Copyright Act: 'Business Of Issuing Licenses Can Be Routed Only Through Copyright Societies U/S 33'; Madras HC Dismisses Suits Filed For Violation Of Licensing Rights

The Single Judge Bench of Justice N. Anand Venkatesh accordingly held:

"There is no doubt true that an owner need not necessarily join a copyright society. The first proviso to Section 33 makes it clear that the right of an owner to issue licenses, in his individual capacity, remains unimpacted, subject to the rider that such a right must be consistent with his obligations as a member of any copyright society. However, once the grant of license moves from the owner in his individual capacity, and transcends into the realm of a business, Section 33(1) and/or the second proviso applies. The legislative intent is manifestly clear that the business of licensing must be routed only through a copyright society."

The court held that the plaintiff's cause of action will 'crumble like a pack of cards' when it is clear that the plaintiff is subject to the statutory bar on issuing licenses under Section 33. When the answer arrived at on the preliminary question of law indicates that the plaintiff doesn't have the authority in law to issue licenses, there cannot be any consequences for the claim of the plaintiff that the defendants have failed to obtain licenses and pay license fees for on-ground performance rights of the sound recordings concerned.

Background

In the case at hand, Novex Communications Private Limited, the plaintiff had entered into various assignment agreements with the owners of sound recordings, especially the songs in films. By virtue of the rights assigned to them, including the rights for the on-ground public performance of sound recordings of the songs, the plaintiff contended that their acquired rights bestow upon them the absolute copyright for granting licenses to others for on-ground performances of the songs concerned.

"Whether the plaintiff 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?", this was the question that the single judge bench of Justice N. Anand Venkatesh framed as the preliminary issue that warrants an answer.

In the two suits filed before the court, the allegations levelled by Novox against both defendants, i.e, DXC Technology Pvt. Ltd. and Cognisant Technologies Solutions India Pvt. Ltd, are the same. It has been contended by Novex that despite its absolute copyright over ground performances of some songs under Section 18(2), both the defendants played those songs in the events conducted by them without obtaining a license from Novex.

The plaintiff also claimed that they have become the owner of 'sound recordings' and the latter comes within the definition of 'work' under Section 2(y) of the Copyright Act. It was submitted that the owner of a work is different from the original content creators who are the authors of the underlying literary, musical or artistic work; only the latter would be subjected to the constraints of Section 33 of the Act, added the plaintiff counsel. Therefore, according to the plaintiff, joining the copyright society is a voluntary act that has no bearing on the plaintiff's right to grant licenses.

However, the defendants argued that the plaintiffs have admitted that they are in the business of granting licenses in sound recordings for all forms of exploitation of copyright in sound recordings. Section 33 of the Copyright Act does not permit Novex to grant license or claim license fees on the assigned rights under Section 30, since they are neither a copyright society nor a member of copyright society. The defendants had also argued that the plaintiff has only claimed rights over on ground performances and that won't make them the owner of 'work', i.e, sound recordings.

Accordingly, under Order XIV Rule 2(2)(b) of Code of Civil Procedure, 1908, the court framed the preliminary issue on the question of law that will determine the competency of Novex to institute both these suits.

Court's Findings

At the outset, relying on ICSAC v. Aditya Pandey (2016), the court observed that Section 18 of the Copyright Act transfers the ownership of the copyright to the assignee while a licensee under Section 30 merely acquires a right of user with the ownership still vesting with the owner/licensor.

While tracing the genesis of copyright societies and its transformation over time, the court noted that the copyright amendment Act of 1994 introduced the concept of 'Copyright society' registered under Section 33 (3) of the Act.

"Though envisaged with an intent to benefit authors of the work, Section 35 of the Act placed these societies under the collective control of the owners with little or no room for authors. By 2008, a situation reached, where, these Copyright Societies were completely under the control of the owners who ignored the interests of the authors and composers", the court observed.

