IPAB Decision On Needle Per Hour Royalty Causes Flurry Of Legal Activity

The judgment delivered by the Intellectual Property Appellate Board (IPAB) on December 31, 2020, in the matter of Music Broadcast Ltd. v. Tips Industries Ltd. & Ors.; has inspired a flurry of legal activity from parties on both ends. FM radio stations are aggrieved with the IPAB order which directs them to pay royalties they deem too expensive, for sound recordings, as well as the underlying lyrics and music.

The lyricists and musicians, represented by the Indian Performing Rights Society (IPRS), have appealed against the order of Justice Endlaw which denies their right to royalty, on the basis of Justice Ravindra Bhatt’s judgment of 2011 in the matter of IPRS v. Aditya Pandey & Anr.

Further, music labels represented by Phonographic Performance Ltd. (PPL), have appealed asking for the adoption of a hybrid model – a combination of NAR and NPH that would, as per evidence shown, amount to at least 9% as royalties, since current NPH royalties offer a sum much lower than that figure. The Division Bench of the Delhi High Court has clubbed these matters together and is hearing them in batches, divided as per the parties involved. 

How are royalty rates calculated?

The IPAB matter was instituted under Section 31D of the Copyright Act 1957, to re-fix the royalties payable by broadcasting organisations, for use of sound recordings in broadcasts.

Rahul Ajatshatru, Counsel and Head of Ajatshatru Chambers explains,

“It may be inferred through the Copyright Rules, 2013 that broadcasting organizations are Radio or TV Stations. The purpose for which a broadcasting organization can apply for a Statutory License is communication to the public of sounds or visual images.”

Additionally, the radio stations averred that they need pay only one set of royalties to the owners of the sound recording, and not for the underlying works (lyrics and musical compositions), which according to them, are subsumed by the former.

Over the last 20 years, FM Radio Stations in India have paid license fees, only for sound recordings, either on the basis of a fixed Needle Per Hour rate (NPH) or through a fixed percentage of Net Advertising Revenue (NAR).

The former, as explained by Justice Manmohan, Chairman of the IPAB,

“[i]s the internationally accepted term denoting the actual time for which music is played on the radio during an hour’s duration, excluding the advertisements, promotions, and presentation time is taken by the radio jockey”

and the latter is calculated on the basis of advertisement revenue.

What is Section 31D?

Section 31D of the Copyright Act was introduced through the Amendment of 2012 to provide a forum – the IPAB – to decide the methodology for payment and the amount of royalty payable, for the Statutory License acquired by broadcasting organizations.

Explaining the scope of this section, Counsel Ajatshatru states,

“Essentially, this kind of license allows broadcasting organizations to easily access broadcast rights in sound recordings as per fixed rates, without the need for any negotiation or discussion. The procedure for doing so is determined by the Copyright Rules of 2013, where a number of factors are taken into account by the Board before determining the royalty. These include the time slot of the broadcast, different rates for different classes of works and different nature of use, among others.”

In the matter at hand, the Applicants had asked for a reduction of the prevailing license fee of 2% of Net Advertisement Revenue (NAR) instituted by an Order of the Copyright Board in 2010, claiming this to be an ‘exorbitant and arbitrary’ amount, with the rising popularity of digital platforms, the decline in advertisements and consequent limitations of their revenue streams.

Opposing parties claimed that the revenue streams of radio stations had risen in recent years, evident from their proliferation throughout the country. Detailed submissions and averments were made by various parties and experts in the field, leading to an extensive hearing on the merits of using NAR as opposed to the Needle Per Hour rate for calculating royalties, as well as the existence of separate copyright in underlying works.

Hon’ble Justice Manmohan Singh, Chairman of the IPAB, weighed the merits of all arguments and upheld the existence of this separate copyright. He also held as follows:

“During this fast-paced environment of high-level listenership, and adding manifold revenues in terms of the advertisement and reach of the broadcaster, we cannot allow the same criteria to be adopted for payment of royalty which was considered relevant as for “initial push” for the Radio stations to flourish as a matter of concession…. this tribunal if offered to opt between the NAR and Needle Hour Basis has to take into consideration Needle Hour Basis as criteria for assessment of Royalty as the same is based on time slot basis…”

Needle Per Hour Rate

A reasoned rate for calculating the royalty amount on the basis of NPH was pronounced, with INR 750 made the cap for sound recordings and INR 300 for underlying works in them. In the case of regional radio stations broadcasting in smaller cities, the Bench pronounced they would have the option of entering voluntary license agreements upon mutual agreement, at a lesser rate than the one fixed.

Hailing the judgment as judicially sound, Hardeep Singh Anand, Advocate Supreme Court of India, says,

“It unequivocally recognizes the independent existence of the communication to public right in musical works and lyrics in the hands of composers and lyricists, as distinguished from the communication to public right in sound recordings. This is in consonance with the legislative intent of the 2012 amendment,”

“However, immediately after the IPAB judgement, Justice R. S. Endlaw of the Delhi High Court, in his January 4, 2021 judgement pronounced in the matter of IPRS v. ENIL, has questioned the independent existence of this right despite the 2012 amendment. Hence the dispute continues where the Division Bench of the Delhi High Court has combined these matters together and is in the process of hearing them.”

The dates of hearing have been pushed twice and it appears there is time yet for the matter to finally be put to rest. Perhaps Counsel Ajatshatru’s advice may be heeded in this regard when he says,

“Because the usage of these sound recordings is so insignificant/small it makes sense for the FM Radio Stations to obtain a statutory license and avoid the entire rigmarole of negotiations and heavy license fee. This does encourage wider sampling of music but does not make a substitute for a robust license that a radio station may require.”

Text by Noor Anand Chawla

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