Op EdsOP. ED.

The advent of the internet has enabled individuals to copy and distribute protected marks and materials with ease, while its accessibility across territories has complicated the issue of determining jurisdiction for legal action. The issue of jurisdiction has been raised before courts time and again, and the volume of adjudication upon it is extensive. This article summarises takeaways from said adjudication, and sets out the principles currently guiding the choice of forum in a suit involving online infringement of trademarks or copyrights.

I. Legislative Backdrop

The general provision governing territorial jurisdiction in respect of intellectual property disputes is contained under Section 20 of the Civil Procedure Code, 1908 (hereinafter “CPC”), which provides that a suit may be instituted at the court within whose jurisdiction:

  1. the defendant resides, carries on business, or personally works for gain; or
  2. where a part of or the entire cause of action arises.

According to the accompanying explanation, a defendant corporation is deemed to carry on business at its sole/principal office, or at a subordinate office if the cause of action arose at the place where such subordinate office is located.

More specifically, the issue of territorial jurisdiction is governed by Section 62 of the Copyright Act, 1957 (hereinafter “the CR Act”) and by  Section 134 of the Trade Marks Act, 1999 (hereinafter “the TM Act”),  both of which are pari materia. According to the same, suits are to be instituted at a “district court having jurisdiction”, which includes courts within whose territorial limits the plaintiff resides, carries on business, or personally works for gain. These provisions may be availed only in cases of infringement, and not in cases of passing off i.e. only a registered right-holder may sue at the place of its residence or business.

It is to be noted that any explanation for the aspect of “carrying on business” similar to the one for a defendant corporation under Section 20 CPC is absent from the text under both the CR Act and the TM Act (hereinafter collectively “the IP Acts”). Despite that, the explanation has been read into the IP Acts by virtue of the decisions in Indian Performing Rights Society Ltd. v. Sanjay Dalia[1] (hereinafter “Sanjay Dalia”) and Ultra Home Construction (P) Ltd. v. Purushottam Kumar Chaubey[2] (hereinafter “Ultra Home”). This acts as a restriction on forum shopping by plaintiffs and is discussed later in the article.

Ordinarily, the doctrines of lex specialis and lex posterior would apply, and the provision under CPC would be restricted. However, in light of the language used in the IP Acts, the Supreme Court has held that the jurisdiction under CPC is not ousted[3]; rather the IP Acts merely provide an additional forum where suits may be filed. The purpose behind this additional route is to expose an infringer with inconvenience rather than compelling the sufferer to chase after the former.

Since content, products and services on a website or mobile application are available throughout territories wherever the reach of the internet extends, there are two pertinent questions that need answering:

  1. In respect of an entity having an online presence, where exactly can a plaintiff or a defendant be said to “carry on business”?
  2. In respect of infringing goods/services offered or sold over the internet, where exactly does the “cause of action” arise?

Answers to these can assist us in addressing the conundrum of jurisdiction around internet-based intellectual property disputes, and pinpoint the appropriate forum for institution of a suit.

II. “Carrying on Business”

In Dhodha House v. S.K. Maingi[4] (hereinafter “Dhodha House”), it was observed that the presence of any man was not necessary for the purpose of “carrying on business”, and the Supreme Court set out three fundamental conditions that had to be satisfied for establishing that an entity carries on business within a court’s jurisdiction:

  1. Presence of an agent who carries on business exclusively for and in the name of the principal;
  2. Agency in the strict sense of the term; and
  3. An “essential part” of the business must take place in that place.

However, in World Wrestling Entertainment Inc. v. Reshma Collection[5] (hereinafter “WWE”), the Division Bench clarified that in case of web-based business models, the first two conditions set out in Dhodha House[6] will not apply, since they specifically relate to agents. What warrants consideration is whether in transactions over the internet  the third condition stipulating performance of the essential part of the business is satisfied, and if yes, where?

It was noted that display of goods on a website amounts to an invitation to offer against which an offer is made by a customer at the place where he or she is located. If accepted, the money is paid from the customer’s location, and the goods are delivered to the same location. Owing to the nature of the internet, the offer and acceptance are instantaneous. Keeping these factors in mind, it was held that the availability of transactions through a website at a particular place is virtually the same as a seller having a shop at that place in the physical world, and therefore, such seller would be regarded as carrying on business at that place.

