Much has changed since 2004 when the ringtones were first introduced in theIndian Market. Mobile phone companies now look at Value Added Service (VAS) as a serious revenue generator. In 2010 VAS revenues were about 16 per cent of the total revenue of the telecom operator. With a whopping market of about Rs 500 crore and growing, the Mobile and Telephony platform has turned heads of many. It is not surprising that the mobile platform became a more popular source of revenue than the Internet despite the latter’s wide and cross-border reach. Music is 100 per cent monetised on mobile telephony platform in contrast to the Internet, which is infested with piracy and at the best fetches some indirect advertising revenue. These new developments have drawn [new] claimants from the cold storage to claim their portion in the revenue pie. This brings us to the question, whose [copy]right is it anyway?
The Copyright Act, 1957 as it was passed in 1957, and even with subsequent amendments, always required the transfer of a copyright to be in writing (unless the music was created in course of employment as an employee). The copyright owner always had the choice of cutting a slice of the Copyright Pie as thin as he wanted and feed music companies and such seekers. The Act was never amended to include the latest technologies or platform of commercial exploitation in an exhaustive sense, but broadly define what one could do with a [copyright] work. Anything that could be done was indeed contemplated but not detailed.
In fact, the last amendment of 1994 attempted to make it technology free. The definition of ‘sound recording’ and ‘communication to public’ for the first time imagined a recording of sound that could exist without a physical device and similarly public communication of music was imagined on a distribution platform where each member of public could be catered singularly. Indeed, Internet and Satellite TV had arrived and were in the contemplation of the law makers. 1994 amendment also brought in new clauses of 19(5) and (6) which recorded that if the term of assignment and territory of assignment were not specified, any assignment of copyright shall be limited to a term of 5 years and for territories of India only. Thus, protective measures were put in place so that a copyright owner is not divested of his rights by tricky and at times selective silence of contract.
In light of new media rights, what becomes most important now is how the contract is interpreted. Copyright in sound recording exists for 60 years and in music and lyrics during the lifetime of composer and 60 years after his death. But during this span of time lots change. Disputes have now started to emerge whether such mobile and digital rights could have been in contemplation of the contracting parties in the 60’s, 70’s or even upto the 90’s. The old contracts are certainly silent about Internet, Mobile Platforms, Digital Distribution. Royalty payable under old agreement(s) were either an advance lumpsum amount or a small percentage of net sales (5 per cent if MRP is the statutory mechanical royalty) or a mix of both. Now on the mobile and digital platforms, there are NO cost of manufacturing, NO serious marketing overheads, NO promotion and publicity expenses (old catalogue), and the music sales are driven by pure popularity of such music. Copyright Royalty paid by telecom operators are at times upto 40 per cent of the net End User price. These royalties are like coins falling out of slot machines. A pure ‘windfall gain’. While for the music companies it comes as breeze of relief saving their business from dying record sales and threatened radio broadcast royalties, the producers have started frowning as they see them to be overreaching the very letters they actually signed.
The courts while interpreting the contract are left with the job of applying the laws of contract and interpretation. Whether, the intention of the grantor was to completely assign the rights forever and for all future platforms, or was it limited to the existing modes of distribution/commercial exploitation, or whether grant was specific to platforms known then, all depends from case to case. The courts have time and again refused to lay down a strait-jacket formula, but evolve the rules of interpretation. The answer lies in wording of the terms that differ from contract to contract. The courts often see the conduct of the parties to determine what the contracting parties actually understood their contract to include.
While the courts build case laws and precedents on this issue, one thing is not to be forgotten: Copyright is for the protection of creators and authors and to give them the economic incentive to create. If there is any windfall gain or any doubt in the grant of rights, the same should go in favour of the assignor/grantor and not the assignee/grantee. This is the most fundamental difference between intellectual property of copyright and other forms of [tangible] properties (land, building, mining rights, etc). This object of copyright law should not be forgotten. This principle of favouring authors has been recognised by most courts of the world and even the Indian Supreme Court has so concurred.
With music companies and mobile operators with better infrastructure and understanding of emerging markets and coupled with first mover’s advantage end up efficiently exploiting the copyright in music. The producers on the other hand often suffer from information asymmetry and fail to exploit their rights efficiently. There may still be scope for profitable tie-ups between producers and music companies for mobile and digital rights to maximise revenues, however, it remains a question of key importance: Who owns the rights and are they adequately compensated?