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At The Dawn Of A New Beginning: Are We Prepared?

The Copyright (Amendment) Bill, 2012 has been passed by the Indian Parliament in May 2012. Once signed by the President and notified, it will bring some unprecedented changes in the [Copyright] law that governs the core transactions in the Media & Entertainment Industry. This article looks at some key amendments which is likely to affect the core transactions in the Film Industry

Films and songs, the two basic entertainment product(s), are created by efforts of many individuals. There are creative artistes who compose the underlying works like story, screenplay, dialogues, lyrics, musical composition, set and costume designers; then there are performing artistes like actors, singers, musicians; then there are specialists like sound engineers, makeup and costume stylists, cinematographers, directors; behind all of them there is a producer who take the enterprise of putting everything together. This is not the end to it. Once the final cut of a film or song is ready enter another league of gentlemen who are the distributors, exhibitors, record labels, aggregators, operators (radio, cable and telecom) and retailers who distribute the entertainment ‘products’ to the final audience, the end consumer.

The revenue pie or the fruits of labour is to be shared between all these people and entities that have made the business possible. On one hand there are author, composers and actors who have created and performed these works and on the other hand there are producers and financers who have borne the risk of such enterprise. Not all films and music are commercially successful, albeit all of them are created and marketed at a substantial cost. When the time comes to share the revenue pie everyone wants their rightful claim. It has been argued for decades that authors and performers should benefit from the commercial success of the works of their creation. Indian industry practice has been to compensate them in advance on a lump-sum basis. The payment was based on reputation and previous works’ commercial success. It was one time assured guaranteed payment. There has been some revenue share arrangement in the past 4-5 years but by large it is absent in the industry. Mr. Javed Akhtar, M.P., a noted author and lyricist in his maiden and moving speech during discussion on the Bill in the Rajya Sabha claimed that these amendments will bring distributive justice to the authors and composers. Let’s look at the some of the provisions of the Bill and its potential impact on the business and transactions in the Industry.

Ensuring Authorship/First Ownership

Copyright Act in the present form provides that the authors shall be the first owner of the copyright. For original literary, musical, artistic and dramatic works, the composer/creator is deemed to be Author. For sound recordings and cinematograph film the Producer is deemed to be Author. But the law also provides that works that are created in course of employment (where there is master-servant relationship created by a contract of service) the employer becomes the first owner. This concept is not confined to the world of copyright, but a general principle of law. The Bill carves out an exception for authors and composers whose works are incorporated in a film that despite being in a contract of service they will be the first owner of copyright. This protects the authors and composers in two ways: Firstly, it gives authors  and composers bargaining power to trade in the works of their creation, and secondly, it protects them from tricky contracts where they did not intend to create such relationship. Now in-house employed authors and composers will be first copyright owners of their works and can demand royalty for their works.

This amendment will have very interesting effect on other sectors. For instance, in the advertising world ad films [cinematograph films] are made by in-house production teams of an advertising agency or production team hired by the agency at the behest of a client. This will mean that the creative persons who compose slogans, jingles and tunes for the advertisement film will be the first owner of copyright in their works despite them being employee of the agency of production team and as a consequence will be entitled to royalty every time the advertisement film is exhibited.

This amendment potentially also disturbs the equality between journalists in the print media and the electronic media. While in course of employment whatever is written by journalists in the print media is owned by the media house, a script for a show/news/tele-program in the electronic media will still be owned by the creator working for a channel and he will retain the right to demand royalty when the programme is broadcasted. Will this affect the remuneration of employee– creative artistes and journalists in the electronic media? How will the royalty be collected and distributed?

Confining deals to “present” technology

The advancement of technology has been a double edged dagger for the Industry. While rampant piracy has shown serious dents in the revenue of physical media sales (CDs, DVDs) it has also brought in new distribution and monetisation verticals. With Internet Downloads and Streaming, Mobile Value Added Services, Satellite TV Channels, FM Radio Station there are many options to commercially exploit copyright works, which did not exist in the last century. These new media is seen as a “windfall gain” or a lottery by authors and composers (of old works) and they want a share in this bounty. No one anticipated the new media [rights], which has low investment, low risk and wide distribution reach. The Bill restricts the application of any assignment of copyright to any technology which was not invented and commercialised at the time of assignment. Copyright transactions are generally for long periods of time if not for entire term of copyright. Technology is ever changing and new forms and media are quickly replacing the old ones. VCDs were replaced by DVDs and they are replaced by Blu Ray discs and who knows what will come next. This will seriously jeopardise the entrepreneurship in the Entertainment Industry and may discourage investment.

Messy terms of assignment

The Bill empowers the authors and composer of works in a film the right to collect royalty despite assignment of copyright. What it means is that even though an assignee can further sublicense the copyright work of the author, the author will have the right to collect equal royalty from commercial exploitation of the work by the sub-licensee. Royalty is not defined in the Act but the Bill provides for right to receive royalty on equal (different from equitable) basis. Not only that, the author now, cannot waive the right to collect royalty. Which also means, the author cannot ‘gift’ any of his creative works to a friend who is making the film, not even to his friend or a guru or a loved one whom he wants to benefit from his work. The right can only be assigned to a collecting society or a legal heir. Technically no one can decide who is a legal heir during one’s lifetime. It is only one’s heir apparent one may tell. This means the royalty which accrues on account of underlying works will by law necessarily be claimed and collected. This is the most radical part of these amendments.  Right to waive a right in the jurisprudence of rights is an integral part (rare exceptions are for rights like fundamental rights). More puzzling is the impact on the Advertising and Television Industry.

Saving grace for Producers

The Bill provides that royalty to be collected for authors and composers on account of their work incorporated in a film cannot be from revenues from exhibition of film in a cinema hall. This means that the producer (along with distributors and exhibitors) gets the entire box office proceeds. If the producers are being given protection under this amendment to enjoy the fruits of their investment then why confine the protection to box office collections? The share of satellite broadcast revenue has grown in an unprecedented manner. In fact, now many films are targeted for satellite release and have a namesake theatrical release. Why should the producer not be protected there? Internet streaming (and IPTV) will be a significant revenue generator in time to come. Why not protect that stream of revenues? How will all this affect the present transactions in the Entertainment Industry will be something to be watched.

These are some of the many amendments the Bill will bring about, which will have a deep impact on the existing practices of the Entertainment Industry. One must not forget that in a welfare country like ours distributive justice is an important goal to be achieved. However, can the route to such goal be at the cost of other important values like freedom to contract and free trade. One thing is clear, the Bill attempts to empower the authors and composers and strengthen their bargaining power. The laws should indeed change with time, to answer the need of the hour. Weather these amendments will bring in the desired changes and how efficiently and effectively the market attains the new equilibrium, only time will tell.

DISCLAIMER: This article is the author’s personal views and not of the Law Firm or any of their clients. This article does not intend to be a legal advice and should not be construed as such. This article does not create attorney-client relationship between the author and the reader.

Rahul Ajatshatru is an Entertainment Lawyer and lead’s Anand And Anand’s Media & Entertainment Law practice in Mumbai

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