Tips Industries Ltd. v. Wynk Music Ltd. & Anr.

High Court of Judicature at Bombay, Commercial Division | Decided: 23rd April, 2019 Notice of Motion (L) No. 197 of 2018 in Commercial IP Suit (L) No. 114 of 2018 and Notice of Motion (L) No. 198 of 2018 in Commercial IP Suit (L) No. 113 of 2018 Bench: S.J. Kathawalla, J. Citation: AIRONLINE 2019 BOM 1452

Background

Tips Industries Ltd., the plaintiff, is a well-established music company that claims ownership of copyright in a repertoire of over 25,000 sound recordings, referred to throughout the proceedings as the “Plaintiff’s Repertoire.” The defendants, Wynk Music Ltd. and another, own and operate WYNK, an Over the Top digital music service accessible via the internet, smartphones and smart media devices. Through the WYNK platform, subscribers paying a monthly fee are given access to a vast catalogue of sound recordings and audio-visual content, including, prominently, the Plaintiff’s Repertoire. The platform offered users the ability to both stream music on demand and to download electronic copies of songs for offline access, representing two commercially significant and legally distinct modes of exploitation.

The commercial relationship between the parties originated through a licensing arrangement administered by the copyright society Phonographic Performance Limited. PPL, acting on behalf of Tips Industries, granted a written licence to Wynk on 22nd August 2014 for use of the Plaintiff’s Repertoire. The licence fee apportionable to the plaintiff’s content was fixed at Rs. 1.31 crores per year. However, this licence agreement expired by efflux of time on 31st August 2016. In the period immediately preceding and following the expiry, the parties entered into negotiations for the execution of a renewed licence agreement. An extension was agreed upon in writing to cover the period until 31st October 2016, with the plaintiff accepting such extension on the express condition that a formal written agreement would be executed by that date, failing which, usage would be discontinued by 7th November 2016 with liability attached for usage during the intervening period.

Negotiations continued from October 2016, with various proposals being exchanged. The plaintiff’s position, as recorded in correspondence and further maintained throughout the proceedings, was that at a meeting held on or around 22nd March 2017, a Minimum Guaranteed Amount of Rs. 4.5 crores for two years had been agreed upon. The defendants disputed this, contending that the said figure had been rejected as excessive vide their letter dated 24th April 2017. Correspondence between the parties continued without resolution and the plaintiff, on two separate occasions, namely 27th April 2017 and 5th May 2017, formally requested the defendants to deactivate the Plaintiff’s Repertoire from the WYNK platform. These requests went unheeded. A formal cease and desist notice was thereafter issued by the plaintiff on 17th November 2017, calling upon the defendants to remove the Plaintiff’s Repertoire, recording the history of the failed negotiations and setting a deadline of 1st December 2017 for deactivation of all Tips content.

In response to the cease and desist notice, the defendants by their notice dated 24th November 2017 invoked Section 31-D of the Copyright Act, 1957, claiming for the first time that they were a broadcasting organization entitled to a statutory licence for communication of the Plaintiff’s Repertoire to the public by way of broadcast without requiring the plaintiff’s consent. The defendants acknowledged in this notice that the Appellate Board had not yet notified the royalty rates for such broadcast and tendered a sum of Rs. 10,00,000 as a first tranche payment. The plaintiff rejected this invocation as wholly illegal and non-est by its response dated 23rd January 2018, denying that the defendants qualified as a broadcasting organization or that Section 31-D had any application to their activities.

The plaintiff consequently filed two suits before the Bombay High Court on 29th January 2018. Commercial IP Suit (L) No. 113 of 2018 concerned the communication of the Plaintiff’s Repertoire to the public by way of on-demand streaming services and Commercial IP Suit (L) No. 114 of 2018 concerned the defendant’s download and purchase features, which the plaintiff characterized as commercial rental and sale of sound recordings respectively. In both suits, the plaintiff filed accompanying notices of motion seeking temporary injunctions. The suits and notices of motion were heard together, with extensive oral and written submissions tendered by senior advocates on both sides.

