Compulsory licensing in Copyright post 2012 amendment to the Indian Copyright Act, 1957

Introduction

Copyright is an exclusive right given to creators to reproduce, perform or distribute the work. The purpose of a copyright is to protect the rights of the authors and ensure that they receive the due benefit of having created that work. However, the authors cannot be given complete monopoly over the work created by them. There will have to be some leeway given for fair use and public knowledge. Therefore, the concept of licensing a copyrighted work was created. Licensing is a controlled right to publish, broadcast or communicate to the public copyrighted material with the prior consent of the copyright owner against the payment of a fee.

In India, the Indian Copyright Act, 1957 introduced two broad classifications of licensing- compulsory and voluntary licensing. While Section 30 dealt with voluntary licensing, Section 31 dealt with compulsory licensing. Section 30 states that the owner of the copyright in any existing work or the prospective owner of the copyright in any future work may grant any interest in the right by license in writing signed by him or by his duly authorized agent.[1] Therefore, the copyright owner of any existing work or the prospective owner of any future work can grant any interest in the right by way of a license. However, it has to be borne in mind that in case of a future work, the license will come into force only when the work comes into existence.

Section 31 of the Indian Copyright Act, 1957, on the other hand, states that if the copyright owner does not allow the republication of the works or refuses to allow the communication to the public by broadcast then a complaint to that effect can be submitted with the Copyright Board of India. If on examination they find that the copyright owner does not have a reasonable justification for withholding the fair use of the copyrighted material, then they can order a compulsory license order in favour of the complainant and ensure that the copyrighted material is used against the payment of a fee by the complainant to the copyright owner.

Compulsory licensing is, in simple terms, the Copyright Board enforced right of a complainant to use a copyrighted work for the payment of a fee to the copyright owner.

The aim of this paper is to understand the development of the concept of compulsory licensing in India through the course of case laws and the various international conventions such as the Berne Convention that India was a party to. This paper will aim to understand and analyse the importance of compulsory licensing in India in the field of copyrighting in India. . The author will not restrict compulsory licensing only to India but will also compare it with the American and European Union perspective to give a more well-rounded and comprehensive overview of compulsory licensing. The author will further recommend certain amendments that maybe put forth in the current Indian copyright regime with respect to compulsory licensing in order to ensure more effective functioning of the laws

 Historical Development of Compulsory Licensing in India

India gets compulsory licensing from the International Copyright Mandate. Article 9 of the Berne Convention for the Protection of Literary and Artistic Works, 1886 explains the mechanism for compulsory licensing to be followed in countries that are signatories to the Convention. India became a signatory to the Berne Convention and had an option to adopt Article 9 as the guiding light to determine mechanism of compulsory licensing in India.

Article 9 states:

“(1) Authors of literary and artistic works protected by this Convention shall have the exclusive right of authorizing the reproduction of these works, in any manner or form.

(2) It shall be a matter for legislation in the countries of the Union to permit the reproduction of such works in certain special cases, provided that such reproduction does not conflict with a normal exploitation of the work and does not unreasonably prejudice the legitimate interests of the author.

(3) Any sound or visual recording shall be considered as a reproduction for the purposes of this Convention.”

However, Article 9 does not put any restrictions on the legislative powers of the countries of the Union as a result of which there was a real possibility that the Legislation may go too far and curtail the rights of the copyright owners too stringently. Thus, the Indian policy makers were averse to adopting Article 9 of the Berne Convention and instead leaned towards Article 11 bis Berne Convention, 1886. The differentiating factor between Article 9 and Article 11 bis is the following paragraph:

 “It shall be a matter for legislation in the countries of the Union to determine the conditions under which the rights mentioned in the preceding paragraph may be exercised, but these conditions shall apply only in the countries where they have been prescribed. They shall not in any circumstances be prejudicial to the moral rights of the author, nor to his right to obtain equitable remuneration which, in the absence of agreement, shall be fixed by competent authority.”

From the above, it becomes clear that under Article 11 bis, the issuance of copyright licensee would be subject to the condition that the moral rights of the author and his right to obtain equitable remuneration remain unprejudiced- these conditions were missing under Article 9 of the Berne Convention. Thus, the view was that Article 11 bis would be more appropriate for a developing Indian society as compared to Article 9 of the Berne Convention. Ultimately, elements of both Articles, Article 9 and Article 11 bis, were adopted to create Section 31 of the Indian Copyright Act, 1957.

