Can issuing/granting of music licenses be done by private companies?
Music licencing is the usage of copyrighted music under the terms of a licence agreement. In order to guarantee that the owners of copyrights on musical compositions get reimbursed for specific uses of their work, the music licencing industry was established. Without a separate agreement, a purchaser's rights to utilize the work are severely restricted.
Under Section 30 of the Copyright Act 1957, the owner or authorized agent may grant any license to any person. Hence, private companies are also entitled to grant licences if they are registered copyright society.
At the moment, third-party licencing companies issue licences in one of two ways: by claiming to be the owner of the copyrighted works by virtue of assignment under Section 18(2) of the Act; or (ii) by claiming to be an authorized agent of the copyright owner under Section 30 of the Act, which provides that an authorized agent can grant licences on behalf of the owner of the copied work.
In the case of Leopold Café Stores v. Novex Communications Pvt. Ltd., The defendant claimed to be an authorized agency under Section 30. ...What Section 33 bans is an involvement in the “business of issuing and granting” licences in works in which copyright subsists. This does not mean a copyright owner cannot appoint an agent to grant interest on their behalf. Section 30 expressly permits this. It is not permissible to extend the stated limitation in Section 33. The two sections require only that the factum of agency be reported... The prohibition in Section 33 kicks in as soon as the principle isn't revealed and the agent gets his own licence." This decision legitimized third-party licencing organizations granting licences in the name of the copyright owner rather than their own.
In the case of M/S. Leopold Cafe & Stores & Anr vs Novex Communications Pvt. Ltd"...Since PPL, IPRS, and Novex is not registered as copyright societies, they are prohibited from carrying on the business of issuing or awarding licences by virtue of Section 33(1) of the Act," said a Single Judge Bench of the High Court of Delhi. Third-party licencing businesses may no longer give licences regardless of whether they can prove assignment under Section 18 read with the first proviso to Section 33(1) of the Act, as this ruling said.
In the case of Novex Communication Pvt. Ltd. v. Lemon Tree Hotels Ltd. and Ors, the delhi high court observed that "...it is not as though the second Proviso to Section 33(1) stipulates that so far as the sound recording is concerned, the same cannot be licenced except by a copyright organisation," a Single Judge Bench [Valmiki J. Mehta, J.] said. Obviously, if this interpretation is adopted, the first Proviso to Section 33(1) will be nullified or rendered otiose." The Supreme Court specifically ruled that "...a copyright organization need not legally be the only one exclusive authorized entity/person to grant licences...".
Novex and other third-party firms are now allowed and favoured by the most recent court ruling on the matter. Differing High Courts, however, have given different interpretations of the law, with some allowing such firms to operate, and others deeming them unlawful. The subject of third-party licencing remains open since all of the judgments cited above were made on coordinate benches. As a result, a bigger bench of the High Courts or the Supreme Court of India should investigate and handle this matter.
“Section 33 Registration of Copyright society.—“(1) No person or association of persons shall, after coming into force of the Copyright (Amendment) Act, 1994 (38 of 1994) commence or, carry on the business of issuing or granting licences in respect of any work in which copyright subsists or in respect of any other rights conferred by this Act except under or in accordance with the registration granted under sub-section (3).So long as an owner of copyright retains the ability to offer licences to his own works in accordance with his responsibilities as a member of a registered copyright society: A copyright organisation established under this Act may only issue or grant licences for literary, dramatic, musical or artistic works integrated in films or sound recordings:...”
