In an order contrasting with the previous decisions on the issue, a DHC DB has held that PPL cannot issue or grant licences for sound recordings without registering itself as a copyright society or becoming a member of any registered copyright society. In this long post, Kartik Sharma explains the judgement and its implications in light of Section 31 (1) of the Copyright Act. Kartik is a fourth-year student at the National Law School of India University and was the third prize winner in the 2024 Shamnad Basheer Essay Competition on IP law. Interestingly, in his essay, he discussed the role of Indian collective rights management organizations like PPL and Novex in the current Copyright Society structure.
PPL Cannot Issue Licenses for Sound Recordings Without Being Registered as a Copyright Society: DHC
By Kartik Sharma
To the ones who are interested in the Copyright societies saga, well there is news in the form of Azure v PPL!(Azure 2) A division bench of the Delhi HC, in an appeal from an interim injunction passed by a single judge bench (Azure 1), has ruled that Phonographic Performance Limited (PPL) cannot issue licenses to other entities for playing music without registering itself as a Copyright society (CS) or being part of another CS. This marks a shift in the Delhi HC’s position held till now and also puts it in contrast with Bombay HC in Novex v Trade Wings that had sided with PPL and Novex’s ability to carry out the licensing business on the anvil of their assignment deeds cloaking them as owners under Sections 18 and 30 of the Act. Anushka in a previous post has very nicely covered and critiqued the single bench’s reasoning in Azure. In this post, I do a similar thing for Azure 2 and analyse the judicial logic that was deployed. On a broader level, the decision resonates with what I had argued in my essay about PPL and Novex’s present functioning as “super-assignees” as a subversion of the CS structure.
I will straight up jump into a dissection of the reasoning. I do not intend to make any grand, overarching argument in this post. As the upcoming discussion shall reveal to the reader, it is still a mess! And this post just highlights key areas of contention and some food for thought.
The Mysterious ‘Person’ in Section 33(1)
One specifically interesting point of contention in this whole debate has been the very conception of person/association of persons that S. 33(1) main provision applies to. For the uninitiated, S. 33(1) mandates that the business of issuing licenses in respect of copyrighted works can only be done under the framework of a registered CS. Azure 1 in para 36 had held that the expression would not include ‘owners who are not members of a copyright society’. Section 33 kicks in only when copyright owners have assigned their right to give licenses to public and collect royalties therein to a CS. Trade Wings, taking a similar yet broader stance, had refused to accept the contention that “no person” in S. 33(1) includes an “owner” of copyright; essentially BHC’s reading seems unrestricted by the factum of the owner being a member of a CS or not. And now we have Azure 2 that reads “no person/ association of persons” in the broadest light and includes even owners of copyright within its scope. It held that the business of granting licenses can only be done, irrespective of ownership, under or in accordance with the registration under Section 33(3). I wish to point out here that Azure 2 reads “under” AND “in accordance with” to indicate two different scenarios: the first is if PPL itself is a CS, and the second is if PPL is itself a member of another CS, which the DB said in this scenario would be RMPL. Essentially, the person/association of persons itself does not have to be a CS itself, but can be part of another CS. But then, the person itself would not be carrying out the business, it would nevertheless be the CS, right? I have not seen this interpretive observation in any other previous judgments; an alternate view is also possible on the non-consequentialist nature of this distinction.
In my essay, I had argued for a similar liberal reading of the provision since the breadth of the expression ‘any work’ in S. 33(1) presents a nexus between the person and the work that is not constrained by the metric of the ownership status. I contended that the word ‘person’ cannot be exclusive of the ‘owner’ since the Copyright Society has been explained as an ‘association of persons’, and the owners and/or authors of the works are supposed to be the society members.
Business, and Individual Capacity: First Proviso to 33(1)
All being said, I do see the way this particular reading of the main provision of 33(1) leads to the more controversial construction of the relationship between the main part and its first proviso that was done by Azure 2. The first proviso to S. 33(1), on face of it, allows the copyright owner the ability to grant licenses to public in its individual capacity, with the condition that this activity should not conflict with his obligations as a member of the registered CS. PPL was trying to contend that the proviso saves it from the main provision’s rigours by preserving its ability to license out its own works in individual capacity. The DB chose to disagree. It held that the first proviso proceeds on the premise that the owner is a member of a registered CS; moreover, even if the owner is carrying out licensing activities in his individual capacity, it has to be a member of a registered CS. This stance is a break-even from DXC Technology (this was quashed this year) where Madras HC had also demonstrated a great deal of anxiety in preserving the whole framework of CS; DXC observed that the first proviso does not force any owner to necessarily join any CS. However, once the activity of licensing moves from the realm of individual capacity to business, then the rigours of Section 33 are attracted and all such activities have to be routed only through a CS.