Scope of Compulsory Licensing in India

An important case with regard to compulsory licensing is Entertainment Network (India) Ltd. v. Super Cassette Industries Ltd[2]. In this case, Radio Mirchi was playing music, the rights of which were held by Super Cassette Industries. Super Cassette Industries filed for a permanent injunction and while the suit was pending, the FM operators filed an application before the Copyright Board for the grant of compulsory license under Section 31(1) (b) of the Copyright Act. The question that arose was- “Whether in such circumstance, granting of a compulsory license was viable?” The broadcasters, i.e. Radio Mirchi, argued that since a license had already been granted to AIR and Radio City, there were no grounds on which a license to Radio Mirchi should be denied. The Court reiterated that a compulsory license could be granted only on grounds stated in Section 31 of the Copyright Act, i.e. only when access to the work had been absolutely denied to the public. In this case, license had already been granted to AIR and Radio City. Therefore, there was no complete bar on public access to the songs that were forming the subject matter of the compulsory license. Therefore, the argument of Radio Mirchi was not strong enough and they were held liable for copyright infringement.

What is clearly explained through the case is that a compulsory license will not be given in all cases where fair use has been denied. It will only be given in those cases where there is an absolute and unreasonable restraint on public access of the copyrighted information. Thus, the condition of absolute and unreasonable restraint on public access of the copyrighted information needs to necessarily be fulfilled for Section 31 to apply.

In the case of Reliance Broadcast Network Limited v. Super Cassettes Industries Limited[3], the applicant (Reliance) filed an application on 9th November, 2011 under S.31 (b) of the Copyright Act for grant of compulsory license. The applicant demanded an interim order to be allowed to broadcast the songs, based on royalty rates deemed by the applicant to be reasonable. After much deliberations and brilliant arguments being laid down from either sides. The Court the case of Super Cassettes Industries Limited v. Music Broadcast Pvt Limited[4] and Reliance Broadcast Network together since the facts and arguments laid down in both cases was identical. The Court held that the Copyright Board of India, whilst having the right to pass an order of compulsory licensing does not have the authority to pass an interim order on compulsory licensing. Only final orders maybe passed. Thus, in no case will the Copyright Board pass an interim compulsory license order on the basis of interim royalty rates.

The determination of compulsory licensing royalty rates was determined by the Copyright Board in the matter of Music Broadcast Private Limited v. Phonographic Performance Limited[5]. The standard rate of payment for royalty during the prime time broadcast shall be Rs.1,200/- per needle hour. The rate for day time (also called normal hours) and for night time (lean hours) shall be at a reduced rate.

Differential rates for different cities were not fixed after classifying them according to their population. The reason is that the more populous cities have larger number of F.M stations. If the population of a city is divided by the number of stations the resultant number is almost the same for all the cities. Thus all the F.M stations are more or less on the same footing as regards the size of the audience.

The standard rate shall be applicable to prime time broadcast which shall be 2 hours in the morning (8 a.m. to 10 a.m.) and 2 hours in the evening (6 p.m. to 8 p.m.). The rate for 8 lean hours (night hours) i.e. 10 p.m. to 6 a.m. shall be 25% of the standard rate. The rate applicable to 12 normal hours (which do not fall in the prime time or night hour’s category) shall be 60% of the standard rate.

Further, compulsory licensing is not limited to only the scope mentioned in Section 31 of the Copyright Act, 1957. Compulsory licensing extends to the unpublished works of dead authors or authors that cannot be traced, found or are unknown. Any person, in such a case, can apply to the Copyright Board under Section 31 A for a compulsory license allowing such person to publish such works for the benefit of the public.

Finally, under Section 32 (1) any person can apply to the Copyright Board for a licence to produce and publish a translation of a literary or dramatic work in any language after a period of seven years from the first publication of the work. Under Section 32 (1a) any person may apply to the Copyright Board for a licence to produce and publish a translation, in printed or analogous forms of reproduction, of a literary or dramatic non-Indian work, in any language in general use in India after a period of three years from the publication of such work, if such translation is required for the purposes of teaching, scholarship or research. However, if the translation is to be made in a language not in general use in any developed country then such application for translation maybe made after a period of one year from such publications.

