Why the Bombay High Court ruled against Wynk in its licence dispute with TipsMay 11 2019
The Bombay High Court recently ruled that Airtel-owned digital music app Wynk cannot store or use music owned by Tips Industries without its consent merely by claiming the shield of statutory broadcasting rights under Section 31D of the Copyright Act.
Importantly, while rejecting Wynk's claims, Justice SJ Kathawalla also held that Section 31D of the Copyright Act does not extend to internet broadcasting. Rather, it was clarified that the provision only covers broadcasting through radio and television. As stated in the judgment,
"... the provisions of Section 31-D read with Rules 29 to 31 coupled with the legislative history preceding the passage of Copyright Amendment Act, 2012 clearly support the submission that Section 31-D contemplates only television and radio broadcasting and not internet broadcasting."
Section 31D allows anyone wanting to broadcast content publicly to do so upon intimating the copyright holder of the same (notice) after payment of royalties prescribed by the Copyright Appellate Board.
This Section serves as an exception to the general rule that copyrighted content can only be exploited by third parties on the grant of a licence by the copyright holder. In other words, Section 31D would allow the broadcast of content even without the owner's consent. However, as now clarified by the High Court,
"The grant of Statutory License under Section 31-D is only restricted to radio and television broadcasting organisations and the Defendants’ on demand streaming services offered through internet as an “internet broadcasting organisation” do not fall within the purview of Section 31-D of the Act."
This effectively means that OTT internet service providers such as Wynk cannot provide copyrighted music and sound recordings without the permission of the copyright holders. Justice Kathawalla observed in his judgment,
"Recently, the music industry has experienced a rise of over the top service providers such as the present Defendants who seek safe harbour under Section 31-D to exploit copyrighted works, through either internet broadcast or download features, without seeking / obtaining a license from the owners thereof.
In my view, such use of the copyrighted works, through internet broadcast or download features, without obtaining a license from the owners of the copyright amounts to usurpation of the exclusive rights of the owners to commercially rent, sell or communicate to the public their sound recordings."
In the case before the Court, negotiations to enter into a fresh licensing agreement between Tips and Wynk fell through in April 2017. Consequently, Tips demanded that Wynk deactivate all of its content from the latter's platform by December 2017.
Wynk, however, asserted that it is a broadcasting organisation entitled to a statutory license to broadcast under Section 31D of the Copyright Act, even in the absence of a license agreement. Tips denied the claim as wholly illegal and eventually approached the Bombay High Court claiming copyright infringement by Wynk.
In turn, the High Court rejected Wynk's claim to statutory broadcasting rights under Section 31D and ruled in favour of Tips for the following reasons.
Wynk's business model violates the exclusive rights of the copyright owner
The Wynk music app provides music to users in one of three ways i.e.
- Music on demand - users can listen to music in devices connected through the internet
- Music download during pendency of subscription - The downloaded music will be available offline on the Wynk app as long as the paid subscription is active.
- Music purchase - Music could be purchased on payment of a one time fee after which the music may be stored offline and also available for use on other devices.
The Court eventually held that such provision of digital music would violate Tips' exclusive proprietary rights under Section 14 (1) (e) of the Copyright Act, if the same is carried on without authorisation. During the pendency of the case, Wynk stated that it had stopped the option of music purchase. However, this did not help their case either, as the judge proceeded to observe,
"In the absence of any reason forthcoming from the Defendants for stopping the feature of permanent download subscription in so far as the Plaintif’s content is concerned while continuing the download feature, it is safe to assume that the Defendants have indeed acknowledged that they have no right to ofer such permanent download subscription in respect of Plaintif’s content "
Provision of music over the Wynk App amounts to Commercial Rental/Sale of music
The Court found that Wynk's services entailed commercial rental/sale of music. As noted in the judgment,
"The customers’ access to the Downloaded Songs is contingent upon uninterrupted payment of the subscription fee. Non-payment of this subscription fee prompts a withdrawal of such access to the same, until the subscription is restored. Thus, the Defendants [Wynk] are essentially renting out the sound recordings available on their Platform, including the Plaintif’s [Tips] Repertoire, in exchange for a consideration/fee. Sale/ Commercial rental of sound recordings in a digital medium through the internet is no diferent than done through physical modes. This is a vivid instance of a commercial rental as contemplated under the Act..."
