeal, the state’s interest in ensuring public access to copyrighted works may well constitute a sufficient public purpose, leaving open the question of whether copyrighted works are essential commodities.
3) Art. 300A: T-Series argues that the provision enables a deprivation of property that doesn’t afford copyright owners the benefit of due process, and that doesn’t achieve any real public purpose. This argument also seems weak to the extent that the copyright owner is in fact given a reasonable opportunity to be heard – but the due process argument is more convincing with respect to third party beneficiaries of a compulsory license, who may not be involved in the hearing.
II. Section 31D
Natural justice: T-Series objects to s.31D as it does not give a copyright owner any opportunity to be heard before a broadcaster avails of a statutory license.
Constitutionality: Parallel to those against s.31(1)(b), T-Series also makes the following constitutional arguments against s.31D:
1) Art. 14: T-Series argues that s.31D makes not one, not two, but three types of discriminatory classifications:
· It discriminates between copyright owners and broadcasters, as the former are deprived of their freedom of contract while the latter may continue to trade without hindrance. This argument is susceptible to an “apples and oranges” objection – only an unjustified distinction between two classes of copyright owners is capable of violating Art. 14, and that copyright owners and broadcasters are not on the same footing under Art. 14.
· It impermissibly singles out owners of literary and musical works and sound recordings, leaving owners of other types of copyrighted works free to exploit their works without the threat of statutory licensing. T-Series may have a point here – why, for example, are dramatic works and cinematograph films not subject to the statutory license?
· In a manner similar to s.31(1)(b), only the rights of broadcasting and public performance are made subject to a statutory license, while the other exclusive rights remain untouched.
2) Arts. 19(1)(g), 21 and 300A: T-Series’ arguments are similar to those made with respect to s.31(1)(b).
Analysis
Although T-Series’ constitutional arguments are susceptible to criticism, it makes two other points worth considering. The firstis that under the existing voluntary licensing arrangements, public access to copyrighted works is not an issue. Does the mandatory licensing scheme introduced by the 2012 Amendments therefore amount to a solution in search of a problem? Secondly, it points out that while license fees are not a significant expenditure for broadcasters (and annexes a sample broadcaster’s P&L statement showing that its licence fees are much lower than administrative expenses and salaries), against a backdrop of declining physical sales, licensing royalties represent a copyright owner’s primary revenue stream, and a portion of these are paid out to the artists associated with the copyright owner. Lowering these revenues by fiat would cause irreparable harm to copyright owners.
T-Series also stresses the urgency of the situation by disclosing that it has been receiving letters from some of its licensees threatening to broadcast its copyrighted works without its consent and subject only to the royalty rates determined by the Copyright Board.
With respect to s.31(1)(b), T-Series appears to have glossed over the built-in reasonableness requirement that limits the ability of third parties to avail of a compulsory license. Where a copyright owner refuses to authorize the broadcast of its work(s), the Copyright Board may grant a compulsory license only “if it is satisfied that the grounds for such refusal are not reasonable”. This accords with the state’s interest in ensuring public access to copyrighted works while safeguarding a copyright owner’s right to exploit its works – as long as the copyright owner doesn’t unreasonably refuse to authorize the broadcast of its works, it has nothing to worry about.
The court may have a more difficult time finding a limiting principle in s.31D, which appears to completely exclude copyright owners from the statutory licensing process (except for a right to notice of a third party’s intent to broadcast its works and a right to inspect the third party’s books). There is a case to be made for the proposition that mandatory licensing should be the exception rather than the rule, and that licensees shouldn’t be able to exploit the system by using it as a proxy for voluntary licensing at a fair market rate. I’d love to have your thoughts on this (and T-Series’ other arguments) in the comments.
In its challenge to Section 31 D, T Series has submitted that it bypasses the scheme for a fair hearing. However, in my view Rule 31of the Copyright Rules, 2013 adequately provides for a fair hearing mechanism.