Compulsory Licensing in European Union- TRIPS Perspective

All countries of the European Union are signatories to  the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

The TRIPS Agreement introduced intellectual property rights into the world of international trade for the first time and is still one of the most comprehensively drafted documents with respect to intellectual property rights in the world. All European Union countries are bound by the provisions of the TRIPS Agreement which makes reference to compulsory licensing in intellectual property rights including copyright in Article 31 of the document.

Compulsory licensing with respect to the TRIPS Agreement is the Government granted right given to a private party to use copyrighted (or any other material which is regarded as intellectual property rights) material without the consent of the copyright owner for a specific purpose and a specific time period in a certain matter after all efforts for obtaining a voluntary license have failed except in cases of national or extreme emergency. In such cases of extreme or national emergency, it is not necessary that steps should have been taken in order to procure a voluntary license. Even directly passing an order for compulsory licensing of a copyright would be appropriate. Further, citizens of all countries of the European Union that enter into agreement for compulsory licenses are supposed to use the copyrighted material only for domestic purposes, and rights holders should be given a remuneration for the license based on considerations such as “economic value of the authorization.”

In the case of Volvo AB v. Erik Veng (UK) Ltd.[6] in Europe the United Kingdom law authorized the granting of compulsory licenses when, due to the conditions imposed by the patentee on the grant of a license a market for the export of any patented product made in the United Kingdom was not being supplied, the working or efficient working of any other patented invention which made a substantial contribution to the art was prevented, or the establishment or development of commercial or industrial activities was unfairly prejudiced under article 48(3)(d) of the United Kingdom Patent Act as revised in 1977.

“Refuse to deal” on part of the holder of copyright or patent is an accepted ground in the European Union for granting a compulsory licensing. A decision of the European Court of Justice (ECJ) dated 6 April 1995 in the case of Magill elucidated how refusal to deal could be a ground for granting a compulsory license for use of intellectual property. In its judgement, the Court confirmed that Radio Telefis Eireann (RTE) and Independent Television Publications Limited (ITP), were the only sources of basic information on programme scheduling (which is indispensable raw material for compiling a weekly television guide) and could not rely on National copyright provisions to refuse to provide that information to third parties. It was held by the European Court of Justice that such refusal to deal constituted the exercise of an intellectual property right beyond its specific subject matter and was instead, an abuse of a dominant position under Article 86 of the Treaty of Rome[7].

The court argued that RTE and ITP held a dominant position in the market since they were the only sources of the information required to produce weekly television programming guides in Ireland. Thus they were in a position to exclude all secondary market for weekly television guides and maintain a monopoly by simply not sharing the information. The Court was of the opinion that refusal to grant a license for the use of intellectual property rights cannot prima facie be regarded as the abuse of dominant position except in special circumstances. Such circumstances included-

• the lack of an actual or potential substitute for a weekly television guide[8],
• the existence of a specific, constant and regular demand for such a guide[9],
• the fact that the refusal to grant a license to Magill to produce such a guide prevented the appearance of a new product on the market which RTE and ITP did not offer.[10]

In 1995, the Belgium Courts imposed a compulsory license on two copyright collecting societies in favour of two cable distributors whose right to transmit, by cable, programmes from German Cable SATI in Belgium has been refused. Refusal of authorization for a reasonable remuneration was deemed to be abusive[11].

Compulsory Licensing in United States of America

While discussing compulsory licensing in copyright, it is prudent to compare the compulsory licensing system of India to USA. This enables a comparison of commonwealth to federal systems and helps obtain a well-rounded perspective. Compulsory licensing is mostly applied to the music industry in United States of America. In USA, a song that has been recorded and distributed to the public can be re-recorded and re-distributed by any person, entity or group without obtaining the permission of the copyright owner provided that the copyright owner is given a notice to that effect along with the statutory fee for such re-recording and re-distributing and the recording is to be used for non-dramatic purposes.

The US Copyright Office sets a statutory fee to be paid by the third party to the copyright owner for the use of the copyrighted works without the copyright owner’s consent. As of 2017, the statutory fee set by the US Copyright Office is 9.1 cents per song (or 1.75 cents per minute of the playing time)[12]. This would mean that if a third party wants to re-record a 3 minute song and re-distribute 100 cassettes of the same, then the copyright owner of the song should receive $910.

