Music Industry: Economic and Legal Issues and Challenges

BY:

Mitali Srivastava

5th Year, B.A., LLB (Hons)

Rajiv Gandhi National University of Law, Patiala, Punjab

Electronic copy available at: http://ssrn.com/abstract=2149853

 Music Industry in India: Economic and Legal Issues and
Challenges

Table of Contents

1. INTRODUCTION ............................................................................................................................... 3
1.1 Music Industry in India ............................................................................................................ 3

1.2 Intellectual Property Rights .................................................................................................... 3

1.3 Copyright ................................................................................................................................. 4

1.4 Music and Internet .................................................................................................................. 4

2. INDIAN PERSPECTIVE ON MUSIC AND COPYRIGHT ........................................................................ 7

2.1 Copyright Act........................................................................................................................... 7

2.2 Digital World ......................................................................................................................... 10

3. INTERNATIONAL PERSPECTIVE ON MUSIC AND COPYRIGHT ........................................................ 12

3.1 International Treaties ........................................................................................................... 12

3.1.1 WIPO TREATY ................................................................................................................ 12

3.1.2 WPPT ............................................................................................................................. 13
3.2 The Digital Millennium Act 1998........................................................................................... 13

4. CERTAIN CONTROVERSIES ............................................................................................................ 15

4.1 The Sony Case (in the United States of America) ................................................................. 15

4.2 The Napster Case (in the United States of America) ............................................................ 15

4.3 Super Cassette Industries v. Bathla Cassette Industries Pvt. Ltd (in India)................................. 16

5. CONCLUSION ................................................................................................................................. 17

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 Music Industry in India: Economic and Legal Issues and
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1. INTRODUCTION

1.1 Music Industry in India

The music of India and its history are too complex to be described briefly. Nevertheless
a brief introduction will help those who are new to Indian music; they will no doubt be
more influenced by what they hear than by what they read but a foreknowledge of
certain theoretical points may assist their appreciation. The origin can be traced back to
Vedic days - nearly two thousand years. One of the strongest and most significant
influences has perhaps been that of Islam (and of Persian music). The music of
India includes multiple varieties of folk, popular, pop, classical music and R&B. India's
classical music tradition, including Carnatic and Hindustani music, has a history
spanning millennia and developed over several eras, it remains fundamental to the lives
of Indians today as sources of spiritual inspiration, cultural expression and pure
entertainment. India is made up of several dozen ethnic groups, speaking their
own languages and dialects, having very distinct cultural traditions.

1.2 Intellectual Property Rights

Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic
works, and symbols, names, images, and designs used in commerce.

IP is divided into two categories: Industrial property, which includes inventions

(patents), trademarks, industrial designs, and geographic indications of source; and
Copyright, which includes literary and artistic works such as novels, poems and plays,
films, musical works, artistic works such as drawings, paintings, photographs and
sculptures, and architectural designs. Rights related to copyright include those of
performing artists in their performances, producers of phonograms in their recordings,
and those of broadcasters in their radio and television programs.

IP is a term referring to a number of distinct types of creations of the mind for which a
set of exclusive rights are recognized and the corresponding fields of law. Under
intellectual property law, owners are granted certain exclusive rights to a variety of
intangible assets, such as musical, literary, and artistic works; discoveries and
inventions; and words, phrases, symbols, and designs. Common types of intellectual

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 Music Industry in India: Economic and Legal Issues and
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property include copyrights, trademarks, patents, industrial design rights and trade
secrets in some jurisdictions.

1.3 Copyright

Copyright is a set of exclusive rights granted to the author or creator of an original

work, including the right to copy, distribute and adapt the work. Copyright does not
protect ideas, only their expression. Copyright owners have the exclusive statutory right
to exercise control over copying and other exploitation of the works for a specific period
of time, after which the work is said to enter the public domain. Uses covered under
limitations and exceptions to copyright, such as fair use, do not require permission from
the copyright owner. All other uses require permission. Copyright owners can license or
permanently transfer or assign their exclusive rights to others.

Copyright is usually regarded as intellectual property. Copyright owners, like other

property owners, must depend upon laws to protect their property. According to the
World Intellectual Property Organization the purpose of copyright is twofold: "To
encourage a dynamic culture, while returning value to creators so that they can lead a
dignified economic existence, and to provide widespread, affordable access to content
for the public."

1.4 Music and Internet

The technological advances of the past decade have created a huge new reservoir of
music: the Internet. With the advent of the Internet and MP3 technology, consumers can
now easily download, retain, and listen to digital copies of songs on their hard drives,
regardless of whether those songs have been authorized for such use. The emergence of
digital music technology has called to attention the need to re-examine our current
copyright regime. Digital music technology enables mass copying and distribution of
songs that are not authorized for such use. The resulting piracy has record companies
struggling to find ways to reduce piracy while simultaneously developing legitimate
digital distribution models. Technology may provide copyright owners with further
control over their works, but may also empower users to circumvent those control
measures. What results is a copyright system in which law and technology must work
together to maintain a balance between the rights of users and copyright owners.

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Just as the explosive growth of the Internet has changed the nature of communication
and distribution of information, the development of a new medium for sound
recordings has likewise changed conceptions of music distribution. MP3 format has
become the emerging new standard for music distribution. Unlike previous methods of
distributing music such as CDs, tapes, LPs, etc., the MP3 format does not require any
physical medium; instead it exists in digital file format. The MP3 standard was
developed in order to devise a way to compress music files while retaining high sound
quality. Previous digital music formats took up large amounts of computer hard drive
space and could take upwards of one hour to download.

