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RESOLUTION OF ROYALTY DISPUTES IN THE ENTERTAINMENT SECTOR

Author: Pahul Wadhwa, III year of B.A.,LL.B.(Hons.) from Kirit P. Mehta School of Law, NMIMS, Mumbai, Maharashtra


Abstract

As a common man, it is not quite common that we are interested in knowing how the music which we listen to is made. India has one of the largest music industries in the world. And this premise is sufficient to assume that there are disputes in proportion to how big the industry is. In an art form, there has to be something that can protect an artist’s work. Copyrights and Royalties help us do that job. There are multiple instances where the contracts, as well as the middlemen, cause issues in the proper disposition of royalties and copyrights to various artists. Several cases happened to date that were taken to court and were stretched for a long period. The cases have arisen on the coming of big music labels. According to the paper, an amicable solution to this is bringing Alternative Dispute Resolution into the picture. Dragging such cases in courts will inflict harm on an artist’s/writer’s financial as well as a creative approach towards his/her art. To prevent this, there shall be a different approach to solve these cases i.e. through negotiation, mediation etc. This way quick and efficient solutions will come up and the artists will not have to wait for years to get their share of fees/payments.

Keywords: Royalties, Copyrights, ADR, Lyricists, Writers, Negotiation, Music Industry


INTRODUCTION

In the contemporary world, almost every one of us has heard about copyright once in a lifetime. This is because all the artistic, as well as the intellectual work created and produced by various creative individuals, involved needs to be protected by law. The protection is needed to protect that piece of work from being stolen, infringed, damaged, copied or monetized by any other person. This helps in safeguarding the rights of the team or the individual involved in the process of creating a unique piece of art such as music, drama, film, cinematographic film. However, in this research article, a particular form of art i.e. Music and the factors revolving around the disputes within the music industry will be discussed as well as understanding. A Musical Work is defined as a piece composed entirely of music, including any graphical notation for the work, but excluding any words or actions meant to be sung, spoken, or performed in conjunction with the music. Copyright protection does not require that a musical piece be written down. [1]


The major part where the disputes begin to rise is always the monetary part. It is important to understand how the music business works and what the levels where the money is circulated are. In this case, the remuneration which the musicians and everybody involved in the creative process get is ‘Royalty’. Music royalties are those mandatory amounts paid to composers, songwriters, recording artists, and their agents in exchange for the licenced use of their music. Institutions that utilise music pay royalties, which are collected on behalf of rights holders by intermediary entities. If we're talking about a big label collecting its streaming earnings, for example, the user may pay out the royalties straight to the rights holders.


The basic process of royalties, in general, begins with the creation of an artwork, in this context, a composition, recording and final release after which the piece of music needs to be promoted, monetized and has to be sent to the marketing intermediaries. These people now do the job of promoting the music with the help of either labels or streaming services to make it reach the general public via various kinds of advertisements, promotions or YouTube videos or social media images. Once the music is out, it depends on who buys the music, it can be a TV show, a movie, a web series, or an advertisement jingle. Now the music company associated with the song gets the generated royalties by these sources. After which, they forward it to the music makers and everyone who is involved in the process of making that piece whether those are the sound engineers, recording engineers, musicians or composers. [2]


ANALYSIS

Before mentioning the problems which are occurring in dispensing off the royalties, it is important to mention what are the different types of royalties. Then it will help us observe who is eligible to receive what kind of royalties.


Mechanical Royalties: Songwriter is owed mechanical royalties when his/her song is printed on CD or downloaded from streaming services such as Spotify, iTunes etc. These are also generated when the songs are played on interactive streaming platforms. The streaming music app services allow the users to choose what they want to listen to our interactive services and the services such as public platforms, radio stations, TV channels are non-interactive platforms. Mechanical royalties are paid by those who buy the mechanical license to sell or distribute music. It goes from a record company to anyone who wants to put out a cover of a song. Some agencies do this work of collecting the mechanical royalties and selling the licenses to people who buy them.


Performance Royalties: Any copyrighted music which is performed, streamed, or played in public are eligible to earn performance royalties. Even if a song is played from a previously recorded file, it counts as a performance. This includes the radio (AM/FM), clubs, taverns, restaurants, televisions, shopping malls, and live concerts, music streaming services, internet radio, and each and everywhere, wherever that copyrighted music is played in public.


Synchronisation Royalties: When a part of/full copyrighted music is coupled or 'synced' with visual material then the royalties which are generated are Synchronization or Sync Royalties. The permission to utilize copyrighted music in movies, broadcast, ads, gaming consoles, online streaming, ads, and any other sort of video content is granted through synchronization licenses. Music Publishers are the most common sellers of sync licenses. The right to use an existing recording with the audio-visual medium is not included in a synchronization license. Before using copyrighted music with a new audio-visual project, the licensee will additionally need to obtain a 'Master-Usage License' if the artist's version of the song is needed elsewhere for visual use. Unless the intention is to re-record a fresh new version of the song that is only sync-licensed, a Master-Use Licensing will be required in addition to the sync license. This holds for any audio-visual medium, including YouTube. [3]


Print Royalties: Sheet music and folios are subject to print royalties. The royalties are derived from the exclusive right to distribute copies of copyrighted content. The licencing agreement between a copyright owner (typically a music publisher) and the copyright user is known as a print right. It allows you to alter, display, and print a song's sheet music, notes, or lyrics - even the tiniest use need a print licence. [4]


