(This post is an extract from Films and the Copyright (Amendment) Bill, 2010.)
International agreements such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)1 avoid the issue of exhaustion. As a general rule, the first sale doctrine which is closely related to the exhaustion of rights states that once a copy of a work is sold by or with the consent of the owner of the work, the owner cannot control subsequent sales. Thus, once a copy of a book is sold, the owner of the copyright in the book cannot prevent that copy of the book from being resold. This is what allows the second hand market in books to flourish.
In India, the scope of the applicability of the doctrine of exhaustion primarily revolves around interpreting Section 14 of the Copyright Act, 1957. However, a proposed amendment to the definition of an ‘infringing copy’ in Section 2(m) could have the effect of completely changing the status quo. It has been proposed to amend Section 2(m) of the Copyright Act by inserting into it a proviso which would state that ‘a copy of a work published in any country outside India with the permission of the author of the work and imported from that country into India shall not be deemed to be an infringing copy’.
This, in itself would not drastically change existing law2 although it would make clear that India follows a principle of international exhaustion with respect to works protected by copyright. Under the current law, in order to reach such a conclusion, one would have had to traverse a circuitous route, relying heavily on an Explanation in Section 14 of the Copyright Act, 1957 (which defines the “Meaning of Copyright”). This Explanation states that for the purpose of Section 14, ‘a copy which has been sold once shall be deemed to be a copy already in circulation’.
There has been some amount of litigation regarding exhaustion, and whether India follows a principle of national or international exhaustion. The law, with respect to literary works, such as books seems debatable although courts have veered towards upholding the right of copyright owners to determine in which territory a particular copy of a book may be sold. 3
Notwithstanding this ambiguity in the case of literary works, films and sound recordings have been treated in an exceptional manner with respect to the exhaustion of rights. In the case of films and sound recordings, even if a particular copy had been legally sold, the copyright owner would have a say in the resale and/or rental of that copy. This is because, under Sections 14(d)(ii) 4 and 14(e)(ii) of the Copyright Act, all the rights of the copyright owner in a copy of a film are not lost by the first legal sale of that copy of the film or sound recording. 5
Currently, Section 14(d)(ii) of the Copyright Act, 1957, states that it is one of the rights of the owner of the copyright in a films ‘to sell or give on hire, or offer for sale or hire, any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions’, and Section 14(e)(ii) contains an analogous provision in respect of sound recordings. As such, it is pertinent to note that in the case of films and sound recordings, copyright owners have the right to control both the resale and hire of lawful copies of works which have already been once legally sold. This right was introduced in India vide the 1994 amendments to the Copyright Act and are intended "to facilitate the flow of remuneration to copyright owners”. 6
The result has been that Indian copyright law does not recognise the Doctrine of First Sale with respect to either films or sound recordings. By allowing copyright owners to control sales subsequent to the first sale of a copy of a film or sound recording, and to prohibit the hire of copies which have been legally purchased, the “period of exploitation” of such copies could be considered to have been increased.
Popular belief is that this helps to increase revenues for the copyright owners, usually film production houses or music companies, and that such increased revenues assure the owners of the copyright in films and sound recordings returns on their investment and, further, that in consequence, such increased revenues ultimately result in a trickle-down effect which increases the monies payable to the authors of the underlying works contained in films and sound recordings. However, while Sections 14(d)(ii) and 14(e)(ii) would almost certainly increase the revenues of production houses and music companies, it is unclear to what extent they do so, and it is even more unclear whether any trickle-down effect benefitting the authors of underlying works actually exists.
