Bombay High Court on the Fate of Digital Music Streaming and Downloading Applications

[Tanya Varshney is a 4th year B.A. LLB. (Hons) student at Jindal Global Law School]

The Bombay High Court pronounces another judgement changing the fate of online music streaming and downloading services. In Tips Industries Ltd. v. Wynk Music Ltd., Justice Kathawalla provides an interpretation of the provisions of the Copyright Act in the context of digital streaming and downloading of music.

Factual Background

Tips Industries Ltd., the plaintiff, is a significant music label in India. Wynk Music Ltd., the defendant, had a licensing agreement with Tips Industries which expired in 2017. Following failed negotiations with respect to renewal of their license, Wynk claimed that they can avail a statutory license to broadcast sound recordings under section 31D of the Copyright Act. Tips Industries challenged Wynk’s claims under section 31D and filed a suit claiming infringement of their copyrighted works under section 14(1)(e) of the Copyright Act.

Fair Use Defence and Incidental Electronic Storage

Tips Industries contended that the purchase and download features offered by Wynk are meant for profit and amount to a “commercial rental” under section 2(fa) of the Copyright Act which is the exclusive right of Tips Industries. Wynk responded to these contentions by stating that the Wynk services allows the users to retain an electronic copy of the musical works only during the validity of the subscription. Subscribers are not permitted to make copies of the sound recordings or transfer the songs to any third parties. Thus, Wynk argued that this does not amount to a commercial rental and/or sale, and temporary downloads for the subscriber’s personal use on the Wynk application constitutes “fair dealing” with such work for private or personal use as provided for in section 52(1)(a)(i) of the Act

Under section 14, the owner of the copyright has the exclusive right to make any other sound recording embodying it, including storing it in any medium be electronic or other means, the right to sell or give on commercial rental such sound recording, and the right to communicate the sound recording to the public. The Court noted that “the activity of the Defendants enabling their customers to permanently download sound recordings and have a permanent access to the same once paid for clearly amounts to sale of the sound recording”.

Section 2(fa) of the Act defines “commercial rental” in negative terms. It states, “commercial rental does not include the rental, lease or lending of a lawfully acquired copy of a computer programme, sound recording, visual recording or cinematograph film for non-profit purposes by a non-profit library or non-profit educational institution.” The services provided by Wynk are clearly outside the ambit of the exclusionary terms mentioned in section 2(fa) as Wynk enabled their customers to download sound recordings and access them offline in lieu of a monthly subscription fee. The Court noted that download options offered by Wynk, enabling their customers to download sound recordings and access them offline in lieu of a monthly subscription fee, violates the exclusive right of Tips Industries 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. The Court further rejected the “fair use” defence argued by Wynk on the basis that Wynk are selling and commercially renting Tips Industries’ sound recordings for their own commercial benefit and not for ‘personal use’ or ‘research’.

Wynk further argued that the storage of Tips Industries’ songs on Wynk’s platform is protected under section 52(1)(b) of the Act, being transient or incidental storage of the sound recording purely in the technical process of electronic transmission or communication to public. The Court rejected this argument on the basis that offline storage of sound recordings on the Wynk application is its primary selling point. Thus, this storage can neither be termed as ‘transient’ not ‘incidental’ because the sound recordings are stored on devices of Wynk’s subscribers as per the users’ discretion.

Ambit of Section 31D

Section 31D of the Copyright Act was introduced by the 2012 amendment to the legislation. The provision states:

Any broadcasting organization 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.

Clause 2 of section 31D requires the broadcasting organization to give prior notice of its intention, duration and territorial coverage of the broadcasting and accordingly pay the royalties to the Copyright owners as fixed by the Intellectual Property Appellate Board. Clause 3 also expressly refers to the differential royalty rates for radio and television broadcasting. There is no mention of “internet broadcasting” or “online streaming” in the provision as it exists. Thus, the pressing question before the Bombay High Court was whether Wynk Music Ltd. falls within the scope of “any broadcasting organization” under section 31D?