After undertaking this interpretive endeavour, Azure 2 concluded that the grant of licenses, even in an individual capacity, can only be done if such person is a registered copyright society or a member of a registered CS. The operating logic of the proviso nevertheless stands open to ambiguities. Another alternate way of thinking is as follows: the main part of 33(1), in prohibiting licensing business without CS registration, impliedly allows for such activities to be done outside a CS’ ambit if they do not qualify as business. The first proviso is only meant to emphasise on the freedom that a copyright owner continues to retain of indulging in ‘individual capacity’ activities despite being a member of a CS. How this will work out is a matter of the CS’ internal working and rules. Nevertheless, I concede that such a concurrent exercise of licensing ability by the member as well as the CS is difficult to grapple with. More broadly, Azure 2 left this tension unresolved where it is unclear as to whether the reference to ‘individual capacity’ is a further exception to business activities of a CS or a completely carved out space altogether from the business realm.
PPL Being a Member of RMPL!
The real-world consequences of Azure 2 would be interesting to see. Novex, another collective rights management organization which is not registered as a CS, was not a party to the suit. Prima facie, the same reasoning would extend to it in a future ruling. In a fireside chat on the decision, Akshat Agrawal highlighted that, Azure 2 implies that an owner, outside the bounds of a CS, has no individual right to license out works. Such an understanding of the regime would strike at the heart of the very right of an individual owner to give out their works. Section 34 of the Act also mentions that copyright owners have the ability to withdraw authorization from the society. I believe that this oversight on part of the DB is linked to its absence of focus on the term ‘individual capacity’ in the first proviso. Even with DXC and Trade Wings, the failure to accurately capture the essence of business activities vis-a-vis individual capacity has been a frequent point of criticism, and Azure 2 also seemingly has repeated the same mistake. I do believe that the phrase ‘individual capacity’ has some material significance. One possible argument might be to read the individual as the original creator/owner of the work and the business aspect being that of an entity that collects copyrights via assignment from such creators. One might even ask the DB: after all of this, what remains to even constitute the activity of giving out licenses in ‘individual capacity’?
In the final leg of the ruling, the DB ordered Azure to pay royalties to PPL on the basis of Recorded Music Performance Ltd. (RMPL)’s tariff rates, as if PPL were a member of RMPL! This presumption, on a first reading, did sound strange and difficult to make sense of. Linking this to the previous para’s discussion on individual capacity, can then PPL retain some part of its rights to itself and assign the rest of it to RMPL? Will PPL further have to assign its entire portfolio to another CS or some other form of contractual relationship will be developed? One may also wonder how the tariff regime will work out in such situations. In my understanding, the licenses given out by a CS are not owner-portfolio specific, since all owners have essentially assigned their rights to the body and rendered it the super-assignee. On an examination of contractual documents of PPL, Novex, and even IPRS (which is an existing CS), assignment is the prevailing modus operandi through which societies carry out business.
I think somewhere along the line there is also an absence of clarity on what a Copyright society even is. The Bombay HC in Trade Wings had articulated a CS as wearing two hats: (i) as an authorized agent and (ii) as an assignee. This is a framing that I personally had found unconvincing and internally contradictory. Regardless, the problem remains and maybe we need a clearer picture of what exactly a CS is. As already mentioned, assignment deeds are a common pathway for CS. Nevertheless, RMPL itself is an outlier because its sample agreement uses the term ‘deed of authorization’, without referring to Sections 18 or 30. It might be a sound strategy to train the guns on such foundational questions firstly.
Before I part ways, I also wish to mention the first proviso’s sibling, equally controversial, that did not find a resolution in Azure 2 insofar as there was an opportunity for the court to articulate its actual role. The second proviso mandates that the licensing business in respect of literary, dramatic, musical and artistic works incorporated in a cinematograph films or sound recording. On the face of it, it does not cover sound recordings as an independent type of work. Why is this proviso even there? I have no idea, and there seem to be different views (see here and here) on it. The main part of Section 33(1) already seems to cover the business activities aspect. Azure 1 and Trade Wings relied on the second proviso to deny the requirement of mandatory registration as a CS for PPL and Novex since they deal with sound recordings and not the underlying works. While the Court did ask PPL to approach the concerned CS in this case, the question in light of the second proviso still remains.
Witnessing all of this chaos caused due to a multiplicity of judicial interpretations, one may also wonder whether the problem is with the statute itself. Clearly, the different provisions and their components when read together generate tensions and logical contradictions. The ultimate prescription then might be an overhaul of the statutory provisions themselves in order to rid them of the indeterminacies and conceptual turbidity.
I guess nobody knows what’s even going on anymore with the statutory interpretation. And maybe the only way to go ahead is, as Ms. Casey advised in Severance (brilliant show btw), please try to enjoy each fact judgment equally, and not show preference for any over the others!
