The Wynk application on an Android phone. (Photograph: BloombergQuint)

‘Wynk’ing At The Copyright Act

BloombergQuintOpinion

Music labels have gone to town over a recent judgment of the Bombay High Court in a copyright infringement lawsuit filed by Tips Industries against Wynk, which is Airtel’s internet music service. The lawsuit was filed by Tips after Wynk continued to host its content even after failed negotiations for renewal of a copyright licensing agreement. Wynk’s attempt to seek refuge for its internet streaming services under Section 31D of the Copyright Act, which puts in place a statutory licensing regime for radio and television broadcasters (that allows a judicial body to fix licensing fees), was dismissed by the court and the service was restrained by an injunction from offering music owned by Tips on its service.

For music labels, this is a significant first victory because it strengthens their hands in negotiations with internet streaming services without the fear of having the Intellectual Property Appellate Board intervening to set a licensing fee. Given the stakes at hand, this question of law is destined to reach the Supreme Court.

History Of Statutory Licensing Regime In Section 31D

Since 1993, when the government first allowed private players to broadcast on All India Radio during certain slots, there has been litigation between music labels and radio broadcasters on the issue of licensing fees for copyright-protected music. That dispute landed before the Monopolies and Restrictive Trade Practice Commission and the Calcutta High Court before being resolved through a settlement between both parties.

In 1999, when the National Democratic Alliance government further liberalised the radio sector by allowing private broadcasters to purchase their own spectrum and setup radio stations in multiple cities there was a whole new market that wanted access to music, both old and new. Once again, negotiations between the parties broke down. And this time, the radio broadcasters applied for a compulsory license under Section 31(B) of the Copyright Act on the grounds that the music labels were making unreasonable demands. An application for a compulsory license enables the Copyright Board to fix the royalties at a rate that it thinks is reasonable.

However, in order to grant a compulsory license, the board was first required to determine on whether the terms demanded by the copyright owner were unreasonable.

This first round of litigation which started before the Copyright Board worked its way up till the Supreme Court. The judgment of the Supreme Court in 2008 settled some important questions of law regarding compulsory licensing. On the important issue of the royalties payable, the Supreme Court remanded the matter to the Copyright Board on the grounds that the first determination was flawed because of procedural lapses.

The Copyright Board reheard the matter and delivered a judgment in 2010. While the music labels were demanding 20 percent of the ad-revenue of the radio stations, the Copyright Board fixed the royalties at 2 percent. That judgment was appealed before the Madras High Court where it has been pending for the last nine years.

Meanwhile, in 2012, when Parliament passed the Copyright (Amendment) Act, 2012, the broadcast industry was successful in lobbying the government to enact a statutory licensing regime for the radio broadcasters in form of Section 31D.

A statutory licensing regime, unlike a compulsory licensing regime, does not require the radio broadcasters to demonstrate that the copyright owner has been unreasonable.

It gives all broadcasters a right to demand a license from the copyright owners at a rate fixed by the IPAB, which took over the function from the Copyright Board.

A statutory licensing provision diminishes the bargaining power of copyright owners and the value of their monopoly. Over the last decade there has been justified speculation that most Indian music labels were colluding rather than competing. The most efficient remedy at the time would have been an investigation under the Competition Act but Indian policymakers opted for a statutory licensing regime.

The fixing of royalties through a judicial body like the Copyright Board is a feature across the world. For example, in the United States, non-interactive music streaming services, where the listener cannot choose the songs that are being played (like traditional radio), are subject to a statutory licensing scheme. The Copyright Royalty Board determines the royalties every five years.

There is a certain logic to prescribing compulsory licenses as a solution to resolve an abuse of market power. However, there does not appear to be much economic logic to a scheme of statutory licenses that can be invoked without any showing of an abuse of market power.

Such licenses should be discouraged as they greatly diminish the bargaining power of the copyright owner.

Also read: The Background Music To Spotify’s India Launch Is A Crucial Legal Battle On Music Copyright

Does Section 31D Encompass Internet Broadcasting?

Thanks to the extraordinarily shoddy drafting skills of the Copyright Office at the time, Section 31D raised more questions than it should have. Chief among these were whether Section 31D applied to internet broadcasting. For some bizarre reason, the phrases ‘radio’ and ‘television broadcasting’ were not defined in Section 31D. To the contrary, the Department of Industrial Policy and Promotion, which was given charge of the Copyright Office in 2016, issued an office memorandum opining that internet broadcasting was, in fact, covered by Section 31D. In the present case, the Bombay High Court has held that it is not bound by the DIPP’s interpretation.

The High Court reasoned, that by 2012, the legislature was aware of the internet and its capacities and had amended other provisions of the legislation to deal with the challenges. But its silence in Section 31D on internet broadcasting was an indication that the legislature did not want to extend the provision to internet broadcasters.

This conclusion is not very well reasoned because it never really engaged with the meaning of radio and television broadcasting. Both phrases have had different meanings in the nineties and in the present decade.

For example, ‘internet radio’ is a phrase that has been in the vogue for more than a decade and generally refers to non-interactive internet streaming. Similarly, IP-TV, which expands into internet protocol television refers to internet television and is a phrase that has been trending for most of this decade.

Instead of looking for the meaning of these words in contemporary dictionaries, the Court has relied on a Parliamentary Standing Committee report on the Copyright (Amendment) Bill, 2010 to ascertain legislative intent. A recent Supreme Court judgment has ruled that it is possible to look at these reports to ascertain legislative intent. However, these reports represent the opinions of around 30-35 MPs who are on the committees and it is doubtful if they represent the ‘legislative intent’. In any event, the Standing Committee report on the 2010 Bill is entirely silent on the aspect of internet broadcasting so it is not clear why the Court has placed so much reliance on the report.

Spotify’s Litigation Around Section 31D

The question of whether Section 31D applies to internet streaming services is the subject of two more lawsuits involving Spotify one each before the Bombay High Court and Delhi High Court. Even if the other judges agree with the present judgment of the Bombay High Court, the door is still open for streaming services like Wynk to invoke compulsory licenses under Section 31B if they can show unreasonable behaviour on part of the music labels.

T Prashant Reddy is a Senior Resident Fellow at the Vidhi Centre for Legal Policy and is co-author of Create, Copy, Disrupt: India’s Intellectual Property Dilemmas.

The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or the editorial team.