What Tips-Wynk legal row, invoking Section 31D of Indian Copyright Act, means for music fans

Amit Gurbaxani

May 27, 2019 09:24:06 IST

Earlier this month, a long-running legal dispute between record label Tips Industries’ and Airtel-owned audio streaming service Wynk Music was ruled in the former’s favour. And while the average music fan may have missed the news, it gave Indian record labels much reason to celebrate.

So significant was the outcome of the case that a senior music executive, on condition of anonymity, told this writer that had Tips lost, “we would have gone back to the dark ages”. “When 60-90 percent of your monies are coming from the internet, if the government sets up the royalty rate it would mean the industry would collapse,” this executive said.

Tips, which owns the rights to many popular 1990s Hindi film soundtracks such as Khalnayak, Raja Hindustani and Taal, had sued Wynk for infringing its copyright, by continuing to stream its music in the absence of an agreement. If that sounds vaguely familiar, it’s because it’s the same reason Warner/Chappell took Spotify to court.

The other similarity between the suits: both Wynk and Spotify attempted to invoke Section 31D of the Indian Copyright Act, which lays down the provisions under which a “statutory licence for broadcasting of literary and musical works and sound recording” may be granted.

Here’s an attempt to simplify the legalese and explain the details of the disputes, for music fans:

What is a statutory licence?

When any organisation or individual wants to use copyrighted materials, such as (in these particular situations) songs, they are required to buy or otherwise obtain a licence from the organisation or individual that holds the rights to those songs, like a music label, publishing company or even an independent songwriter or composer. The licence is obtained by entering into an agreement with the copyright holder that states the mutually decided rate of royalty — or, alternatively, one-time fee — that they will receive.

The exception to this rule is covered under Section 31D, which states that “Any broadcasting organisation desirous of communicating to the public by way of a broadcast or by way of performance of a literary or musical work and sound recording which has already been published, may do so subject to the provisions of this section”.

According to the section, broadcasters can use copyrighted material without a licencing agreement by paying the copyright holder a rate of royalty fixed by the Intellectual Property Appellate Board. The controversial words here are “broadcasting organisation”. Both Wynk and Spotify claimed they were entitled to a statutory licence because they are “internet broadcasting” organisations.

What Tips-Wynk legal row, invoking Section 31D of Indian Copyright Act, means for music fans

Both Wynk and Spotify attempted to invoke Section 31D of the Indian Copyright Act in their cases versus Tips and Warner-Chappell, respectively

What exactly happened in the Tips vs Wynk case?

Wynk had a licencing deal with Tips, which lapsed in 2016. They were renegotiating the licence fees for months, until after failing to agree on a figure, Tips finally asked Wynk to remove its repertoire from the service in 2017. Wynk then informed Tips that they were invoking Section 31D of the Copyright Act according to which they were entitled to a statutory licence as an “internet broadcasting” organisation. Tips subsequently filed two suits in the Bombay High Court against Wynk disputing this, the first with respect to the “communication to the public” of its repertoire and the second with respect to the “giving on commercial rental/sale” its songs.

Justice SJ Kathawalla, the same judge hearing the Warner/Chappell-Spotify dispute, ruled in Tips’ favour in both instances, saying firstly that the ability for a user to download a song off Wynk to their device to hear it offline and to buy a song from the service for a subscription free and one-time payment respectively amounted to their “rent” and “sale”, which are exclusive rights of the copyright holder under the Copyright Act. (An exclusive right is a right “to permit or deny others the right to perform the same action or to acquire the same benefit”.) In other words, Wynk could not let users download or buy Tips’ songs without the latter's permission.

However, this aspect of the case did not deal with Section 31D, which relates to broadcast or “communication to the public” and is an exception to the copyright holder’s exclusive rights. In his judgment, Justice Kathawalla said that a user’s ability to stream songs on the service for free falls outside the scope of “communication to the public”, which according to the Copyright Act, is the same as “broadcast”. He stated that while making songs available to stream on demand does amount to “communication of the sound recordings to the public”, he agreed with Tips' lawyers that Wynk could not invoke Section 31D, which should be read in “conformity with the specific intention for which it was enacted”.

According to him, 31D applies only to radio stations and television channels as stated in the section, which refers to the “rates of royalties for radio broadcasting” and “television broadcasting”. In their arguments, Tips’ lawyers cited both the wording of the section, the Rules 29 and 31 of the Copyright Act and a report of the Rajya Sabha Standing Committee on the Copyright (Amendment) Bill 2010, which refer specifically to radio and television broadcasting.

As per the Standing Committee report, the logic behind granting these broadcasters a statutory licence, Tips' lawyers said, is that TV and radio are broadcast for free as a service to the public and are also in the interest of artists as they promotes their compositions. (It’s another matter that music labels believe that the very existence Section 31D, which was intended to boost the radio industry is problematic, not only because of the rate of royalty they get under a statutory licence but also because today, the size of the radio industry is far larger than the music industry.)