The principle expounded in WWE[7] has been upheld and applied in subsequent cases. In Millennium & Copthorne International Ltd. v. Aryans Plaza Services (P) Ltd.[8] (hereinafter “Millennium & Copthorne”), it was clarified that service providers would also attract jurisdiction at places where customers can make a mere reservation (even through third-party websites), whether the reservation concludes into a transaction or not. For example, if there is a hotel located at A, and through a tourism website, customers at B and C can book a room at the hotel, the hotel would be carrying on business at B and C, and would attract jurisdiction on this ground at both of those places in addition to A.

III. Cause of Action

The determination of the cause of action, and thereby, jurisdiction under Section20 CPC in an online context has been examined extensively in Banyan Tree Holding (P) Ltd. v. A. Murali Krishna Reddy[9] (hereinafter “Banyan Tree”); a case where interestingly, neither the plaintiff nor the defendant was located within the territorial limits of the court. Here, the Division Bench of the Delhi High Court decided that mere accessibility or interactivity of a website in a particular place would not confer jurisdiction to courts in that place. Rather, the plaintiff must establish that the defendant “purposefully availed” itself of the jurisdiction at the place of suing. After noting common law developments in UK and USA, the following elements were held necessary to show that the cause of action partly arose in a particular place through the use of internet:

  1. Specific targeting of customers in that place;
  2. Conclusion of commercial transactions with such customers; and
  3. Injury to plaintiff’s business, goodwill or reputation in that place.

Thus, a rigorous standard to determine cause of action and jurisdiction in cases of online transactions was set up. Over the years, however, adjudication has diluted this standard. In Sholay Media and Entertainment (P) Ltd.  v. Yogesh Patel[10], the Court considering that mere display of a trade mark at an exhibition confers jurisdiction[11] observed that an act of advertising counterfeit products or soliciting customers therefor in a place would constitute a part of the cause of action, and courts in such place would accordingly have jurisdiction.

Similar views have been held in Burger King Corpn. v. Techchand Shewakramani[12] and in Exxon Mobil Corpn. v. Exoncorp (P) Ltd.[13] (hereinafter “Exxon Mobil”).  According to these decisions, the cause of action arises in each and every place where infringement/passing off occurs. Since, in addition to actual sales, advertisements and promotions too constitute infringement according to the IP Acts, the cause of action partly arises in all places where such advertisements and promotions are made. The courts exercising jurisdiction in all those places would thus be appropriate fora for institution of proceedings.

IV. Restriction on Forum Shopping

Guided by the motive of aiding convenience, the IP Acts provide for an additional forum where a registered right-holder could sue for infringement. However, the motive was never to enable a plaintiff to indulge in forum shopping, and the legislature did not attend to require either party to travel to distant places. Therefore in Sanjay Dalia[14], the Supreme Court interpreted Section 62 of the CR Act and Section 134 of the TM Act in a manner that allowed the availment of the additional route to plaintiffs while restricting harassment of defendants through filing of suits at far-flung places.

It was noted that generally, a plaintiff under the IP Acts ought to file a suit at the place of ordinary residence or where the principal office is situated. However, if a right-holder is residing or carrying on business at a place where the cause of action has also arisen, the suit must be filed at that place itself – the IP Acts thus do not allow the right-holder to travel to a far-off place where it carries on business for the purposes of instituting proceedings. For example, if a company has its registered office at A and branch offices at B and C, with the cause of action arising at B, the appropriate forum for filing a suit under the IP Acts would be the court exercising jurisdiction over B.

This position has been adopted and further clarified in Ultra Home[15], where specific scenarios contemplating the plaintiff as a corporation were set out as follows:

Sl. No. Place of principal or registered office Place of subordinate or branch office Place where cause of action arose Place where plaintiff may sue under IP Acts
1. A C A
2. A B A A
3. A B B B
4. A B C A

It is important to remember that this stance is not in derogation of Dhodha House[16].  While the Court in that case elucidated upon the meaning of the phrase “carrying on business”, in Sanjay Dalia[17], the Court defined the geographic limits for institution of a suit under the IP Acts. The above table is applicable in scenarios where one seeks to sue under Section 62 of the CR Act or under Section 134 of the TM Act, and is in addition to the fora available to a plaintiff under Section 20 CPC.

