Tag Archives: Department of Industrial Policy and Promotion

Are Streaming Services Broadcasters?

Traditionally, the consumption of media content was primarily carried out through television and radio. This has changed with the internet. In today’s day and age, internet content streaming services have taken over the market and changed the way in which content is consumed by the public.

While the developments in technology have made life more convenient for the consumers, the laws governing such content are not clear with respect to the use of such content. This can be seen in the conflict that arose between Spotify and Warner Chapple Music Ltd. (WMC).

Spotify is a company that provides an audio streaming services around the globe. While Warner Chapple Music Ltd. is a Music record label that produces and licenses out music.

As Spotify provides an audio streaming service, it licenses music and other sound recordings from the owners of the copyright. In this case the record labels or the production houses. Once they have licensed out their Musical works, Spotify can upload the works on their application for its users.

Spotify wished to enter the Indian market and thus wished to acquire the licenses form record labels and production houses, in order to stream their music on its app. While doing so, they had a conflict with the WMC and thus a license agreement could not be reached upon.

Though Spotify did not have an agreement with WMC, they launched their application in India and provided their users access to the songs by WMC. WMC had issued an objection against the same, still Spotify went ahead made WMC’s music available to its users. Though not all WMC’s songs were being streamed many of them were available to the users1.

The conflict had grown when Spotify made its intentions clear to invoke the Statutory licensing provision given in the Copyrights Act under section 31D. On the 25th of February 2019, Spotify issued a notice to the Intellectual Property Appellate Board (IPAB) stating that it was invoking the statutory

licensing provisions given under section 31D of the Act as it is an internet broadcaster and intended to broadcast the same. Spotify supported its claim of being a broadcaster through an Office Memorandum issued by the Department of Industrial Policy and Promotion (DIPP).

Spotify launched their service and enforced the statutory license on the 26th of February 2019. However, there was an issue in the enforced statutory agreement i.e. the IPAB had not fixed any royalty rates for the statutory license to be enforced2.

Section 31D allows broadcasters to communicate to the public any ‘previously published’ musical work or sound recording. They can do so by invoking compulsory licensing through a unilateral notice i.e. the party intending to use the work shall inform the owner of the copyright that they intend to broadcast their work. The provision also directs the parties that the license would be enforceable after the IPAB fixes the royalty rates3.

However, as the royalty rates have not been fixed by the IPAB for either radio, television or even internet broadcasters with respect to statutory licenses, there is no clarity that the move by Spotify to not wait for the IPAB to fix the rates and launch their services with the musical works of WMC was authorised.

WMC responded to the notice for statutory licensing and anticipated infringement of their copyrights by suing Spotify and applied for a petition seeking injunction against their music being streamed on the app.

The Bombay High Court issued an order where, Spotify was asked deposit a sum rupees six crores fifty lakhs with the high court, they were directed to do so without any justification. The court also directed them to not enforce the statutory license till the time the IPAB fixed the royalty rates. But did not prohibit Spotify, from using WCM’s catalogue of musical works, subject to the remuneration being offset upon the final disposition of the suit.

On one hand, if the legislative intent of section 31D of the Copyrights act were to be understood, it was put in place with the view of television and radio broadcasting4. However, the Office Memorandum issued by the DIPP brought internet streaming services under the purview of being broadcasters5.

As both the companies wish to continue their business relations this matter would be in most likelihood be resolved by negotiations. However, it would be interesting to know what could happen if the courts were to give a judgement on the issue6.

If the court went in favour of Spotify, all internet audio streaming services would be become as broadcasters and could therefore apply for statutory licenses. At the same time, it would mean that the DIPP has substantial powers with regards to the interpretation of copyright laws. As well as, WMC would have to allow Spotify to use their musical works on their application.

If the courts were to go in favour of WMC, internet streaming services would not come under the purview of being a broadcaster and the Office Memorandum issued by the DIPP would become invalid. Spotify would have to remove the music catalogue belonging to WMC and proceed to negotiate a voluntary licensing agreement in order to stream WMC’s music.

A judgement to this case would have a long-lasting effect on the copyright laws in India. It would answer the questions whether a streaming service is a broadcaster. It would ascertain the power of DIPP. Most importantly, it would give a clear picture as to how a statutory license is to be enforced in an authorised manner.

Author: Aditya Vaidya , student of BBA LL.B(Hons.) from Alliance school of law, Alliance University, Intern at Khurana and Khurana Advocates and IP Attorneys and can be reached at swapnils@khuranaandkhurana.com

References:

[1]Intellectual Property Right. (2018). In: Black’s Law Dictionary, 2nd ed. [online] Available at: http://thelawdictionary.org%5BAccessed 5 May 2018]

[2]The Copyright Act 1957, s 13(1)

[3]Black’s Law Dictionary, 2nd ed.

