Guest Post: T-Series’ Constitutional Challenge to ss. 31(1)(b) and 31D of the Copyright Act

We have for our readers today, a very detailed guest post by my friend Chaitanya Ramachandran, analysing the argument made by T-Series in its constitutional challenge against Section 31(1)(b) and Section 31D of the Copyright Act, as amendment by the Copyright (Amendment) Act, 2012.

Chaitanya, graduated from the National Law School of India University in 2009. At NLS, he was the Chief Editor of the Indian Journal of Law and Technology. On graduating from law school, he worked for the law firm, Clifford Chance in London. He is presently studying towards his LLM Degree at Stanford Law School, where we are classmates.

Image from here

T-Series’ Constitutional Challenge to ss. 31(1)(b) and 31D of the Copyright Act

By

Chaitanya Ramachandran

As Prashant indicated in a previous post, Super Cassettes Industried Ltd. (“T-Series”) has filed a writ petition (W.P.(C) No. 2316 of 2013) in the Delhi High Court challenging the constitutionality of two of the compulsory licensing provisions of the Copyright Act, 1957 affected by the Copyright (Amendment) Act, 2012 – the amended s.31(1)(b) and the newly-introduced s.31D (and the rules corresponding thereto). In this post, I summarize and comment on T-Series’ challenges to these two provisions – Prashant has pithily recapped the challenges to the Copyright Board here.

Section 31(1)(b) sets out the regime for the compulsory licensing of works that have been withheld from the public, while s.31D creates a statutory licensing regime that allows compliant broadcasters to broadcast any literary and musical works or sound recordings. T-Series challenges both sections as being violative of Arts. 14, 19(1)(g), 21, and 300A. For context, here are links to the original Copyright Act, 1957 (here) and the Copyright (Amendment) Act, 2012 (here).

T-Series’ contentions are as follows:

I. Section 31(1)(b)

T-Series argues that this provision privileges the interests of broadcasters (who it claims have previously abused it for financial gain at the cost of copyright owners). Its arguments can be classified under the two broad headings of natural justice and unconstitutionality.

Natural justice: T-Series objects to the 2012 Amendment’s expansion of compulsory licenses to persons other than the complainant as being unreasonable and contrary to principles of natural justice, on the ground that the reasonableness of the copyright owner’s refusal to grant a voluntary licence can only be judged vis-à-vis the complainant, and thus any remedy should accordingly be restricted to the complainant alone (especially as third parties are not involved in any hearing under this provision).

Unconstitutionality: T-Series also argues that the provision is ultra vires the following constitutional provisions:

1) Art. 14: T-Series contends that while the object of s.31 is to ensure that the public is not deprived of access to copyrighted works, subsection 1(b) doesn’t require the “withholding of” or “denial of access to” a work, thus creating a disconnect between the object of the provision and the means of achieving it. This is a rather weak argument, as the words “has refused to allow communication to the public by broadcast” seem to concord with the object of ensuring public access.

T-Series also argues that an arbitrary and discriminatory distinction has been made between (a) the exclusive right to broadcast a work and (b) the other exclusive rights available to a copyright owner. While the right to broadcast does serve the goal of ensuring public access more than, say, the right to adapt, the right to reproduce or the right to perform could arguably also serve that goal. So perhaps T-Series isn’t being entirely unreasonable when it claims that broadcasters are getting special treatment.

2) Arts. 19(1)(g) and 21: T-Series complains that the provision unreasonably fetters its freedom of contract by destroying third parties’ incentives to enter into voluntary licenses. It also makes the interesting argument that the compulsory license is effectively a price control/royalty subsidization mechanism that has no legal justification, as (a) copyrighted works are not essential commodities and (b) there is no primary public purpose associated with the licensing of such works to broadcasters. While this argument has some appeal, the state’s interest in ensuring public access to copyrighted works may well constitute a sufficient public purpose, leaving open the question of whether copyrighted works are essential commodities.

3) Art. 300A: T-Series argues that the provision enables a deprivation of property that doesn’t afford copyright owners the benefit of due process, and that doesn’t achieve any real public purpose. This argument also seems weak to the extent that the copyright owner is in fact given a reasonable opportunity to be heard – but the due process argument is more convincing with respect to third party beneficiaries of a compulsory license, who may not be involved in the hearing.

II. Section 31D

Natural justice: T-Series objects to s.31D as it does not give a copyright owner any opportunity to be heard before a broadcaster avails of a statutory license.

Constitutionality: Parallel to those against s.31(1)(b), T-Series also makes the following constitutional arguments against s.31D:

1) Art. 14: T-Series argues that s.31D makes not one, not two, but three types of discriminatory classifications:

·      It discriminates between copyright owners and broadcasters, as the former are deprived of their freedom of contract while the latter may continue to trade without hindrance. This argument is susceptible to an “apples and oranges” objection – only an unjustified distinction between two classes of copyright owners is capable of violating Art. 14, and that copyright owners and broadcasters are not on the same footing under Art. 14.

·      It impermissibly singles out owners of literary and musical works and sound recordings, leaving owners of other types of copyrighted works free to exploit their works without the threat of statutory licensing. T-Series may have a point here – why, for example, are dramatic works and cinematograph films not subject to the statutory license?

·      In a manner similar to s.31(1)(b), only the rights of broadcasting and public performance are made subject to a statutory license, while the other exclusive rights remain untouched.

2) Arts. 19(1)(g), 21 and 300A: T-Series’ arguments are similar to those made with respect to s.31(1)(b).

Analysis

Although T-Series’ constitutional arguments are susceptible to criticism, it makes two other points worth considering. The firstis that under the existing voluntary licensing arrangements, public access to copyrighted works is not an issue. Does the mandatory licensing scheme introduced by the 2012 Amendments therefore amount to a solution in search of a problem? Secondly, it points out that while license fees are not a significant expenditure for broadcasters (and annexes a sample broadcaster’s P&L statement showing that its licence fees are much lower than administrative expenses and salaries), against a backdrop of declining physical sales, licensing royalties represent a copyright owner’s primary revenue stream, and a portion of these are paid out to the artists associated with the copyright owner. Lowering these revenues by fiat would cause irreparable harm to copyright owners.

T-Series also stresses the urgency of the situation by disclosing that it has been receiving letters from some of its licensees threatening to broadcast its copyrighted works without its consent and subject only to the royalty rates determined by the Copyright Board.

With respect to s.31(1)(b), T-Series appears to have glossed over the built-in reasonableness requirement that limits the ability of third parties to avail of a compulsory license. Where a copyright owner refuses to authorize the broadcast of its work(s), the Copyright Board may grant a compulsory license only “if it is satisfied that the grounds for such refusal are not reasonable”. This accords with the state’s interest in ensuring public access to copyrighted works while safeguarding a copyright owner’s right to exploit its works – as long as the copyright owner doesn’t unreasonably refuse to authorize the broadcast of its works, it has nothing to worry about.

The court may have a more difficult time finding a limiting principle in s.31D, which appears to completely exclude copyright owners from the statutory licensing process (except for a right to notice of a third party’s intent to broadcast its works and a right to inspect the third party’s books). There is a case to be made for the proposition that mandatory licensing should be the exception rather than the rule, and that licensees shouldn’t be able to exploit the system by using it as a proxy for voluntary licensing at a fair market rate. I’d love to have your thoughts on this (and T-Series’ other arguments) in the comments.