In another landmark development concerning the long standing dispute between music owners and radio broadcasters, the Hon’ble Madras High Court in its recent decision[1] has varied the rate of 2% Net Advertising Revenue (NAR) as determined by the Copyright Board in 2010[2] in the compulsory licence proceedings.
The decision arose from appeals filed by Phonographic Performance Limited (PPL) challenging the rate determined by the Copyright Board on the ground that the determination was not based on the evidence adduced by the parties, and was instead premised on the role of the FM broadcast sector in respect of social impact and welfare, and other public interest considerations. PPL argued that during the Copyright Board proceedings, the radio broadcasters never disclosed their advertising revenues, and therefore the rate determined by the Copyright Board basis the NAR concept was disadvantageous to the Music Companies. The South India Music Companies Association (SIMCA) had also filed an appeal against the said order challenging the applicability of the order to “all music providers”. SIMCA had argued that it was never a party to the compulsory licence proceedings, and without being afforded an opportunity to be heard, and adduce evidence, the Copyright Board order could not bind SIMCA.
Before delving into the decision of the Hon’ble Madras High Court, it may be important to shed some light on the procedural history of the long-standing battle for compulsory licence between radio broadcasters and music companies.
Radio broadcasters had filed compulsory licence proceedings against PPL wherein the Copyright Board had granted a compulsory licence in favour of the radio broadcasters. PPL had filed an appeal before the Hon’ble Bombay High Court challenging the grant of compulsory licence. The Hon’ble Bombay High Court, remanded the matter back to the Copyright Board for determination of rates. Around the same time, as T-Series was not a member of PPL, ENIL had filed a compulsory licence application against T-Series. During the course of proceedings, the Copyright Board had declined T-Series the opportunity to adduce oral evidence, and passed an order granting a compulsory licence against T-Series. Aggrieved by the said order, T-Series filed an appeal before the Hon’ble Delhi High Court, which set aside the order, and remanded the matter back to the Copyright Board for fresh determination of the compulsory licence application.
The radio broadcasters filed appeals before the Hon’ble Supreme Court against the aforesaid decisions of the Hon’ble Delhi High Court and Bombay High Court. The Hon’ble Supreme Court upheld the order granting a compulsory licence in relation to the works of PPL, and remanded the matter back to the Copyright Board for fixation of the quantum of royalty payable for the compulsory licence. In relation to the compulsory licence granted by the Copyright Board in respect of T-Series’ works, the Hon’ble Supreme Court affirmed the order of the Hon’ble Delhi High Court setting aside the compulsory licence granted in respect of T-Series’ works and remanded the matter back to the Copyright Board for fresh determination of the dispute. Interestingly, when the matters came back to the Copyright Board, fresh applications were filed by new radio broadcasters and these were tagged along with the PPL’s rate fixation matters without a determination as to whether these entities were in fact entitled to a compulsory licence, a mandatory step under the compulsory licence regime under Section 31(1) of the Copyright Act, 1957. The compulsory licence proceedings concerning T-Series were de-tagged from the rate fixation matters.
The Copyright Board heard the rate fixation issue and vide order dated 25th August 2010[3] fixed a rate of 2% of NAR for all music providers.
Soon thereafter, the radio broadcasters began enforcing the Copyright Board order against non-parties, such as T-Series and SIMCA which led to T-Series filing a writ petition before the Hon’ble Delhi High Court, and SIMCA filing the appeal in which Hon’ble Madras High Court in which the Judgment being discussed was passed.
In September 2010, the Hon’ble Delhi High Court granted an interim relief in the writ petition filed by T-Series, whereby T-Series was not bound by the rate determined in the Copyright Board Order and it was open to radio broadcasters to independently apply for a compulsory licence in relation to the works of T-Series.[4] Subsequently, in May 2022 the writ petition was disposed of in accordance with consent terms agreed by T-Series, and the Radio Broadcasters who were respondents in the proceedings with an understanding that the Copyright Board Order shall not bind T-Series, and shall not be treated as a precedent against T-Series.[5]
In relation to SIMCA’s stand that the Copyright Board order could not be made applicable to a non-party, the Hon’ble Madras High Court considered the interim order passed in the writ petition filed by T-Series[6] and found that SIMCA, not being a party to the proceedings before the Copyright Board, and not being afforded an opportunity of hearing, cannot be bound by the Copyright Board order.
