31 May 2019

UPDATE | ONLINE STREAMING AND COPYRIGHT PROTECTION

The Bombay High Court recently held in the case of Tips Industries Limited v Wynk Music Limited that online streaming services are not eligible for being granted statutory licenses for broadcasting under Section 31D of the Copyright Act, 1957 (Act).

FACTS OF THE CASE:

• In 2016, Tips Industries Limited (Tips) entered into a licensing agreement with Wynk Music Limited (Wynk), an online music streaming service. After expiry of the license in 2017, both parties attempted to renegotiate the terms of the license allowing Wynk to offer downloading and streaming of musical works owned by Tips. However negotiations between the parties for extension of the license failed.
  
  
• Tips`s issued a cease and desist notice to Wynk requesting Wynk to remove the songs whose copyrights were owned by Tips`s from their platform. In reply to the same Wynk invoked Section 31D of the Copyright Act, 1957, claiming that they were a broadcasting organisation hence making them entitled to a statutory license to communicate the work to the public by way of a broadcast of the Tips`s songs.
  
  
• Tips`s filed two suits against Wynk for (1) infringement of the Tips`s copyright, disputing Wynk’s right to avail of a statutory license provided for by Section 31-D; and (2) claiming permanent injunction, restraining Wynk from — (a) communicating to the public the Tips`s musical work and sound recordings; and (b) giving on commercial rental/sale, the Tips`s songs by way of providing download services.
  
  

DECISION OF BOMBAY HIGH COURT

• Section 31D of the Act does not cover `downloading/purchase` of works
  
  The court held that when copyrighted songs were allowed to be stored or cached on the devices of their users, it would classify as ‘making another sound recording’ embodying the copyrighted work, under Section 14(E)(I) of the Act.
  
  When these same copyrighted songs are ‘sold’ through the feature allowing users to ‘purchase’ and access songs offline, it would classify as a ‘sale’ or ‘rental’ of the song. When copyrighted songs are ‘streamed’ without the provision for downloading, it amounts to a ‘communication to the public’ and a ‘broadcast’ under the Copyright Act, the exclusive right to which belongs to the copyright owner.
  
  Hence the court was of the view that the Wynk’s feature of allowing users to download songs and store for unlimited future use constituted ‘sale’ and not ‘communication to the public’, hence not coming under the definition of a ‘broadcast’ under Section 31D. Therefore, Wynk could not claim a statutory license for the use of such works.
  
  
• Section 31D of the Act does not Cover Internet Broadcasting
  
  The court examined Section 31D of the Act along with the Report of the Rajya Sabha Parliamentary Committee on the Copyright Amendment Act, 2012 and stated that the legislature was aware of internet streaming services and they consciously chose not to include such forms of communication within the scheme of Section 31D of the Act.
  
  Therefore, Wynk could not claim that the legislature intended ‘radio’ broadcasts to subsume online broadcasts. The court strictly interpreted Section 31D(3) of the Act along with the copyright rules framed to hold that it was clear that statutory licensing was intended to cover only ‘radio’ and ‘television’ broadcasting, and not internet broadcasting. The Court also rejected Wynk’s reliance upon the Government of India Office Memorandum, stating that it lacked statutory authority, and could not prevail over the statutory scheme under Section 31D of the Act.
  
  
• Section 31D of the Act cannot be invoked without the prior fixation of rates by the IPAB
  
  The court held that, the Intellectual Property Appellate Board (IPAB) did not have jurisdiction to fix rates for `internet broadcasting`. The court further held that after strict perusal of the statutory scheme under Section 31D of the Act and Rules 29, 30 & 31 of the Copyright Rules 2013 (Copyright Rules), the prior fixation of royalty rates by the IPAB was essential for the invocation of a statutory license under Section 31D of the Act. Wynk also attempted to argue that Rules 29, 30 and 31 of the Copyright Rules were ultravires the section as they provided for prior fixation of the royalty rate, but this contention was also rightly rejected by Bombay High Court, who stated that there is no inconsistency between the rules and the statute.
  
  
• Finally, the Court allowed the Notice of Motion and stated that Tips was entitled to an interim injunction stating that they had prima facie made out a case that they would suffer irreparable injury in the form of revenue lost, and that the balance of convenience was in Tips`s favour.
  

MHCO Comment: This judgment is welcome relief to the music industry and finally puts to rest the questions about Section 31D of the Act and internet streaming. It will also have a ripple effect on how online streaming services need to be incorporated into our copyright law. While it still remains open whether the present position will be overturned by the Supreme Court in a future appeal, the current position has been clearly established by the Bombay High Court.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.comfor any assistance.