Authors, Copyright and Royalty Share : The Calcutta High Court gives clarity

It has been 12 years, and the consequences of the 2012 Amendment of the Indian Copyright Act have not settled down yet. The Amending Act brought about several changes, and one much debated change was related to the rights of authors to receive royalties. The right however was not exhaustive, and was limited by two important  parameters:

  1. The right was only provided for authors of literary and musical works; and
  2. The right extended to only works that formed part of cinematographic films, and by one interpretation, to sound recordings as well.

This right to receive royalty was brought in through modifications of several provisions of the Copyright Act relating to copyright ownership, assignment, licensing, and copyright societies. Though the royalty right came into the statute more than a decade ago, its scope and applicability continue to be debated and discussed even today. Partly because of ambiguities in the language of the statute, largely because of resistance from the film/content industry, and to some extent because of lack of a well-established approach to enforce the right, the royalty right was never fully implemented.

Scope of the Royalty Right

From 2012, three arguments circumscribed the scope of the royalty right in legal and business transactions. Those arguments are:

Argument 1: The right of authors to receive royalty is applicable to only works created after the 2012 Copyright Amendment came into existence, and authors of old works are not eligible for the share of royalty.

Argument 2: The right of authors to receive royalty is applicable to only exploitation of literary and musical works, and it is not applicable to exploitation of sound recordings and cinematographic films.

Argument 3: Authors of literary and musical works are eligible for royalty share only if there is an assignment or license involved in the grant/transfer of copyrights, and the right is not applicable if the works have been commissioned.

The bargaining position of authors did not improve significantly even after the statutory amendments, and the arguments served content owners and exploiters well to narrow down the scope of assertion and enforcement of the royalty right by authors.

The Calcutta High Court on the Royalty Right of Authors

In the case between Vodafone Idea Limited (“Vodafone”) Vs. Saregama India Limited (“Saregama”) and Indian Performing Rights Society (“IPRS”, the Calcutta High Court gave what could be termed as a landmark decision for authors of lyrics and musical compositions. The Court held in the case that the right of authors to receive equal share of royalty supersedes claims of copyright ownership, contractual arrangements, and the nature of the work that is created from literary and musical works. In a simple, well-written Judgment, the Court put to rest all three arguments that were being made to circumscribe the scope of the right of authors to receive royalty. By initially stating that the 2012 Amendment created a royalty right in favour of authors through various provisions, the Court clarified that the right is applicable to all works irrespective of when they were created. It went on to state that the royalty right would be applicable to all works created from literary and musical works including sound recordings. Discarding the argument relating to ownership, the Court held that the right to receive royalty would not be affected if the copyright ownership is transferred. In other words, as per the Court, the authors will continue to have the right to claim and receive royalty share in exploitation of their works outside the cinema hall irrespective of who owns copyrights over their works.

Answering the questions before it, the Court stated that Vodafone cannot exploit sound recordings and/or its underlying lyrics and musical compositions based only on a license from Saregama. It must also acquire a license from IPRS, which administers works of authors and publishers, and collects royalties payable to them on their behalf. The Court stated that Vodafone is liable to pay the applicable royalties as per the tariff of IPRS, and ordered that the deposit of Rs. 3.5 crores plus interest be transferred to IPRS for the royalties due to it.

Relevant Paragraphs

The relevant paragraphs from the Judgment read as follows:

“20. On a combined reading of the aforesaid sections, the amendments brought into effect in 2012 have radically changed the legal framework concerning the rights of authors of the original literary, dramatic, musical and artistic works. In fact, the amendments have the effect of reversing the prevalent position of law under the unamended Copyright Act. The amendments have been brought about inter alia with the intention to protect the rights of the authors of the original literary and musical works. As a consequence, authors of original literary and musical works, who had always been given unsympathetic treatment are now entitled to claim mandatory royalty sharing on each occasion when a sound recording is communicated to the public. The amendments cannot be interpreted to be merely clarificatory in nature. Post amendment, substantive rights have now been granted to the authors of original works which prohibit contracts whereby authors were forced to license away their rights for even future technologies. An elaborate scheme has also been incorporated for payment of royalties to the authors of these works which is inter- alia recognized in the Act and the Rules framed thereunder. Section 33A provides for a Tariff Scheme by copyright societies. Rule 56 pertains to a Tariff Scheme. Rule 57 also provides for an appeal mechanism against determination of such tariff scheme. Rule 58 pertains to a distribution scheme. In effect, post amendment, the entire spectrum pertaining to competing claims of the different stakeholders having specific rights under the Act has undergone a sea change. The underlying object being that creative work ought to belong to the authors and that the author should have a share in all future commercial exploitation of their work (except cinema hall).