The Copyright (Amendment) Bill would have the result of changing the status quo by making the First Sale Doctrine applicable to films and sound recordings, and thereby ceasing to accord a special position to them. The Bill proposes to delete the words ‘regardless of whether such copy has been sold or given on hire on earlier occasions’ from both Sections 14(d)(ii) and 14(e)(ii). If such deletions were made to the Copyright Act, films and sound recordings may be treated in the same manner as literary, dramatic, musical and artistic works, and it would, inter alia, be possible to have a legitimate second-hand market in films without the consent of the owners of the copyright of films. (It is, however, pertinent to note that this would not affect the rental right.) 7
However, there is also a second interpretation possible. It is pertinent to note that Sections 14(d)(ii) and 14(e)(ii) state that it is the right of the copyright owner ‘to sell or give on hire, or offer for sale or hire, any copy’ of the work. As such, it may be possible to argue that the use of the word ‘any’ denotes that it does not matter whether or not the copy has already been sold, and that the words ‘regardless of whether such copy has been sold or given on hire on earlier occasions’ are merely in the nature of a clarification and have no substantive value. If this were the case, it is possible that films would enjoy a special position despite the proposed amendments to Sections 14(d)(ii) and 14(e)(ii).
This argument would be supported by the fact that in the cases of literary, dramatic, musical and artistic works, Sections 14(a)(ii) and 14(c)(iii) of the Copyright Act respectively both explicitly state that it is the right of the owner of the copyright ‘to issue copies of the work to the public not being copies already in circulation’. The requirement of the copies not already being in circulation simply does not exist in the case of either films or sound recordings under current law. In fact, current law, expressly states that this requirement which exists in respect of literary, dramatic, musical and artistic works is irrelevant in the case of films and sound recordings.
While it may be plausible to conclude that the removal of the words ‘regardless of whether such copy has been sold or given on hire on earlier occasions’ would make no substantive change to the existing Sections 14(d)(ii) and 14(e)(ii), it would probably be farfetched to conclude that this proposed amendments to Sections 14(d)(ii) and 14(e)(ii), read in conjunction with the proposed amendment to Section 2(m) would not cause international exhaustion to apply with respect to films and sound recordings.
As such, regardless of how one interprets the proposed amendment to Sections 14(d)(ii) and 14(e)(ii), it seems clear that international exhaustion would apply in respect of both films and sound recordings if the Copyright (Amendment) Bill were passed in its current form. This would affect those involved in film production in an indirect manner. By disallowing copyright owners from being able to control sales subsequent to the first sale of a copy of a film, the “period of exploitation” would be decreased, and would, in all probability, affect the revenues generated by such things as the sale of DVDs / VCDs.
It is possible that the accrual of potentially lower revenues to distributors would adversely affect the amount distributors would be willing to pay to producers for distribution rights, and that the possibility of lower amounts being paid to producers would have a “trickle down” effect which would be to the detriment of all those involved in film production. Whether or not any of these predictions would actually be realised is, however, entirely a matter of speculation.
1. TRIPS, Article 6: For the purposes of dispute settlement under this Agreement, subject to the provisions of Articles 3 [National Treatment] and 4 [Most-Favoured-Nation Treatment] nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.
2. John Wiley & Sons Inc. & Ors. v. Prabhat Chander Kumar Jain & Ors.. High Court of Delhi. Manmohan Singh, J.. IA No. 11331/2008 in CS (OS) No. 1960/2008 decided on May 17, 2010.; The judgment speaks of “Regional Exhaustion”, so to speak.
3. Penguin Books Ltd. v. India Book Distributors and Ors.. The High Court of Delhi. AIR1985Delhi29
4. Section 14(d)(ii), Copyright Act, 1957: ‘to sell or give on hire, or offer for sale or hire, any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions;’. Also see: Eurokids International (P) Ltd. v. India Book Distributors Egmont Books Ltd.. The High Court of Bombay. (2005) 6 Bom CR 198.
5. Also see: Warner Bros. Entertainment Inc. and Ors. v. Mr. Santosh V. G.. The High Court of Delhi. MIPR2009(2)175.
6. “Statement of Objects and Reasons” appended to the 1992 Amendment Bill (No. 105 of 1992), Para. 16.
7. Also see: TRIPS, Article 11; USC, Title 17, Section 109(b)(1)(A).
(This post is by Nandita Saikia and is an extract from Films and the Copyright (Amendment) Bill, 2010.)
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