[4] PTI, ‘Indian Film and TV Industry Threatened by Online Piracy’ The Hindu(Mumbai, 16 december 2009)

[5]Arul George Scaria, Piracy in the Indian Film Industry: Copyright and Cultural Consonance ( 1st ed., Cambridge University Press 2014)

[6]Prasar Bharti v. Tam Media [2012] CCI 32

[7]The Copyright Act 1957The Copyrights Act, 1957

[8]Copyrights and industrial Designs by P. Narayana.

[9]www.spicyip.com

[10]www.billboards.com

[11][www.dipp.gov.in

[12]www.theverge.com



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All New 2019 Startup Policy of the DPIIT/DIPP (Widened Definition and Modified Norms)

Startups play a major role in any economy, they may be small in size but they do create a number of Jobs, more jobs means an improved economy. They also contribute to innovation and competition. Startups act as catalyst, once a startup is established, the process of industrialization and generate demands for various other units and hence result in overall development. According to the NASSCOM report of 2015 India is home to almost 3100 startups and are just behind US and UK. The PM has launched a Special Startup Campaign , Government is also creating policies that are startup friendly in order to provide boost to the Startups. The Department for Industrial Policy and Promotion (DIPP) or its Department of Promotion for Industry and Internal Trade (DPIIT) as it is called now, under the Ministry of Commerce, vide its notification dated 19th February 2019 has revolutionized the world of Startups by introducing the new definition of Startups and modified tax structures. This has been done in consonance with the Make in India Campaign.

SCOPE OF THE NOTIFICATION

Present Notification shall apply irrespective of the dates on shares which are issued by the Start up from the date of its incorporation, except for the shares issued in respect of which an addition under section 56(2) (viib) of the Act has been made in an assessment order made under the Act before the date of issue of the notification. The Present Notification shall be applicable only in respect of applicability of the provisions of section 56(2) (viib) of the Act to the Startup and shall not grant any exemption in respect of applicability of other provisions of the Act.

Major Highlights of the Notification

“WIDENED” DEFINITION

An entity shall be considered as a Startup upto a period of 10 years from the date of incorporation/ registration, if it is incorporated as a private limited company (as defined in the Companies Act, 2013) or registered as a partnership firm (registered under section 59 of the Partnership Act, 1932) or a limited liability partnership (under the Limited Liability Partnership Act, 2008) in India.
The turnover limit has been increased from the current Rs 25 crore to now Rs 100 crore.

CERTIFICATION FOR THE PURPOSES OF SECTION 80-IAC (100% EXEMPTION OF TAX) OF THE INCOME TAX ACT (“ACT”)

A Startup being a private limited company or limited liability partnership, which fulfills the conditions specified in sub-clause (i) and sub-clause (ii) of the Explanation to section 80-IAC of the Act, can, for obtaining a certificate for the purposes of section 80-IAC of the Act, make an application in Form-1 of the current Notification along with documents specified therein to the Board and the Board may, after calling for such documents or information and making such enquires, as it may deem fit, grant the certificate referred to in sub-clause (c) of clause of the    Explanation to section 80- IAC of the Act or reject the application by providing reasons.

EXEMPTION FOR THE PURPOSE OF SECTION 56(2) (VIIB) (WHICH PROVIDES FOR TAXATION OF FUNDS RECEIVED BY AN ENTITY) OF THE ACT

A Startup shall also be eligible for notification under 56(2) (viib) of the Act and consequent exemption from the provisions of that clause, if it fulfills the following conditions:

  • It has been recognized as Startup by DPIIT under para 2(iii)(a) of the current notification or as per any earlier notification on this subject;
  • Aggregate amount of paid up share capital and share premium of the startup after issue or proposed issue of share, if any, does not exceed, 25 crore rupees:

However, in computing the aggregate amount of paid up share capital, the amount of paid up share capital and share premium of 25 crore rupees in respect of shares issued to a non resident or a venture capital company/fund shall not be included.

Furthermore, that considerations received by such startup for shares issued or proposed to be issued to a specified company shall also be exempt and shall not be included in computing the aggregate amount of paid up share capital and share premium of 25 crore rupees.