  1. To give an example, a young author unknowingly assigns all his rights for a pittance in all future technologies and subsequently comes to learn that the big corporates have earned zillions. To some, this is trading. To others, misfortune. And now, the passive authors of the original works at least have a statutory remedy. The protection is all the more justified in an era of even changing technology. The aim is to protect parties with weaker bargaining powers from being compelled to contract all their rights to a stronger party. To this extent, “copyright is not seen merely as an economic tool, a property right but as something like an extension of the personality of the author – something for his benefit and that of his heirs.” [The Globalization of Copyright- A Paper For The Conference of The Australian Copyright Society, November 2005 – Robin Jacob and The Background Score To The Copyright (Amendment) Act, 2012 – Prashant Reddy, 5 NUJS Law Review 469 (2012)].
  1. Ordinarily, the normal function of a proviso is to make an exception or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. However, at times a proviso may wholly or partly be a substantive enactment adding to and not merely excepting something or qualifying what goes before, as it speaks the last intention of the makers. [Rhondda Urban District Council v. Taff Vale Fly. Co., (1909) AC 253, Kerala v. P. Krishna Warriar, AIR 1965 SC 59 and Motiram Ghelabhai v. Jagannagar, (1985) 2 SCC 279]. Thus, there can be no rule that a proviso should always be restricted to the scope of the main enactment and can never rise to a substantive right in favour of a party. (Dattatraya Govind Mahajan v. State of Maharashtra, (1977) 2 SCC 548, Ishwarlal Thakarlal Almania v. Motabhai Nagjibhai, (1966) 1SCR 367). In this context, the decisions of Union of India & Ors. vs. Dileep Kumar Singh (2015) 4 SCC 421 and Mackinnon Mackenzie & Co. Ltd. v. Audrey D’Costa, (1987) 2 SCC 469 relied on by Vodafone are distinguishable and inapposite.
  1. On a true construction of the added provisos to section 17 and 18 and also sub sections (8), (9) and (10) of section19 of the Act, it is clear that the Act now grants additional rights to the authors of musical and literary works. It is true that there has been no amendment to sections 13 and 14 of the Act, nevertheless as a rule of construction, provisions of a statute must be read in conjunction as a whole and cannot be interpreted in isolation. In this background, section 13 and 14 of the Act, when read in conjunction with the provisos and sub sections of section 17, 18 and 19, provides for a change in the position of the law which now grants specific rights to the authors for the works upon payment of an equal share of royalty to the authors and prevents unlawful commercial exploitation of the said works without obtaining a licence from IPRS and making payment of royalty.
  1. In view of the above, although sections 13 and 14 of Act confers no specific rights to the author of the literary and musical works, the subsequent amendments to the Act and the incorporation of the provisos therein categorically provides a right of equal sharing of royalty to such authors indicating a liability upon the commercial exploiters of such works to pay the legitimate share of royalty to the authors. For the above reasons, there is no merit in the contention that since there has been no change to sections 13 or 14 of the Act there has been no change brought about post amendment. The words ‘subject