Such commercial rental/sale can only be permitted under the Copyright Act on permission being granted by the copyright holder. Therefore, Wynk was also barred from commercially exploiting Tips music without its consent.
"... once the subscription expires, the user would not be in a position to exploit the sound recordings. The Defendants do not have any such right without any authorization or permission of the Plaintif.
Such feature of download subscription option ofered by the Defendants enabling their customers to download sound recordings and access them offline in lieu of a monthly subscription fee violates the exclusive right of the Plaintif to give on commercial rental or offer for such commercial rental a copy of its sound recordings as provided in Section 14(1)(e)(ii) of the Act."
To put it in another way, the Court pointed out that the definition of commercial rentals/sale under the Copyright Act was couched in negative terms. The definition only excluded rentals /lease/lending for non-profit purposes by non-profit libraries and non-profit educational institutions.
"Hence, by implication, all other instances which are not specifically provided in the said definition amount to ‘commercial rental'", observed the Court.
Since Wynk services did not fall into any of these categories, it could not be excluded from the definition of commercial rental/sale services. This, in turn, strengthened the Court's conclusion that Wynk could not claim broadcasting rights under Section 31D. As noted in the judgment,
"A bare perusal of Section 14(1)(e) of the Act, would make it clear that the Legislature intended to keep independent the right to commercially rent / sell a sound recording from the right to communicate the sound recording to the public ... A bare perusal of the definition of the term ‘broadcast’ would make it clear that the same is a species of ‘communication to the public’.
Hence, by deduction, the right to commercially rental or to sell a sound recording is separate and distinct from the right to broadcast."
Wynk's unlicensed use of copyrighted music does not constitute Fair Use under Section 52 (1)
The Court rejected Wynk's contention that the recording of music for a user's personal use would constitute "fair dealing" under Section 52 (1) (a) (i) of the Copyright Act. This provision permits the unlicensed "fair use" of copyrighted content, if it is for private use including research. In this regard, the Court pointed out,
"The defence of fair use may be available in a given case, to an individual user. The activities of the Defendants [Wynk] can never be termed as ‘private’ or ‘personal use’ or ‘research’. The Defendants are clearly selling and /or commercially renting sound recordings including, inter alia, the Plaintiff’s Repertoire for their own commercial benefit. Thus, the Defendants use of the Plaintiff’s Repertoire cannot be termed as fair dealing for the purpose of private personal use or conducting research."
Another contention rejected was Wynk's claim that the storage of music on the app was only transient or incidental. Section 52 (1) (b) provides that such "transient or incidental storage...purely in the technical process of electronic transmission or communication to the public" would not constitute copyright infringement. The Court, however, rejected this defence as well, noting,
"It is clear from the nature of the Defendants’ activities that the offline storage either permanent or temporary of electronic copies of the sound recordings on the customer’s devices is the primary selling point/unique object of the Defendants’ business. The electronic storage of Plaintiff’s sound recording on the platforms of the Defendants can neither be termed as ‘transient’ nor ‘incidental’...
…it is evident that the provisions of this Section 52(1)(b) would generally apply in case of Internet Service Providers and not to the activities of the Defendants. Thus, I am of the opinion that the defence under Section 52(1)(b) of the Act is not available to the Defendants."
Section 31D of the Copyright Act does not cover internet broadcasting on strict interpretation
The Court opined that Section 31D of the Copyright Act must be strictly interpreted since it permits broadcasting of copyright work without the owner’s consent. Tips had argued that this provision must be construed so as to put least burden on the expropriated copyright owner.