Further a third party can proceed to re-record and re-distribute a musical piece without prior consent of the copyright owner only where the musical piece is not to be used for dramatic purposes such as in a drama, a TV show or an opera. If the musical piece is to be used for dramatic purposes, then the third party must approach the copyright owner and seek express permission to re-record and redistribute the musical piece. In such cases, the fee paid by the third party will be determined by the copyright owner on the basis of an agreement entered into between the two parties. However, where the copyright owner is not in a position to decide the fee, he can refer the matter to the US Copyright Office for fee determination.

An important feature of compulsory licensing in USA is that as long as the basic melody or the fundamental nature of the music piece is not being tampered with, the third party can proceed without express permission of the copyright owner, albeit the payment of fee is necessary. However, if the basic melody or the fundamental nature of the music piece is changed, then the third party has to seek express permission from the copyright owner for the same.

In USA, there have also been instances where compulsory licensing would not have ordinarily applied in a given case, but the US Courts normalised the compulsory licensing by way of a court order and allowed the continuation of the use of the copyrighted song without initial permission of the copyright owner through the court order.

When the Supreme Court issued its May 15, 2006 decision in eBay Inc. v. MercExchange LLC[13], it eliminated the belief that a patent or copyright can be automatically enforced as an exclusive right. The decision concerned not the putative rights under a patent or copyright, but rather the ability of the first owner to obtain remedies, in cases involving infringement.

The approach of providing an injunction in cases of patents is consistent with the treatment of injunctions under the Copyright Act. Like a patent owner, a copyright holder possesses “the right to exclude others from using his property.”[14] Like the Patent Act, the Copyright Act provides that courts “may” grant injunctive relief “on such terms as it may deem reasonable to prevent or restrain infringement of a copyright”.[15] The Court has consistently rejected invitations to replace traditional equitable considerations with a rule that an injunction automatically follows a determination that a copyright has been infringed.[16]

The Court said “the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.”[17]

The Court noted that under “well-established principles of equity, a plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief.”[18]

A plaintiff must demonstrate:

• that they have suffered an irreparable injury;
• that remedies available at law, such as monetary damages, are inadequate to compensate that injury;
• that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted;
• that the public interest would not be disserved by a permanent injunction.

Subsequent to the eBay decision, U.S. courts have disallowed several pleas for temporary and permanent injunctions in cases involving patents, and at least one case involving a permanent injunction for copyright infringement.

Regulations with respect to Compulsory Licensing of Copyright in United States of America

Section 115 of the Copyright Act, 1967 provides that a compulsory license is required to make and distribute phono records after a phono record of a work has been distributed to the public in the United States under authority of the copyright owner, subject to certain terms and conditions of use. Such a license includes the right of the compulsory licensee to distribute or authorize the distribution of a phono record of a nondramatic musical work by means of a digital transmission, which constitutes a digital phono record delivery.

The United States Copyright Office’s regulations have been set out in detail for the procedures that must be followed while seeking a compulsory license. Under Section 201.18  of the US Copyright Act, 1967, procedure for giving notice of intention to obtain a compulsory license for making and distributing phono records of nondramatic musical works has been laid down. Section 37 CFR Part 210 lays down royalties and statements of account under compulsory license for making and distributing phono records of nondramatic musical works. Further Section 115 lays down the rates of mechanical Licenses Royalty Rates.

As per the procedure laid down in Section 115 and 37 CFR 201.18, a Notice of Intention (NOI) may be filed with the Licensing Division of the Copyright Office if certain special circumstances exist. Such NOIs have to be submitted to the Office either electronically or in hard copy form. 

Recommendations

In the case of Entertainment Network (India) Ltd. v. Super Cassette Industries Ltd[19], it was held by the Courts that denial of fair use is not sufficient for providing a compulsory licensing, unreasonable and absolute restraint to public knowledge needs to exist for the enforcement of a compulsory licensing order in copyrights. However, the author is of the opinion that this need for unreasonable and absolute restraint to public knowledge is a very extreme pre-condition for enforcement of compulsory licensing. As long as it is sufficiently proved that fair use has been prevented, there should be an option available for providing a compulsory licensing.

Under the TRIPS Agreement, in any case where attempts have been made to procure a voluntary license and the attempts have not been reciprocated positively, the party can approach the Copyright Office for a compulsory license and it will be provided. This provision of the TRIPS Agreement has widened the scope of procuring a compulsory license. There is a need for Indian law to adopt a similar approach to ensure that the benefit of compulsory licensing maybe given to more parties and they do not need to wait for the existence pf an extreme condition of unreasonable and absolute restraint to public knowledge to claim their right.

