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    Vodafone Loses Case Over Music Royalties in Landmark High Court Judgement

    In a landmark decision (in a Vodafone music royalties case), the Calcutta High Court confirmed that the 2012 amendments to the Copyright Act of India ensure that authors of original literary and musical works are entitled to claim mandatory royalty sharing whenever a sound recording is communicated to the public. This is an important judgement for the artists (authors) who had always received unsympathetic treatment before when it came to royalty claims.

    Justice Ravi Krishna Kapoor on May 17, 2024, gave the final verdict on a group of legal cases between Vodafone Idea Limited, Saregama India Limited and the Indian Performing Right Society Limited (IPRS). The crux of the issue in these proceedings was whether Vodafone was required to obtain a separate licence from IPRS and pay it royalties before using the musical works of its members for its pre-recorded Caller Ring Back Tone (CRBT) service.

    Arguments made by the parties

    IPRS argues Vodafone must obtain a license from IPRS for music works:

    IPRS contended that while Vodafone contracted with Saregama to use the musical content, it did not obtain a valid license from IPRS. It argued that neither Saregama nor any other music company has any authority to grant any licence in respect of any such works or to permit commercial exploitation of the recordings.

    “Vodafone has not produced any licence from IPRS or any other music company which permits Vodafone to commercially exploit the music and literary works in the sound recordings. None of the agreements relied on by Vodafone, whether the Master Agreement dated 14 March 2014 read with the agreement dated 16 June 2016 or the agreement dated 20 September 2019 grants Vodafone any such right,” said IPRS as per the judgement.

    IPRS added that Sections 19, 30, and 30A of the Copyright Act showed that any licence granted in contravention of the terms and conditions of the rights granted to the Copyright Society shall be void. Following the 2012 amendments, IPRS also renewed agreements with all music companies including Saregama and had them assign their rights in respect of the underlying musical and literary works in favour of IPRS including the right to collect all royalties.

    Vodafone says IPRS is not the first owner of the copyright:

    Vodafone argued that Saregama is the first owner of the literary and musical works incorporated in the sound recordings and that sound recording is a separate copyright. As such, it said that it did not need to obtain any licence from IPRS or pay any royalty to the Society.

    “In the framework of the Act, the producer of a sound recording is to be the first owner of the copyright in the musical and literary works incorporated therein. Moreover, when a musical or literary work is commissioned for a sound recording under a contract of service for valuable consideration, the ownership in respect thereof no longer vests with the author of the said musical or literary work but rather with the producer of the sound recording who becomes the first owner of the said sound recording. Section 17(c) of the Act has remained unaltered even post-amendment. As a result, the authors and owners of the musical and literary works part with their rights when engaged in an agreement for valuable consideration. Accordingly, the use of sound recordings does not require any separate licence from IPRS in respect of the musical and literary works incorporated in such sound recordings,” it said.

    Calcutta High Court upholds rights of authors

    The amendment gives substantive rights to authors:

    After going through relevant sections of the copyright law, the Court stated that the 2012 amendments “have radically changed” the legal framework concerning the rights of authors of the original literary, dramatic, musical and artistic works. The judgement went as far as to say that the amendments reversed the prevalent position of the law under the unamended Copyright Act:

    “The amendments have been brought about inter alia with the intention to protect the rights of the authors of the original literary and musical works… As a consequence, authors of original literary and musical works, who had always been given unsympathetic treatment are now entitled to claim mandatory royalty sharing on each occasion when a sound recording is communicated to the public. The amendments cannot be interpreted to be merely clarificatory in nature. Post-amendment, substantive rights have now been granted to the authors of original works which prohibit contracts whereby authors were forced to license away their rights for even future technologies [emphasis added]. An elaborate scheme has also been incorporated for payment of royalties to the authors of these works which is interalia recognized in the Act and the Rules framed thereunder. Section 33A provides for a Tariff Scheme by copyright societies. Rule 56 pertains to a Tariff Scheme. Rule 57 also provides for an appeal mechanism against the determination of such a tariff scheme. Rule 58 pertains to a distribution scheme. In effect, post-amendment, the entire spectrum pertaining to competing claims of the different stakeholders having specific rights under the Act has undergone a sea change. The underlying object being that creative work ought to belong to the authors and that the author should have a share in all future commercial exploitation of their work (except cinema hall).”

    Ownership argument stands dismissed:

    While the amendment does not change the meaning of copyright or the scope of works under its ambit, the amended sections regarding first ownership, assignment and mode of assignment of copyright grant additional rights to authors, said the court. Owing to these provisos, authors have a right of equal sharing of royalty indicating a liability upon the commercial exploiters of such works to pay the legitimate share of royalty to the authors.

    In fact, the court observed that the amendment even prohibited authors “from renouncing their rights of royalty for exploitation of their works in any form other than cinematographic films in a cinema hall. In fact, the author’s rights to receive royalties for utilization of such sound recordings has now been categorically recognised and preserved.”

    As such, the court stated that though Saregama may have assigned the rights of exploitation of the sound recordings to Vodafone as first owners, post-amendment, Vodafone is statutorily obliged to pay IPRS royalty to the authors. It thus rejected Vodafone’s contention that there is no change in the copyright law.

    “It is unequivocally clear that Saregama has not and could not have granted any right to Vodafone to exploit the underlying musical and literary works incorporated in the sound recording. Vodafone is now statutorily obliged to procure licences from IPRS,” concluded the judgement, directing Vodafone to deposit INR 2.5 crores along with any accrued interest in terms of an order dated October 12, 2018 to IPRS,” said the judgement.

    Also Read:

    The post Vodafone Loses Case Over Music Royalties in Landmark High Court Judgement appeared first on MEDIANAMA.

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