India: Copyright Assignment & Advancement In Technology: The Case Of "Shalov"

Last Updated: 9 November 2012
Article by Abhai Pandey

In a recent significant legal development, the Copyright (Amendment) Act 2012 has amended section 18 of the Copyright Act 1957, which deals with 'Assignment of Copyright'. Section 18 (1) provides that the owner of a copyright in any work or prospective owner of a future work may assign the copyright. The proviso to this subsection clarifies that in case of future work, assignments will come into force only when the work comes into existence. A second proviso has been inserted in this section by providing that no such assignment shall apply to any mode of exploitation that did not exist or was not known in commercial use when the assignment was made, namely: -

"Provided further that no such assignment shall be applied to any medium or mode of exploitation of the work which did not exist or was not in commercial use at the time when the assignment was made, unless the assignment specifically referred to such medium or mode of exploitation of the work."

The above amendments strengthen the position of the author if new modes of exploitation of the work come to exist. In continuum, the significance of the instant case lies within the realm of the unfairness and invalidity of contracts covering future assignments where rapid advancements in technology keeps changing the character of intellectual property rights. Sholay Media & Entertainment Pvt. Ltd. (Sholay Media), the owner of all rights to the movie Sholay, filed a suit alleging copyright infringement by Vodafone Essar Mobile Services Ltd. over sale of music and dialogues from the movie as ringtones / caller tunes. Vodafone, a cellular services provider offers various value added services such as ringtones, true tunes, caller tunes, Internet radio etc. to their subscribers.

The Court granted an ex-parte injunction restraining Vodafone from offering ringtones / caller tunes of the movie Sholay to its subscribers without prior permission / license from Sholay Media. Subsequently, Phonographic Performance Ltd (PPL) and Universal Music India Pvt. Ltd (Universal Music) impleaded (joining the suit as a party) themselves in the suit. The case was later heard on plaintiff's application for interim injunction and the defendant's application for setting aside of the ex-parte injunction order (Sholay Media & Entertainment Pvt. Ltd vs. Vodafone Essar Mobile Services Ltd. I.A. Nos. 3258/2011 & 4504/2011 in CS (OS) No. 490/2011).

As a backgrounder - Sippy Films Pvt Ltd., which produced Sholay, had assigned / transferred all rights in the movie vide a gift deed in 2000 to Sholay Media but much before this, in 1978 Sippy Films Pvt. Ltd granted certain rights in the movie to Polydor, now known as Universal Music India Pvt. Ltd (Universal). Universal in turn entered into an agreement with Phonographic Performance Ltd (PPL), a copyright society administering copyright in sound recordings for music companies. PPL under this authorization, under an agreement in 2006, granted all rights to Vodafone for exploitation of sound recording on mobile cellular services.

Telecom operators like Vodafone distribute the content to the end user acting as a content aggregator and platform company, which provide ringtone and caller-tunes based on the content licensed from music companies.

The dispute in this case pertains to the scope of the rights assigned to Universal Music as to whether an absolute right to use the sound recordings by way of ringtones and caller-tunes (digital rights) was assigned to Polydor / Universal Music in 1978; or the right to use sound recordings on digital and mobile platform continue to vest in Sholay Media & Entertainment Pvt. Ltd?

Section 18 of the Copyright Act, 1957 provides that the owner of the copyright in the work may assign to any person either wholly or partially and either generally or subject to limitations and either for the whole term of the copyright or any part thereof. Therefore the construction of the terms of the Assignment deed was brought into play to answer the question as to whether the assignment to Polydor/Universal Music extended all rights in the sound recordings or only some of them.

Sholay Media argued that the assignment to Universal from Sippy Films extended only to the –

  1. right to make records for sale and distribution; and
  2. right to communicate the sound recordings by way of radio broadcast.

It also advanced the case that rights in respect of value added services for mobile phones neither existed nor were in contemplation of the parties at the time of assignment. In pertinent parts of the "assignment agreement", where there is an assignment of copyright in the work, the clause states "Save as aforesaid the Assignor reserves to himself the copyright in the said work." This could be interpreted to mean that anything other than specifically mentioned in the agreement was reserved to the Plaintiffs and not transferred to Polydor / Universal Music. As a logical consequence, plaintiffs argued that residual rights in future mediums like ringtones were never transferred in the impugned assignment deed.

However the assignment deed in the defining the term 'Record' mentions 'to include disc, tapes or any other device in which sounds are to be embodied', which conveys that all rights in the sound recording, including digital rights which were neither available nor in contemplation at the time of the execution of the Assignment deed, were assigned to Polydor / Universal Music. To this the plaintiffs argued the application of ejusdem generis rule which when applied would translate 'any other device' as a physical device and not a digital device.

Vodafone's case is that Sholay Media has no title to the sound recording of the movie as it stood assigned to them in 1978. It disputed that the assigned rights are confined to only physical records and radio broadcast and contended that the residual rights in the assignment deed means the remaining right in the movie and not the remaining rights in the sound recording.

This, however, was vehemently contested by Sholay Media, which contended that the rights to exploit the movie in any case was not the subject matter of the assignment and, therefore, the rights reserved under the clause are those rights in the sound recording not expressly assigned to Polydor / Universal Music.

The Court was of the opinion that the assignment deed could be interpreted in both ways and the crux of the issue was the definition of 'record' and whether 'any other device' could mean incorporating the digital medium. This question was left as an issue for the trial and the Court disposed off the interlocutory applications by passing interim orders.

Vodafone was allowed to continue using the sound recording of the film through digital and mobile media subject to the condition that Universal will pay royalty regularly as agreed in the assignment deed, covering the exploitation of digital rights by Vodafone also. As for the profit that Universal was making from the ringtone royalties (i.e. the money that Universal makes after giving Sholay Media & Entertainment Pvt Ltd their share of the royalties) the Court ordered it to be deposited with it until conclusion of the trial. Vodafone was directed not to allow the use of the film's sound recordings except on the terms as ordered by the Court.

The suit at present is at the stage of framing of issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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