Issues for Determination

1. Whether the defendants were infringing upon the plaintiff’s copyright in the Plaintiff’s Repertoire as provided for in Section 14(1)(e) of the Copyright Act, 1957, by reason of their download and purchase features?
2. Whether the use of the Plaintiff’s Repertoire by the defendants’ customers could be considered fair dealing for private or personal use under Section 52(1)(a)(i) of the Copyright Act, 1957, so as to exclude the defendants’ activities from the scope of infringement?
3. Whether the storage of sound recordings upon the devices of the defendants’ customers could be regarded as transient or incidental storage purely in the technical process of electronic transmission or communication to the public, within the meaning of Section 52(1)(b) of the Copyright Act, 1957?
4. Whether the defendants could invoke Section 31-D of the Copyright Act, 1957 to exercise a statutory licence in respect of their download and purchase business, which the court had characterized as commercial rental and sale of sound recordings?
5. Whether the defendants, as an internet broadcasting organization, could invoke Section 31-D of the Copyright Act, 1957 to exercise a statutory licence for internet broadcasting of the Plaintiff’s Repertoire by way of on-demand streaming?
6. Whether, even assuming internet broadcasting fell within the scope of Section 31-D, a statutory licence under that section could be exercised without prior fixation of the manner and rate of royalty by the Appellate Board?
7. Whether Rule 29 of the Copyright Rules, 2013 and in particular its third proviso requiring prior fixation of royalty rates before issuance of a notice under Section 31-D, was valid or whether it was ultra vires of and repugnant to Section 31-D of the Act?
8. What was the legal bearing of the Government of India’s Office Memorandum dated 5th September 2016 on the interpretation of Section 31-D, to the extent that it purported to extend the scope of that section to internet broadcasting?
9. Whether pending the disposal of the suits, the defendants could be permitted to continue using the Plaintiff’s Repertoire upon payment of a monetary deposit to the court?
10. Whether the plaintiff, having engaged in commercial negotiations and sought specific monetary consideration for a licence, could be said to be interested only in money, thereby disentitling it to the remedy of an interim injunction?

Key Holdings of the Court

1. The three categories of exclusive rights in respect of sound recordings enumerated under Section 14(1)(e)(i), (ii) and (iii) of the Copyright Act, 1957 are distinct, independent and non-overlapping and each such right may be separately assigned or licensed by the copyright owner.
2. The defendants’ download feature, enabling subscribers to store electronic copies of sound recordings on their devices for offline access during the validity of a subscription, constitutes commercial rental within the meaning of Sections 2(fa) and 14(1)(e)(ii) of the Act, as such activity involves giving copies of sound recordings for consideration in a manner that does not fall within any of the exclusions provided under the definition of commercial rental.
3. The defendants’ purchase feature, enabling permanent download of sound recordings accessible independently of the WYNK application and transferable to other devices, constitutes a sale of sound recordings within the meaning of Section 14(1)(e)(ii) of the Act and the defendants’ voluntary cessation of this feature with respect to the Plaintiff’s content amounts to an implied acknowledgment of the plaintiff’s exclusive right to sell its works.
4. The defence of fair dealing for private or personal use under Section 52(1)(a)(i) of the Act is unavailable to the defendants, as the said exception is available only to individual end-users and cannot be invoked by a commercial entity exploiting copyrighted works for profit.
5. The defence of transient or incidental storage under Section 52(1)(b) of the Act is unavailable to the defendants, as the offline storage of sound recordings on customers’ devices constitutes the primary commercial object of the defendants’ business and is neither transient nor incidental; that section is intended to protect internet service providers and not commercial platform operators of the defendants’ nature.
6. Section 31-D of the Copyright Act, 1957, read with Rules 29, 30 and 31 of the Copyright Rules, 2013 and the legislative history of the Copyright (Amendment) Act, 2012, restricts the grant of statutory licences exclusively to radio broadcasting and television broadcasting organizations and does not extend to internet broadcasting organizations such as the defendants.
7. Since Section 31-D does not extend to commercial rental or sale of sound recordings, the defendants cannot invoke the statutory licence regime under that section in respect of their download or purchase features irrespective of any other consideration.
8. Even assuming internet broadcasting were covered under Section 31-D, prior fixation of the manner and rate of royalty by the Appellate Board is a necessary precondition to the valid exercise of a statutory licence under that section and the statutory licence does not automatically come into operation upon the mere giving of notice.
9. Rule 29 of the Copyright Rules, 2013, including its third proviso requiring prior fixation of royalty rates before issuance of notice, is valid, consistent with the parent Act and must be read harmoniously with Section 31-D to give effect to both.
10. The Government of India’s Office Memorandum dated 5th September 2016 purporting to extend Section 31-D to internet broadcasting lacks statutory authority, is inconsistent with the Act and the Rules and is not binding on the court.
11. This court does not have jurisdiction to permit the defendants to continue using the Plaintiff’s Repertoire upon deposit of money, as such an order would amount to the grant of a compulsory licence which is within the exclusive jurisdiction of the Appellate Board.
12. The plaintiff is not disentitled to an interim injunction merely because it had previously sought commercial licensing fees from the defendants; a copyright owner’s desire to receive fair remuneration for use of its works does not transform a legitimate infringement action into a claim motivated solely by money. Both notices of motion were allowed and interim injunctions were granted in terms of prayer clause (a) of each notice of motion.

