Calcutta High Court Mandates Royalty Sharing For Public Sound Recordings; Restrains Vodafone From Unlicensed Caller Tunes

Calcutta High Court Mandates Royalty Sharing For Public Sound Recordings; Restrains Vodafone From Unlicensed Caller Tunes

Justice Ravi Krishan Kapur of the Calcutta High Court affirmed that authors possess statutory entitlements to royalties whenever sound recordings are publicly communicated, as per the Copyright (Amendment) Act, 2012.

The court instructed Vodafone to halt the unauthorized use of copyrighted works and to compensate the Indian Performing Rights Society (IPRS), an organization that safeguards the copyrights of its members, including music composers, authors, and publishers, by paying royalties.

Vodafone India Ltd. (Vodafone) introduced a feature allowing customers to personalize their Caller Ringback Tones (CRBT) with pre-recorded songs. Some of these recordings were originally produced and released by Saregama India Pvt. Ltd. (Saregama). Additionally, many of the recordings offered by Vodafone were protected by the Indian Performing Rights Society (IPRS), a copyright society established under the Copyright Act of 1957. The primary objective of IPRS is to safeguard and uphold the rights of its members, comprising authors, music composers, and publishers. Through licensing and fee collection, IPRS manages the rights associated with literary and musical works, ensuring the collective interests of its members are protected.

IPRS argued that Vodafone needed to acquire a distinct license and remunerate royalties for utilizing the musical and literary creations of IPRS members in their sound recordings. In response, Vodafone initiated legal proceedings before the Calcutta High Court (High Court), seeking a declaration that IPRS has no entitlement to any claims, including license fees. On October 1, 2018, an interim injunction was issued by the High Court, prohibiting IPRS and Saregama from asserting royalties against Vodafone, contingent upon Vodafone depositing Rs. 3.5 crore with the High Court. Subsequently, IPRS sought to annul this injunction.

In the meantime, Saregama initiated a distinct lawsuit in the High Court, aiming to prohibit Vodafone from utilizing its copyrighted sound recordings for its value-added services. Responding to this, Vodafone filed applications to halt the lawsuit and to incorporate IPRS as a party in the case. Simultaneously, IPRS also sought to be included in the lawsuit to prevent the withdrawal of the deposited amount.

IPRS lodged a third lawsuit before the High Court to prohibit Vodafone from publicly performing or communicating its repertoire without remitting royalties. Subsequently, an interim order on October 12, 2018 permitted Vodafone to sustain its value-added services after depositing Rs. 2.5 crore. Later on, Vodafone moved to include other music companies, namely Sony and Tips, in this litigation. In response, IPRS sought to annul this order and requested further payments and disclosures from Vodafone.

The High Court consolidated these three suits and heard them jointly after obtaining consent from all parties involved.

IPRS argued that Vodafone lacked legal authorization to utilize the music and literary works featured in the sound recordings of IPRS members without securing a valid license. According to IPRS, neither Saregama nor any other music company holds the authority to issue licenses for the use of these works. Even if Saregama granted a license to Vodafone in contravention of the terms and conditions of the rights vested in IPRS, such an agreement would be rendered void under Sections 19, 30, and 30A of the Copyright Act. In 2017, fresh agreements were established between IPRS and all music companies, including Saregama, wherein the companies transferred their rights to IPRS, including the authority to collect royalties.

Vodafone contended that under Section 17(c) of the Copyright Act, the producer of a sound recording becomes the initial owner of the copyright in the incorporated works, particularly when such works were commissioned under a contract of service for valuable consideration. Hence, the utilization of sound recordings did not require a separate license from IPRS for the musical and literary works contained within them. Moreover, following the amendment of the Copyright Act, sound recordings retained an autonomous copyright status. Consequently, royalties were not obligated to be paid to IPRS or the proprietors of the literary and musical works featured within the sound recordings.

On the matter of royalty payments, Vodafone emphasized that such payments should be determined by the terms of the assignment agreement between the assignor and the assignee, as outlined in Section 18(1) read with Section 19(10) of the Act. They pointed to an assignment deed between Saregama and IPRS, where Saregama assigned public performance and mechanical rights to IPRS. However, Vodafone argued that this assignment merely designated IPRS as a collecting agent of royalties and did not confer ownership rights to IPRS. Additionally, Vodafone cited a settlement reached with Saregama concerning disputes over prior agreements. Under the settlement, Saregama agreed to withdraw a lawsuit upon receiving a specified sum, and it was mutually agreed that Vodafone would remit royalties to IPRS for the copyright on content provided by Saregama.

The High Court noted that the amendments to the Copyright Act in 2012 brought about significant changes to the legal landscape regarding the rights of authors of literary and musical works. These amendments were designed to safeguard the rights of authors by mandating the sharing of royalties whenever sound recordings are publicly communicated. They conferred substantive rights upon authors, shielding them from being obliged to license their rights for emerging technologies in the future. A comprehensive framework for royalty payment was integrated into the Act and its associated rules. The amendments marked a transformation in the equilibrium of rights among stakeholders under the Act.

The High Court illustrated the scenario of a young author who might unwittingly relinquish all rights for a nominal fee, only to realize later that major corporations have reaped substantial profits. The amendments were designed to shield authors, especially those with limited bargaining power, from such exploitation. Copyright was perceived not only as an economic instrument but also as an extension of the author's identity, benefiting both the creators and their successors.

The High Court ruled that despite Saregama being acknowledged as the initial owner of the sound recordings, subsequent amendments acknowledged the rights of authors, which took precedence over those of the first owner. Consequently, Vodafone was legally obligated to pay royalties to IPRS for the utilization of literary and musical works. The court dismissed Vodafone's contention that there had been no alteration in the law post-amendment, affirming that authors now possess statutory entitlements to royalty sharing.

Additionally, the High Court disregarded the significance of specific agreements between Saregama and Vodafone, emphasizing Vodafone's duty to procure licenses from IPRS. It underscored Saregama's previous transfer of rights to IPRS and criticized any efforts to bypass these rights. The High Court concluded that the amendments unambiguously granted authors rights to royalties, rendering Vodafone's arguments baseless.

In consideration of these findings, the High Court instructed Vodafone to cease all activities infringing upon IPRS's Copyright unless a valid license is obtained, along with payment of royalties to IPRS. Additionally, the High Court mandated the release of deposited funds to IPRS and stressed the importance of expeditious proceedings to address the disputes.