30 May 2020

Continuing Royalties for Authors and Performers

The 2012 amendments introduced two provisos to Section 18 of the Indian Copyright Act, 1957, two provisions to Section 19, and a proviso to Section 38A(2), which was itself newly-inserted into the statute, with the aim of ensuring that performers and the authors of underlying works in cinematograph films and sound recordings would be entitled to continuing royalties for the use of their works and performances.

The two provisos to Section 18 of the Copyright Act, 1957, which deal with continuing royalties mandate that:
  • any assignment or waiver by the author of a literary or musical work included in a cinematograph film of the right to receive continuing royalties for, in essence, the non-theatrical use of their works is void unless the assignment or waiver is in favour of the author’s legal heirs or a copyright society for collection and distribution; and
  • any assignment or waiver by the author of a literary or musical work (included in a sound recording which is not part of a cinematograph film) of the right to receive continuing royalties for any use of their work is void unless it is in favour of the author’s legal heirs or a copyright society for collection and distribution.

Section 18 provisos are structured in a manner which first enjoins authors (and performers) eligible to be paid continuing royalties from entering into agreements to assign or waive the right to receive such royalties except to their heirs or to copyright societies, and then states that any agreement contrary to the statutory mandate would be void. This could be considered to be a recognition of ground realities: individual authors and performers can sometimes quite easily be persuaded to sign agreements which disadvantage themselves simply because they have very little power in comparison to those with whom they transact business. Also, since the provisos refer to agreements which could potentially be entered into in the future, they are essentially prospective in nature.

The two provisions inserted into Section 19 of the Copyright Act, 1957, play the same theme as the Section 18 provisos which deal with continuing royalties but their structure significantly differs. Firstly, they refer not to restraints keeping eligible authors and performers’ rights to continuing royalty from being entirely alienated from themselves but, instead, of eligible authors and performers having the right not only to claim continuing royalties but also other consideration in respect of both copyrighted works and protected performances. Secondly, the Section 19 provisions refer to underlying works in cinematograph films and sound recordings without limitation, and, so, they do not apply to a limited kind of underlying works as the Section 18 provisos do.

Assuming that they are otherwise eligible to be paid continuing royalties, even if the rights in works or performances to make cinematograph films have been assigned or, possibly, licensed, their authors and performers still have the right to claim an equal share of royalties and consideration payable for their non-theatrical use. Similarly, even if the rights in works or performances to make sound recordings independently of cinematograph films have been assigned or, possibly, licensed, their authors and performers retain the right to claim an equal share of royalties and consideration payable for any utilization of their works or performances assuming they are not barred from doing so for any other reason.

The statute itself specifies that the authors of underlying works incorporated into cinematograph films and sound recordings are eligible to be paid continuing royalties. And reading Section 2(qq) of the Copyright Act, 1957, which defines 'performers' along with Section 38A(2) which describes the performer's right in part, it would appear that performers who are credited are entitled to be paid continuing royalties — the restriction that a performance must be live for a performer to enjoy the performer’s right arguably cannot apply to eligibility to be paid continuing royalties since such eligibility stems not from Section 38A in isolation but also finds roots in Sections 18 and 19 which deal with grants of rights and apply to the performer's right. In any case, even if the statute were not purposively interpreted to grant all credited performers in cinematograph films and sound recordings continuing royalties, the performers of live performances would certainly be eligible to be paid.

Sections 18 and 19 of the Copyright Act, 1957, both apply to performers and to the performer’s right, with necessary adaptations and modifications, by virtue of Section 39A. It is, however, not entirely clear what this means for performers. A proviso to Section 38A(2) clarifies that nothing in the provision prevents performers from being entitled to ‘royalties in case of making of the performances for commercial use’ while the main body of the provision to which the proviso applies states: "Once a performer has, by written agreement, consented to the incorporation of his performance in a cinematograph film he shall not, in the absence of any contract to the contrary, object to the enjoyment by the producer of the film of the performer’s right in the same film."

While it is clear that the Section 19 provisions pertaining to continuing royalties apply to eligible performances, it could be argued that their scope differs from that contemplated Section 38A(2) since the term ‘commercial use’ is, of course, wider than the non-theatrical use contemplated by Section 19(9) and narrower than ‘any utilization’ contemplated by Section 19(10). Although the two Section 19 provisions apply in different scenarios, the only way to resolve the inconsistency is to treat the Section 38A(2) proviso as simply being an enabler which ensures that the main body of Section 38A(2) does not prevent eligible performers from receiving continuing royalties.