V. Conclusion: Synopsis

Section 62 of the CR Act and Section134 of the TM Act provide a forum additional to those under Section 20 CPC where a plaintiff may institute proceedings. However, the jurisdiction under IP Acts may only be utilised in respect of a registered copyright/trade mark; in cases of passing off, only the jurisdiction under CPC may be availed.

In a case involving infringement of a copyright/trade mark, jurisdiction may be invoked either under the IP Acts or under CPC. Both are individually sufficient for determining the appropriate forum of dispute.

By virtue of Sanjay Dalia[18], the plaintiff’s right to sue under the IP Acts has been restricted to those places of residence or business where there is an overlap with the cause of action. Alternatively, the cause of action ipso facto confers jurisdiction under CPC to courts in the place where it has arisen, regardless of whether that place has an office/residence of the plaintiff/defendant or not.

In context of disputes over the internet, the scope of “carrying on business” has been elucidated in WWE[19] while the scope of “cause of action” has been expounded in Banyan Tree[20]. The ratios of these decisions have been applied and clarified in the subsequent decisions of Millennium & Copthorne[21] and Exxon Mobil[22] to hold that jurisdiction is conferred even in places where a website advertises infringing goods and services or facilitates the mere making of bookings or reservations.

These decisions have greatly expanded the ambit of jurisdiction in cases of online intellectual property violations, so far so that they were recently applied in HT Media v. Brainlink International[23] towards the exercise of extra-territorial jurisdiction to injunct the infringing activities of a defendant located in New York.

Clearly, Section 20 CPC has a wider scope than jurisdiction under the IP Acts, and in context of intellectual property violations over the internet, right-holders would be able to invoke jurisdiction on the basis of “cause of action” under CPC with greater ease than on the ground of “carrying on business”. To demonstrate the same, the table provided by the Court in Ultra Home[24] is reproduced below, with an additional column setting out the choice of forum under CPC as well.

Sl. No. Place of principal or registered office Place of subordinate or branch office Place where cause of action arose Place where plaintiff may sue under IP Acts Place where plaintiff may sue under CPC
1. A C A A, C
2. A B A A A
3. A B B B B
4. A B C A A, C

*Practising Lawyer, New Delhi. Author can be reached at aggarlaw@gmail.com.

[1] (2015) 10 SCC 161

[2] 2016 SCC OnLine Del 376

[3] Exphar SA v. Eupharma Laboratories Ltd., (2004) 3 SCC 688

[4] (2006) 9 SCC 41

[5] 2014 SCC OnLine Del 2031 : (2014) 60 PTC 452 

[6] Supra Note 4.

[7] Supra Note 5.

[8] 2018 SCC OnLine Del 8260

[9] 2009 SCC OnLine Del 3780

[10]2014 SCC OnLine Del 7704

[11] Laxman Prasad v. Prodigy Electronics Ltd., (2008) 1 SCC 618

[12] 2018 SCC OnLine Del 10881

[13] 2019 SCC OnLine Del 9193

[14] Supra Note 1.

[15] Supra Note 2.

[16] Supra Note 4.

[17] Supra Note 1.

[18] Ibid.

[19] Supra Note 5.

[20] Supra Note 9.

[21] Supra Note 8.

[22] Supra Note 13.

[23] 2020 SCC OnLine Del 1703

[24] Supra Note 2.

NewsTreaties/Conventions/International Agreements

The Union Cabinet has approved the proposal submitted by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry regarding accession to the WIPO Copyright Treaty and WIPO Performers and Phonograms Treaty which extends coverage of copyright to the internet and digital environment The approval is a step towards the objective laid in the National Intellectual Property Rights (IPR) Policy adopted by the Government, which aims to get value for IPRs through commercialization by providing guidance and support to EPR owners about commercial opportunities of e-commerce through Internet and mobile platforms.