Statutory Provisions Involved

Section 14(1)(e) of the Copyright Act, 1957 defines copyright as it subsists in sound recordings and enumerates three exclusive and independent rights granted to the owner thereof. Sub-clause (i) confers the exclusive right to make any other sound recording embodying the original, including storing it in any medium by electronic or other means. Sub-clause (ii) confers the exclusive right to sell or give on commercial rental or offer for sale or for commercial rental, any copy of the sound recording. Sub-clause (iii) confers the exclusive right to communicate the sound recording to the public. These three rights formed the analytical architecture of the entire judgment, as the court was required to determine which, if any, of these rights were engaged by each category of the defendants’ services.

Section 2(fa) of the Act defines “commercial rental” in the negative, providing that it does not include the rental, lease or lending of a lawfully acquired copy of a sound recording for non-profit purposes by a non-profit library or non-profit educational institution as defined therein. The court held that this definition, being couched in negative terms, impliedly brings all rental, lease or lending that does not satisfy those specific exclusions within the category of commercial rental. The defendants’ subscription-based download service, being profit-oriented and not falling within any of the stated exclusions, was accordingly found to constitute commercial rental.

Section 2(dd) of the Act defines “broadcast” as communication to the public by any means of wireless diffusion or by wire and includes a re-broadcast. Section 2(ff) defines “communication to the public” as making a work available for being seen, heard or otherwise enjoyed by the public, directly or by any means of display or diffusion other than by issuing physical copies, whether simultaneously or at times and places chosen individually. These definitions were central to the question of whether the defendants’ internet streaming services constituted a form of broadcast and whether Section 31-D could be invoked in respect of them.

Section 31-D of the Act, as inserted by the Copyright (Amendment) Act, 2012, creates a statutory licence regime enabling broadcasting organizations desirous of communicating to the public by way of broadcast of published literary, musical works and sound recordings to do so upon fulfillment of specified conditions. Section 31-D(2) requires prior notice to be given to the copyright owner and royalties to be paid at the manner and rate fixed by the Appellate Board. Section 31-D(3) directs that the rates of royalty for radio broadcasting shall be different from those for television broadcasting and that the Appellate Board shall fix separate rates for both. The court held that Section 31-D, read holistically, is restricted to radio and television broadcasting and does not extend to internet broadcasting.

Section 52(1)(a)(i) of the Act provides that fair dealing with any work, not being a computer programme, for the purposes of private or personal use including research shall not constitute infringement of copyright. The court held that this exception is personal in nature and cannot be invoked by a commercial entity offering services for profit; the defence is available to end-users, not to the intermediary platform exploiting the works commercially.

Section 52(1)(b) of the Act provides that the transient or incidental storage of a work or performance purely in the technical process of electronic transmission or communication to the public shall not constitute infringement. The court held, by reference to the Parliamentary Standing Committee’s reports and the plain language of the provision, that this section was designed to protect internet service providers involved in caching and incidental technical transmission and not commercial platforms whose entire business model is premised on enabling offline storage of copyrighted works on users’ devices.

Rules 29, 30 and 31 of the Copyright Rules, 2013 elaborate the procedural requirements for the exercise of a statutory licence under Section 31-D. Rule 29 prescribes the notice that a broadcasting organization must give to the copyright owner and limits the notice requirements exclusively to radio broadcasting, television broadcasting and performance. The third proviso to Rule 29 expressly mandates that no such notice may be issued until the royalty rates have been determined by the Appellate Board under Rule 31. Rule 31 prescribes the procedure for fixation of royalty rates by the Appellate Board separately for radio and television broadcasting, making no provision whatsoever for internet broadcasting. The court upheld these rules as valid and harmoniously consistent with the parent statute.

