Exploring Section 31D of the Copyright Act: Mechanisms of Statutory Licensing and the Determination of Royalty Rates in India

INTRODUCTION

In 2012, Section 31D  was added to the Indian Copyright Act, 1957 (the “Act”). This section concerned statutory licensing for the transmission of literary and musical works as well as sound recordings, was included in accordance with Articles 11(2) and 134 of the Berne Convention, Article 9(1) of the TRIPS Agreement, and Article 15(2) of the Rome Convention (for sound recordings). Broadcasting organizations are permitted to broadcast or perform any literary, musical, or sound recording works under Section 31D of the Act, in conjunction with Rules 29 and 30 of the Copyright Rules 2013  , provided that they give prior notice of their intention to do so and pay royalties to the rights holder, as determined by the commercial courts. (Earlier that power vested in the “Appellate Board” which was replaced in 2021). If we look up to the legislative intent of the parliament then we can find that they did not want the copyright holders to withhold the work from public beyond a reasonable time and conditions. They intended to develop legislation that, in exchange for the interested party’s willingness to pay the legal owner a legitimate compensation, would permit licenses for works protected by copyright to be given.  
The essence of section 31D is that broadcasting organizations may communicate with the public by performing or transmitting a previously published sound recording of a literary or musical work, provided that they meet the requirements outlined in the section. Broadcasting organizations are subject to stringent regulations, and in order to operate, any such organization must get licenses under the Indian Telegraph Act and the Indian Wireless Telegraphy Act.  According to the Act, section 2 (dd)  contains a definition of broadcast. Researchers frequently emphasize how important it is to construe section 2(ff)  of the Act’s concept of “communication to the public” in a way that makes sense with section 2(dd). The harmonic design suggests that broadcast is only a small portion of “communication to public,” since the latter is significantly more limited in scope and one of the many forms of “communication to public.”

ISUUES REGARDING BROADCASTING ORGANISATIONS: A DISCUSSION

In 2016, the Department of Industrial Policy and Promotion clarified that internet and online streaming platforms are to be included in the category of broadcasting organisations according to an official memorandum.  The explanation stated that the phrase “any broadcasting organization desiring to reach the public” should not be narrowly understood to only refer to radio and TV broadcasts, as the definition of “broadcast” in conjunction with “communication to the public”  seems to encompass all types of broadcasts, including internet broadcasts. In the case of Tips Industries Ltd vs Wynk Ltd. and another , decision dated 23 April, 2019, the Bombay High Court ruled that Section 31-D of the Act does not apply to internet broadcasting when deciding on interim applications for an injunction in Commercial Suit IP (L) No. 114 of 2018. 

It should be noted that the communication with multiple households, hotel rooms, or hostels through satellite, cable, or other simultaneous means is considered public communication. Based section 31 D, it can be concluded that the internet and online streaming serve the purpose of disseminating the work to the audience. However, it is important to note that there should be a clear distinction made between interactive streaming services and non-interactive ones. Simply put, as long as internet services and online platforms are used for communication and entertainment, they will fall under section 31D. But, if the content is offered for activities such as downloading or renting, it would go beyond what is allowed in section 31D.

Considering internet and online streaming within the scope of section 31D can be viewed as a defensive measure against online piracy. Making the copyrighted work readily and freely accessible in a licensed manner will certainly aid in the fight against online piracy. Internet radio services allow the public to explore new music without spending too much money, which deters them from engaging in illegal sharing of copyrighted content. 
It is argued by many that section 31D eliminates the ability to negotiate licensing fees as the Copyright Board determines the royalty rate. In the context of internet and online streaming platforms, services can be divided into two categories i.e. one where users can enjoy copyrighted content through streaming, and another where users can download, purchase, or rent the service.  The first falls within the scope of section 31D, while the second goes beyond the scope of section 31D. Furthermore, in the second scenario, the copyright owners have the ability to freely discuss terms for advertising opportunities. Therefore, this establishes a boundary and maintains an equilibrium between the public’s right to access services and the rights of copyright holders. 

Similarly, there appears to be no distinction between ‘Broadcasting via Radio’ and ‘Broadcasting via Internet.’ Both mediums utilize a similar approach by disseminating services to the public through wireless diffusion and generating revenue through advertisements. Therefore, if radio broadcasters are considered broadcasting organizations according to Section 31D, internet broadcasters should also be considered.

STATUTORY LICENSING

The Act and the regulations made under it provide the parameters of the processes for determining the rates of royalties that must be paid to the copyright owner as established in the case of Phonographic Performance Ltd. India v. Entertainment Network India Ltd.  
The IPAB does not have the authority to determine a party’s rights or obligations. All that Section 31D does is to give the IPAB the authority to set rates following an investigation, as per the old legislation. The exclusive authority to ascertain the rights and obligations of parties belongs to a court of law. The jurisdiction of the High Court supersedes the authority of a statutory tribunal in the case of a disagreement. Pursuant to changes by Tribunal Reforms Act, 2021, the appellate authority is now completely out of the picture. 

A statutory license for the broadcast of sound recordings is granted under Section 31D, subject to payments at the rates set by the Court. In light of the type of proceedings that are being considered under Section 31D, the broadcaster’s right cannot be undermined by the claim of delay.  

