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Spotify’s India launch and the crucial legal battle on music copyright – SpicyIP

By Divij Joshi

It’s the one we’ve all been waiting for. Spotify, the Swedish music-streaming service, finally launched in India after months of speculation as to when and how the service would reach Indian consumers. Yet, an as yet unknown number of works in Spotify’s catalogue are in a precarious position, and could at any moment be pulled from the service.

While we enjoy tunes from the world’s largest online streaming service, the background music to the launch is an intense legal battle with Warner Chappel Music Ltd. (WCM), a music publisher in the Bombay High Court, which epitomises the legal uncertainty in copyright licensing in India, particularly concerning on-demand interactive digital streaming services, which have emerged as the primary means by which we listen to music online. (Long Post)

Spotify’s Nuclear Option: Section 31D and the Compulsory Licensing of Musical Works

While licensing negotiations, ostensibly the cause behind the delay in the launch, have been going on for months, the public saga began when Spotify declared its intention to invoke the Copyright Act’s statutory licensing scheme under Section 31D.

Section 31D of the Copyright Act, introduced in 2012, allows any broadcasting organisation to communicate to the public, any previously published musical work or sound recording, by invoking a compulsory license through a unilateral notice, and paying royalty rates determined by the Intellectual Property Appellate Board, in the manner prescribed under the Copyright Rules (Rules 29-31).

In response to certain ‘representations’, the Department of Industrial Policy and Promotion (DIPP) in 2016 released an Office Memorandum which brought ‘internet broadcasting organisations’ under the ambit of the compulsory licensing scheme under Section 31D.

On February 25, Spotify invoked the compulsory licensing scheme under Section 31D by filing a public notice with the IPAB of its intention to broadcast the works of WCM as an internet broadcaster. The notice, inter alia, states that Spotify intends to broadcast sound recordings in which WCM has rights to the underlying musical works. Strangely, the notice specifically excludes the broadcast of sound recordings over which WCM has a right, even though Section 31D allows for this as well. According to Spotify, WCM has the underlying rights (including rights in ‘as little as 1% of the composition’) to sound recordings in which licenses have already been obtained, and alleges uncompetitive conduct on behalf of WCM in withholding a voluntary license.

Unlike the compulsory licensing provisions under the Patents Act, Section 31D does not require the licensee to make efforts to obtain a voluntary license. Even so, Spotify’s notice states that the reason for resorting to Section 31D is due to the unreasonableness of WCM in refusing to grant a license to Spotify. It supplies further rationale for its actions, stating that it would lead to a loss of works to the public, and cause harm to Spotify as well as the artistic community. It also deposited 5,28,000 EUR with the Copyright Office as ‘advance royalty’, although its unclear how this specific sum was arrived at.

As per the notice, Spotify intended to (and did) launch the service and invoke the license from 26th February itself, a day after the notice was served, which itself presents an anomaly. Section 31D and the Copyright Rules suggest that the statutory licensing scheme can only be invoked after the determination of royalty rates by the IPAB. Yet, until present, these rates have not yet been determined for either radio, TV or internet broadcasters, which makes it unclear whether they were authorised to jump the gun and begin their ‘broadcast’ prior to the procedure under Section 31D being completed.

In response to the notice, and anticipating infringement of copyright, WCM sued Spotify in the Bombay High Court, before Mr. Justice Kathawalla, seeking an injunction, who issued an interesting order on February 26.

Placing the application for directions on March 25th, the Court in its order of February 26, crafted a rather peculiar interim arrangement – Spotify was to deposit a sum of 6.5 Crores with the High Court (once again, no justification for this sum), and refrain from pursuing their statutory licensing application before the IPAB. At the same time, the Court’s order appears to allow Spotify, in the absence of a voluntary or statutory license, to use WCMs catalogue of musical works, subject to the remuneration being offset upon the final disposition of the suit.

‘Big Tech’ v ‘Big Music’ – What will be the Future of Music Copyright in India?

Regardless of the Court’s interim arrangement, at the heart of the case is a battle for the soul of music copyright in the digital age – a battle echoed in courts and parliaments around the world, as the traditional music licensing and publishing industry tries to cope with new forms and models of digital communication. The frequent proclamation of a ‘value gap’ in the distribution of remuneration received by music publishers vis-à-vis technology platforms is symptomatic of this battle. While Spotify has not generally been at the receiving end of the scorn of the publishing industry (as opposed to platforms reliant on user-generated content, like YouTube), the invocation of compulsory licensing could soon place it in a similar bracket.