  • It has not invested in any of the following assets

(a) building or land appurtenant thereto, being a residential house, other than that used by the Startup for the purposes of renting or held by it as stock-in-trade, in the ordinary course of business;

(b) land or building, or both, not being a residential house, other than that occupied by the Startup for its business or used by it for purposes of renting or held by it as stock-in trade, in the ordinary course of business;

(c) Loans and advances, other than loans or advances extended in the    ordinary course of business by the Startup where the lending of money is substantial part of its business;

(d) capital contribution made to any other entity;

(e) shares and securities;

(f) a , aircraft, yacht or any other mode of transport, the actual cost of which exceeds ten lakh rupees, other than that held by the Startup for the purpose of plying, hiring, leasing or as stock-in-trade, in the ordinary course of business;

(g) jewellery other than that held by the Startup as stock-in-trade in the ordinary course of business;

(h) any other asset, whether in the nature of capital asset or otherwise, of the nature specified in sub-clauses (iv) to (ix) of clause (d) of Explanation to section 56(2) (vii) of the Act.

The Startup shall not invest in any of the assets specified in the sub-clauses (a) to (h) for the period of seven years from the end of the latest financial year in which shares are issued at premium.

DECLARATION FORM

A startup fulfilling conditions shall file duly signed declaration in Form 2 to DIPP that it fulfills the conditions. On receipt of such declaration, the DPIIT shall forward the same to the CBDT.

REVOCATION

In case if it is found that any certificate has been obtained on the basis of false information, the Board reserves the right to revoke such certificate or approval. Where the certificate or approval has been revoked under sub-para (1), such certificate or approval shall be deemed never to have been issued or granted by the Board.

In case the Startup which has furnished declaration in Form-2 invests in any of the assets specified in para 4(iii) of the present notification before the end of seven years from the end of the latest financial year in which the shares are issued at premium, the exemption provided under section 56(2)(viib) of the Act shall be revoked with retrospective effect.

CONCLUSION

This latest notification has been able to tackle most of the issues raised in the past and made exemptions wider. It has simplified the entire process. Distribution of loans and advance to other entities are also limited. This means investments have to chosen carefully in order to claim benefits. This step is vital to keep a check on diversion of funds and generation of black money through complicated entity structures, which was extensive in the past.

It takes care of a majority of issues raised by the experts and the entrepreneurs on Angel Tax. The limit on investments in certain asset class will also ensure the exemption is not exploited in any manner.

Now, the ball has been passed to Startups to get them recognized with the DPIIT, if not already done and start filing declarations in Form 2 of the notification to save themselves from Income Tax Notices and Angel Tax.

Author: Mr. Shubham Borkar, Senior Associate – Litigation and Business Development  and Lakshay Kewalramani –Intern, at Khurana & Khurana, Advocates and IP Attorneys. In case of any queries please contact/write back to us at shubham@khuranaandkhurana.com or at www.linkedin.com/in/shubhamborkar.

All About Section 31 D of Copyright Act, 1957

The 2012 amendment in Copyright Act has introduced various provisions, one of them being section 31 D. This section is concerned with the broadcasting or performance of a literary or musical and sound recording, which has already been published.

Clause 1 of Section 31D 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”.

Broadcasting or performance of such work can be done by issuing a prior notice of the intention to broadcast the work and by paying royalty to the rights holder, as fixed by the Copyright Board. However, the term “Copyright Board” in the Act has been substituted with “Appellate Board” as per the Finance Act, 2017.

Due to widespread growth of internet all over the globe, ‘communication to public’ via internet is  much more prevalent and thus, on September 05, 2016, the Department of Industrial Policy and Promotion (DIPP) issued an Office Memorandum clarifying the scope of section 31 D of Copyright Act, 1957 by construing that  “any broadcasting organization desirous of communicating to the public” may not be restrictively interpreted to be covering only radio and television broadcasting, as definition of “broadcast” read with “communication to the public” appears to include all kinds of broadcasts including internet broadcasting.[1] Therefore, bringing ‘online broadcasting’ under the ambit of section 31 D of Copyright Act, 1957.

The practices as provided under section 31 D can be adequately taken care of by Copyright societies as provided in the statutes.  The functioning and working of the copyright societies in India has been well explained in the case of Entertainment Network (India) Ltd vs. Super Cassette Industries Ltd & Ors. In this case it was stated that the existence of the copyright society is for the benefit of the copyright holder. The Copyright society must help the copyright owner in a way that he/she is able to exploit his/her intellectual property rights in a structured manner. “The Copyright society grants license on behalf of the copyright owner, files for litigation on their behalf not only for the purpose of enforcement but also protection to enforcement of the copyright owner’s right. It not only pays royalty to the copyright owner but is authorized to dispense the amount collected by it amongst its members.” But the functioning of societies is under the scanner nowadays, as societies are alleged to have been using this law for getting personal gains, thus making the enforcement of this law redundant, leading to various contentious matters.

