compulsory licensing of music

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COMPULSORY LICENSING OF

MUSICKRISHNAVENI.SHEAD -RESEARCH



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INTRODUCTION

• Compulsory license is the term generally applied to a statutorily license to do an act covered by an exclusive right, without the prior authority of the right owner. Compulsory license provisions afford the facility of using protected material in certain circumstances, as provided by statute, without seeking the prior permission of the right owner

• The Copyright Act and rules made there under contain elaborate provisions regarding licensing of Copyright. Licensing under the copyright law can be either voluntary or non-voluntary. Licensing can be done not only with respect to the existing work but also with respect to the future works.



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THE RATIONALE BEHIND COMPULSORY LICENSING OF

COPYRIGHT

• To correct imbalances in market forces

• Protect those who wish to use a work for educational or non-commercial purposes

• Useful when it is too burdensome to locate the author

• Generally considered good for society

• Tempers the exercise of market power

• Discourages abuse of Copyright



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AUTHORITY EMPOWERED TO GRANT COMPULSORY LICENSE

In the interest of the General Public the Copyright Board has been empowered to grant compulsory license

• where the copyright work is withheld form the public (Section 31)

• in case of unpublished Indian work (Section 31A)

• Produce and Publish Translation (Section 32)

• reproduce and publish work for certain specified purposes (Section 32A).



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Grant of Compulsory License

• Under section 31 of the Act the Copyright Board can grant a Compulsory License on the satisfaction of the following conditions :-

(1) The work in respect of which the compulsory license is sought is withheld from the Public.

(2) Owner has refused to make the work available to the Public.

(3) The ground(s) for refusal by the owner are not reasonable.

(4) Owner is being afforded an opportunity of being heard.

(5) The license in granted subject to the payment of royalty fixed by the Copyright board.

Section 31(1) (b) confers on the Board the power to grant compulsory licenses in works if it is satisfied that the copyright owners has refused to allow communication to the public of the work and such refusal is not reasonable. The licensee then will have to pay compensation and follow such terms and conditions as determined by the Board and pay fees to the licensor as prescribed.



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COMPULSORY LICENSING - BY FM RADIO’S

EMERGENCE OF FM RADIO STATIONS

• The government of India has been in the process of privatising the broadcasting sector and has issued about 37 licenses to private players to run radio channels in different parts of the country covering about 19 cities.

• Majority of these private radio channels play film songs, FOR which they should obtain a license from a copyright society to play the film songs by paying a certain amount as royalty. The royalty received by such copyright society is shared with the original owners of the copyright.

• .



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Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

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CALCULATION OF ROYALTY BY COPYRIGHT SOCIETIES

• Every radio station to submit a monthly log sheet to Copyright Societies to enable it to prepare a debit note or invoice and for making payments to its members.

• Copyright Societies to submit monthly invoices to each party showing the amount of royalty payable for the relevant previous month. On receipt of the invoice, the party will make payment to the Society through normal banking channels.

• If invoice submitted by Copyright Societies are not paid for 2 consecutive months, Copyright Societies would be entitled to deduct the amount due from the security deposit. If the outstanding is not cleared for 3 consecutive months, Copyright Society may terminate the license by giving 30days notice to the party.

• Rate of royalty payment during the prime time broadcast shall be Rs. 1,200/- per needle hour. The rate for the day time and for night time shall be at a reduced rate.

• .



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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Music Broadcast Pvt. Ltd vs.

Phonographic Performance Ltd.,

• In this case the Board held in favour of granting compulsory licences under Section 31 (1) (b) of the Copyright Act, 1957 to complainants FM radio providers against music providers such as Phonographic Performance Limited (PPL). Here , the issue in question was that whether the FM radio industry could claim compulsory licensing on music owned by music providers such as PPL.

• This was based on the argument that the latter were being unreasonable in charging exorbitant royalties of FM radio channel providers for music owned by the latter which in turn was affecting public interest at large.



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Contd., the Board observed that the Board can exercise its jurisdiction in this

regard, only if the copyrighted work in issue is,

(a) an Indian work; (“Indian work” will include sound recording made or manufactured in India)

(b) has been published or performed in public;

(c) the owner of copyright has refused to allow communication to the public by broadcast of such work or sound recording on such terms which the complainant considers reasonable;

(d) complaint is made to the Board. Further, in order to fix a license fee the in the absence of comparable license the Board decided to give a judgment for a limited period from November 2002 to October 31, 2004 and directed the Registrar of Copyrights to issue compulsory licenses to all complainants on following terms: Each complainant to deposit Rs. 20 lakhs per radio station by way of security in favor of PPL. They may furnish a bank guarantee as a substitute to deposit Being aggrieved by the order, both the complainants and defendant filed an appeal before the Bombay High Court.



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JURISPRUDENCE REGARDING LICENSING MUSIC

• The Hon’ble Supreme Court in its Landmark Judgment of “M/s Entertainment Network (India) Ltd. Versus M/s Super Cassette Industries Ltd” delivered on 16th May 2008 is :-

• Sound Recording stands on the different footing than that of other literary, dramatic or musical work and there is no statutory requirement that a compulsory license can be granted only once the work is withheld from the public.