to the provisions of this section and the other provisions of this Act’ obviously refers to all the provisions of the Act including sections 17, 18, 19 and the other sections. [Adani Gas Limited vs. Union of India (2022) 5 SCC 210]. Moreover, in view of section 33, 34 and 34A of the Act, read with the third and fourth provisos to section 18 of the Act, authors have also been prohibited from renouncing their rights of royalty for exploitation of their works in any form other than cinematographic films in a cinema hall. In fact, the author’s rights to receive royalties for utilization of such sound recordings has now been categorically recognised and preserved.
  1. In such circumstances, although in view of section 17 (c) of Act, Saregama is considered to be the first owner, however the subsequent amendments brought about to section 17 and 18 of Act in the form of the provisos clearly recognise the right of an author of the literary and musical works in a sound recording which now has an overriding effect over the claim of the first owner of copyright. Accordingly, despite the first owner granting a licence to exploit the sound recordings, the rights of an author to claim royalties cannot be bypassed nor circumvented. Though Saregama may have assigned the rights of exploitation of the sound recordings to Vodafone as first owners, Vodafone post amendment of the Act is bound and statutorily obliged to pay IPRS royalty to the authors of the literary and musical works incorporated in the sound recordings. Accordingly, there is no merit in the contention raised by Vodafone that there is no change in law brought about by the Copyright (Amendment) Act of 2012 and the same stands rejected.
  1. The judgment of IPRS vs. Aditya Pandey (Supra) relied on by Vodafone is distinguishable and of no assistance. With utmost respect, the views expressed by the Learned Judge insofar as the amended Act are concerned were wholly unnecessary and obiter. In this decision, the disputes had arisen in the year 2006 and discussion on the amendments brought up in 2012 was unnecessary. The finding that the 2012 amendment does not alter the provisions of the Act (Para 31) is per incuriam and has been passed inter-alia ignoring the Statements of Objects and Reasons of the Amendment Act of 2012 and the purpose behind introduction of proviso (3) and (4) of section 18, proviso (8), (9) and (10) of section 19, proviso to section 17 and sections 30A, 33, 33A, 34 and 35 of the Act. The additional protection of rights of authors of such literary and musical works has been simply ignored in the said judgment. In this background, reliance on the decisions in Principal Chief Conservator of Forests & Anr. vs. J.K. Johnson & Ors. (2011) 10 SCC 794 and Central Bank of India & Ors. vs. Workmen etc. AIR 1960 SC 12, to contend that the Statements of Objects and Reasons are not relevant and should not also be looked into is only an attempt to obfuscate issues. Ordinarily, as a principle of statutory interpretation reference to the Statements of Objects is permissible for understanding the background, the antecedents, state of affairs, the surrounding circumstances in relation to the statute and the evil which the statute was sought to remedy. (Sanghvi Jeevraj Ghewar Chand v. Secretary., Madras Chillies, Grains & Kirana Merchants Workers Union, AIR 1969 SC 530 and Devadoss v. Veera Makali Amman Koil Athalur AIR 1998 SC 750).
  1. In IPRS vs Rajasthan Patrika Pvt Ltd (Supra) it has inter-alia been held as follows:

“53. It cannot be said that since the literary and musical works of such authors get subsumed in the sound recording, which under Section 13(1) (c) is also a work in which copyright subsists, the entitlement of authors of such works to collect royalties would be taken away, despite specific guarantee of such rights by way of amendment in the year 2012, manifested by introduction of proviso to Section 17, third and fourth provisos to Section 18 and sub- sections (9) and (10) in Section 19 of the Copyright Act. The plaintiff – IPRS has indeed made out a strong prima facie case to hold that communication of the sound recording to the public on each occasion amounts to utilization of such underlying literary and musical works, in respect of which the authors thereof have a right to collect royalties. It cannot be disputed that in the Indian context, when radio stations, including the radio stations of the defendants herein, communicate sound recordings, they could be part of cinematograph films or otherwise. But, most of the sound recordings communicated to the public through such radio stations are the part of film music, and therefore, both, the third and fourth provisos to Section 18 read with sub-sections (9) and (10) of Section 19 of the Copyright Act come into operation.

  1. The third proviso to Section 18 read with sub-section (9) of Section 19 of the Copyright Act clearly provides that authors of such literary and musical works are very much entitled to claim royalties to be shared on an equal basis with an assignee of the copyright for utilization of such works in any form other than communication of the works to the public along with the cinematograph film in a cinema hall. A communication to the public of sound recordings that form part of the cinematograph film from radio stations is indeed a form of communication other than communication in a cinema hall along with the cinematograph film. Thus, the authors of such literary and musical works are entitled to claim royalties on each occasion that such sound recordings are communicated to the public through radio stations, including radio stations of the defendants herein.
  2. As regards sound recordings that do not form part of any cinematograph film, as per the fourth proviso to Section 18 and subsection (10) of Section 19 of the Copyright Act, the authors of such literary and musical works have the right to collect royalties for utilization of such works in any form. Thus, this Court is of the opinion that the plaintiff – IPRS, while espousing the cause of its members, who are authors of such literary and musical works, has indeed made out a strong prima facie case for grant of interim reliefs in the present applications.”
  1. The Master Agreement relied on by Vodafone is also of no assistance. Firstly, the Master Agreement is dated 14 March, 2014 and is of an unspecified duration. In the light of section 19(5) of the Act, the Master Agreement is deemed to be only for a period of five years which admittedly expired on 13 March, 2019. Secondly, the Master Agreement refers to an annexed agreement which would only be entered in the future between the parties. The agreement between Vodafone and Saregama dated 16 June, 2016 is one such annexed agreement which categorically records as follows:
  2. “Notwithstanding anything to the contrary contained herein Vodafone may be required to procure licences from any copyright society/organisation operating in any part of the Territory during the term. Procurement of any such copyright society/organisation licences shall be the sole responsibility of Vodafone at its sole cost and the Service Provider shall not be held responsible for the same in any manner whatsoever.”
  1. In such circumstances, on a combined reading of Master Agreement dated 14 March, 2014 read with the annexed agreement dated 16 June, 2016, it is unequivocally clear that Saregama has not and could not have granted any right to Vodafone to exploit the underlying musical and literary works incorporated in the sound recording. Vodafone is now statutorily obliged to procure licences from IPRS. This fact is also evident from the Memorandum of Settlement dated 20 September, 2019 and the agreement dated 20 September, 2019. The fact that there is an independent obligation on Vodafone to obtain such licences from IPRS has also been recorded and confirmed by Saregama as reflected in the order dated 1 October, 2018. There is no other valid mode of assignment which Vodafone has been able to produce or rely on to exploit the underlying musical and literary works of the members of IPRS. For such purposes, any attempt to rely on any of the different agreements vis a vis Vodafone and Saregama is distorted, misleading and untenable.
  1. In any event, Saregama could not possibly have any right to grant any licence in respect of the underlying musical and literary works incorporated in the sound recordings to Vodafone since Saregama had already assigned the same to IPRS as far back as in 1993 and once again in 2017. Thus, Saregama could not have given anything which it had no right to give. Nobody can give a better title than that he or she possesses. In any event, any such assignment would be void in terms of section 19(8) of the Act. Prima facie, Vodafone and Saregama also appear to be acting in concert with the ulterior aim of defeating the rights of IPRS. Saregama despite being a member of the IPRS has also failed to look after the interests of the authors of the literary and musical works and has acted contrary thereto. Vodafone has been unable to rely on any licence in compliance with section 30A read with section 19 of the Act permitting them to commercially exploit musical and literary works incorporated in the sound recordings.

31. In its new avatar, the amendments provide the authors a right to collect royalties which cannot be defeated nor avoided by reading some of the sections of the Act in isolation and depriving the authors of their now statutorily recognized legal rights. One of the objects of the 2012 amendment is to protect the authors of literary and artistic works and this must now be accepted. In view of the above, IPRS has been able to make out a strong prima facie case on merits. The balance of convenience and irreparable injury is also in favour of orders being passed in favour of IPRS.”

Citation: Vodafone Idea Limited Vs. Saregama India limited and IPRS, decided on 17th May, 2024 by the Calcutta High Court, available at: https://indiankanoon.org/doc/91122152/, visited on 28th May, 2024.

Disclaimer

The case note/s in this blog post have been written by IP Attorneys at BananaIP Counsels based on their review and understanding of the Judgments. It may be noted that other IP attorneys and experts in the field may have different opinions about the cases or arrive at different conclusions therefrom. It is advisable to read the Judgments before making any decisions based on the case notes.

If you have any questions, or if you wish to speak with an IP expert/attorney, please reach us at: [email protected] or 91-80-26860414/24/34.