It may also be relevant to go back to the object behind Section 31 D (Statement of Objects and Reasons 3 ((xiv)-“ introduce a system of statutory licensing to broadcasting organisations to access to literary and musical works and sound recordings without subjecting the owners of copyright works to any disadvantages;”)
T Series should blame itself for this Amendment. The Standing Committee Report while holding that fast-growing industry like broadcasting industry needs to have hassle-free access to works had observed that “the access to copyright works by radio broadcasters in the light of the new system of auction of licences for FM operators was dependant on voluntary licensing. As a result, unreasonable terms and conditions were being set by the copyright societies and owners. This has also led to divergent views by the courts in interpreting the existing compulsory licensing provisions under section 31. There were litigations pending before various High Courts as well as the Copyright Board regarding the nature of licence and the rate of royalties to be paid when works particularly songs were used for broadcasting. Automatic licence or non voluntary licence such as proposed statutory ensuring adequate return to the owner of works was the best solution to make access easy for broadcasting.”
The monopolistic regime of T Series and the necessity of Section 31-D would be seconded by the HT Media CCI case.
Though Section 31 D seems to be a welcome change in public interest, Chaitanya is correct in his proposition that mandatory licensing should be an exception rather than a rule. T Series seems to have made a strong ground under Article 14 as far as S. 31D is concerned.
Thanks for your thoughtful comment, Anushree.
I agree that Rule 31 does afford copyright owners (and other interested persons) the opportunity to suggest the appropriate rate of royalties to the Copyright Board. It is even conceivable that, in practice, the evidence and recommendations put forth by copyright owners may be given some deference by the Board. At the same time, the Rules do go above and beyond the bare text of s.31D – so it is possible that a future amendment to the Rules that is not violative of s.31D could nevertheless be violative of T-Series’ due process rights.
I agree with your observation that the CCI’s recent finding of discriminatory conduct by T-Series in response to HT Media’s complaint might serve as strong evidence that T-Series’ licensing terms are unreasonable for the purposes of s.31(1)(b). By contrast, there is no reasonableness requirement in s.31D, which will therefore be the path of least resistance for broadcasters.
It is also surprising that T Series has not challenged the newly inserted proviso to Section 33 (1). They had a good ground of challenge under A.19(1)(g).
@ Anushree,
I agree with you that its strange that they havent challenged the amendment in S.33 – maybe they dont want to take a stand on the section’s interpretation so as to be able to argue otherwise later, or they’re just in denial about it! But I dont agree with you that they have a good ground of challenge. The proviso is crucial to the new provisions on royalty, and if the proviso is stuck down, the entire scheme will fail. T Series is not precluded from owning and exploiting its copyrights, however, it will have to do so as part of IPRS (and thereby part with 50% of the royalties they would have collected otherwise). They would, of course, be very upset about this — but I doubt a court would strike the proviso down given that the entire objective of this change was to guarantee the authors that 50% share.
One should choose their words wisely Anushree. It would be a factually incorrect statement, treading on the borderline of being defamatory, to misrepresent the result of CCI proceedings against T-Series and publicly label them as ‘monopolistic’.
As regards the petition, i like the analysis Chaitanya has made. Appears to be a fair assessment based on his personal understanding of the petition. While the intent of the legislature in bringing these amendments may not be a good idea to be questioned the mechanism adopted by them both under the Act as well as the Rules is highly objectionable and reeks of bias towards a particular industry.
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@ Udit- I agree with you partially to the extent that T Series may have valid reasons for not challenging S.33 proviso. However the new proviso has created several ambiguities. It is definitely an extension of the amendment to Section 17, 18 and 19. However it may be pertinent to note that while the proviso immediately preceding the newly inserted proviso permits the owner of a copyright to grant licenses in respect of his own works which includes owners of cinematograph films and sound recordings as well, the new proviso creates an embargo and takes away the right of the owner of the cinematograph film/ sound recording to license the underlying works incorporated in the cinematograph film/ sound recording. The aforesaid proviso overshadows the principles laid down by the Hon’ble Supreme Court in the matter of 1977 IPRS judgment i.e. it fails to recognize the separate existence of the cinematograph films and sound recordings once the musical and literary works are subsumed and embodied in it. (That seems to be the intent of the amendment). However in my view, formation of copyright societies was for convenience of the industry. By making it mandatory to carry on the business of granting licenses in underlying works incorporated in cinematograph films/ sound recordings only through a copyright society, the Act is clearly putting a fetter on free trading of rights. An author/ owner must have the right to freely trade in the rights owned by them. The new proviso has also led to a situation where entities communicating work to the public are required to go through duplication of licenses, one from sound owners for the sound recording rights and another from copyright societies of which the authors of underlying works are members. I am open to corrections in my understanding.
