Radio royalties for sound recordings and underlying works: what is the path ahead?

The Intellectual Property Appellate Board (IPAB) recently issued a landmark Order in the case of Music Broadcast Limited v. Tips Industries Ltd.& Ors.[1] and fixed separate statutory royalty rates to be payable to owners of sound recordings and underlying works for the radio broadcast of musical works and sound recordings, and underlying works. The decision of the Appellate Board involves section 31D of the Copyright Act, 1957 which deals with statutory licenses for broadcasting of literary works, musical works and sound recordings and states that broadcasting organizations shall pay royalties to the owners of rights in each work, ‘in the manner and at the rate fixed by the Appellate Board’.

However, in less than a week, the Delhi High Court came up with a contrasting decision in the cases of The Indian Performing Right Society Ltd (“IPRS”) v. Entertainment Network (India) Ltd (“Radio Mirchi”) and Phonographic Performance Ltd (“PPL”) & IPRS v. Cri Events (P) Ltd & Ors[2] (the “Judgement”) where the Court disposed of two disputes of statutory licensing of sound recording and underlying works holding that when sound recordings are broadcasted, the underlying works are not considered to be independent of the sound recording, therefore, a separate license for communicating the underlying works is not required.

The IPRS is a registered society for authors, composers and publishers of literary and musical works in India and the PPL is a registered society for music companies. It was argued by the IPRS that the broadcast or exploitation of sound recordings implies exploitation of the literary and/or musical works and thus, the licenses for the sound recordings as well the underlying works should be obtained by organizations seeking to broadcast these sound recordings.

On the other hand, the Defendants argued that when underlying works are used to create a sound recording, they merge into it and the only copyright is that of the author of the copyright, hence the authors of the underlying works should not have any separate rights. It was also alleged that the sound recording without the underlying works would not be a ‘commercially viable’ option.

It was observed by the Court vide the Judgement that underlying works form part of the sound recordings and therefore cannot be exploited separately. The Court explained that, “it is the owner of the sound recording who transforms the literary work which otherwise is a mere collection of words into a sound, capable of phonetic pleasure and who gives the composition of music a sound of various musical instruments.” Thus, the Court accepted the arguments of the Defendants and held that the utilization of a song recording does not constitute the utilization of underlying works and so there is no need to acquire authorisation from authors of underlying works and there is also no need to pay them any royalties. In other words, the Court explained that underlying works incorporated in sound recordings are not utilized and do not incur separate royalties when the sound recording is used.

While the IPAB recognized the rights of the authors of underlying works, the Delhi High Court in its Judgement, seems to have interpreted the concept of underlying works in a different manner wherein the authors of such underlying works seem to have no right to royalties. The decision is based on the premise that the sound recordings are a combination of the underlying works and so the underlying works cannot be separated from the sound recording. The Judgment goes on to interpret the 2012 Amendment in a manner that almost completely extinguishes the rights of authors of underlying works.[3]

Finally, it should be noted that the Judgement has currently stayed and a final decision on the matter is pending before the Division Bench of the Delhi High Court.[4] With these contrasting decisions, the sharing of royalties remains a contentious issue that should be clarified through a final decision by the Court in the near future.

[1] https://ipab.gov.in/ipab_orders/delhi/OP-(SEC-31D)-1-to-9-2020-CR-NZ-and-OP-(SEC-31D)-1-2020-CR-WZ.pdf [2]http://164.100.69.66/jupload/dhc/RSE/judgement/04-01-2021/RSE04012021S6662006_133303.pdf [3]https://spicyip.com/2021/01/delhi-hc-delivers-order-crippling-authors-royalty-rights-in-underlying-works.html [4] http://iprmentlaw.com/wp-content/uploads/2021/01/IPRS-vs-ENIL.pdf