A big thanks to Swaraj, Praharsh and Akshat for their assistance and thoughts on the piece!
[Update- The Supreme Court has passed a stay on the direction of the DB for Azure to pay RMPL rates to PPL. Readers can check Kartik’s post on this update here.]
Only in Section 30 of the Copyright Act does the Act use the singular for “Work.” It is NOT A TYPO, or “singular means plural.” Section 30 has been carved out for single work licensing, such as synchronisation, lyrics printing, dramatic adaptation (ex, “Mama Mia”), etc. Without section 30, such licensing would fall under the ambit of section 33 and deprive the owner of his right to negotiate the license fee for his Work. Obviously, a “Chayya Chayya” will fetch a different fee than an unknown track, and it is not the business of any CMO to negotiate the license fee for a single work. A child can understand that.
The Act is crystal clear when you’re in the music licensing business. You need sections 30 and 33 to find the best market price for your property.
Slightly complicated to be understood by a common man. Would like to know whether these bodies are authorised under the law and license is required to be obtained for DJ during a wedding function while the CS Act exempts. Would appreciate a revert on this.
In our business, the rule is clear and applies in most countries. General programming – e.g., background music, regular shows such ad ‘Indian Idol’ – are covered by the blanket licences – e.g., IPRS for publishing, and normally* RMPL/PPL/Novex for sound recordings.
However, if the work is not covered under the CMO’s mandate and is used in a promotional or synch-like context – e.g., theme song for IPL, promos, title track for a program, etc. – then the work is used as signature content and requires direct licensing from the publisher and record label.
* ‘Normally’ because the situation here is different and requires a long explanation.
Hi sir, Kartik this side. Thank you so much for this insightful and pertinent comment. I also wanted to understand whether this distinction of promotional content is reflected in the assignment deeds as well. And secondly, what is your opinion on the possible argument that this second kind of usage can be construed to fall as business activity and within the ambit of main provision of 33(1)
Blanket licenses provided by authorized CMOs distinctly define the rights granted to the licensee, as these rights are established ‘at source’ in the CMO’s assignment deed from its members. The primary purpose of having exclusively licensed CMOs is that the assignment deed of their members undergoes scrutiny by the licensing authority, the Government, and, for an authors’ society such as IPRS, by the International Confederation of Societies of Authors and Composers (CISAC).
This supervision extends to their operations. The renewal of IPRS’s license last year was delayed because the Government wanted to understand the functioning of the Society in the minutest detail, and suggested a couple of changes, which were duly approved in the AGM. At the same time, IPRS completed a two-year review by CISAC that exceeded the ambit of Government scrutiny to focus on global standards in documentation and royalty distribution.
This level of oversight enhances the Society’s credibility among global rights holders whose works it manages. Within a few years, IPRS has become one of the best-managed societies in Asia and achieved an administrative cost of under 7% when the Copyright Act allows up to 15%. The productivity gains go into its members’ pockets.
The upside of such supervision is clear, as is the downside of allowing opaque entities to exercise the all the rights of Section 33 under the “indrajaal” of Section 30.
Some rights owners do not see it this way because they will never admit that they caused the mess we – myself included, as member of PPL – are all in today. They now pin their destiny into the hands of the SC, or to the Government allowing multiple Societies for the same class of works. Guys, the Government wants a SINGLE WINDOW, not more Societies!
Your second question is unclear to me. Feel free to reach out to me via LinkedIn.
Can someone tell us in a simple way I mean kindly explain this article so common people can understand it
1. “No person or association of person” is not limited by the statutory language. Why is there even a discussion on whether or not it includes copyright owners.
2. Section 33 contemplates a distinction between “business of granting licenses” and “right of granting licenses”. To restrict an individual from granting licenses in respect of their own works would be antithetical to the idea of agency and perhaps unconstitutional as well for being a restraint of right to practice own livelihood. This is being stated in context of creator-owners and not assignee-owners. So an exception for individuals is allowed, while requiring that an individual can do so only if there are no inconsistent obligations with a copyright society (either no obligations exist, or clear demarcations exist between what the individual can do and what the society can do concerning individual’s works).
The above assessment may not be accurate unless we are able to solve for the question as to, “Why does the 2nd proviso exist to section 33(1). Section 33(1) clearly states business of licensing any work is to be carried out by a registered copyright society. There are no limitations on the class of works. Then the 2nd proviso goes on to require that in respect of literary, dramatic, musical and artistic works used in films – it has to be done only through a registered copyright society, implying thereby that 2nd proviso contemplates a scenario where non-film literary, dramatic, musical and artistic works could be licensed as a form of business even by an unregistered person/association of persons. Why would the 2nd proviso say so when section 33(1) clearly require that business of granting license in respect of any work has to be through a registered copyright society only.