The single-judge bench then relied on the 227th Report of the Parliamentary Standing Committee on the Copyright (Amendment) Bill, 2010 that paved way for the 2012 amendment by virtue of which the 'authors' were placed on par with 'owners of copyright', in the control over the copyright society.

Additionally, the court perused the after effect of the amendments till now on granting licenses as a business:

"Clause (1) of Section 33 makes it clear that "no person or association of persons" shall, after coming into force of the Copyright (Amendment) Act, 1994, commence or carry on the business of issuing or granting licenses 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 as a copyright society under Section 33(3)."

The court noted that as per Section 2(42) of the General Clauses Act, 1897, the word 'person' includes companies as well in the absence of a definition within the Copyright Act. Additionally, Section 33(1) and its second proviso does not place restrictions on the right of an owner to grant licenses in his individual capacity for his own works, as long as it is consistent with his obligations as a member of any copyright society.

On the permissibility of Novex Communications, a commercial enterprise carried on for profit, granting licenses on the rights assigned to them, the court observed:

"It is no doubt true that the assignee becomes an owner by virtue of Section 18(2) of the Act and is, therefore, legally entitled to issue licenses under Section 30 as the owner of the copyright. Section 30 merely recognises the right of the owner to grant a license and does not make a distinction between individuals and business entities in the matter of granting license. That distinction is, however, at the heart of Section 33 which clamps a prohibition on the "business of issuing or granting licenses" except through copyright societies [Clause(1) and second proviso to Section 33], while retaining the right of the owner, in his individual capacity, to exercise the right of licensing his works conferred on him by Sections 18(2) and 30 of the Act."

Relying on the judgment in Kalpana Mehta v. Union of India (2018), the court relied on a parliamentary speech by the Minister of Information and Broadcasting who moved the Bill. The bench opined that the intent of the amendment was to protect the rights of authors by underscoring that authors and other owners can claim equal royalty shares through the copyright society.

"The same applies to sound recordings, the idea being, you can have the work assigned, but you cannot have the royalties, assigned. You can use that work through other media, but there can be no assignment of royalty. So, the author and the music composer would share royalty with the producer, the assignee, in equal terms. That is really the concept behind these amendments, protecting the right of the author and the music composer", the Minister of Information and Broadcasting had commented in the parliament then.

Disagreeing with the judgment in Novex Communications Private Limited v. Lemon Tree Hotels Limited (2019), the court clarified that the decision of Delhi High Court was not in consonance with the legislative history behind the Amendment Act of 2012. The Delhi High Court had held that copyright societies would have exclusive right to grant licenses only when an exclusive authorisation to that effect is obtained from the owners under Section 34 (1) (a). The Madras High Court, on that aspect, reiterated that the first proviso to Section 33 operates only qua an issuance of a license by an owner, in his individual capacity. If the entity involved is in the business of issuing licenses, like the plaintiff in these cases, it would fall within the net of the second proviso, if the work is incorporated into a cinematograph film or a sound recording.

"...Furthermore, the second proviso is clear to the effect that the "business of issuing or granting licenses" shall be carried out only through a copyright society. By authorizing entities other than copyright societies to engage in the business of granting licenses, the Court would be clearly rendering the legislative emphasis on the word "only", occurring in the second proviso to Section 33, completely redundant. This would fly in the face of the settled cannons of interpretation that no word or provision should be considered redundant or superfluous in interpreting the provisions of a statute", the court added relying on the judgment that outlines the legislative intent behind each part of the statute in Sankar Ram & Co. v. Kasi Naicker, (2003).

"It must necessarily follow that the very substratum for the relief of injunction and damages, claimed in the two suits, must crumble like a pack of cards", the court noted while dismissing both suits filed by the plaintiff. The court has also imposed costs of Rs one lakh each for both suits to be paid to the respective defendants.

Case Title: M/s.Novex Communications Pvt.Ltd v. DXC Technology Pvt. Ltd, M/s.Novex Communications Pvt.Ltd v. Cognizant Technologies Solutions India Pvt. Ltd.

Case No: C.S Nos.407 & 413 of 2020 (Comm.Suits)