Reasoning of the Court

The court’s analysis on the question of infringement began with a careful dissection of Section 14(1)(e) of the Act. Justice Kathawalla emphasized that the Legislature had consciously constructed three separate and non-overlapping categories of exclusive rights in sound recordings, each of which could be independently assigned or licensed. The defendants’ download feature, which enabled subscribers to retain electronic copies of the Plaintiff’s songs on their devices for the duration of their subscription, was examined against the definition of commercial rental under Section 2(fa). Since the definition is framed in the negative, identifying only those forms of rental that are excluded from its scope, the court reasoned by necessary implication that all rental, lease or lending activities not fitting within those narrow exclusions must be treated as commercial rental. The defendants’ activity of allowing users to access downloaded songs only so long as the subscription fee was paid and withdrawing that access upon non-payment, was found to be precisely analogous to a rental arrangement in the physical world, now transposed to a digital medium. The court rejected the defendants’ attempt to characterize this activity as a form of communication to the public, holding that the download and purchase features engaged the rights under Section 14(1)(e)(i) and (ii), not the communication right under Section 14(1)(e)(iii).

On the question of the fair dealing defence, the court applied a purposive and contextual interpretation of Section 52(1)(a)(i), drawing assistance from the English decisions in Hubbard v. Vosper, Ashdown v. Telegraph Group and the Delhi High Court’s decision in Ruperndra Kashyap v. Jiwan Publishing House. The court reasoned that the fair dealing exception for private or personal use is a personal right available to an individual who, for his own private purposes, makes fair use of a copyrighted work. It cannot be transposed into a defence for a commercial platform operator who aggregates and commercially exploits an entire copyrighted repertoire for revenue generation. The court further held that even the end-users’ enjoyment of the service did not convert the defendants’ commercial activity into private use for the purpose of the section. Similarly, on the Section 52(1)(b) defence, the court examined both the text of the provision and the legislative history as recorded in the 227th Report of the Rajya Sabha Parliamentary Standing Committee. It was held that offline storage of sound recordings on users’ devices was neither transient nor incidental; it was, on the contrary, the primary commercial proposition and unique selling point of the WYNK platform and thus fell entirely outside the protection afforded by Section 52(1)(b).

The resolution of Issue B, concerning the applicability of Section 31-D to internet broadcasting, constitutes the doctrinal centrepiece of the judgment. The defendants sought to invoke the principle of contemporanea expositio and argued for a liberal, expansive interpretation of Section 31-D that would encompass any broadcasting organization communicating to the public by any means of diffusion, thereby including internet broadcasters. The court rejected this argument with firmness and precision. It noted that the Copyright (Amendment) Act, 2012 is a modern statute enacted with full awareness of digital technologies, internet streaming and music downloading, as expressly recorded in the Statement of Objects and Reasons of that legislation. In such circumstances, it held that the principle of contemporanea expositio, which is designed to assist courts in giving life to antiquated statutes that could not have anticipated later developments, was plainly inapplicable. The conscious absence of any reference to internet broadcasting in Section 31-D, in a statute that specifically acknowledged and addressed digital technologies, was treated as a deliberate legislative choice and not as a lacuna to be filled by interpretive expansion.

Reinforcing this conclusion, the court conducted a detailed textual analysis of Section 31-D(3), which requires the Appellate Board to fix separate rates of royalty for radio broadcasting and television broadcasting and Rules 29, 30 and 31 of the Rules, which contain notice requirements and royalty determination procedures exclusively for those two categories. The court observed that the Appellate Board, as a creature of statute, derives its jurisdiction from the Act itself and cannot exercise power that is not expressly vested in it. Since the Act and the Rules confer on the Appellate Board jurisdiction to fix royalty rates only for radio and television broadcasting, there exists no statutory mechanism for the fixation of royalty rates for internet broadcasting. To permit Section 31-D to extend to internet broadcasting would therefore be to create a licensing regime without any governing royalty framework, a result incompatible with both the structure and purpose of the section. The Supreme Court’s caution in Super Cassettes Industries v. Music Broadcast against expanding the scope of compulsory licensing provisions in the absence of express statutory authority was applied by analogy.