Further, Indian courts have taken the view in several cases like Reliance Broadcast Network Limited v. Super Cassettes Industries Limited[20] and Super Cassettes Industries Limited v. Music Broadcast Pvt Limited[21] that copyright licensing cannot be given in the form of an interim order and can only be given in the form of a final order in the matter. This is, again, restrictive to the scope of compulsory licensing in India. Interim orders are given in the due course of proceedings and may or may not be formalised in the final orders. However, they do provide interim relief to the concerned party. Allowing compulsory licensing to be given in the form of an interim order does not have any disadvantage, as such. If on the further perusal of the case, it is found that the interim order given is incorrect,0 the Court can reverse the order and ask the beneficiary of the interim order to compensate the aggrieved party appropriately. However, if the interim order given is, in fact, correct, then it could save the time and resources to the beneficiary of the interim order because he has not lost his right to the compulsory license during the pendency of the trial- which, in India, could be a rather tedious and long drawn out process.

Conclusion

From the above paper, the author has tried to explain the difference between voluntary and compulsory licensing, trace the development of compulsory licensing in the Indian legislative system and finally contrasted the scope of compulsory licensing in India, the European Union and United States of America.

The author is of the opinion that the compulsory licensing system is an integral part of the copyright regime. What makes the compulsory licensing regime imperative is the fact that without it, the authors would have complete monopoly over their copyrighted works and the public would have restricted access to information. However, the compulsory licensing regime is not unilaterally positive. There are certain drawbacks in its applications.

A classic example is the application of Section 32 A of the Copyright Act, 1957 which allows compulsory licensing of published literary, artistic or scientific works that have not been re-produced in India a specific period after the first publication of the work. If an Indian author does not wish to allow his copyrighted work to be published by an International publication, the publication has a remedy to move before the Copyright Board of India under Section 32 A on the grounds that the Indian public is restricted from access to the works. Consequently, the Copyright Board may give the license to the International publication to publish the copyrighted works in the Indian market, albeit at a higher price. Thus, the more expensive publication in the market could potentially kill the low priced editions of the books of India authors under the Edition Programme in India. Thus, compulsory licensing can prove to be more harmful than helpful at times.

It has to be noted that in India, the compulsory licensing regime has been working well due to the harmonious partnership of the Copyright Board of India and the Judiciary thus far. Compulsory licensing is an important way forward in the copyright regime and its applications are still widening due to ever changing circumstances.

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[1] Section 30, Indian Copyright Act, 1957 available at the following link- http://copyright.gov.in/documents/copyrightrules1957.pdf

[2] Civil Appeal 5114 of 2005, Supreme Court of India

[3] Civil Appeal Nos.4196-4197 of 2012 arising out of SLP(C) Nos.26581-26582 of 2011

[4] Civil Appeal Nos.4196-4197 of 2012 arising out of SLP(C) Nos.26581-26582 of 2011

[5] Decided on 19 November 2002 by the Copyright Board

[6] Breier, 1999, p. 274

[7] Article 86 of the Treaty of Rome states:

1. In the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular to those rules provided for in Article 12 and Articles 81 to 89.
2. Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, insofar as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.
3. The Commission shall ensure the application of the provisions of this Article and shall, where necessary, address appropriate directives or decisions to Member States.

[8] Latham and Geissmar, 1995, p. 9

[9] Ibid

[10]Ibid

[11] Latham, 1996, p. 25

[12] Mechanical License Royalty Rates available at the following link- https://www.copyright.gov/licensing/m200a.pdf (Last Accessed on 10.08.2017 at 11:30)

[13] 126 S. Ct. 1837

[14] Fox Film Corp. v. Doyal, 286 U. S. 123, 127 (1932)

[15] 17 U. S. C. §502(a)

[16] See, e.g., New York Times Co. v. Tasini, 533 U. S. 483, 505 (2001) (citing Campbell v. Acuff-Rose Music, Inc., 510 U. S. 569, 578, n. 10 (1994) ); Dun v. Lumbermen’s Credit Assn., 209 U. S. 20, 23–24 (1908) .

[17] eBay Inc. v. MercExchange LLC, 126 S. Ct. 1837

[18] Ibid

[19] Supra Note. 2

[20] Civil Appeal Nos.4196-4197 of 2012 arising out of SLP(C) Nos.26581-26582 of 2011

[21] Supra Note. 4