Justice Kathawalla also agreed that the internet and digital technologies such as streaming and downloads were prevalent when the Copyright Act was amended in 2012 and that Section 31D was framed keeping this in mind so it was never intended to include “internet broadcasting” organisations. Additionally, the section states that the royalty to be paid to the copyright owner has to be fixed by the copyright board before the broadcaster can use the works.

Bengaluru-based lawyer Sandhya Surendran, who runs legal consultancy firm Lexic that works with Indian independent music acts, said she concurred with the ruling. “When you’re talking about a broadcasting entity, the choice of broadcasting rests with the person who’s broadcasting it, not the end user or the person who’s consuming it,” she said. “With Wynk and Spotify, I decide when I want to hear a song, and each of these services also offer the option of downloading the song on your device, so [their activities] completely come out of [the scope of] broadcasting.”

There’s another important factor as well. As pointed out by KT Ang, the Asia Pacific regional director of the International Federation of the Phonographic Industry, at music conferences in Mumbai last year: to say that broadcasting includes internet broadcasting would run foul of the international copyright treaties the World Intellectual Property Organisation (WIPO)’s Performances and Phonograms Treaty aka the WPPT and Copyright Treaty aka the WCT, which India only ratified recently.

On what basis did Wynk claim Section 31D?

In 2016, a memorandum issued by the Department of Industrial Promotion and Policy, the government department in charge of matters relating to the Copyright Act, declared that Section 31D should be interpreted to include internet services. Justice Kathawalla however said that such a memo is merely advisory in nature and as stated by the Supreme Court in a previous case, “subservient to the legislative act and statutory rules”. In other words, the memo “lacks statutory flavour” and cannot be taken as a law.

What happened as a result of the Warner/Chappell v Spotify suit?

All streaming services have licencing deals with record labels, which allow them to stream the music companies’ repertoires in a territory. Each time a service enters a new territory it needs to extend those deals by fixing on mutually agreed financial terms. Spotify claimed that it had a deal with Warner but the latter decided to change the terms at the last moment, essentially jeopardising the former’s launch in India by treating the rights to their music as a pawn in their negotiations for the renewal of their global licencing deal. In response, Spotify decided to invoke Section 31D, saying that as an internet broadcasting company, it could use Warner/Chappell’s songs without its permission. Warner/Chappell filed an injunction against Spotify from doing this.

It would help to know the difference between Warner Music and Warner/Chappell. Warner Music, along with Sony and Universal, is one of the “big three” record companies in the world and includes subsidiaries such as Atlantic (whose roster includes Ed Sheeran), Elektra (Bruno Mars), Parlophone (Coldplay) and Reprise (Green Day). It also owns Warner/Chappell, which is a music publishing company that works with songwriters and composers (as opposed to artists who don’t write or compose their own music) and collects royalties on their behalf.

An act who is signed to Warner/Chappell may not be necessarily be signed to Warner Music, which is why even though Spotify, at the time of publication of this piece, doesn’t have a deal with Warner Music in India, thanks to the temporary agreement between Warner/Chappell and Spotify, you can hear tracks by Warner/Chappell artists on Spotify India, provided of course that they aren’t signed to Warner Music. Such acts include the likes of Beyonce, Katy Perry, Kendrick Lamar, Radiohead and Rihanna.

What exactly is this temporary agreement?

Like Wynk, Spotify informed Warner/Chappell that they’re invoking Section 31D. They then transferred a sum of money, as advance royalty, to royalty collection company International Copyright Enterprise (ICE) Services. Warner/Chappell rejected the payment. Justice Kathawalla did not allow Spotify to invoke Section 31D but also did not prevent it from launching in India. Instead, he asked the service to deposit Rs 6.5 crore in court, which will serve as a sort of minimum guarantee to Warner/Chappell for the use of its repertoire. He also told the platform to maintain records of the same as well of those of its ad and subscription revenues.

What if Spotify loses?

Wynk has already said they will appeal but folks in the music industry say that the judge’s ruling is so carefully detailed that it’s unlikely it will be overturned. If Spotify loses, then it will have to remove all Warner/Chappell tracks from its service in India, unless between now and June when the case will be heard again, they renegotiate and close a deal with Warner Music. Removing Warner/Chappell’s repertoire will prove complicated because songs often have multiple songwriters whose rights are covered by multiple publishing companies. As Spotify has said, even if Warner/Chappell owns only a 1 per cent share of the rights to a tune, it will have to be removed.

If Warner/Chappell’s tracks disappear from Spotify, it will be a further blow to the platform, which currently doesn’t have Saregama’s music either. The best option seems to be for them to sign a contract with the publishing company and its parent label to get all of Warner’s acts on the service. Spotify believes it’s doing decently in India so far but the competition is heating up and the fact is that all the India-based fans of Ed Sheeran and Justin Bieber — two of the few international acts able to sell out tours here — who want to hear their hit collaboration “I Don’t Care” have to go elsewhere.

Amit Gurbaxani is a Mumbai-based journalist who has been writing about music, specifically the country's independent scene, for nearly two decades. He tweets @TheGroovebox

Updated Date: May 29, 2019 09:28:12 IST