Music Broadcast Private Limited v. Phonographic Performance Limited

Citation: 2002 SCC OnLine CB 3 : (2003) 26 PTC 70

Date of Judgement: November 19th, 2002

Court: Copyright Board at Hyderabad

Judges: B K Sharma, VG Munshi, Bela Banerjee, D.R. Meena

Facts

Before 1999, the Indian government didn't want private companies to run their own broadcasting stations. Instead, they had to use government-owned stations. In 1999, the government changed its rules and invited tenders to grant license to private broadcasters to start their own broadcasting services in 40 cities.

The complainants in the present case are the six radio stations that got permission to start their own private broadcasting stations through the tender. Phonographic Performance Limited (PPL) is a copyright society that collects royalty for sound recordings. The six radio stations wanted to broadcast sound recordings from PPL's collection, so they asked PPL for the permission in return of appropriate Royalty.

The dispute arose when there was a disagreement over the amount of royalty and PPL also demanded a share of revenue from some of the broadcasters. Nine private broadcasters filed a complaint to the Copyright Board under Section 31(1)(b) of the Copyright Act, 1957, asking for permission to broadcast specific sound recordings that are part of PPL's collection. These requests were made because PPL declined to provide licenses for these sound recordings to FM radio companies at the prices they had proposed

Issues

• Whether only one person can be granted a licence under Section 31(2) of the Copyright Act, 1957?

• Whether the work has to be withheld from public in order to invoke Section 31(1)(b) of the Copyright Act, 1957?

• Whether the licensing fee can be determined on the basis of royalty rates paid to Indian Performing Rights Society or as per the rates in other western countries?

Analysis

The music broadcasting companies argued that royalty rates for sound recordings around the world were lower than the rates for musical compositions. Further, they argued that the payment of unreasonably high royalties would exceed the expense of obtaining a licence which would result in extreme losses. They also highlighted the fact that broadcasting on radio spread awareness about the music and the artists, thus resulting in accelerated sale of the sound recordings.

However, PPL argued that royalty rates around the world cannot be compared as Indian music is completely different from Western music. Further, they pointed out that artists deserved fair compensation for their music, which was a result of their skills and creativity. Other arguments regarding Section 31 were that the jurisdiction of the Copyright Board can only be invoked when the work is withheld from the public and that a compulsory license can be granted to only one private broadcaster who can best serve the public according to the board.

PPL’s argument that the language of Section 31(2) says that only one person may be granted a license, was dismissed by the Board. The Board held that the concept of exclusivity under this sub-section cannot be applied to a broadcasting station as they are not allowed to further distribute the copies to other stations like movie distributors are able to do. So it is not applicable here that the license shall be granted to only one complainant and not others. Hence, if a complaint is made under Section 31(1) (b) of the Act, Section 31(2) is not applicable.

The Copyright Board examined the difference between Section 31(1) (a) and Section 31(1) (b) and highlighted the work must be ‘withheld’ due to reason of refusal by copyright owner under Section 31(1)(a). However, the word ‘withheld’ is not present under Section 31(1) (b). Therefore, it is not a condition that the work be withheld from the public in order to form a complaint under Section 31 (1) (b). Section 31 (1) (a) talks about ‘publication or performance of the work in public’ and Section 31(1) (b) talks about ‘communication to the public of a work or a sound recording by way of broadcast’. Hence, the complainants are right in invoking Section 31(1)(b) before the Copyright Board.

On the issue of determining the appropriate license fee, the Board held that analyzing the royalty rates paid to Indian Performing Rights Society or what it is paid in other countries would not be helpful as they are not a suitable guide in this case. The reason is that the subject of licenses held by IPRS is extremely different from what PPL deals in India. Regarding the royalty rates in other countries, the Board noted that the Indian broadcasting stations extensively used music based on film soundtracks, which was not as prevalent in other countries. In India, most music programs relied on sound recordings, the copyrights of which were owned by PPL. As a result, PPL's assets held significant value and served as the backbone of music stations.

Finally, the Board determined that the basis for calculating royalty rates included factors such as the size of the audience, the time slot during which broadcasts occurred, the costs incurred by PPL for acquiring rights, the competitive landscape in broadcasting, the revenue generated by radio station owners, the uncertainty surrounding intellectual property rights, and more.

Conclusion

This is the first case in India which provided a unique opportunity to the Copyright Board to analyse the concept of Compulsory License in a creative scenario while balancing the interest of the public at large.

The Indian Copyright Board finally settled the long-standing royalty dispute between private broadcasting stations and Music companies. The Board passed a landmark order fixing the royalty rate for the broadcast of sound recordings on FM radio by providing a revenue-sharing model i.e. 2% of the net advertisement earnings by each FM radio station shall be distributed in proper proportions and fixed the royalty rates on a needle-hour basis for prime broadcasting hours and reduced the rate for other lean hours. The Board ultimately granted a compulsory license under Section 31(1) (b) of the Copyright Act, 1957.