@ anonymous- We all have a right to have our view and have an open academic discussion on the subject. The matter is still sub-judice before the CCI and I had no intention of giving my verdict on the same. I was merely indicating towards the object behind the amendment to S.31-D r/w Standing Committee Report and strengthened by the HT Media case, which in my view indicates certain important elements which should not be ignored. However, I agree with Chaitanya that there is no reasonableness requirement in S.31-D.
@ Anushree
Lets not get into the duality issue! The fact that courts are saying that the 1977 SC judgment implies “subsumation” is strange in itself! But in any case, I think the matter is put to rest by the Amendment.
I do want to comment, however, on the conflict you perceive between the existing proviso in S.33 and the newly introduced one. Please note the word “business” in the new proviso (which is absent in the earlier one that talks about an owner licensing it himself). I think a strong argument can be made in favour of a harmoneous construction to the effect that an author (whose “business” is to create) can license as an owner, whereas entities who purchase copyrights merely in order to license them (whose “business” is one of licensing copyrights — such as TSeries) cannot. Something akin to patent trolls / NPEs I would say…
And I dont see the Authors complaining about the right of entities such as TSeries losing their right to do business de hors copyright societies. The chain of ownership of the copyright (starting with the author and ending with TSeries) was not very rewarding for the authors to begin with anyway.
Anyhow, this is all conjecture till a court really deals with all these provisos!
@Udit- I agree this is all conjecture. But somehow there is a fundamental misunderstanding in the way the Amendment is being interpreted which is obviously attributable to the technical faults in the legislative drafting. The Amendment has created a new right in the author of underlying works which is the right to receive royalties (Pre-Amendment if the author of a work was not the first owner of the copyright therein, then the author had no right vested in him in such works except for moral rights). Royalty rights are separate from copyright in the work. An author can relinquish his rights comprised in the copyright of his work, however he cannot do so with respect to his royalty rights (at least for literary and musical works). If the object of the Amendment was to ensure that lyricists and composers should receive royalties for commercial exploitation of their works, then the Parliament should have developed a mechanism to protect only the royalty rights of the authors and not mix it with the ownership of copyright in the work. An author could always enter into a contract for service and retain whatever rights he desired. There was no necessity to take away from the owner of the film/ sound recording, the right to trade in the underlying works. Let’s consider a practical situation-If a website owner wants the right to stream an audiovisual song from the repertoire of T Series, it would firstly have to take license from T Series/ PPL or the copyright society of which T Series is a member for sound recording rights (Assuming T Series has the ownership of audio visual rights) + license from IPRS or the copyright society of which the lyricists and composers are members + license from copyright society if any formed for the artistic works incorporated in the audio visual (unless the producer has taken a waiver of the royalty rights of the author)+ license from copyright society formed by authors of dramatic works in the audio visual (say choreographers) + license from performers society for singers, actors, dancers in the audio visual. And being the assignee of the work, T Series would obviously have to get itself registered with all these societies. Is this really practical?
Like most others, the authors are not complaining because the Amendment is a camouflage giving the impression that it is for their benefit. If the entity communicating the work to the public, be it the website owner, telecom operator, broadcaster is mindful of the fact that it would have to face the financial brunt of paying the royalties, then obviously consideration paid to each entity in the cycle will be affected reducing the lump sum consideration paid to the author. Not all authors will have the ability to bargain with the producer who would perhaps be giving that author the break of his life. I am not advocating for any particular side, however it is painful to see that despite recommendations being made by each sector in the Standing Committee Report and the involvement of the best legal minds, the Amendment is so deeply flawed & due to its ambiguities it will miserably fail to achieve the object it is trying to achieve.