Benefits:

Meeting the demand of the copyright industries, these treaties will help India:

  • To enable creative right-holders enjoy the fruit of their labour, through international copyright system that can be used to secure a return on the investment made in producing and distributing creative works;
  • To facilitate international protection of domestic rights holder by providing them level-playing field in other countries as India already extends protection to foreign works through the International Copyright order and these treaties will enable Indian right holders to get reciprocal protection abroad;
  • To instil confidence and distribute creative works in digital environment with return on investment; and
  • To spur business growth and contribute to the development of a vibrant creative economy and cultural landscape.

Background:

Copyright Act, 1957:

After the administration of Copyright Act 1957 was transferred to DIPP, a study was initiated to examine compatibility of Copyright Act 1957 with WCT and WPPT. Also a joint study was undertaken with WIPO.

The Copyright Act, 1957 was amended in 2012 to bring it in conformity, with WCT and WPPT, includes amendment in definition of “Communication to the public” to make it applicable to digital environment (Section 2(ff)) as also introduced provisions related to Technological • Protection Measures (Section 65A) & Rights Management Information (Section 65B); Moral rights of performers (Section 38B); Exclusive rights of the performers (Section 38A); safe harbour provisions over electronic medium (Section 52 (1) (b) and (c)),

WIPO Copyright Treaty came in force on March 6, 2002 and has been adopted by 96 contracting parties till date and is A Special agreement under Berne Convention (for protection of literary and artistic works). It has provisions to extend the protection of copyrights contained therein to the digital environment. Further it recognises the rights specific to digital environment, of making work available, to address “on-demand” and other interactive modes of access,

WIPO Performances and Phonograms Treaty came in force on May 20, 2002 and has 96 contracting parties as its members. WPPT deals with rights of two kinds of beneficiaries, particularly in digital environment – (i) Performers (actors, singers, musicians etc.) (ii) Producers of Phonograms (Sound recordings). The treaty empowers right owners in theit negotiations with new digital platforms and distributors. It recognizes moral rights of the performers for the first time & provides exclusive economic rights to them.

Both the treaties provide framework for creators and right owners to use technical tools to protect their works and safeguard information about their use i.e. Protection of Technological Protection Measures (TPMs) and Rights Management Information (RMI).

Ministry of Commerce & Industry

OP. ED.Practical Lawyer Archives

Introduction

The Copyright Act, 1957 (Copyright Act) governs the law relating to copyright in India. The Copyright (Amendment) Act, 2012 (2012 Amendment) was enacted with an underlying objective to establish a just and equitable framework of copyright administration and revenue sharing for protecting rights of authors of works incorporated in sound recordings and films.

The 2012 Amendment inserted onerous burdens [in addition to the obligations set out by the Copyright (Amendment) Act, 1994 (1994 Amendment)] with respect to “issuing or granting licence” in respect of the said works. Added by the 1994 Amendment, Section 33 of the Act stipulated that only copyright societies can carry on the business of issuing or granting copyright licences. As part of the 2012 Amendment, Section 33(3-A) was inserted which lays down that to be a valid copyright society an entity (carrying on the business of issuing or granting copyright licences) must newly register itself under Section 33 within a year from the commencement of 2012 Amendment. Thus, if a copyright society existed by virtue of a pre-2012 registration, there would not be a bar under Section 33 operating on such a society unless there was a new registration within one year after the aforesaid enactment. At the same time, no punishment was prescribed for non-registration as a copyright society in the given time.

Under the amended Copyright Act, a copyright society has significant obligations regarding submitting reports of membership, revenue sharing under Section 36 and compliance with a tariff scheme order as passed by the Copyright Board under Section 33-A(2) set out by the Copyright Board with respect to different categories of works. Any false report submission is punishable under Section 67.

Apart from this, a copyright society must ensure protection of the interest of its members and operate transparently (Section 35). Newly inserted Section 33(3-A) also grants the Central Government prerogative to withhold renewal of registration if a copyright society does not share control and royalty with the authors of works. Thus, the intent of the legislature to benefit authors with low bargaining power vis-à-vis major production companies who own the capital required for production and marketing of creative works is very clear.