On the question of whether prior fixation of royalty rates is a precondition to the exercise of a statutory licence under Section 31-D, the court conducted a comparative examination of the language employed in Sections 31-C and 31-D and a holistic reading of the Act and Rules. The use of the phrase “at the rate fixed” in Section 31-D(2), as opposed to “to be fixed,” was interpreted as grammatically expressing that fixation must precede the exercise of the licence. This interpretation was further supported by the third proviso to Rule 29, which unambiguously provides that notice to the copyright owner may be given only after the royalty rates have been determined by the Appellate Board under Rule 31. The court held that prior fixation of royalty is not merely procedural but is the very heart and soul of the statutory licence concept, without which no licence can be said to exist at all. The court also rejected the proposition that a court could, in the exercise of interlocutory jurisdiction, authorise use of the Plaintiff’s Repertoire upon monetary deposit, holding that such an order would in substance constitute the grant of a compulsory licence, jurisdiction for which vests exclusively in the Appellate Board under the Act.

Doctrinal Significance

The judgment in Tips Industries Ltd. v. Wynk Music Ltd. is the first of its kind in India to address the copyright implications of digital streaming and downloading services with analytical rigour and legislative depth and it has since assumed the character of a foundational precedent in the field of online copyright law. Its most important doctrinal contribution is the clear and authoritative exposition that Section 14(1)(e) of the Copyright Act, 1957 vests in the owner of a sound recording three distinct and non-overlapping categories of exclusive rights, none of which may be eroded by characterizing the relevant activity as falling under one of the others. This tripartite structure had not previously been examined in the context of digital distribution services and the court’s detailed analysis definitively establishes that a commercial download service engages the right of commercial rental and sale under Section 14(1)(e)(ii) and not merely the right of communication to the public under Section 14(1)(e)(iii). This distinction has significant practical consequences for how digital platforms must structure their licensing agreements, compelling them to obtain separate authorization for streaming, on one hand and for any form of offline or downloadable access on the other.

The holding that Section 31-D of the Copyright Act, 1957 does not extend to internet broadcasting is of profound importance for the Indian music industry and the rapidly expanding over-the-top streaming sector. The court’s reasoning, grounded in the legislative history, the Statement of Objects and Reasons of the Copyright (Amendment) Act, 2012 and the textual structure of the Act and Rules, ensures that digital music platforms cannot invoke the statutory licence mechanism as a shield against the obligation to negotiate individually agreed, market-determined licences with copyright owners. The decision has the practical effect of preserving the bargaining power of content owners vis-à-vis digital intermediaries, at a time when the economic balance of power in the Indian music industry has shifted substantially toward technologically dominant distribution platforms. By declining to stretch Section 31-D through creative interpretation, the court enforced the primacy of contractual licensing over statutory override.

The judgment is also of lasting significance for the doctrine of expropriatory legislation and its application in the intellectual property context. Drawing on the Supreme Court’s analysis in Super Cassettes Industries v. Music Broadcast, Union of India v. Board of Control for Cricket in India and State of Madhya Pradesh v. Vishnu Prasad Sharma, the court reaffirmed that provisions which deprive a property owner of the right to deal with his property on terms of his own choosing must be construed strictly and in a manner least burdensome to the owner. The application of this doctrine to Section 31-D has significant implications for how courts must approach any future attempt to expand the scope of compulsory or statutory licensing in India, whether in the fields of broadcasting, digital distribution or emerging technological modalities.

The court’s treatment of the Government of India’s Office Memorandum dated 5th September 2016 raises an important constitutional and administrative law point within the copyright context. The court held, relying on the Supreme Court’s decision in State of Haryana v. Mahender Singh, that executive instructions lacking statutory authority cannot override the provisions of an Act of Parliament or validly enacted subordinate legislation. This principle, applied to an interpretive circular issued by the Department of Industrial Policy and Promotion, confirms that intellectual property policy cannot be effectively reformulated through administrative fiat. The added observation that the said memorandum was internally inconsistent with India’s own stated position in WIPO broadcaster’s treaty negotiations further diminishes the persuasive weight that such executive communications might otherwise carry before courts.

The decision has attracted considerable commentary in the context of India’s obligations under the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty, both of which were acknowledged in the Statement of Objects and Reasons of the Copyright (Amendment) Act, 2012. By preserving the distinction between interactive on-demand services and traditional broadcasting and by reading the statutory licence regime narrowly, the judgment aligns Indian copyright law more closely with the international framework which recognizes the “making available” right as a distinct and separately licensable right of authors and producers. Finally, the judgment’s refusal to permit deposit-based interim relief and its reaffirmation that compulsory licensing jurisdiction is exclusively vested in the Appellate Board marks an important procedural boundary that civil courts must observe, ensuring that the statutory architecture for copyright licensing is not circumvented through creative interlocutory applications.