In another articulation of the clear intent and purpose behind the copyright amendments that were brought in 2012, to economically enable intended beneficiaries of the copyright regime, i.e. the authors of the underlying works, the Division Bench of the Calcutta High Court has reaffirmed that irrespective of the musical and the literary works being embedded in a sound recording, at every exploitation of the said sound recording by a user, de hors it being show along with the film it is a part of, in a cinema hall, continuing royalty amounts would flow back to the author-composers through the Collecting Society, i.e., IPRS. This is the first appellate decision recognizing the true intent and purpose of the 2012 amendments and is definitely in line with the debates that preceded the coming in of the said amendments.
The reason for bringing in the 2012 amendments is clear. In spite of the copyright regime existing for over 50 years, there was barely any enablement in terms of economic survival for the underlying author-composers of the musical and other kinds of works in question. This was primarily because they would either be treated as employees of the production house that produced the ultimate output or would be forced to assign away all their rights in favor of the production house. Thus, they would not be able to receive anything but a lump sum consideration in the beginning of the assignment or the employment. This, of course, was a standard form dotted line contract resulting not in any effective compensation. To remedy this anomalous situation, 2012 amendments were brought in to ensure a continuous flow of economic enablement for the author-composers of the underlying works in question that were being exploited as a part of sound recordings which were incorporated in films or independently exploited otherwise.
In the facts of this case, Vodafone, as a telecom service provider, ran a Value Added Service (VAS) which permitted customers to use caller tunes and ring tones taken from film and non-film songs. To run this service, it had a string of agreements with Saregama, beginning with a Master Agreement of March 14, 2014, supplemented by agreements of June 16, 2016, a Settlement Agreement and a fresh agreement of September 20, 2019, and an Extension and Renewal agreement (CRPT) of May 5, 2021. Vodafone’s case was that these arrangements with Saregama, the owner of the sound recordings, fully discharged its licensing obligations. No further royalties, on its case, were owed to IPRS, the copyright society representing authors of the underlying musical and literary works.
The Division Bench of the Calcutta High Court framed three questions that it sought to respond to. First, do the 2012 Amendments allow IPRS to claim royalties for the underlying works in a sound recording when that sound recording is commercially exploited? Second, do Saregama or other music companies, as owners of the sound recording, have the legal authority to grant a licence over the underlying works? Third, does Vodafone have any licence to commercially exploit the underlying works? The Court answered the first in the affirmative, and the second and third in the negative.
Before entering into the reasoning, it is important to note that Saregama is not merely the owner of the sound recordings in question but also the owner of the underlying rights in most of these cases because of the assignment agreements that are generally entered into by the authors of these works with music companies. Notably both the music companies, who act as publishers in this capacity of ownership, as well as the author/composers are members of the collecting society, which is IPRS. Saregama, in its publishing capacity, in turn assigns its rights to collect royalties on behalf of itself as well as its authors to IPRS, who then collects the same from the users of the said works and disseminates it in an equitable capacity amongst its members.
The welcome clarificatory reasoning of the Court rests on a careful reading of the post-2012 statutory architecture. The Court began with Section 13. Sub-clauses (a) and (c) recognize copyright in literary and musical works as independent of and parallel to copyright in sound recordings. Sub-section (4) preserves the ‘separate copyright’ in any work in respect of which a sound recording is made. The Court read this with Section 19(10) read with Section 30 and held that the statute, after 2012, expressly recognises the continued existence of an independent copyright in the underlying musical and literary works embedded in a sound recording, and a corresponding statutory entitlement of authors to share in royalties whenever the sound recording is commercially exploited.