Problems with the Amendments of 1994 and 2012

There are always two sides of a coin. While the Government’s intent to bring in the amendments is laudable, certain unfortunate discrepancies in the 1994 and 2012 Amendments seriously jeopardise rights and interests of non-author owners of copyright in creative works.  The 1994 Amendment inserted Section 33 which mandates that only copyright societies can carry on “the business of issuing or granting licences” in respect of creative works. However, it is silent about the matter of assignment of rights in copyrightable works. It is to be noted that Section 18 stipulates that a copyright owner/author of creative works has the right to assign copyright to any “person”.

Logically, an author can assign his copyright to a production company and the same can further assign it to other persons. In such an assignment, a copyright society is not necessary. However, Section 33 creates a specific bar on any other entity that may be assigned such rights as laid down in Section 18 to issue such licences as a copyright owner of copyrightable works. The anomaly is that due to Section 33, only a copyright society has the right to engage in business of issuance of licences, even though under the scheme of the Copyright Act, copyright owners have the right to licence a work under Section 30.  Sections 18 and 30 are provisions of the original Act. The impact upon these provisions due to the addition of Section 33 is not clarified by either the statute or its Amendments. It is not clear whether Section 33 should prevail over Sections 18 and 30 or the other way round. Resultantly, adjudication of licensing/assignment related disputes become the subject of enormous legal ambiguity.

The economic dynamics of the film and music industry necessarily require the production companies to engage third-party licensing and collecting companies as authorised agents in terms of Section 30 for issuing public performance licences or other licences and collect fees in respect thereof. Another alternative model is to assign public performance right in terms of Section 18 to the third-party licensing and collecting entities who administer the said right such as to ensure non-infringement of copyright by non-owners. The production companies invest massive capital in producing and marketing original creative content. The third-party licensing and collecting companies due to their specialisation in such tasks, undertake the huge tasks of ensuring that the copyright to the said content is not being infringed in a vast country like India.

A stellar example of such a case is Novex Communications (P) Ltd.., a company as per its website holding authorisation as agent in terms of Section 30 or assigned rights in terms of Section 18 for licensing purposes and administration of copyright. However, in terms of the 1994 and 2012 Amendments to the Act, the legal position of entities such as Novex remains under ambiguity.

A legal vacuum persists upon the rights and interests of third-party licensing and collecting entities which carry on the business of granting/issuing licences in respect of creative works. The 2012 Amendment could have clarified the statutory position. On the contrary, it has only enhanced the ambiguity by adding a new second proviso to the sub-section (1) of Section 33. As per this added proviso, the business of issuing/granting licence in respect of literary, dramatic, musical and artistic works incorporated in film or sound recording must be carried out only through a copyright society. Legally, this leaves the third-party licensing and collecting entities like Novex on an uncertain footing. Judicial pronouncements have been few and contradictory on this aspect of the Amendments, as explained hereinafter.

Interpretation by High Courts

In its order dated 29-12-2016, the Delhi High Court passed an interesting order in Event and Entertainment Management Assn. v. Union of India.[1]  The proceeding was concerned with unauthorised public performance of songs for which rights were owned by a number of third-party licensing and collecting companies and copyright societies. Novex was one among the respondents and had earlier sued several hotels to restrain them from unauthorised public performance of the said songs.

In its order, the High Court held that Novex could operate its business within the scheme of Sections 18 and 30. Therefore, it could collect licence fees from users either as a legitimate assignee or an authorised agent of the authors and producers of the said songs in terms of Section 18 or Section 30 of the Act. To support its conclusion the order relied on Leopold Cafe & Stores v. Novex Communications (P) Ltd.[2], in which it was decided by the  Bombay High Court that issuance of licences by virtue of Sections 18 and 30 is not barred by Section 33 of the Act. The Delhi High Court also held that the absence of a copyright society in terms of Section 33 did not lead to obliteration of all rights of copyright owners.

However, the irony was that in Leopold Cafe & Stores v. Novex Communications (P) Ltd.[3] the  Bombay High Court had in fact temporarily restrained Novex from carrying on the business of issuance of public performance licences based on Section 33. The said judgment temporarily prohibited Novex from issuing/granting licences and collecting licence fees in respect of “any copyrighted works” of major production companies.