In the case of M/s.Novex Communications Pvt.Ltd v. DXC Technology Pvt. Ltd, M/s.Novex Communications Pvt.Ltd v. Cognizant Technologies Solutions India Pvt. Ltd., Licenses for on-the-ground public performances are issued by Novex Communications Private Limited, either as an assignee of copyright or as an agent for the sound recording owner (such as hotels, events, etc). Many music labels, for example, have agreed to agreements with Novex that give the right to perform on the ground to Novex. YRF Music, for example, has hired Novex as an agency. Allegedly, Novex sued DXC Technology and Cognizant Technologies Solutions India Pvt. Ltd. in Madras High Court, claiming that despite Novex owning the on-ground performance rights for certain labels, the defendants played their music without Novex's permission. The preliminary issue raised by the defendants before the Court was that the business activities of Novex will amount to carrying on the business of issuing or granting licenses which is statutorily barred under 33 of the Copyright Act, as Novex is admittedly not a copyright society or a member of any copyright society.
The primary issue before the court thus was “Whether Novex is legally permitted to issue or grant license under the Copyright Act without being the copyright society under the Copyright Act as contemplated under Section 33 of the Copyright Act, 1957?”
The Court differentiated between a copyright owner's right to grant licences as an individual and a commercial enterprise's right to do so only if it is a registered copyright society. For example, a music label may grant licences under Section 30, but not Novex, PPL, or any other business that is not a recognized copyright society.
“It is true that the assignee becomes an owner by virtue of Section 18(2) of the Act and is, therefore, legally able to grant licences under Section 30 as the owner of the copyright.” Section 30 recognises the owner's power to give a licence but makes no difference between people and businesses. Section 33 imposes a ban on the “business of giving or granting licences” except via copyright organizations [clause (1) and second proviso to Section 33], while keeping the right of the owner to licence his works under Sections 18(2) and 30 of the Act. (Para 28).
“The right of an owner to exploit a right by granting a licence remains unaffected. However, a commercial entity giving licences is required to go via a copyright society established under Section 33(3) of the Act.”
It is plainly misconceived that the second proviso infringes on the copyright owner's rights under Sections 18 and 30. Section 33(1) and its second proviso do not affect an owner's authority to issue licences for his own works. It only restricts its usage via licencing through a copyright society”.
Taking into account the above, the Court ruled that the harm underlying the Copyright (Amendment) Act 2012 was that copyright organizations had been taken over by owners, relegating writers and composers to the background. Second, Sections 17 and 18 guaranteed writers and composers no income. The 2012 Copyright Amendment Act seeks to solve this by bringing writers and composers on a level with owners in the management of copyright organizations. Section 35 was amended. The next step was to alter Sections 18 & 19 to provide authors with an equal proportion of revenues. Section 33 was later changed to require that licences for copyrights be issued solely via copyright organizations so that the royalties received might be split equally amongst writers, composers, and copyright owners. It is thus hard to accept the plaintiff's skilled counsel's position that notwithstanding Section 33(1) and its second proviso's explicit command, corporate organizations like the plaintiff may licence works in sound recordings. This interpretation would be contrary to the 2012 Amendment's intent since it would redirect income intended to be shared equally between the owner and the author.
It can be observed from the recent judgment given by the Madras high court, that individuals can grant license through Section 30 of the Copyright Act, 1957 but there is a very broad difference between a person and a private entity/ company. a private company cannot sell music copyright as it will be foul through Section 33 of the Copyright act, 1957 if it will be not a registered copyright society. Novex is not registered as copyright societies, they are - by virtue of Section 33(1) of the Act - proscribed from carrying on the business of issuing or granting licences. Hence, for an entity or company to grant a music license must be a registered copyright society under section 33(1) of the Copyright Act, 1957.
Music licence agreements have an impact on the lives of almost everyone who listens to music, which is pretty much everyone. The intellectual property regulations apply every time someone downloads music, whether legitimately or illegally. Most musicians who practise on a big scale rely on music licence agreements to make a living. Because of the widespread appeal of music, including, unfortunately, stolen music, most of their labour goes unpaid. Through the cases cited it can be concluded that Section 30 of the Copyright act, 1957 states that a person can grant licensing. But when it comes to a private company, the same will be illegal under Section 33 of the Copyright Act, 1957 as they have to be registered as a copyright society which can only be a government entity in India.
The article first published on Lexology.com and the same can be accessed here.