by Ananth Padmanabhan, CPR

The draft copyright rules released for public comment earlier this week represent a notable first in Indian copyright policy: an express articulation, though very brief, of the demands of the digital era. The Department for Promotion of Internal Investment and Trade (DPIIT) has rightly noted the need “to ensure smooth and flawless compliance of the Copyright Act in the light of technological advancement.” Refreshing as this may sound, it is also a tad too late and disappointing, considering that the most significant amendment to the Indian Copyright Act, 1957 (“ICA”) was made in 2012 unlike in the US and the EU where copyright responses to the “internet threat” were shaped in the late nineties. The 2012 Amendment introduced a set of intermediary safe harbours for internet service providers and user-generated content platforms, but without a holistic discussion of what the digital era realistically required to incentivise content production. I would characterise this amendment as an opportunity lost in the din of distributing the revenue pie between content creators and producers, when the actual focus ought to have been on growing the content pie in a digital setting.

In this regard, experiences over the past decade or so reveal the transition of the content economy into a content plus experience economy. What is truly powering the likes of a Spotify and a Netflix today is as much the behavioural and experiential data points on consumers as the specific content they provide. These content players are not only operating “over the top” of internet pipes, but also of legacy content. Therefore, to propel more innovation in this domain, unlimited content access, though laced with equity and remunerative fairness among various stakeholders, is critical. This of course raises deeper questions regarding the property structure of copyright exclusions and their relevance in a digital setting. Mindful of these dimensions, the proposed rules seek to remove the judicial basis of a recent verdict of the Bombay High Court and enhance the licensing possibilities for content access. This is a good policy move, and one consistent with the legislative choice made through the insertion of Section 31D of the ICA in 2012 — a provision that permits the Intellectual Property Appellate Board (IPAB) to fix rates of royalty and allows broadcasting organisations to avail statutory licenses from content owners at these pre-fixed rates instead of leaving matters to the vagaries of negotiation.

To understand the recent move — substituting the express reference to radio and television broadcast with the more generally worded “each mode of broadcast” in Rule 31, the rule that operationalises Section 31D — we must revisit the single judge order of the Bombay High Court in Tips Industries Ltd. v. Wynk Music Ltd. This decision, which came out in the month of April, 2019, has arguably upended the business model and scale-up possibilities of on-demand music streaming platforms. The central controversy in this industry-defining litigation was simple enough: does Section 31D apply to internet broadcasting? Tips Industries, the owner of sound recordings with a vast repertoire of Bollywood music, argued that it would not, while Wynk music, a digital streaming platform contended that it would. The single judge agreed with the former, rejecting the latter’s reliance on the plain text of Section 31D and the intervening clarification from the Department of Industrial Policy and Promotion (DPIIT’s predecessor) through an office memorandum in 2016 that internet broadcasting organizations would come within the purview of this provision.

Two key arguments raised by Tips resulted in this outcome. The first was heavily mired in property rhetoric, branding Section 31D an “expropriatory legislation” that deprived rights owners of their property. This was flawed at many levels, most significantly at the level of drawing a tenuous parallel between copyright and real/tangible property assets. The idea of expropriation derives sustenance from natural rights theory, where it was accepted that a person is entitled to the fruits of their labour, including tangible assets. This underlying basis for property rights in tangible assets is far removed from the philosophical foundations of intangible rights, one that is drawn from utilitarian theory and a careful balancing of property and social goals. Indeed, several cases in India’s intellectual property jurisprudence offer this alternate justification for protecting intangible assets as opposed to a natural rights justification. Hence, a right such as copyright, solely created for instrumental reasons under statute, could well be extinguished or limited by the same statute without any fear of it being termed an act of expropriation. Otherwise, even the fair use doctrine and the Delhi High Court verdict on the photocopying of books, predicated on this doctrine, would equally qualify as similar acts of expropriation.

Unfortunately, the single judge disagreed, holding that a strict construction must be placed on Section 31D because it was expropriatory in character. Lost in this characterisation is a host of social goals advanced through this mechanism. Here, it would be useful to recollect that the Parliamentary Standing Committee which deliberated on this provision saw its utility within a much broader context: one where the compulsory licensing mechanism under Section 31 had not worked too well in the case of the radio industry. Apart from years spent in litigation, the radio industry did not have much to show in terms of ease of obtaining licenses through the complaint mechanism envisaged under Section 31. Hence, the need was felt for an easier mechanism that helped override the transaction costs problem. The Committee had noted in this regard that section 31D “would work in favour of users of copyright works who would then not be subject to lengthy, expensive and monopolistic negotiations by the owners of the work”. Behavioural theory scholarship, most notably from Christopher Buccafusco and Christopher Sprigman on the endowment effects of intellectual property rights, wherein individuals tend to value goods more highly when they own or create them than when they do not, lends additional strength to this concern in the form of undesirable holdout effects. In fact, Spotify’s delayed entry to the Indian market was caused partly due to similar behaviour on the part of some dominant music labels.

The second important argument from Tips, and which is what the newly proposed draft attempts to override, was the reliance placed on the Copyright Rules, 2013, to contend that only radio and television broadcasting was envisaged under the statutory license mechanism. No doubt, the applicable rule did mention fixing separate rates of royalty for these two modes of broadcast. But the definitions of “broadcast” and “communication to the public” in the ICA was broad enough to cover “any work available for being seen or heard or otherwise enjoyed by the public directly or by any means of display or diffusion other than by issuing physical copies of it, whether simultaneously or at places and times chosen individually, regardless of whether any member of the public actually sees, hears or otherwise enjoys the work so made available”. In the light of this broad statutory mandate, it is incorrect to curb its natural meaning through reliance on rules, which are only an exercise of delegated authority by the Executive. Moreover, if these rules could be relied on at all for this purpose, as the single judge proceeded to do, it is highly unclear why he chose to ignore a similar exercise of delegated authority, namely the subsequent clarification vide office memorandum by the DIPP in 2016 as noted above.

It remains to be seen whether the proposed rules come through. Even if they do, it is still not certain that another judge will refuse to adopt the same logic of natural rights and expropriation that the single judge employed here to restrictively interpret the scope of Section 31D. Moreover, piecemeal fixes cannot address what has been a more persistent vision problem with Indian copyright law and policy: the inability to adapt the property structure to a new kind of content economy and experience that demands more, and not less, consumption. Transaction costs and holdout effects are much worse problems in this new ecosystem than before. Therefore, there should be no further delay in reflecting deeply on transitioning from a property and exclusion-based regime to a more licensing-driven system that unlocks content for all while reasonably remunerating the content owner. Only that transition will give us more innovation and richer experiences.

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Ananth Padmanabhan is a fellow at the Centre for Policy Research, New Delhi, and author of the treatise, “Intellectual Property Rights: Infringement and Remedies” (LexisNexis, 2012).