In an order contrasting with the previous decisions on the issue, a DHC DB has held that PPL cannot issue or grant licences for sound recordings without registering itself as a copyright society or becoming a member of any registered copyright society. In this long post, Kartik Sharma explains the judgement and its implications in light of Section 31 (1) of the Copyright Act. Kartik is a fourth-year student at the National Law School of India University and was the third prize winner in the 2024 Shamnad Basheer Essay Competition on IP law. Interestingly, in his essay, he discussed the role of Indian collective rights management organizations like PPL and Novex in the current Copyright Society structure.
PPL Cannot Issue Licenses for Sound Recordings Without Being Registered as a Copyright Society: DHC
By Kartik Sharma
To the ones who are interested in the Copyright societies saga, well there is news in the form of Azure v PPL!(Azure 2) A division bench of the Delhi HC, in an appeal from an interim injunction passed by a single judge bench (Azure 1), has ruled that Phonographic Performance Limited (PPL) cannot issue licenses to other entities for playing music without registering itself as a Copyright society (CS) or being part of another CS. This marks a shift in the Delhi HC’s position held till now and also puts it in contrast with Bombay HC in Novex v Trade Wings that had sided with PPL and Novex’s ability to carry out the licensing business on the anvil of their assignment deeds cloaking them as owners under Sections 18 and 30 of the Act. Anushka in a previous post has very nicely covered and critiqued the single bench’s reasoning in Azure. In this post, I do a similar thing for Azure 2 and analyse the judicial logic that was deployed. On a broader level, the decision resonates with what I had argued in my essay about PPL and Novex’s present functioning as “super-assignees” as a subversion of the CS structure.
I will straight up jump into a dissection of the reasoning. I do not intend to make any grand, overarching argument in this post. As the upcoming discussion shall reveal to the reader, it is still a mess! And this post just highlights key areas of contention and some food for thought.
The Mysterious ‘Person’ in Section 33(1)
One specifically interesting point of contention in this whole debate has been the very conception of person/association of persons that S. 33(1) main provision applies to. For the uninitiated, S. 33(1) mandates that the business of issuing licenses in respect of copyrighted works can only be done under the framework of a registered CS. Azure 1 in para 36 had held that the expression would not include ‘owners who are not members of a copyright society’. Section 33 kicks in only when copyright owners have assigned their right to give licenses to public and collect royalties therein to a CS. Trade Wings, taking a similar yet broader stance, had refused to accept the contention that “no person” in S. 33(1) includes an “owner” of copyright; essentially BHC’s reading seems unrestricted by the factum of the owner being a member of a CS or not. And now we have Azure 2 that reads “no person/ association of persons” in the broadest light and includes even owners of copyright within its scope. It held that the business of granting licenses can only be done, irrespective of ownership, under or in accordance with the registration under Section 33(3). I wish to point out here that Azure 2 reads “under” AND “in accordance with” to indicate two different scenarios: the first is if PPL itself is a CS, and the second is if PPL is itself a member of another CS, which the DB said in this scenario would be RMPL. Essentially, the person/association of persons itself does not have to be a CS itself, but can be part of another CS. But then, the person itself would not be carrying out the business, it would nevertheless be the CS, right? I have not seen this interpretive observation in any other previous judgments; an alternate view is also possible on the non-consequentialist nature of this distinction.
In my essay, I had argued for a similar liberal reading of the provision since the breadth of the expression ‘any work’ in S. 33(1) presents a nexus between the person and the work that is not constrained by the metric of the ownership status. I contended that the word ‘person’ cannot be exclusive of the ‘owner’ since the Copyright Society has been explained as an ‘association of persons’, and the owners and/or authors of the works are supposed to be the society members.
Business, and Individual Capacity: First Proviso to 33(1)
All being said, I do see the way this particular reading of the main provision of 33(1) leads to the more controversial construction of the relationship between the main part and its first proviso that was done by Azure 2. The first proviso to S. 33(1), on face of it, allows the copyright owner the ability to grant licenses to public in its individual capacity, with the condition that this activity should not conflict with his obligations as a member of the registered CS. PPL was trying to contend that the proviso saves it from the main provision’s rigours by preserving its ability to license out its own works in individual capacity. The DB chose to disagree. It held that the first proviso proceeds on the premise that the owner is a member of a registered CS; moreover, even if the owner is carrying out licensing activities in his individual capacity, it has to be a member of a registered CS. This stance is a break-even from DXC Technology (this was quashed this year) where Madras HC had also demonstrated a great deal of anxiety in preserving the whole framework of CS; DXC observed that the first proviso does not force any owner to necessarily join any CS. However, once the activity of licensing moves from the realm of individual capacity to business, then the rigours of Section 33 are attracted and all such activities have to be routed only through a CS.
