Compulsory Licensing under Copyright Law

Compulsory Licensing under Copyright Law

The Indian Copyright Law, which is based on the Berne Convention, incorporates certain rules relating to the compulsory licensing of copyrights in respect of certain publicly owned works. The Copyright Board, a legislative body constituted under the Act, has been granted the power to entertain complaints about such matters. The object of the provision is to prevent the exploitation of copyright monopolies and to create a balance between individual rights and the interests of the public.

The music industry in India is over a century old. It is projected that the size of the industry is around Rs.15 billion and is expected to cross Rs.20 billion by 2022. The Indian music market is very different from other markets, such as the USA or Asian markets, and film and devotional music dominate the sales.

A Compulsory Licence is a term commonly used to refer to a statutory licence to conduct an act subject to an exclusive right without the prior authorization of the owner of the right. In certain cases, compulsory license requirements allow the facility to use protected content, as given by statute, without requiring the prior authorization of the right owner. Any of the terms (for example, those relating to rates of payment) can be fixed beyond the scope of the statute by the court or a tribunal. In implementing such provisions, the legislator has also pursued a way of setting a fair rate for the royalties to be paid and a mechanism to prevent misuse of the exercise of rights in a situation of monopoly.

Article 9 of the Berne Paris Text provides the basis for the compulsory licensing requirements. This clause provides the exclusive justification of the Convention for an equal remuneration and lays out the requirements to be met before a Member State can completely justify a use that requires an equitable remuneration and does not prejudice the author's fair interests.

Section 31(1) allows for a compulsory license for Indian work and grants the power to the Copyright Board in this respect. The Copyright Board, a quasi-judicial body, was formed in September 1958. Adjudication of issues relating to the awarding of permits in respect of works excluded from the public is a matter for the Copyright Board. The criteria that need to be followed are as follows:

(1) The work on which the copyright is asserted must have been written or made public.

(2) The author must have declined to permit the publication or to perform the work or the author must have refused to permit the publication or presentation of the work in public or in the case of sound recording, set down undue requirements.

(3) The work shall be carried out by the public on the basis of such rejection.

The purpose of this provision is to provide for a mechanism to avoid the misuse of the monopoly by the copyright holder and to ensure that the general public is not deprived of patented content purely on the basis of the excessive demands of the copyright holder.

The new verdict in the Copyright Court is the Music Broadcast Pvt Ltd vs. Phonographic Performance Ltd seems to suggest that in forecasting the untimely death of the radio, the Buggles may have been a tad too hasty. In order to cover nine cases, the Board held that it was in favour of awarding compulsory licenses under Section 31(1)(b) of the Copyright Act, 1957, to complainants of FM radio companies against music providers such as Phonographic Output Limited (PPL). Accordingly, Section 31(1)(b) confers on the Board the authority to issue compulsory licenses if it is convinced that the owners of the copyright have failed to allow the public to report the work and that such reluctance is not fair. The licensee would also have to pay costs and meet the Board's terms and conditions and compensate the licensor's fees as specified.

The argument at issue, in this case, was whether the FM radio industry could demand compulsory licences for songs belonging to music suppliers such as PPL. This was based on the premise that the latter was unfair in charging exorbitant fees for songs owned by the latter to FM radio station vendors, which in turn influenced the public interest in general.

The public interest rationale was drawn up by the government's strategy of including the private sector in FM radio broadcasting in the years after the first process of privatization was initiated in 1999. It was seen that the government wanted to contribute to the growth of private FM radio broadcasting as a social development engineering platform through which information, education, and entertainment could be disseminated to the most remote corners of India. Interestingly, the Board agreed that while structured as commercial entities, FM radio stations now owe a social commitment to nation-building. The government itself had moved from the burdensome fixed license fee structure to a revenue-sharing model in order to support the industry, where 4 percent of the government's gross revenue was to be provided.

The matter of whether the fees paid by the copyright providers were fair came into question as to whether the broadcasting of radio stations was in the public interest. The Board reviewed and ultimately ignored much of the claims of the respondent music providers in considering the issue. First, the Board held that it was incorrect to compare the cost of programming for radio service providers and TV broadcasters. While the former was bound to be a 'free to air' service by the Government Directive (where it does not charge any public subscription), the latter could and did charge the viewers. There were also several other limitations on content transmitted on the radio as opposed to television, which again made it impossible to compare wages and prices over these two different mediums, as the respondents wished to do. In addition, the comparison of the royalty paid on All India Radio (AIR), a state-owned company, and FM radio companies in the private sector was again found to be entirely flawed. In the radio business, AIR had maintained a virtual hegemony for decades and could continue to make royalty payments. On the other hand, the nascent FM industry, already running in loss, was difficult to cough up the high royalty payments requested by music providers of 14 percent-15 percent, particularly since its main content had to be music because unlike AIR, it had too many limitations on the type of content it aired.

It was also strenuously tried to be advocated by the music providers that their music sales in physical media such as CDs and cassettes were affected by playing their material over the radios. The Board correctly pointed out, though that the respondents had not tried to determine how much of the decline was attributed to newer multimedia formats such as I Pods, smartphones, TVs, etc., and even piracy. Indeed the counterpoint posed by the complainants seemed to mean that the radio stations' popularization of music would only improve the music industry.

Given that radio service providers are running in losses and have few income-generating avenues due to restrictions, the music providers' fixed royalty system, the Board found, would result in decreasing public access to the work. It was inefficient and unfair to use a 'needle per hour' principle whereby the license price is set regardless of the scale of the radio service providers and their scope (listeners and advertisers). The Board decided that the licensee's willingness to compensate should be measured in relation to the advertising revenue generated by it.

The Board held that the only reasonable licence fee model was that the music providers charge a fixed percentage of the net advertising revenue, taking into account the fact that the radio service providers, although private commercial ventures, operated within the government's social development plan. In reality, the Board argues that this would generate far more revenue for music providers as more broadcasters would be willing to enter the country-wide foray that would generate more revenue. On the basis of the aforementioned rationale, the Board established a series of terms and conditions under which it ordered the Registrar of Copyrights to issue complainants licenses based on a model of revenue sharing in which 2% of each FM radio station's net advertising revenues would be set aside for music providers to pay. While the decision is a definite positive for the FM radio sector, the question remains whether it would help fulfill the very function of public interest on which the judgement hinged. The ordinary city dweller will definitely be able to get his daily dosage of 'top 10 90s hits' on his way to work, although it remains to be seen if it will actually serve to promote greater growth of the private radio industry in tribal or rural areas where the income gained is likely to be less.

BY-

Raksha Singhal