There is a key emphasis on transparency in the Draft Copyright (Amendment) Rules, 2019, specifically regarding the operations of copyright societies.
By Meghna Bal
The Department for Promotion of Industry and Internal Trade (DPIIT) recently released a Draft Copyright (Amendment) Rules, 2019 to overhaul the existing Copyright Rules, 2013. The Copyright Rules, 2013 are a set of stipulations issued by the government that broadly cover matters of procedural governance and administration of India’s copyright regime. These Rules are an integral to the legislative schema of Indian copyright, as they enable its successful implementation.
There is a key emphasis on transparency in the Draft Copyright (Amendment) Rules, 2019, specifically regarding the operations of copyright societies. Copyright societies are entities that carry out the business of copyright administration on behalf of several rights-holders. Copyright administration broadly involves negotiating with prospective licensees, issuing licenses, and collecting royalties. The Copyright Act, 1957 accords these entities with a statutory monopoly over the issuance of licenses for creative content in India. Thus, a majority of commercial rights transactions in India are facilitated by them, making them a central stakeholder in India’s creative economy.
For years, copyright societies sustained heavy criticism for abusing their monopoly over content licensing. The societies operated largely under a shroud of opacity – allowing them to extract maximum revenue from prospective licensees while denying rights-holders and authors fair compensation. They were sued for charging licensees inordinately high tariff rates while providing no methodology on how these tariff rates are determined. Societies would also neglect to make information about their repertoire public, forcing prospective licensees to pay high amounts for blanket licenses that covered the breadth of these repertoires. Concomitantly, they have also been accused of neglecting to pay out royalties to creators from time to time.
The Copyright Act was amended in 2012 to overcome some of these problems. One of the amendments provided that only copyright societies registered under the Copyright Act, 1957 could carry on the business of licensing copyrighted works. The purpose of this provision was to force rights-holders to engage with only registered societies that would be subject to government oversight. Unfortunately, the absence of any penal provision for any society or label that neglected to adhere to this provision, rendered it ineffectual.
Some elements of the Draft Copyright (Amendment) Rules, 2019, however, stand to provide an effective check on the abuse of power by copyright societies, by forcing the societies to reveal key information on their operations. Illustratively, the rules require copyright societies to publish annual transparency reports, wherein they are required to furnish information pertaining to two important financial matters relevant to the quotidian functioning of the society. The first is revenue earned by the society from the administration of rights. The revenue disclosure must include information on how the income earned by the society is deployed, specifically whether it is disbursed to rights-owners or is put to some other use. The society must also give details about the cost of its rights administration and services rendered to members. Finally, it must make declarations regarding deductions made from royalty payments and provide explanations as to why these deductions were made.
The second concerns royalty payments to authors. Copyright societies must publish both the royalties attributed to authors and rights holders as well as the royalties paid out to them, and the frequency of these payments. Reasons must be provided for any delay in royalty payments. The transparency report is to be made available on a society’s website, along with a searchable database of their society’s rights repertoire. These changes would help overcome many of the information asymmetries that allowed copyright societies to abuse their power in the past, provided they are enforced adequately.
There is, however, one provision in the Draft Copyright (Amendment) Rules, 2019 that may nullify some of the gains provided by the transparency provisions. Specifically, the proposed rule states that voting rights in the governance meetings of copyright societies must be commensurate to the volume of works they have rights to or the amount of royalty received.
The 2012 Amendment had inducted a measure that gave all members equal voting rights, in a bid to give authors greater power in the governance of the society and insulate them from being bullied by members with greater economic leverage such as music labels. The problem with this stipulation, however, was that it put a right-holder with a 100 lucrative works on the same footing as one with one unprofitable work, thereby setting the stage for internal disputes over the distribution of the revenue earned by the society from royalties.
The proposed change ostensibly rectifies this issue but also places the reins of the society squarely in the hands of powerful industry players such as music labels. In such a position, these entities would be able to arm-twist authors or smaller rights-holders into accepting lesser royalties or ceding rights for a lower price.
It would behove the government then to consider supplementing the proposed rule pertaining to voting rights with a set of provisions that safeguard the interests of smaller players in copyright societies. These provisions can be modelled along the lines of the corporate governance of minority shareholder rights in India. Under the Companies Act, a minority shareholder may apply to a court for relief if they feel that the affairs of the company are being carried out in a manner that is prejudicial to any member. A similar mechanism may be inducted into the Draft Copyright (Amendment) Rules, 2019 to check any abuse of power by larger players in copyright societies. Additionally, a certain number of executive positions in the copyright society can be held for those representing the interests of smaller players. Such stipulations would go a long way towards maintaining an adequate balance of power within copyright societies and ushering in a fair copyright licensing regime.
The author is a lawyer and a technology policy expert. The views expressed in the article are the author’s own.