Effectively, the order of the  Delhi High Court was the exact opposite of the Leopold[4]  judgment, even though former sought to rely on the latter. Therefore, the aforesaid order of the  Delhi High Court is legally vulnerable owing to the fact that it relied on the Leopold[5] judgment. The Delhi High Court’s order provides some helpful insights about the distinction between Sections 18 and 30 as against Section 33. But it lacks the thorough reasoning which can duly oppose the conclusion of the  Bombay High Court that Novex was barred from doing its business owing to Section 33.

Recently, in its final order dated 12-10-2017, in the aforesaid writ proceeding in Event and Entertainment Management Assn. v. Union of India[6], the Delhi High Court disposed of a writ petition seeking, inter alia, a writ of mandamus against the Central Government to pass an order derecognising and permanently restraining companies like Novex from collecting licence fees from the petitioner. The writ petition placed exclusive reliance on Section 33 of the Act.

The Delhi High Court refused to grant any relief to the petitioner. However, quite contradictorily, the order asserted, “Since PPL, IPRS and Novex are not registered as copyright societies, they are—by virtue of Section 33(1) of the Act—proscribed from carrying on the business of issuing or granting licences.” In other words, the Delhi High Court reached an entirely opposite conclusion about the scope of Section 33 within a span of one year. The underlying reasoning of the said order completely eclipses Sections 18 and 30 to give absolute effect to Section 33 of the Act and is also opposed to the Leopold[7] judgment of the Bombay High Court.

As a result, even though Novex remains currently operational, its business remains vulnerable to the absolute rigour of Section 33. It is still open for any High Court or the Supreme Court to restrain such companies from functioning in response to future writ petitions. It may be an understatement that it could be catastrophic for the film and music industry and arguably enable infringers to obtain windfall gains at the expense of rightful copyright owners/assignees/agents.

The Bombay High Court’s judgment in Leopold Cafe & Stores v. Novex Communications (P) Ltd.[8] is a rarity in terms of the fact that it has directly addressed the central question about the construction of Section 33 vis-à-vis Sections 18 and 30. The first and foremost point emphasised by the judgment is that these sections must be construed harmoniously. The operation of one provision must not render the others otiose or redundant. Thus, Section 33 of the Act could not be said to prohibit operation of Sections 18 and 30 of the Act.

The said judgment differentiated “business of issuing or granting licences” and the assignment/licensing envisaged by Sections 18 and 30 of the Act. In a novel understanding of Section 33, the judgment interpreted the aforesaid phrase to mean “carrying on the business of issuing or granting licences in its own name”. Thus, as per the judgment, the business of issuing of licence in one’s own name is prohibited by Section 33. The issuance of licences by an owner/authorised agent in the course of carrying on a different business, say, film production is not prohibited by Section 33 because it is allowed by Section 30 of the Act. The said judgment provides a significant insight into the interpretation of Section 33 of the Act. The principle of harmonious construction has the potential of removing all ambiguity caused by the Amendments.

However, the judgment concludes that entities like Novex were not entitled to issue licences and collect licence fees. This adverse conclusion may be unwarranted because affidavits submitted by major entertainment companies such as Shemaroo and YRF affirmed that Novex was their authorised agent in its licensing activities. Communications between Novex and entertainment companies highlighted the fact that the said parties had agreed to authorise Novex to issue licence and collect licence fees on their behalf. The licencees had disclosed that the licenced works were owned by others. Thus, Novex’s business was within the ambit of Section 30. Thus, the conclusion that Novex’s business was prohibited due to Section 33 may not be legally sound.

The judgment has made it onerous for entities like Novex to prove that their business falls under the ambit of Section 30 or Section 18. Firstly, the judgment asserts that even if the contracting parties (Novex and the entertainment companies) have made it clear in their communications that Novex is merely acting on behalf of the entertainment companies, Novex’s business cannot fall within the purview of Section 30. The judgment goes beyond Section 30 of the Act to hold that the deeds of licence must also disclose the fact of agency between the entertainment companies and entities like Novex. It is pertinent to note that Section 30 does not require any such disclosure by an authorised agent on a deed of licence.