Strictly interpreted, the Court found that Section 31D would not cover internet broadcasting or commercial rental/sale of copyright works. Therefore, on both counts, Wynk could not claim the benefit of Section 31D.
This was in view of the fact that here was no mention of such broadcasting in the language of the provision, even though it was introduced at a time when digital music was already in existence. The Court observed,
"The absence of express words in Section 31-D providing for a Statutory License in respect of internet streaming and / or downloading, was a conscious legislative choice. In view of the above and in the absence of an express statutory provision including internet broadcasting within the purview of Section 31-D, the scope of Section 31-D cannot be expanded to include the same.
It appears from a reading of the Rajya Sabha Parliamentary Standing Committee Report, that the object of Section 31-D was to ensure that the public had access to FM radio networks. As aforesaid, the legislation enacting the subject section is relatively recent and the Legislature was aware of services such as the services ofered by the Defendants. Clearly, the Legislature did not intend to include internet broadcasting within the ambit of Section 31-D."
Appellate Board has no power to fix Royalties for broadcast of internet content under Section 31D
The Court's conclusions was further supported by the absence of any prescribed royalty rates when it came the grant of statutory broadcasting licences for internet content.
Section 31D (2) lays down two conditions upon a broadcasting organisation in order claim a mandatory broadcasting license i.e. (i) to give prior notice to the owner of the copyright and (ii) to pay royalties in the manner and at the rate fixed by the Copyright Appellate Board.
Wynk argued that Section 31D automatically kicks in upon giving prior notice and without fixation of royalty rates. The Court, however, concluded that the fixation of royalties is a precondition to availing a mandatory statutory licence under Section 31D.
It was further pointed out that specific royalty rates were prescribed only for TV and radio broadcasting. Rules 29 and 31 of the relevant rules also indicated that there were no royalty rates prescribed for broadcasting internet content.
The Court went on to hold that such royalty fixation must be the first step to avail any broadcasting right under Section 31D. In the absence of any such rate prescribed for internet broadcasting, the Court concluded that Wynk could not claim a mandatory licence under Section 31D.
"... In my view, the prior fixation of the rate of royalty by the Appellate Board under Section 31-D of the Act is in fact the heart and soul of the concept of a Statutory Licence.
A joint reading of the Act and Rules therewith elicits the interpretation that prior fixation of the rate of royalty is the fundamental and primary criteria for any statutory license to come into existence in the first place. Without prior fixation of rate of royalty, there is no question of existence of any statutory license.
... in the present case, assuming that ‘internet broadcasting’ was covered within the ambit of Section 31-D, the Defendants could not have exercised Statutory License under the said Section in the absence of pre-fixation of the rate of royalty by the Appellate Board."
In view of a Supreme Court decision, Justice Kathawalla observed for the present, the Appellate Board lacks jurisdiction to fix rate of royalty for internet broadcasting.
Bearing these observations in mind, the Court also held that a September 2016 Government Memorandum stating that internet broadcasting would also be covered by Section 31D appeared contrary to the Copyright Act. Justice Kathawalla therefore declined to accept that the memorandum was binding on the Court. He held,
"The said Memorandum does not seem to be drawing its power from any legislation...The said Memorandum lacks a ‘statutory flavour’ and cannot prevail over interpretation which is drawn under the Act and the Rules (which in-turn were formed under Section 70 of the Act). The interpretation of Section 31-D in the said Memorandum is inconsistent with the interpretation drawn by this Court and this Court is not bound by the said Memorandum."
The Court, therefore, granted an interim injunction in favour of Tips.
This decision could have a significant bearing on a similar litigation pending before the High Court between Spotify and Warner Chappell.
Senior Advocates Ravi Kadam and Venkatesh Dhond, and Advocates Rohan Kadam and Ujawala Kamat represented Tips.
Senior Advocate Aspi Chinoy along with the team from Singh and Singh and Malhotra and Hedge - Vanditta Hedge, Ekta Asrani, and Sayli appeared for Wynk.
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