Issues Specifically in India

On August 23, 1969, the Indian Performing Right Society Limited was established. The IPRS is an organisation that represents music owners, i.e. The Society of Composers, Lyricists (or Authors), and Music Publishers is the only organisation allowed to provide licences for the use of musical works and literary music in India. IPRS' mission is to legalise the use of copyrighted music by music users by granting licences and collecting royalties on behalf of IPRS members, such as authors, composers, and music publishers. After subtracting IPRS's administrative expenditures, the royalties are divided among members. Music Directors are better known as Composers, Authors are better known as Lyricists, and Music Publishers are Music Companies or those who control the Publishing Rights of Musical and Literary Works. [6]


The IPRS was in charge of the literary and musical works that served as the foundation for sound recordings, while the Phonographic Performance Limited (PPL) was in charge of the sound recordings themselves. However, the music labels that controlled the PPL as sound recording owners were successful in removing writers of literary and musical works from the IPRS's governing body, allowing the music labels to take control of both the IPRS and the PPL. The payment of royalties to writers largely halted once authors were removed from the IPRS's governing board. [7]


The IPRS recently was also accused of a royalty scam which resulted in non-distribution of royalties for numerous writers and singers which accumulated for a long time. IPRS is also accused of selecting fraudulent members who are neither writers nor composers, according to the FIR filed by Shubha Mudgal. The revenues that should have been allocated to the complainants were "secretly and covertly channelled to phoney members without the agreement of complainant's members." Another plaintiff, in this case, was late Ghazal singer Jagjit Singh's widow, Chitra Singh, who made a petition in 2016 alleging that they were not given their fair share of rights and that deceptive advertising implied that Jagjit Singh (who died in 2011) would be singing live.


In March 2015, the ED team filed a case against the IPRS and the PPL under the Prevention of Money Laundering Act, based on charges filed and police FIRs claiming "serious irregularities" in their operations. According to sources, during the post-revenue collecting phase, ED discovered severe "distribution-related breaches." Based on a complaint filed earlier this year, the ED searched the offices of Universal Music Group, T-Series, Saregama, Sony Music, and Yashraj Films in Mumbai, New Delhi, and Kolkata on November 3. Since 2012, several music businesses are reported to have failed to pay royalties to their singers, composers, and lyricists. According to the complaint, the overdue sum was in the millions of dollars. [8]


In India, although there is the Copyright (Amendment) Act, 2012 which talks about an equal share of royalty between the makers of the song and the writers/lyricists, still, the authors and the lyricists are yet to receive long-pending royalties because this application of the law is yet to be approved by the government. The law clearly states that they can now have unwaivable royalties. [9]


Copyright Laws and Arbitration in India

The question in the Mundipharma Case was whether an allegation of "copyright infringement" might be arbitrated. The Delhi High Court ruled that the issue was unresolvable because copyright infringement is a statutory claim with specific statutory remedies that may only be awarded by civil courts. This decision appears to reaffirm the second criteria of arbitrability, which prohibits the arbitrability of issues originating from special legislation designated solely for civil courts. [10] The Eros Case was the first sign of a shift in this downward trend. A copyright licence was given to the Respondent to exhibit the Petitioner's films. The licence included an explicit negative covenant prohibiting the usage of copyrighted films after the contract was terminated. This term was broken by the respondent. As a result, the Petitioner filed an arbitration claim for "violation of the contractual covenant" - a claim that, while based only on contract, nevertheless needed proof of copyright violation.


For the first time, the Bombay High Court ruled that declaring the whole domain of IP issues arbitrable would be too wide, unworkable, and contrary to all business sensitivities. As a result, the decision correctly observed that IP disputes originating only from contracts are arbitrable since they are actions in personam, i.e. “one party seeking a specific particularised relief against a specific specified party.” As a result, the first test of arbitrability was applied in this situation. The court went on to say that to prove such a contractual violation, a finding of infringement was required and that only an arbitrator could make such a finding of infringement since "infringement" can only occur in personam. As a result, an infringement claim may now be resolved through arbitration. [11] It is important to note that alternative dispute resolution is a very necessary step to be taken to solve copyright infringement cases in an effective manner. The regular courts are burdened up with numerous cases and take a lot of time which is neither cost nor time-efficient.


Conclusion

There can be two conclusions that can be derived from this particular research article. The first one is about awareness. It has been observed that most of the artists and creative crew do not know what the law is about and how they can safeguard their interests either with the help of litigation or with the help of forming a corruption-free organisation that will be accountable as well as transparent to the artists working in the industry. It is very important to be self-aware in the first place so that the possibility of being exploited can be negated in the first place.


The second conclusion is that there shall be a specific Alternative Dispute Resolution mechanism for the IPRS and other firms working for the current artistic teams working in the industry. The reason is that these types of cases are time-sensitive. Meaning, if a royalty dispute case will end up in the litigation process for 5-10 years, then the litigation costs of the same would be the same as that of the disputed amount. So that is the reason these cases can affect a person’s reputation as well as financial situation. All in all, the industry needs a complete mechanism revival for solving such cases along with law which needs to be revised according to the current digital era.


Endnotes:

1. https://copyright.gov.in/documents/handbook.html

2. https://soundcharts.com/blog/music-royalties

3. https://soundcharts.com/blog/music-royalties

4. https://indiy.com/print-music-royalties-101/

5. https://www.theverge.com/2019/5/29/18531476/music-industry-song-royalties-metadata-credit-problems

6. https://iprs.org/about-iprs/

7. https://link.springer.com/chapter/10.1007/978-981-13-8102-7_9

8. https://mumbaimirror.indiatimes.com/entertainment/bollywood/writers-want-due-royalty-for-their-work-copyright-society-being-formed-to-enforce-the-law/articleshow/79688561.cms

9. ILR 1991 Delhi 606 - Mundipharma Ag vs. Awochardt

10. http://arbitrationblog.kluwerarbitration.com/2019/03/09/arbitrability-of-ip-disputes-in-india-a-blanket-bar/