Royalty Sharing Is Mandatory Whenever Sound Recordings Are Communicated To Public, Calcutta High Court Restraints Vodafone From Using Unlicensed Caller Tunes

The Calcutta High Court single bench of Justice Ravi Krishan Kapur held that, under the Copyright (Amendment) Act, 2012, authors have statutory rights to royalties whenever sound recordings are publicly communicated. 

The bench directed Vodafone to cease unlicensed use of copyrighted works and to pay royalties to the Indian Performing Right Society (IPRS), a society which enforces the copyrights of its members, music composers, authors, and publishers. 

Brief Facts:

Vodafone India Ltd. (“Vodafone”) came up with a feature of pre-recorded Caller Ring Back Tones (CRBT). It allowed customers to select songs for personal listening or as caller tunes. Some of these recordings were originally manufactured and published by Saregama India Pvt. Ltd. (“Saregama”). Several recordings offered by Vodafone were also secured by the Indian Performing Rights Society (“IPRS”), a copyright society under the Copyright Act, of 1957. IPRS aims to protect and enforce the rights of its members, which include authors, music composers, and publishers. IPRS administers rights related to literary and musical works by issuing licenses and charging fees to safeguard the collective interests of its members.

IPRS contended that Vodafone must obtain a separate license and pay royalties before using the musical and literary works of IPRS members as part of their sound recordings. Vodafone filed suit before the Calcutta High Court (“High Court”), seeking a declaration that IPRS is not entitled to any claims, including license fees. An interim order on 1 October 2018 restrained IPRS and Saregama from claiming royalties from Vodafone, provided Vodafone deposited Rs. 3.5 crores with the High Court. IPRS later sought to vacate this order.

Meanwhile, Saregama filed a separate suit in the High Court, seeking to prevent Vodafone from using its copyrighted sound recordings for its value-added services. Vodafone responded with applications seeking to stay the suit and to include IPRS as a party in the case. IPRS also sought to be included in the suit to prevent the withdrawal of the deposited amount.

A third suit was filed by IPRS before the High Court to restrain Vodafone from publicly performing or communicating its repertoire without paying royalties. An interim order on 12 October 2018 allowed Vodafone to continue its value-added services upon depositing Rs. 2.5 crores. Vodafone later sought to include other music companies – Sony and Tips, in this suit. IPRS also sought to vacate this order and demanded additional payments and disclosures from Vodafone.

These three suits were heard together by the High Court after obtaining consent from the parties. 

Contentions of the Parties:

IPRS contended that Vodafone lacked the legal authorization to exploit the music and literary works contained within the sound recordings of IPRS members without obtaining a valid license. Neither Saregama nor any other music company possesses the authority to grant licenses for the exploitation of these works. IPRS contended that even if Saregama granted a license to Vodafone in violation of the T&C of the rights granted to IPRS, that would be void under Sections 19, 30 and 30A of the Copyright Act. Fresh agreements were made in 2017 between IPRS and all music companies, including Saregama, whereby the companies assigned their rights to IPRS, including the right to collect royalties. 

Vodafone argued that as per Section 17(c) of the Copyright Act, the producer of a sound recording is the first owner of the copyright in the incorporated works, especially when such works were commissioned under a contract of service for valuable consideration. Therefore, the use of sound recordings did not necessitate a separate license from IPRS for the musical and literary works within them. Further, post-amendment of the Copyright Act, sound recordings retained an independent copyright status. This meant that royalties did not need to be paid to IPRS or the owners of the literary and musical works within the sound recordings. 

Regarding the issue of royalty payments, Vodafone asserted that such payments should be determined by the assignment agreement between the assignor and the assignee, as per Section 18(1) read with Section 19(10) of the Act. They highlighted an assignment deed between Saregama and IPRS, where Saregama assigned public performance and mechanical rights to IPRS. However, Vodafone argued that this assignment only designated IPRS as a "collecting agent" of royalties and did not confer ownership rights to IPRS. Moreover, Vodafone mentioned a settlement reached with Saregama regarding disputes over previous agreements. Saregama agreed to withdraw a lawsuit upon receiving a specified sum, and it was agreed that Vodafone would pay royalties to IPRS for the copyright on content provided by Saregama. 

Observations of the High Court:

The High Court observed that the amendments to the Copyright Act in 2012 significantly altered the legal framework concerning the rights of authors of literary and musical works. These amendments aimed to protect the rights of authors by ensuring mandatory royalty sharing whenever sound recordings are communicated to the public. The amendments granted substantive rights to authors, preventing them from being compelled to license away their rights for future technologies. A comprehensive scheme for royalty payment was incorporated into the Act and its accompanying rules. The amendments represented a shift in the balance of rights among stakeholders under the Act.

The High Court gave an example of a young author who might unknowingly assign all rights for a minimal fee, only to later realize that large corporations have profited immensely. The amendments aimed to protect authors, particularly those with weaker bargaining power, from such exploitation. Copyright was viewed not merely as an economic tool but as an extension of the author's personality, benefiting both them and their heirs.

The High Court held that despite Saregama being considered the first owner of the sound recordings, subsequent amendments recognized the rights of authors, which superseded those of the first owner. Therefore, Vodafone was legally obliged to pay royalties to IPRS for the use of literary and musical works. The court rejected Vodafone's argument that there had been no change in the law post-amendment, affirming that authors now have statutory rights to royalty sharing.

Furthermore, the High Court dismissed the relevance of certain agreements entered between Saregama and Vodafone and emphasized Vodafone's obligation to obtain licenses from IPRS. It highlighted Saregama's prior assignment of rights to IPRS and criticized attempts to circumvent these rights. The High Court concluded that the amendments provided authors with undeniable rights to royalties, and Vodafone's contentions were without merit.

In light of these observations, the High Court directed Vodafone to stop engaging in any acts infringing on IPRS's copyright without obtaining a valid license and making payment of royalties to IPRS. The High Court also directed the payment of deposited sums to IPRS and emphasized the need for expedited proceedings to resolve the disputes.

Case Title: Vodafone Idea Limited vs Saregama India Limited and Anr. 

Case No.: CS/23/2018 (CS-COM/93/2024) (CS/58/2024) IA NO: GA/1/2018 GA/3/2019

Advocate for Vodafone Idea: Mr S.N. Mookherjee, Mr Arunabha Deb, Mr Soumabho Ghose, Mr Deepan Kumar Sarkar, Ms Ashika Daga, Mr Samriddha Sen, Mr Ashish Bhan, Ms Kirti Balasubramanian, Mr Aayush Mitruka and Ms Lisa Mishra

Advocate for Saregama India Ltd.: Mr Debnath Ghosh and Mr Avijit Dey

Advocate for the Indian Performing Right Society: Mr Anindya Kumar Mitra, Mr Abhrajit Mitra, Mr Soumya Ray Chowdhury, Mr Himangshu Bagai, Mr Sarosij Dasgupta, Mr R. K. Ganguly, Ms Susrea Mitra, and Mr S Biswas

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