In relation to PPL’s appeal for setting aside the rate fixed by the Copyright Board, the Hon’ble Madras High Court considered the pleadings, and evidence of the parties, and found that neither the radio broadcasters nor the music companies had sought the rate to be fixed as a percentage of the net advertising revenue, and the concept propounded by the parties was always a per needle hour (PNH) rate. The Hon’ble Madras High Court pointed out that the compulsory licensing scheme must be a win-win situation for both Radio Broadcasters and Music Companies alike, and the cost of music acquisition by the music companies should be balanced against the royalty paid by the radio broadcasters. While the Hon’ble Madras High Court upheld the rate determined by the Copyright Board being the net advertising revenue of 2%, it found it reasonable and just in the interest of all parties to devise a minimum floor rate, an argument which was propounded by the appellants and which concept also finds mention in the Berne and Rome Conventions to which India is a signatory. Therefore, the Hon’ble Madras High Court upheld the 2% NAR rate but modified it by providing a minimum floor rate of INR. 660/- PNH irrespective of the radio station.
The radio broadcasters have now preferred an SLP against the Judgement of the Hon’ble Madras High Court before the Hon’ble Supreme Court. The Hon’ble Supreme Court has not stayed the Judgment and has simply made an observation that all payments made as per the Judgement in the meantime shall be subject to the final results of proceedings before it[7]. The variation in the rate fixed by the Copyright Board may require an adjustment in terms of payment made for PPL (as the licence had run its course of ten years in 2020) as there was a compulsory licence in respect of PPL’s works and the radio broadcasters may need to make additional payments to PPL to comply with the terms of the compulsory licence. However, the order raises an issue as to the position of law in relation to the broadcasts of works in which SIMCA owned the copyright over a period of ten years as no compulsory licence existed in favour of the radio broadcasters for SIMCA’s works, and any broadcasts of SIMCA’s works under the guise of the Copyright Board order being applicable to SIMCA were infringing. Therefore, the liability of the radio broadcasters in relation to SIMCA’s works should be broader and perhaps punitive in nature rather than payment of a balance of the licence fee.
This opens up other issues as well, for instance smaller music companies that were brow beaten into accepting the rate of 2 % NAR under the belief that this was a rate fixed for the entire music industry. Of course a mistake of law is no defence. Where it does get significant is that the Hon’ble Intellectual Property Appellate Board (IPAB), while fixing a rate for statutory licence under Section 31D of the Copyright Act[8], relied on the 2% NAR rate fixed in the Copyright Board order at the lower end of the spectrum. Now with this decision of the Hon’ble Madras High Court, the lower end of the spectrum actually merges with what the IPAB considered the negotiated rate of INR 660/- PNH, as a minimum for each station. Therefore, the rate fixed by the IPAB in the statutory licence proceedings is liable to be modified accordingly, though this is pending in appeal before a Division Bench of the Hon’ble Delhi High Court.
As a footnote the rate of INR. 660/- PNH has been made a stand alone rate but there is no specific time slot which sets out INR 660 /- PNH. This rate is actually a blend of “Prime Time”, “Non Prime Time” and “Lean Time”, based on this calculation, sometime in the year 2004/2006 a rate of INR 661/- PNH was arrived at. The rate of INR. 661/- PNH gradually became INR. 660/- PNH, we assume for easier calculations. While this rate has been in force for close to two decades, perhaps it is a ground for an upward revision?
[READ THE JUDGEMENT OF THE HON’BLE MADRAS HIGH COURT HERE]
[1] Judgement dated 27 April 2023 in M/S. Phonographic Performance Limited vs. M/S. Entertainment Network (India) Limited [CMA No. 3923 of 2010].
[2] Order dated 25th August 2010 of the Hon’ble Copyright Board.
[3] ibid.
[4] Order dated 15th September 2010 in Super Cassettes Industries Limited vs. Union of India & Ors. [WP (C) – IPD 82 of 2021].
[5] Order dated 11th May 2022 in Super Cassettes Industries Limited vs. Union of India & Ors. [WP (C) – IPD 82 of 2021].
[6] Order dated 15th September 2010 in Super Cassettes Industries Limited vs. Union of India & Ors. [WP (C) – IPD 82 of 2021].
[7] Order dated 15th May 2023 in M/S DB Corp. Ltd. vs. M/S Phonographic Performance Limited [SLPC 10083-10084/2023].
[8] Order dated 31st December 2020 of the Hon’ble Intellectual Property Appellate Board.