CHALLENGING SECTION 31 D AS ULTRA-VIRES

Since the introduction of section 31 D, it has been challenged by various entities alleging it to be ultra-vires the Constitution of India, especially Article 14, 19(1)(g) and 21 of the Constitution as well as the right to property under Article 300A.[2]   The functionality and mechanism of this particular section was disputed on ground that :

  1. a) There is no public interest in making film music available to the broadcasters at subsidized and preferential royalty rates rather than leaving them to negotiate commercial agreements with copyright owners and that the practical effect of Section 31D is to ensure commercial profitability of the broadcasters at the expense of the owners of the copyrighted works.
  2. b) The content of this provision cause inconsistency in the provisions of the Copyright Act, 1957 as it takes away the exclusivity from the exclusive rights granted to the owners of copyrighted works. Thus, leading to impediment of copyright owners to create original work and to commercially exploit them to his liking.
  3. c) Section 31D is violative of Article 19(1)(g), as it provides for the royalties to be fixed for radio broadcasting by the Board directly. Thus, such a power cannot be termed as a reasonable restriction.

The Madras High Court upheld the validity of Section 31 and 31D in the case of South Indian Music Companies v. Union of India  W.P No. 6604 of 2015 and observed that Section 31 and 31D provides for a mechanism to deal with public interest vis-a-vis the private interest. Thereby, taking care of public as well as interest of owners. Further, the guidelines as to determination of royalty and provision of providing the owners, a reasonable opportunity to be heard, thereby substantiating section 31D that was also introduced in compliance of Article 11(2)[3] and 13[4] of Berne Convention and Article 15(2)[5] of the Rome Convention (for sound recordings) and Article 9(1) of the TRIPS Agreement.[6]

Thus, the High Court, after analyzing various factors such as  principles governing the interpretation of statutes including the doctrine of purposive construction, reading down and contextual interpretation, did not find any reason to hold section 31 D of Copyright Act as unconstitutional.

These provisions under the amended Copyright Act has tried to balance the power of music labels by allowing the broadcasters that obtain the said licenses to have continuity of business by making copyrighted works available to the general public at large.  These provisions have dealt with the monopoly of the music labels by including the grant of a statutory non-voluntary license in the Act.

MECHANISM OF LICENSING UNDER SECTION 31 D

In another case of International Confederation of Societies of Authors and Composers (CISAC) v. Aditya Pandey & Ors. [7] The Hon’ble Supreme court of India, reaffirmed an interim order passed by the High Court of Delhi, which essentially discussed the following issues:-

  1. Whether the ‘Communication to the Public by way of Broadcasting of a Sound Recording’ also amounts to a ‘Communication to the Public of Literary and Musical Works embodied in the Sound Recording’ under the Copyright Act 1957?
  2. If the above is answered in affirmative, whether separate licenses in respect of such Literary and Musical Works should be obtained from the authors of copyrights in such works in addition to the license secured from the producer of the Sound Recording?

The court referred to the decision pronounced under Gramophone Co. Ltd. vs. Stephen Carwardine & Co.[8], which, recognized the concept of co-existing copyright. The learned Single Judge, at first had concluded that once a license is obtained from the owner or someone authorized to give it, in respect of a sound recording, for communicating it to the public, including by broadcasting, a separate authorization or license is not necessary from the copyright owner or author of the musical and/or literary work. However, this does not mean that the musical and/or literary work can be otherwise “performed” in the public, (as opposed to communication of a sound recording to the public) without authorization.[9]

With regard to the second issue, the Court relied on Indian Performing Right Society Ltd. v. Eastern Indian Motion Pictures Association and others[10], in which the Court had already pronounced that it was not necessary for a party to obtain a license from the authors of underlying works (e.g. lyricists and musicians) or from the assignees of such works (in this case, the sound recording company).

It is also pertinent to mention that the Supreme Court also noted that the assignment of the copyright in the work to make sound recording per se (i.e., which does not form part of any cinematograph film), shall not affect the right of the author of the underlying work to claim an equal share of royalties or/and consideration payable for utilization of such work in any form by the plaintiff/respondent.