• Compulsory License can be granted even when the work in not withheld form the public but on owner’s refusal to permit a broadcaster to broadcast the work. Refusal also means demanding of the royalty which is high or imposing unreasonable restrictions therein



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PUBLIC INTEREST

The argument regarding public interest was drawn up by pouring over government’s policy regarding the involvement of private sector in FM radio broadcasting over the years since the launch of the First Phase of privatization in 1999.

The Board firstly held that comparing the cost of content for radio service providers and TV Broadcasters was erroneous. While the former was bound by government directive to be a ‘free to air’ service (wherein It cannot charge any subscription from the public), the latter could and did charge the viewers. Also there were many other restrictions regarding content aired on radio broadcast as opposed to the television which again made comparing the incomes and costs over these two different mediums, difficult.

All India Radio (AIR), a state owned enterprise and private sector FM radio providers cannot be compared as AIR had for decades enjoyed a virtual monopoly in the radio industry and could afford to make the royalty payments. The nascent FM industry, on the other hand, already running in loss, was hard pressed to pay the high royalty payments demanded by the music providers of 14%-15% especially since its main content is music and as it had too many restrictions on the type of content it aired unlike AIR.



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PUBLIC INTEREST Cntd…

• It was advocated by the music providers that playing their content over the radios was damaging their sale of music in physical formats such as CDs and cassettes. However the Board pointed out that the respondents had not sought to assess how much of the loss was a result of newer digital formats such as IPODs, mobile phones, TVs etc and internet piracy.

• In fact the counter argument raised by the complainants seemed to suggest that the popularization of music by the radio stations would only boost the music industry.

• The case was referred back to the copyright board for determining "appropriate" royalties.



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ORDER OF THE BOARD

• Interestingly, the Board while concluding that FM radio broadcasters, though organized as business enterprises, thus now owe a social obligation towards nation building, thus serving public interest

• fixed the royalty at “2% of net advertisement earnings of each FM radio station accruing from the radio business only for that radio station shall be set apart by each complainant for pro rata distribution of compensation to all music providers”.

• The previous published tariff of PPL is Rs. 2400 per needle hour or 20% of the net advertising revenue, whichever is higher.

• The radio channels immediately furnished the bank guarantees and started playing film songs



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



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APPEAL TO THE SUPREME COURT

• In the circumstances, the copyright owners approached the Bombay and Delhi High Courts to set aside the Board’s order. They have challenged the Board’s power to grant a compulsory license, its terms and the amount of royalty payable.

• Further, one of the radio channels has challenged the amount of royalty fixed by the Board. In view of the complexity of the matter, the High Courts proposed to move all the cases to the Supreme Court and issued notices in this regard to thecopyright holders. Therefore, a final decision in this regard can be anticipatedfrom the Supreme Court shortly.



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INTERNATIONAL CONVENTIONS -ON MUSIC LICENSING

• Article 11bis OF Rome Convention

Authors of literary and artistic works shall enjoy the exclusive right of authorizing:

(i) the broadcasting of their works or the communication thereof to the public by any other means of wireless diffusion of signs, sounds or images; (ii) any communication to the public by wire or by rebroadcasting of the broadcast of the work, when this communication is made by an organization other than the original one; (iii) the public communication by loudspeaker or any other analogous instrument transmitting, by signs, sounds or images, the broadcast of the work.

(2) It shall be a matter for legislation in the countries of the Union to determine the conditions under which the rights mentioned in the preceding paragraph may be exercised, but these conditions shall apply only in the countries where they have been prescribed. They shall not in any circumstances be prejudicial to the moral rights of the author, nor to his right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority



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ROME CONVENTION

• Article 12Secondary Uses of Phonograms

• If a phonogram published for commercial purposes, or a reproduction of such phonogram, is used directly for broadcasting or for any communication to the public, a single equitable remuneration shall be paid by the user to the performers, or to the producers of the phonograms, or to both. Domestic law may, in the absence of agreement between these parties, lay down the conditions as to the sharing of this remuneration.



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ROYALTIES FOR MUSIC IN DIFFERENT JURISDICTIONS

• Australia– 1 % of the gross earnings of the broadcaster during the specified period

• China-- Free to air

• Japan– Director General of the Cultural Affairs Agency determines the compensation to be paid

• United Kingdom– 3-5.25 of net advertising revenues

• USA- royalty payments will vary depending upon the amount of license fees we collect and the number of payable performances in any given quarter.



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Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

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WEBSITE

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Competition & Compulsory License

• Competition for the market should be promoted, and for the same compulsory licensing should follow some concrete rules and should not be granted liberally.

• In the field of broadcast reproduction rights, however there is a requirement for antitrust authorities to be more vigilant.

• Broadcasting organisation tend to assimilate market strength at a very fast pace and the tendency to abuse it is also very high.

• They may undertake a variety of activities that may foreclose competition and create barriers to entry, all in the name of reproduction rights.

• Thus, the CCI need to keep such organisations and their conduct under close scrutiny to maintain free markets.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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CONCLUSION

Though the judgment is a definite positive for the FM radio industry, there still remains the question of whether it will help serve the very purpose on which the judgment hinged – that of public interest. Sure the average city dweller will be able to get his regular dose of ‘top ten 90s singles’ on his way to work, but it remains to be seen as to whether it would really help incentivise greater expansion of the private radio industry in tribal or remote areas wherein the revenue earned is likely to be less.

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