The internet broadcasting organizations cannot enjoy the benefits of a Statutory License under Section 31-D. The intention of the Legislature while enacting the amending legislation viz. the Copyright (Amendment) Act, 2012, was to restrict the grant of Statutory License under Section 31-D to radio and television broadcasting organisations
In a significant judgment which can have impact on internet streaming services by OTT platforms, the Bombay High Court has held that Section 31D of the Copyright Act 1957 covers only radio and TV broadcasting and not internet broadcasting.
This was held by Justice Kathawallah by rejecting the defence of ‘Wynk Music’, an online music streaming application, in a copyright infringement suit filed by music company Tips Music Ltd. It alleged that even after the expiry of license granted to Wynk Music, it was storing the song records of Tips in its online music library from where users can listen or download them for a fee.
Among other defences, Wynk placed reliance on Section 31D, which was introduced in the Act by 2012 amendment to provide for a statutory licensing scheme, as per which any broadcasting organisation desirous of communicating to the public any sound recording, may obtain a statutory license to do so, provided they pay the royalty rates to the copyright owners, at rates fixed by the Intellectual Property Law Board.
Wynk claimed that its ‘on demand streaming service’, whereby public can listen to any songs of their choice from the app, does not amount to ‘commercial rental’ or ‘sale’, and was ‘broadcasting’ covered under Section 31D, as it was simply ‘communicating to the public’. It relied on the use of expression “any” broadcasting organization in the provision to contend that online streaming is also covered.
The plaintiff opposed this by saying that Section 31D is available only to radio and TV broadcasting.
Internet Broadcasting is not Covered by Section 31D
Accepting plaintiff’s arguments, the Court held that Section 31D does not cover internet broadcasting.
It noted that Section 31-D acted as a statutory exception to the rule that a copyrighted work is the exclusive property of its owner, and should be therefore construed narrowly in “conformity with the specific intention for which it was enacted”.
From a perusal of the reports of the Rajya Sabha Standing Committee, and the Statement of Objects and Reasons of the 2012 amendment act, the Court gathered that the Section was intended only to address radio and TV broadcasting. The Standing Committee understood ‘broadcast’ to mean radio and TV broadcast.
“The absence of express words in Section 31-D providing for a Statutory License in respect of internet streaming and / or downloading, was a conscious legislative choice. In view of the above and in the absence of an express statutory provision including internet broadcasting within the purview of Section 31-D, the scope of Section 31-D cannot be expanded to include the same”, observed Justice Kathawalla in the order.
Further, a bare perusal of the Rules 29 and 31 of the Rules also supported the view that Section 31-D is a statutory licensing regime meant only for ‘radio’ and ‘television’ broadcasting and not internet broadcasting.
“Digital downloading or surfing of music was in the public domain when the Copyright Amendment Bill 2010 was introduced and when the Copyright Amendment Act 2012 was passed. The Legislature was thus fully aware and cognizant of the digital technologies and of music downloading / streaming in 2010 and 2012. The same is also evident from the excerpts (reproduced in the preceding paragraph) of the Rajya Sabha Parliamentary Standing Committee Report. It is pertinent to note that despite the said position, the Legislature consciously decided not to specifically introduce the term ‘internet broadcasting’ in Section 31-D of the Act“.
In conclusion, the Court said unequivocally :
“The internet broadcasting organizations cannot enjoy the benefits of a Statutory License under Section 31-D. The intention of the Legislature while enacting the amending legislation viz. the Copyright (Amendment) Act, 2012, was to restrict the grant of Statutory License under Section 31-D to radio and television broadcasting organisations”.
Central Government Memorandum rejected.
The defendants pressed into service an Office Memorandum issued by Department of Industrial Policy and Promotion on behalf of Government of India on September 5, 2016, which clarified that “the provisions of Section 31-D of the Copyright Act, 1957 are not restricted to radio and television broadcasting only but cover internet broadcasting also”.
The Court rejected this memorandum by observing that Central Government did not have power to make such interpretations.
“The said Memorandum lacks a ‘statutory flavour’ and cannot prevail over interpretation which is drawn under the Act and the Rules (which in-turn were formed under Section 70 of the Act). The interpretation of Section 31-D in the said Memorandum is inconsistent with the interpretation drawn by this Court and this Court is not bound by the said Memorandum”, observed the Court.
Prior determination of royalty necessary before invoking Section 31D
“Prior determination of royalty rates is a necessary precondition for the exercise of rights in respect of a Statutory License under Section 31-D. A holistic reading of the Act and the Rules, including Rules 29, 30 and 31 of the Rules, indicate the Legislature’s intent to make fixation of royalty rates a mandatory step before grant of license under Section 31-D”, said the Court.
The defendant’s attempt to challenge Rules 29, 30 and 31 as ultra vires the section as they provided for prior fixation of the royalty rate was unsuccessful, as Justice Kathawalla held that there is no inconsistency between the rules and the statute.
Online services amount to ‘commercial rental’ and ‘sale’
In the earlier part of the judgment, the Court held that defendant’s download services amounted to ‘commercial rental’ and ‘sale’.
Wynk offered two types of services : ‘download’, whereby the registered user can download songs of her choice and store it in the app and ‘purchase’ whereby songs can be permanently saved into the device of the user after paying the charges.
The Court observed that “the Defendants through their outright purchase / download services are enabling their subscribers to actually store electronic files of the Plainti’s sound recordings on their devices. Storing the files of the Plaintiff’s sound recordings in electronic medium by the Defendants is nothing but making of another sound recording embodying the Plaintiff’s sound recording. This right is an exclusive right granted to the owner of the copyright in the sound recording under Section 14(1)(e)(i) of the Act and the Defendants cannot be allowed to continue the same without any permission or authorization of the Plaintiff”.
Wynk’s services enabling their customers to permanently download sound recordings and have a permanent access to the same clearly amounted to sale of sound recording violating the exclusive right of the Plaintiff to sell or offer for sale its sound recordings as provided in Section 14(1)(e)(ii) of the Act.
The Court also noted that the ‘download’ services were not covered by the ‘non-profit library or non-profit educational purpose’ exception to the definition of ”commercial rental” as per Section 2(fa) of the Act.
“the activities of the Defendants enabling their customers to download sound recordings and access them offline in lieu of a monthly subscription fee clearly do not fall under the exclusions provided in the said definition of ‘commercial rental’ and would therefore amount to ‘commercial rental'”, observed the Court.
The Notice of Motion was allowed to grant interim injunction restraining Wynk from using the copyrighted sound labels of Tips.
The Indian Music Industry welcomed the judgment through a statement by its president Blais Fernandes, who said. “This decision confirms IMI’s consistent stand that internet streaming services are not covered under Section 31D of the Copyright Act,1957. As an industry, we noted the intention of our parliament to provide involuntary licensing benefits under the Copyright Act, 1957 and are encouraged that the honourable court has now clarified that the intention of our lawmakers did not include streaming services under the statutory licensing scheme”.[“source=livelaw”]