The legal battle against Section 31D captures this battle well. The constitutionality of the section has been frequently challenged – both before the Supreme Court as well as various High Courts. The challenge is based on the argument that Section 31D privileges the rights of broadcasting organisations over the rights of music publishers, and goes against the freedom to contract and the fundamental right to carry on business under Article 19(1)(g). There is some merit in this argument, as has been argued on this blog in the past, as Section 31D is particularly broad and permissive, without giving due (or any) account to the rights owner. Yet, suitable safeguards, for example, requiring good faith efforts to obtain voluntary licensing and factoring in anti-competitive actions by music publishers, could save such a scheme.

The situation gets even more complex when it comes to on-demand music services and the legality of the DIPP’s Office Memorandum extending 31D to online streaming. This concerns the jurisdiction of DIPP to issue an interpretation of Section 31D, and whether the justifications for statutory licensing of musical works apply outside the context of ‘traditional’ broadcasting forms, particularly in the context of ‘on-demand’ streaming and digital reproductions of musical works.

Section 31D covers the broadcasting of musical works and sound recordings, which, under Section 2(dd) relates to the right of communication to the public, which is defined under Section 2(ff), and includes the right to make a ‘performance’ available “whether simultaneously or at places and times chosen individually.” On the one hand, this language could ostensibly cover on-demand streaming services. However, the counter-argument to this could be that the relevant right which must be licensed by Spotify must also include the right of reproduction (which includes ‘electronic’ storage, which could extend to any form of data transfer, including on-demand, downloading as well as non-interactive streaming), which is distinct from the right to communicate to the public, and is not granted under a Section 31D license.

While some laws, as in the US, have made a distinction between interactive and non-interactive broadcasters for the purpose of obtaining statutory licenses, this issue has not been deliberated by Indian legislators, and we are forced to read abstractly into the language of the Copyright Act to apply the law to a state of technology which was presumably not apprehended while drafting these sections.

Ultimately, Section 31D is a provision for taking into account public interest considerations, to ensure availability and access to cultural works to the public, in which broadcasters play a crucial role. Statutory licensing schemes for broadcasts (in many forms) are a part of copyright laws across the world. Do such considerations change when applied to the digital age? Should laws encourage greater distribution of works to the public, which ostensibly privileges online platforms and ‘broadcasters’, including large (and wealthy) platforms like Spotify and YouTube, or should the interests of publishers and artists be at the forefronts? How should this balance be drawn? Ideally, the arbiter of such a dispute is lawmakers and not courts, who need to determine the ideal balance of copyright and the public interest and engage with the changes brought about by interactive and non-interactive digital music services.

Another Copyright Conundrum: Spotify’s Licensing of Musical Works in the Aftermath of IPRS v Aditya Pandey

Another issue which piques my interest in this dispute is the applicability of the Supreme Court’s interpretation of the rights in sound recordings vis-a-vs the rights in underlying musical works (compositions and lyrics). To recall, in IPRS v Aditya Pandey, the SC had stated, in a rather disappointing and anomalous decision, that when musical works are licensed for the purpose of sound recordings, the rights in those works are subsumed within the sound recordings. Therefore, the licensing of such sound recordings do not require further, separate licenses for the underlying work – essentially bundling the rights in one form, placing the liability on authors of musical works to negotiate with the recording industry than with the eventual user of the song.

How would this apply in the present dispute? To go back to Spotify’s 31D notice, the company specifically stated that it proposes to statutorily license only musical works in cases where the sound recordings of those works have been legally licensed. If the Aditya Pandey decision stands, there is no requirement for Spotify to include such a license, although for post-2012 licenses, there is a requirement for the sharing of royalties obtained through licensing, with the authors of the underlying works. Why, then, did Spotify opt for the statutory licensing scheme instead of invoking this decisions?

The thicket of copyright controversies that this singular case throws up shows us that there’s much introspection and reform required in Indian copyright law, to favour authors, publishers, and most importantly, the public’s access to music, arts and cultural work.


Crossposted with permission from SpicyIP and the author. Read the original here.

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