Under Sections 186 and 187 of the Contract Act, 1872 an agency can be either expressed or implied. Even if an agency is not formulated in a particular document or not disclosed in any document, such agency can be “inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing”. It is precisely in accordance with the aforesaid provisions that Novex had contended that it was in an (implied) agency with the entertainment companies. However, the judgment seems to have narrowed the scope for such entities to prove that it operates within the confines of Section 30.

The nature of an agreement must be determined by the terms and conditions incorporated therein, as held by the Calcutta High Court in Saregama India Ltd. v. Suresh Jindal[9] and by the Delhi High Court in PVR Pictures Ltd. v. Studio 18[10].  Irrespective of the fact that the exact owners were not specifically mentioned in the licence deeds, the fact that it was stated that the copyright in the licenced works were owned by someone else itself was a clear indication of the agency of Novex. The name of the copyright owners may have been excluded for reasons of confidentiality, an important facet of transactions in a highly competitive film and music industry. If a deed has terms which by necessary implication grant licence on behalf of a copyright owner, then superficial facets like absence of names of copyright owners are immaterial. In such a situation, the licence deed would remain legally valid and binding. The Copyright Act specially covers the field of rights in creative works. The Contract Act is specifically applicable as regards contracts. Thus, Section 33 of the Copyright Act, 1957 should not be given a construction opposed to the Contract Act with respect to the deeds of licence or agency contracts.

Secondly, the judgment may have proceeded on a presumption of primacy of Section 33. The judgment asserts that Section 30 enacts a “permissive” regime. The implication of this assertion is that between Sections 30 and 33, it is the latter which should ordinarily prevail. Consequently, Section 30 is merely an exception to the general precedence of operation enjoyed by Section 33 of the Act. Thus, the necessary implication of the aforesaid assertion in the judgment is that Section 33 deserves primacy over and above Section 30. The extremely narrow scope for an entity like Novex to prove that it operates within the purview of Section 30 (the underlying reasoning of the judgment) also supports this troubling implication.

An interesting observation is made in the judgment regarding the underlying economic rationale of engaging third-party licensing and collecting companies to conduct licensing and collection of licensing fees on behalf of the copyright owners. It is more efficient for copyright owning entertainment companies to appoint an agent for ensuring that anyone using the works must have valid licences and pay due licence fees. The judgment affirms, “I very much doubt it could have been the legislative intent of Section 33 to compel every copyright owner to set up a separate division to monitor the use of its works.”

The aforesaid justification is appropriate given the fact that copyright owning entertainment companies cannot be adept in ensuring due administration of their copyright as their resources are mainly devoted to production and marketing of creative works.  Instances involving public performances in hotels, restaurants or matrimonial events provide stark examples of such a scenario. Such matters came up before the Delhi High Court in Supercassette Industries v. Nirulas Corner House (P) Ltd.[11], Indian Singers Rights Assn. v. Night Fever Club & Lounge[12] and Indian Performing Right Society Ltd. v. R. Krishnamurthy.[13]  In the aforesaid cases, third-party licensing and collecting companies were granted injunctions based on the fact that copyright infringement had been committed by unauthorised public playing of copyrighted music in hotels and restaurants. The Delhi High Court justified the grant of injunctions based on the subsistence of copyright on the works concerned and clear proof of infringement.

In fact, collecting public performance licence fees through agent companies has become a regular practice in the film and music industry. As noted by the Delhi High Court in Federation of Hotels & Restaurants Assn. of India v. Union of India[14], a customer does not enter a hotel or a restaurant to consume food and drink but also to enjoy the ambience available therein. Similarly, as observed by the Supreme Court in T.N. Kalyana Mandapam Assn. v. Union of India[15] providing marriage halls is a commercial service which includes the necessary ambience provided by hall owners. It is common knowledge that public performance of sound recordings is a major contributor to such ambience. Thus, public places like hotels, restaurants and marriage halls provide a ready audience for creative works like sound recordings. Third-party licensing and collecting entities are the bridge between the entertainment companies and this audience.

