Copyright Act amendments not apt for film and music

By Ameet Datta and Suvarna Mandal, Saikrishna & Associates
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The amendments almost three years ago to the Copyright Act, 1957, are arguably among the most significant made to the act to date. The amendments not only radically altered how copyright ownership devolved but also included film and music industry centric provisions which, in effect, disallowed authors and composers from transferring or waiving a right to profit “equally” from the ongoing exploitation of their works, thus impeding contractual freedom.

Ameet Datta
Ameet Datta

It was clear at the outset that while the amendments impacted everyday transactions and ways of doing business, the success of the author centric changes depended on other provisions which were supposed to ensure that industry functioning was not obstructed. It now appears that provisions intended to streamline licensing administration and valuation remain ineffective on the ground, and the film and music industry and sectors which exploit film and music face exposure on account of gaps in the act and confusion arising due to varying interpretations of the extent of the royalty provisions.

Prior to the amendment which prevents authors and composers from assigning or waiving an “equal share” of royalties, the industry practice was to pay a one-time lump sum consideration as opposed to revenue share arrangements. The provision impairing, in effect, the ability of authors and composers to enter into contracts waiving their monetary rights under the act may be the only such provision in any statute worldwide.

While it would be incorrect to say that the amendments brought about immediate change in business models or practices in the media and entertainment industry, over the past two years contracting practices have been adjusted to incorporate royalty sharing provisions between producers/music labels and authors/composers. However, the infrastructure necessary for the effective collection of royalties is yet to be put into place for several reasons.

First, what has been criticized as “loose legislative language” has created confusion about the meaning of “equal share” in section 18 as opposed to “equal basis” in section 19, and also as to whether a single sum would be an adequate and equitable remuneration in compliance with the act. Further, since authors and composers continue to charge an up-front lump sum consideration (in addition to royalties), producers and music labels argue that the lump sum should either be done away with or “adjusted” against the royalties. This, they say, would allow them to recover their acquisition and marketing costs with the alternative spelling financial disaster. Music labels also complain that the royalty provisions practically do not allow for “downstream” lump sum-based licensing deals, effectively interfering with their ability to negotiate private arrangements.

Suvarna Mandal
Suvarna Mandal

Second, copyright societies – the collective licensing bodies which were intended to be the “vehicles” for royalty administration – have, as a result of the amendments, withdrawn from the government-mandated and regulated copyright society system under the act. This has been prompted largely by music labels, which drive the societies and are unhappy with the new system. This has led to a fragmentation of copyright administration and has adversely impacted both owners and users of copyright. The prevailing uncertainty has led to confusion as well as financial and legal exposure for broadcasters, digital content distributors, etc.

Third, the amendments envisaged that a strengthened Copyright Board would be constituted to enable broadcasting companies to access statutory licences. The expectation was that the board would fix statutory licence tariffs for broadcast of music across the radio and TV sectors. The inexplicable delay by the government to constitute the board has left broadcasters remediless and at the mercy of wildly fluctuating and apparently illogical valuations for use of music. Moreover, it is unlikely that the board will be constituted anytime soon since its constitutional validity has been challenged in various court cases.

Fourth, a lack of clarity on whether the amendments apply retrospectively has exposed users of music to potential civil and criminal liabilities. Producers and music labels argue that to require payments now for exploitation of works assigned 20 years ago would adversely impact the industry. One view, which is yet to be tested in a court, is that the amendments have “retroactive effect”, i.e. while they are not retrospective in nature, royalties would be payable if a work assigned prior to the amendments is exploited after the commencement of the amended act.

It is safe to say that almost three years after the amendments came into force, the film and music provisions are yet to deliver useful results. The Copyright (Amendment) Act, 2012, has been challenged by various affected parties in writ petitions before Delhi High Court, Bombay High Court and more recently Calcutta High Court and it is hoped that judicial pronouncements in such cases will clarify the legislative intent.

Ameet Datta is a partner at Saikrishna & Associates, where Suvarna Mandal is an associate. The views expressed in this article are personal.

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