After undertaking this interpretive endeavour, Azure 2 concluded that the grant of licenses, even in an individual capacity, can only be done if such person is a registered copyright society or a member of a registered CS. The operating logic of the proviso nevertheless stands open to ambiguities. Another alternate way of thinking is as follows: the main part of 33(1), in prohibiting licensing business without CS registration, impliedly allows for such activities to be done outside a CS’ ambit if they do not qualify as business. The first proviso is only meant to emphasise on the freedom that a copyright owner continues to retain of indulging in ‘individual capacity’ activities despite being a member of a CS. How this will work out is a matter of the CS’ internal working and rules. Nevertheless, I concede that such a concurrent exercise of licensing ability by the member as well as the CS is difficult to grapple with. More broadly, Azure 2 left this tension unresolved where it is unclear as to whether the reference to ‘individual capacity’ is a further exception to business activities of a CS or a completely carved out space altogether from the business realm.
PPL Being a Member of RMPL!
The real-world consequences of Azure 2 would be interesting to see. Novex, another collective rights management organization which is not registered as a CS, was not a party to the suit. Prima facie, the same reasoning would extend to it in a future ruling. In a fireside chat on the decision, Akshat Agrawal highlighted that, Azure 2 implies that an owner, outside the bounds of a CS, has no individual right to license out works. Such an understanding of the regime would strike at the heart of the very right of an individual owner to give out their works. Section 34 of the Act also mentions that copyright owners have the ability to withdraw authorization from the society. I believe that this oversight on part of the DB is linked to its absence of focus on the term ‘individual capacity’ in the first proviso. Even with DXC and Trade Wings, the failure to accurately capture the essence of business activities vis-a-vis individual capacity has been a frequent point of criticism, and Azure 2 also seemingly has repeated the same mistake. I do believe that the phrase ‘individual capacity’ has some material significance. One possible argument might be to read the individual as the original creator/owner of the work and the business aspect being that of an entity that collects copyrights via assignment from such creators. One might even ask the DB: after all of this, what remains to even constitute the activity of giving out licenses in ‘individual capacity’?
In the final leg of the ruling, the DB ordered Azure to pay royalties to PPL on the basis of Recorded Music Performance Ltd. (RMPL)’s tariff rates, as if PPL were a member of RMPL! This presumption, on a first reading, did sound strange and difficult to make sense of. Linking this to the previous para’s discussion on individual capacity, can then PPL retain some part of its rights to itself and assign the rest of it to RMPL? Will PPL further have to assign its entire portfolio to another CS or some other form of contractual relationship will be developed? One may also wonder how the tariff regime will work out in such situations. In my understanding, the licenses given out by a CS are not owner-portfolio specific, since all owners have essentially assigned their rights to the body and rendered it the super-assignee. On an examination of contractual documents of PPL, Novex, and even IPRS (which is an existing CS), assignment is the prevailing modus operandi through which societies carry out business.
I think somewhere along the line there is also an absence of clarity on what a Copyright society even is. The Bombay HC in Trade Wings had articulated a CS as wearing two hats: (i) as an authorized agent and (ii) as an assignee. This is a framing that I personally had found unconvincing and internally contradictory. Regardless, the problem remains and maybe we need a clearer picture of what exactly a CS is. As already mentioned, assignment deeds are a common pathway for CS. Nevertheless, RMPL itself is an outlier because its sample agreement uses the term ‘deed of authorization’, without referring to Sections 18 or 30. It might be a sound strategy to train the guns on such foundational questions firstly.
Before I part ways, I also wish to mention the first proviso’s sibling, equally controversial, that did not find a resolution in Azure 2 insofar as there was an opportunity for the court to articulate its actual role. The second proviso mandates that the licensing business in respect of literary, dramatic, musical and artistic works incorporated in a cinematograph films or sound recording. On the face of it, it does not cover sound recordings as an independent type of work. Why is this proviso even there? I have no idea, and there seem to be different views (see here and here) on it. The main part of Section 33(1) already seems to cover the business activities aspect. Azure 1 and Trade Wings relied on the second proviso to deny the requirement of mandatory registration as a CS for PPL and Novex since they deal with sound recordings and not the underlying works. While the Court did ask PPL to approach the concerned CS in this case, the question in light of the second proviso still remains.
Witnessing all of this chaos caused due to a multiplicity of judicial interpretations, one may also wonder whether the problem is with the statute itself. Clearly, the different provisions and their components when read together generate tensions and logical contradictions. The ultimate prescription then might be an overhaul of the statutory provisions themselves in order to rid them of the indeterminacies and conceptual turbidity.
I guess nobody knows what’s even going on anymore with the statutory interpretation. And maybe the only way to go ahead is, as Ms. Casey advised in Severance (brilliant show btw), please try to enjoy each fact judgment equally, and not show preference for any over the others!
A big thanks to Swaraj, Praharsh and Akshat for their assistance and thoughts on the piece!