If one were to accept this interpretation, one could infer that Sections 18 and 19 would apply to performers as follows:
  • any assignment or waiver by an eligible performer of the right to receive continuing royalties in respect of performances for which they could claim such royalties would be void unless it were in favour of the performer’s legal heirs or a copyright society for collection and distribution; and
  • performers whose works are incorporated into cinematograph films are entitled to continuing royalties for the non-theatrical use of their performances while performers whose works are incorporated into sound recordings that are independent of cinematograph films are entitled to continuing royalties for any use of their performances.

There are, however, puzzling differences in Sections 18 and 19 in regard to continuing royalties.

Under Sections 19(9) and (10) of the Copyright Act, 1957, eligible authors may claim an equal share of continuing royalties and other consideration — the Section 18 contractual restraints apply only to continuing royalties and not to any other consideration and, as such, it is reasonable to posit that there is no statutory prohibition on authors or performers assigning or waiving their rights to consideration not falling within the scope of royalties to anyone.

Similarly, the contractual restraints in Section 18 apply only to eligible performers and to the authors of underlying literary and musical works in cinematograph films and sound recordings in some circumstances. This creates two classes of authors as far as copyrighted works in respect of which continuing royalties are payable are concerned: the authors of underlying works who are not contemplated by the Section 18 provisos could conceivably assign or waive the right to receive continuing royalties in favour of anyone. Due to this, one could argue that the copyright statute affords greater protection to the authors it contemplates in Section 18.

Further, the Copyright Act envisages continuing royalties as ‘royalties to be shared on an equal basis with the assignee [of copyright or the performer’s right]’ or ‘an equal share of royalties’ in Sections 18 and 19 respectively. Unfortunately, there is not a modicum of clarity within the statute about what these terms actually mean. To begin with, it is unclear who is liable to pay eligible authors and performers under both provisions, and Section 19 does not even clarify with whom the continuing royalty is to be shared. This omission is made particularly stark by the possibility that Section 63 of the 1957 Copyright Act could be interpreted to treat the non-payment of continuing royalty as a criminal offence. Since the statute provides no clear guidance about who is liable to pay continuing royalties, guidance must be sought from contract, where contractual agreements which speak to the matter exist. In such circumstances, it isn't inconceivable that non-payment which would ordinarily be a breach of contract could, with the intervention of the copyright statute, necessarily metamorphose into a crime.

The situation is complicated by the fact that, under the Copyright Act, only copyright societies registered under the statute itself can engage in ‘the business of issuing or granting license in respect of literary, dramatic, musical and artistic works incorporated in a cinematograph films or sound recordings’ even though the restriction does not apply to authors and performers acting in their capacity as individuals as long as their acts are consistent with their obligations as members of registered copyright societies. In fact, any assignment or licence of the copyright in any work or a performer’s right which is inconsistent with the terms and conditions of rights already assigned to a copyright society to which the concerned author or performer belongs is void.

There is also little clarity in the statute regarding what an equal share of royalty means. Presume there exists a situation which involves an assignee-producer of rights, one author of an underlying work, and one performer. In such a case, if the author and performer were both entitled to an equal share, that could mean (a) that the assignee-producer was entitled to 50% and that the author and performer were each entitled to 25%, with the collective share of persons other than the assignee-producer being 50% or ‘equal’ or, alternatively, that (b) the assignee-producer, the performer, and the author were each entitled to 33.33%, which formulation would also satisfy statutory provisions.

That said, nothing in the statute prevents the quantum of royalties being split on the basis of rights instead of with reference to persons. Therefore, it would also be possible to state that equal shares of royalties would be payable to the assignee-producer and to the owners of each right. Under this formulation, if royalties were due to two people in respect of a single right — two joint authors of a script, perhaps — and monies were split on the basis of rights, it could transpire that each one of them would payable half the amount that a single owner of a single right — such as the sole music composer — would be payable.

The provisions in the Copyright Act relating to the payment of continuing royalties are susceptible to multiple interpretations all of which are compatible of the statute, and no guidance was made available at the time the provisions were enacted detailing mechanisms to interpret and implement them.

It comes as no surprise that, apart from sporadic reports of authors and performers having benefitted, the effect of the amendments to entitle performers and the authors of underlying works incorporated into cinematograph films and sound recordings to continuing royalties appears to have been primarily theoretical.

(This post is by Nandita Saikia and was first published at IN Content Law.)