The regulations of Rule 29 of the Copyright Rules only apply to radio broadcasting, television broadcasting, and performance. Because Rule 29 only considers sending notices for those three categories, it reinforces the argument that Section 31D pertains solely to radio and television broadcasting. This perspective is further supported by Rule 31 of the Rules, which focuses on calculating royalties specifically for television and radio broadcasts. An examination of the Rajya Sabha Parliamentary Standing Committee Report indicates that Section 31D was objected to in order to guarantee public access to works through FM radio networks. The issues brought up in front of the Committee only pertained to the radio and television sectors, showing that Section 31D was originally intended for radio and TV broadcasting exclusively.  

Therefore, Section 31D is a unique strategy in copyright law that allows broadcasters to access content while still protecting the rights of copyright owners. This specific license deviates from the usual licensing processes, providing a customized answer to meet the requirements of both broadcasting organizations and copyright holders.

CONSTITUTIONAL VALIDITY

Challenges to the constitutionality of 31D have been raised based on Articles 14,  19(1)(g) , 21,  and 300A. The main issue is that 31D greatly hinders the ability of both parties to have a shared understanding in business dealings and limits their freedom to make agreements. Moreover, there is a specific argument related to Article 300A that takes away authors or copyright holders’ works or property does not meet the requirement of public purpose stated in the article. Additionally, Broadcasting Organisation’s one-sided broadcasting of authors’ works without involving them in licensing discussions and negotiating fair royalty rates diminishes their motivation to create and benefit from their own intellectual property. 

The strict and rigid doctrine of separation of powers is not adhered to while announcing official memorandum. Although, it (separation of power) has been determined to be a fundamental aspect of the constitution. The primary responsibility for interpreting regulations and parts of legislation is mainly held by the judiciary and quasi-judicial authorities. According to articles 73 and 162 of the constitution, it asserts that the executive can only interpret provisions and sections of a statute if it is sanctioned by a statute. In the present situation, the DIPP had no reason or valid justification for interpreting section 31D, broadening its interpretation and thus including online broadcasters in the definition of Broadcasting Orgainisation in section 31D. 

Although, if the Copyright Board had issued the elongation or broadening of the scope of section 31D instead of the DIPP, it may not have been deemed ultra vires or unconstitutional as the Board is recognized as a quasi-judicial entity, as shown in the Shamnad Basheer v. Union of India case. 

The principle of arbitrariness, which is a key aspect of Article 14 of the Constitution, acts as a crucial protection against unnecessary State interference and activities, making sure that these actions are not conducted without proper legislative support or in a way that goes beyond legal jurisdiction.  This principle requires that all administrative or executive decisions be both rational and reasonable. In Om Kumar and Ors. v. Union of India , the Supreme Court establishes a structure for disputing administrative decisions based on arbitrariness. As per this framework, it is necessary to examine whether an administrative or executive order is logical or sensible. This includes evaluating if the decision-making authority properly took into account important factors, refrained from unlawful actions, and did not give excessive consideration to minor factors. Basically, a decision is considered arbitrary when it represents a perspective that no logical, sensible individual could have.

The aim of section 31D of the Act is to govern statutory licensing for broadcasting organizations, particularly in relation to radio and television broadcasting. The purpose of the statutory license provided in this section is to make it easier to play sound recordings on broadcasts and to guarantee that copyright holders receive appropriate payment. section 2(ff) of the Act defines ‘communication to the public’ as including different methods of distribution like satellite, cable, or simultaneous communication to multiple households. The Department for Promotion of Industry and Internal Trade has expanded the interpretation of this broad definition to cover online broadcasting, broadening the reach of section 31D to include internet broadcasting.

POSSIBLE SOLUTION

One practical way to handle the balance between innovation and intellectual property rights in Section 31D is to create a tiered licensing system that suits different types of broadcasting platforms. This model is able to classify platforms according to how they are used (e.g., conventional broadcasting, interactive streaming, non-interactive streaming) and their technological characteristics. Royalty rates and compliance requirements would adjust based on platform type, guaranteeing fair treatment without overwhelming smaller or newer players. In order to promote transparency, an impartial entity like a revamped Copyright Board could oversee a publicly available database of royalty rates, helping to guide negotiations and reduce conflicts. India could follow the example of the U.S. Music Modernization Act by implementing a blanket licensing system for internet broadcasters, while also providing flexibility for on-demand services.

Ultimately, implementing a collaborative governance structure, in which copyright holders, broadcasters, and technology experts work together to establish equitable practices, can foster a flexible regulatory framework. This method would showcase changing digital patterns while guaranteeing equitable payment for creators and smooth public entry to content.

CONCLUSION

Considering internet and online streaming platforms as Broadcasting Organisations under Section 31D would ensure fairness among all broadcasting mediums when it comes to showcasing copyrighted content. The creators of the work will receive fair compensation in the form of a set royalty, while the general public will be able to enjoy access to the copyrighted material. This measure would improve the organization and transparency of the licensing model for broadcasting companies. The most recent 161st Report of the Rajya Sabha Parliamentary Standing Committee explains that the Legislature plans to incorporate internet and online streaming platforms under Section 31D, acknowledging them as broadcasting organizations. This update signifies a change in legislative purpose to include these contemporary broadcasting methods. 

The Music Modernization Act of 2018 in the USA  is a prime illustration of how internet streaming services and statutory licensing can be effectively incorporated into copyright law. It achieved a fine equilibrium by safeguarding the rights of music creators and publishers to reward their creativity, while also streamlining licensing procedures for on-demand streaming services, making it easier for the public to access musical works. It is important to encourage the creation of new music by protecting creators’ rights and ensuring they are compensated, but it is also crucial to promote innovation in delivering recorded music for greater social benefit.