‘Commercial Rental’ and ‘Sale’ versus ‘Broadcasting’

Wynk, aside from offering purchase and download options, also offers online music streaming on its platform. Wynk argued that making a work available for being heard or enjoyed by the public directly by any means of display or diffusion, without issuing a physical copy of such work is within the purview of “communication to the public” and does not constitute commercial rental and / or sale of a sound recording as provided in section 14(1)(e)(ii) of the Act. The Court noted that the right to commercially rent or sell a sound recording is a separate and distinct right as against the right to communicate the sound recording to the public.

The Court noted that section 31-D is applicable to only broadcasting organizations which are desirous of communicating to the public by way of ‘broadcast’ and not their commercial rental and/or sale. Justice Kathawalla relied upon the 227th Report of the Rajya Sabha Parliamentary Standing Committee on the Copyright (Amendment) Bill, 2010 wherein it was observed that “issuing physical copies or legitimate digital downloading music or video recording by payment cannot be considered a communication to the public”.

Internet Broadcasting Under Section 31-D

Tips Industries contended that statutory licenses under section 31D are only restricted to radio and television broadcasting organization. Wynk provides its users with online streaming services. Tips Industries contended that internet broadcasting is outside the purview of section 31D. A counter argument presented by Wynk was that section 31D(1) refers to “any” broadcasting organization. They submitted that a joint reading of section 2(dd), (referring to “any means of wireless diffusion”) and section 2(ff) (referring to “any means of display and diffusion”) expresses the legislative intent that any broadcasting organization, which is broadcasting / communicating to the public by any means of display or diffusion including wireless and wired diffusion, is entitled to a Statutory License under Section 31-D of the Act.”

The Bombay High Court noted that section 31D provides an exception to the general rules of copyright protection and, thus, must be interpreted narrowly with respect to the specific intention behind its inclusion. In order to gather the intent of the legislature in enacting this provision, the Court relied upon the reports of the Rajya Sabha Standing Committee and the Statement of Objects and Reasons of the Copyright (Amendment) Act, 2012. Justice Kathawalla rejected Wynk’s construction of section 31D and stated:

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…….. 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 offered by the Defendants. Clearly, the Legislature did not intend to include internet broadcasting within the ambit of Section 31-D.

The Court further relied upon rules 29 and 31 of the Copyright Rules to aid their interpretation of section 31-D. The notice requirements of rule 29 are only in respect of (i) radio broadcasting, (ii) television broadcasting and (iii) performance. Since rule 29 only contemplates issuance of notice for these three categories, it supports the submissions that section 31-D covers only radio broadcasting and television broadcasting. Additionally, rule 31 contemplates determination of royalties only in respect of television and radio broadcasting.

Fixation of Royalties by the Appellate Board

While the liability of Wynk was established on the basis of the construction of sections 14, 52(1)(a), and 31-D(1), the Bombay High Court went a step ahead to answer whether a statutory license under section 31-D can only be exercised upon fixation of the rate of royalty by the Appellate Board. The Court stated that section 31-D(1) cannot be interpreted in isolation and it expressly mentions that it is subject to other provisions of this section.

Section 31-D(2) imposes two conditions upon a broadcasting organisation – (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 Appellate Board. Fortifying their interpretation with rules 29 and 31 of the Copyright Rules, the Court concluded that prior fixation of the rate of royalty is a necessary condition to invoking section 31-D. The Court stated:

Section 31-D is therefore only a departure from the old scheme of licensing to the limited extent that it does away with a hearing to the copyright owner and an inquiry for determining the necessity and / or requirement of a licence and the Registrar’s act of issuing a license. It, however, does not do away with a prior determination of the rates for defining the statutory license to be exercised. Had such a radical departure been intended, the Legislature would have expressed its mind unequivocally and explicitly, including, by employing the verbiage “to be fixed” and / or like words to that effect in Section 31-D(2).

Justice Kathawalla has interpreted the present case and the case concerning the launch of Spotify India to answer the pertinent questions of copyright law when it comes to digital streaming and downloading. While it still remains open whether the present position will be overturned by the Supreme Court on a future appeal, the current position has been clearly established by the Bombay High Court. In conclusion, digital music platforms such as Wynk Music and Spotify must have licensing agreements with the music labels who own the copyright.

Tanya Varshney

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