WHOSE AUTHORITY IS IT TO GRANT LICENSE

The section once again came under the controversies, when the Deputy Registrar of Copyrights, granted an interim statutory license under Section 31D(1) of the Copyright Act, 1957 in favour of M/S Kuku & Koyal Internet Pvt. Ltd. The petitioners i.e. Saregama India Ltd and Super Casettes Industries Pvt Ltd, challenged this very order of the Deputy Registrar of Copyrights before the Delhi High Court through writ petition  [W.P.(C) 1155/2018 & W.P. (C) 1299/2018]  disputing the jurisdiction of this matter.   Petitioners argued that the power to grant license remains only with the Copyright Board . Thereby, the Hon’ble High Court of Delhi stayed the interim license and held that such directions had to be complied in accordance with law and thus, if the Registrar of Copyrights did not have the power to issue a statutory license, no such license could be granted.

CONSEQUENCES OF VIOLATING SECTION 31D

The violation of section 31D amounts to infringement of  copyright. The Calcutta High Court in the case of Saregama Ltd vs. The New Digital Media & Ors.[11] issued injunction against the defendant after analyzing the fact that the  agreement under section 31 D was enforceable and was not a dead agreement. Thus, non-payment of royalty by the defendants leads to violation of agreement as well as section 31D. It is pertinent to note that the Court did not grant any injunction with respect to those sound recording which was being used by the defendants without paying any royalty, as the concerned agreement has expired due to lapse of time, thus, such use of work was not considered as an injunction. However, the Court granted a monetary remedy to the owner of copyright because his work having exclusive right was being used by other party. The Court observed that provisions of section 31 D merely require royalties to be paid to the owner of the work as prescribed by the Copyright Board, the same is a statutory license.  As such, for breach of copyright, there can be no order of injunction only monetary claim as recognized by rules 29 – 31 of the Copyright Rules 2013.

The judiciary has tried to construe section 31 D of Copyright Act by balancing public interest and interest of the owners.

Author: Ms. Pratistha Sinha , Trademark Associate and Ms. Anuja Nair, Senior Associate – Media & Entertainment Litigation at Khurana & Khurana,  Advocates and IP Attorneys. In case of any queries please contact/write back to us at pratistha@iiprd.com.

References:

[1]http://www.manupatrafast.in/NewsletterArchives/listing/Induslaw/2016/ September-2016%20–%20Legal%20Developments.pdf

[2] Eskay Videos Pvt. Ltd. v. Union of India W.P. 92 of 2015; South Indian Music Companies v. Union of India  W.P No. 6604 of 2015

[3]Article 11 (2) Of Berne Convention: Authors of dramatic or dramatico-musical works shall enjoy, during the full term of their rights in the original works, the same rights with respect to translations thereof.

[4] Article 13 Of Berne Convention: Possible Limitation of the Right of Recording of Musical Works and Any Words Pertaining to 1. Compulsory licenses; 2. Transitory measures; 3. Seizure on importation of copies made without the author’s permission

[5]International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations Permitted Exceptions: 1. Specific Limitations; 2. Equivalents with copyright

[6] Article 9(1) of TRIPS Agreement:  Members shall comply with Articles 1 through 21 of the Berne Convention (1971) and the Appendix thereto. However, Members shall not have rights or obligations under this Agreement in respect of the rights conferred under Article 6bis of that Convention or of the rights derived therefrom.

[7] CIVIL APPEAL NO. 9416 OF 2016

[8] (1934) 1 Ch. 450

[9]http://www.manupatrafast.in/NewsletterArchives/listing/Induslaw/2016/ September-2016%20–%20Legal%20Developments.pdf

[10] (1977) 2 SCC 820

[11] C.S. No.310 of 2015

Extension of Time to submit the objections or suggestions to the Proposed Draft of Amendment of Trade Marks Rules, 2002

This post comes as an update to the previous one in context of the Proposed Draft Trade Mark Rules by the Central Government, which has been dealt few days back. The proposed draft rules were published on 17th November 2015 for information of all persons likely to be affected, inviting objections or suggestions, if any, with an indication that the said draft rules shall be taken into consideration after the expiry of a period of thirty days from the date of publication.

It has been notified that the last date for consideration of objections or suggestions on the draft Rules stands extended for a further period of Fifteen days from 17th December, 2015 and any Objections or suggestion may be addressed to the Secretary to the Government of India, Ministry of Commerce and Industry (Department of Industrial Policy and Promotion), Government of India, Udyog Bhawan, New Delhi or by e-mail at Sahni.palka@nic.in. by 01.01.2016. Official Press Release can be accessed here.

About the Author: Mr. Abhijeet Deshmukh, Trade Mark Attorney, Khurana & Khurana, Advocates and IP Attorneys and can be reached at: Abhijeet@khuranaandkhurana.com.