Therefore, if third-party licensing and collecting entities become non-existent, it may cause irreparable financial loss to the film and music industry by depriving it of a major source of revenue. The conflict of Section 33 vis-à-vis Sections 30 and 18 of the Act is yet to come before the Supreme Court of India for a decisive judgment. One may hope that the current ambiguity may eventually be resolved in a legally sound manner in times to come. The insights provided by the Delhi High Court in Event and Entertainment Management Assn. v. Union of India[16] and by the Bombay High Court in Leopold Cafe & Stores v. Novex Communications (P) Ltd.[17] may guide a future resolution of the ambiguity created by the Amendments to the Copyright Act. Going by these insights, the ambiguity may be better resolved on the twin principles of preservation of rights of copyright owners outside copyright societies and a harmonious statutory interpretation coupled with a sound economic reasoning.

Conclusion

As discussed above, the Amendments to the Copyright Act have given rise to significant ambiguity regarding the scope of copyright societies and subsisting rights of third-party licensors in creative works. This ambiguity has not been conclusively resolved by any judicial pronouncement till date. The few judgments of High Courts on the issue have been contradictory and indecisive, raising more questions than answers. Given that copyright litigation in India is at a developing stage, subsequent assignment/licensing disputes will likely bring the much-needed opportunity for the High Courts and possibly the Supreme Court to decisively lay down the appropriate position of law. It is expected that till the resolution of this ambiguity, third-party licensing and collecting companies will recalibrate their commercial arrangements and exercise high degree of caution in terms of strengthening the legality of their agreements to make them fully eligible for protection under Sections 18 and 30 of the Copyright Act.

 

*Bhumesh Verma is Managing Partner at Corp Comm Legal and can be contacted at bhumeshverma@corpcommlegal.com and Somashish, is Fifth Year B.A. LL.B. (Hons.) student, School of Law, Christ (Deemed to be University), Bangalore.

[1]    2016 SCC OnLine Del 6567.

[2]    2014 SCC OnLine Bom 4801 : (2014) 6 Bom CR 394 .

3]    Ibid.

[4]    Ibid.

[5]    Ibid.

[6]    2017 SCC OnLine Del 12740.

[7]    2014 SCC OnLine Bom 4801 : (2014) 6 Bom CR 394.

[8]    Ibid.

[9]    2006 SCC OnLine Cal 467 : AIR 2006 Cal 340.

[10]   2009 SCC OnLine Del 1878 :  (2009) 41 PTC 70.

[11]   2008 SCC OnLine Del 360 : (2008) 148 DLT 487.

[12]   2016 SCC OnLine Del 5418 : (2016) 234 DLT 22.

[13]   2011 SCC OnLine Del 4668 : (2012) 49 PTC 362.

[14]   2007 SCC OnLine Del 353 : AIR 2007 Del 137.

[15]   (2004) 5 SCC 632.

[16]   2016 SCC OnLine Del 6567.

[17]   2014 SCC OnLine Bom 4801 : (2014) 6 Bom CR 394.

Case BriefsHigh Courts

Bombay High Court: In a recent order, a Single Judge Bench comprising of G.S. Patel, J has clarified that a mere act of watching a pirated movie is not criminal offence, however, selling or showing a pirated movie is a crime, as per the Copyright Act. This case was regarding a message which had started appearing on certain blocked URLs, which stated that watching or downloading a pirated film could result in a three year prison term and a fine of Rs 3 lakh under Sections 63, 63-A, 65 and 65-A read with Section 51 of the Copyright Act, 1957.
The Judge stated that he had noticed some media reports, that commented on the fact that the error pages being displayed by various ISPs gave an impression, that ‘viewing’ an illicit copy of a film is a penal offence under the Copyright Act, 1957. The Court clarified that this was inaccurate. The offence was not in viewing, but in making a prejudicial distribution, a public exhibition or letting for sale or hire without appropriate permission copyright-protected material.The Court also noted that these irresponsibly worded messages had created confusion among internet users and that it was no longer possible to leave it to these ISPs to construct appropriate error pages. The Court requested the plaintiffs’ counsel  to come up with an appropriate message with basic objective of helping those who are adversely affected by a blocking order, so that they are made aware of their remedies and can approach the Court for corrective or remedial action. [Eros International Media Limited v.  Bharat Sanchar Nigam Limited, 2016 SCC OnLine Bom 6948, order dated 24th August, 2016]