In the matters of M/s. Novex Communications Pvt. Ltd. v DXC Technology Pvt. Ltd., C.S. No. 407 of 2020 and M/s. Novex Communications Pvt. Ltd. v Cognizant Technologies Solutions India Pvt. Ltd., C.S. No. 413 of 2020 (collectively, Suits), the Learned Single Judge of the Madras High Court (Court) passed a judgment dated 8 December 2021 (Decision) holding that Novex Communications Private Limited (Novex) is barred from carrying on the business of issuing or granting licenses in respect of sound recordings.
Factual background
Novex filed Suits against DXC Technology Pvt. Ltd. and Cognizant Technologies Solutions India Pvt. Ltd. (collectively, Defendants) for copyright infringement in relation to certain sound recordings (Sound Recordings) before the Court. Novex claimed it has right to restrain the Defendants from exploiting the Sound Recordings without its permission as it is an owner or duly authorized agent of the 'on ground performance rights' (Rights) in the Sound Recordings.
The Defendants raised a preliminary objection that since Novex is not registered as a copyright society, it cannot carry on the business of issuing or granting license in respect of Sound Recordings, as per the specific bar under Section 33(1) of the Copyright Act 1957, as amended from time to time (Act), which inter alia provides that 'no person shall carry on the business of issuing or granting licenses in respect of any work in which copyright subsists'. Accordingly, the Court framed this as a preliminary issue for determination.
Rival contentions
Novex inter alia contended that it has right to restrain the Defendants as, either by virtue of Section 18(2) of Act (which provides that an assignee shall be treated as the owner of the rights so assigned) and the assignment agreements entered between Novex and owner of the Sound Recordings, Novex is the owner of the Rights in the Sound Recordings; or it is the duly authorized agent of the owner of the Sound Recordings. Thus, as per Section 30 of the Act, which permits an owner of copyright either by himself or by his duly authorized agent to grant licenses, Novex either as an assignee or a duly authorized agent of the owners of the Sound Recordings is entitled to issue license and claim royalties from the users of the Sound Recordings.
Further, Novex contended that the bar under Section 33(1) of the Act which provides that an entity cannot engage in the business of licensing unless it is registered as a copyright society, does not apply to Novex in view of 1st proviso to Section 33(1) which carves out an exception permitting copyright owners to engage in licensing in their individual capacity. Novex further contended that as per Section 34 of the Act, joining a copyright society is purely optional and that the right to issue licenses cannot be made contingent upon the owner being a member of any copyright society. Therefore, holistic reading of Sections 18(2), 30, 1st proviso to Section 33(1) and Section 34 of the Act, makes it clear that Novex has the right to stop the Defendants from exploiting the Rights in the Sound Recordings without its permission.
In response, the Defendants inter alia contended that (i) the 2nd proviso to Section 33(1) of the Act inter alia states that only a registered copyright society can carry on the business of issuing or granting licenses in respect of literary, dramatic, musical and artistic works incorporated in a film or sound recording. Thus, Novex, not being a registered copyright society, was barred from carrying on the business of granting licenses in respect of the Rights in the Sound Recordings; (ii) Novex is only the owner of limited Rights in the Sound Recordings and not the Sound Recordings as a whole, and therefore, it cannot take benefit of Section 30 of the Act which only entitles an owner of a 'work' and not 'rights in the work' to grant licenses; (iii) Defendants relied upon the legislative intent and purpose of Section 33 of the Act, as amended by 2012 amendment, which according to the Defendants permits only a registered copyright society to engage in the business of issuing or granting licenses.
Findings and Decision
The Court extensively relied upon the speeches in the Parliament to glean the true intent and purpose of Section 33 of the Act, which was to bring parity between the various right owners in a sound recording. The Court observed that an owner need not necessarily join a copyright society and that the 1st proviso to Section 33(1) makes it clear that the right of an owner to issue license in his individual capacity is unfettered subject to the rider that such right must be consistent with the obligation as a member of copyright society. However, once the grant of license moves from the owner in his individual capacity and transcends into the realm of a business, Section 33(1) and/or the 2nd proviso applies. The Court further observed that Section 33(1) of the Act mandates an entity to be first registered as a copyright society before entering into the "business of issuing or granting license". On Novex's contention that it was permitted to grant licenses as per Section 30 of the Act (being the owner or the duly authorized agent) and as per 1st proviso to Section 33(1) of the Act, the Court observed that the same applied only to the owners of copyright in their individual capacity, and not to an entity, such as Novex, which is involved in the business of licensing. The Court delved into the word 'business' used in Section 33(1) of the Act, and also observed that this provision clamps a prohibition on the 'business' of copyright licensing except through copyright societies. The Court further observed that it was impossible to accede to Novex's contention as the same would de hor the purposes of 2012 amendment made to the Act.
The Court observed that Section 33(1) and its 2nd proviso which specifically provides that the business of licensing shall be carried only through a registered copyright society, clearly emphasizes that "only" copyright societies may engage in the business of granting licenses.
In view of the above, the Court held that Novex does not fall within the ambit of Section 30 of the Act, and since, it is in the business of copyright licensing, it was barred from issuing licenses for the exploitation of Rights in the Sound Recordings in view of Section 33(1) of the Act, especially 2nd proviso thereof. The Decision has been assailed before the Division Bench of the Court, and it remains to be seen if the same would be upheld or reversed.
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