The Court then turned to Section 18. The 2nd, 3rd and 4th provisos to Section 18(1) were inserted with effect from June 21, 2012. The 3rd proviso operates on the author of literary or musical works included in a cinematograph film, i.e., it bars assignment or waiver of the right to receive royalties on equal basis with the assignee for the utilisation of such work in any form ‘other than the communication to the public of the work along with the cinematograph film in a cinema hall’. The 4th proviso operates on the author of literary or musical works included in a sound recording but not forming part of any cinematograph film, it bars assignment or waiver of the right to receive royalties for any utilisation, except to legal heirs or to a copyright society. The Court has expressly held that with effect from June 21, 2012, all assignments contrary to these provisos, save the saved categories, are void.
The third pillar is Section 19. Sub-sections (8), (9) and (10) were inserted by the 2012 Amendment. Sub-section (8) renders void any assignment contrary to terms already assigned to a copyright society of which the author is a member. Sub-sections (9) and (10) ensure that an assignment of copyright to make a cinematograph film or to make a sound recording ‘shall not affect the right of the author of the work to claim an equal share of royalties and consideration payable for any utilization of such work in any form’. Reading Sections 13(4), 18(1) and 19(10) together, the Court, concluded that the statute now recognizes an unwaivable royalty right for authors of underlying works whenever the sound recording is commercially exploited, except where the sound recording is part of a cinematograph film exhibited in a cinema hall.
The legal act of reaffirming
Three points are worth making about the Court’s reasoning.
First, the Court’s treatment of Section 19(10) is the right reading. The statutory phrase is ‘any utilization of such work in any form’. The Single Bench of the Delhi High Court in 2021 substituted that phrase with “identically as in the sound recording but not in any other form”. lacked any reasoning or basis. The Bombay High Court in Rajasthan Patrika had already pointed out that the Delhi Single Bench had not considered the words ‘subject to the provisions of this Act’ in Sections 13 and 14 read with the provisos to Sections 17 and 18 and the new sub-sections to Section 19. The Calcutta DB now arrives at the same conclusion.
Second, the ‘paradigm shift’ framing. Vodafone’s appeal turned on the argument that the 2012 Amendments were clarificatory and merely re-stated the pre-amendment regime under which the producer of a sound recording could license the underlying works as part of the sound recording licence. That position has now been expressely rejected. The Court at paragraph 84 records that the Amendments to the Act of 1957 incorporated by the Copyright Amendment Act, 2012, have ushered in a paradigm shift in the rights of owners of literary and musical rights. They are now protected and entitled to receive royalties for the use of their literary and musical works incorporated in the sound recordings, through IPRS continuously, ensuring continuous enablement of authors inspite of assignments and licenses entered into in lieu of commercialization. As recorded in various pieces by Prashant, Shamnad and others, the 2012 Amendments did substantially try to ensure equitable and continuous flow of monetary enablement to creators, and the question whether they actually deliver on that promise has always been a question of enforcement. The point is once IPRS collects the money, who and how much will flow to artists? That is a point for another day.
Third and essentially, the Court’s distinguishing of ICSAC v. Aditya Pandey is welcome. ICSAC has often been read by music companies as a blanket holding that no separate licence is required from the author of underlying works once the sound recording is licensed. That is not what the Supreme Court said. The Supreme Court was dealing with a dispute that pre-dated the 2012 Amendments, and it expressly recorded that with effect from June 21, 2012 the position has changed by virtue of Section 19(10). The Calcutta DB has applied that in its proper sense. EIMPA (1977) is in the same boat, its reasoning, whatever its merits, was a reading of Sections 13 and 14 as they stood before 2012, and cannot be transplanted onto the consciously chosen post-amendment regime. In any case, I have argued elsewhere that EIMPA is now per incuriam.
This decision joins the Bombay High Court in Rajasthan Patrika in giving the 2012 Amendment the substantive and equitable reading it was meant to have understanding the underlying purpose driving it. It refuses to allow a closed Vodafone-Saregama settlement to extinguish a contractual royalty right held in trust for authors through an assignment or license in the underlying rights and it accepts that Section 19(10) means what it says: ‘any utilization’ in ‘any form’, would create a royalty flow for the author of the underlying works in lieu of providing them the economic support that the act intends to. How much of an economic support this ensures, is a question for another day.