Songs from the Internet in MP3 format can be downloaded and played on a computer in
a matter of minutes. With the appropriate software, users can download songs and
“burn” them onto blank CDs, or, using a computer equipped with CD-ROM and an MP3
encoder, can “rip” their own CDs into MP3s, enabling them to distribute or make
available those songs via the Internet. This poses a threat to copyright holders by
increasing the risk of music piracy.

The popularity of the MP3 has been growing steadily. MP3s are easy to both locate and
use, making them an attractive option for anyone with Internet access, especially those
with high-speed connections. On any given day, the Internet houses over 500,000
infringing digital music files. There are over 72,000 music sites on the Internet.
Thousands of songs in MP3 format can be downloaded from the web at the click of a
mouse—in fact; “MP3” is one of the most frequently searched terms on the Internet.

Digital technology now allows unlimited copies of a work to be made at very little cost.
Furthermore, numerous copies of a song can be made and distributed quickly without
sacrificing sound quality. The underlying culture of the Internet itself is problematic for
copyright law. The Internet is not centrally controlled, thus the content of web sites is
not restricted. The free flow of information causes many to claim that information
should inherently be free—that is, copyright laws should not exist. There are thousands
of sites that use copyrighted musical works without authorization, and many other sites
from which unauthorized copies of music can be downloaded onto personal computers.
In addition, the anonymity provided by the Internet makes it difficult for the music
industry to hold individuals responsible for copyright infringement.
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Record companies usually require artists to sign over the copyrights to their music in
their contracts. Because digital technology enables the consumer to easily and
inexpensively create an infinite number of perfect copies of a song, the recording
industry fears that music piracy will increase. Consumers who have access to digital
technology can use it to make counterfeit or bootleg copies of copyrighted recordings
instead of legitimately purchasing them. The revenue of record labels thus goes down.
While the recording industry claims it is protecting the rights of artists, it is mainly
protecting its commercial interest in the music business. The Internet and digital music
technology have become a serious threat to the recording industry.

The advent of this new technology has the recording industry clamouring not only to
eliminate online piracy, but also to develop methods and models to exploit digital music
technologies, including MP3 technology. The advances in digital technology and the
growth of the Internet provide enormous possibilities for copyright owners.

Not only is there a large financial or market share loss at stake, but digital technology
could eventually lead to a system in which the need for the recording industry is
eliminated. This potential problem has become a reality, with some well-known artists
opting to post some of their music for free downloading unbeknownst to their record
labels. They don’t take the help of the recording company and upload their music online
for free.

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2. INDIAN PERSPECTIVE ON MUSIC AND COPYRIGHT

2.1 Copyright Act

Indian copyright law is governed by the Indian Copyright Act, 1957. Copyright Law in
the country was governed by the Copyright Act of 1914, which was essentially the
extension of the British Copyright Act, 1911 to India, and borrowed extensively from the
new Copyright Act of the United Kingdom of 1956. Now Indian Copyright is governed by
the Indian Copyright Act, 1957.

The Indian Copyright Act today is compliant with most international conventions and
treaties in the field of copyrights. India is a member of the Berne Convention of 1886 (as
modified at Paris in 1971), the Universal Copyright Convention of 1951 and the
Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement
of 1995.

Though India is not a member of the Rome Convention of 1961, WIPO Copyrights Treaty
(WCT) and the WIPO Performances and Phonograms Treaty (WPPT), the Copyright Act
is compliant with it.

Copyright is a right given by the law to creators of literary, dramatic, musical and
artistic works and producers of cinematograph films and sound recordings. In fact, it is
a bundle of rights including, inter alia, rights of reproduction, communication to the
public, adaptation and translation of the work. There could be slight variations in the
composition of the rights depending on the work.

It covers following aspects:

 Artistic work - An artistic work means

-A painting, a sculpture, a drawing (including a diagram, map, chart or plan), an

engraving or a photograph, whether or not any such work possesses artistic
quality;

-A work of architecture; and

-Any other work of artistic craftsmanship.

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 Musical work

"Musical work" means a work consisting of music and includes any graphical
notation of such work but does not include any words or any action intended to be
sung, spoken or performed with the music. A musical work need not be written
down to enjoy copyright protection.

 Sound recording

"Sound recording" means a recording of sounds from which sounds may be

produced regardless of the medium on which such recording is made or the method
by which the sounds are produced. A phonogram and a CD-ROM are sound
recordings.

 Cinematograph film

"Cinematograph film" means any work of visual recording on any medium

produced through a process from which a moving image may be produced by any
means and includes a sound recording accompanying such visual recording and
"cinematograph" shall be construed as including any work produced by any process
analogous to cinematography including video films.

 Government work - "Government work" means a work which is made or

published by or under the direction or control of

-The government or any department of the government

-Any legislature in India, and

-Any court, tribunal or other judicial authority in India.

In the case of a musical work, the composer is the author and duration of copyright is
sixty years from the beginning of the calendar year next following the year in which the
author dies.

Copyright infringement is punishable under Sec 63 of the Copyright Act:

Any person who knowingly infringes or abets the infringement of-

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(a) The copyright in a work, or

(b) Any other right conferred by this Act, shall be punishable with imprisonment for a
term which shall not be less than six months but which may extend to three years and
with fine which shall not be less than fifty thousand rupees but which may extend to
two lakh rupees:

Provided that the court may, for adequate and special reasons to be mentioned in the
judgment, impose a sentence of imprisonment for a term of less than six months or a
fine of less than fifty thousand rupees.

A fair dealing constitutes a literary, dramatic, musical or artistic works (not being a
computer programme) for the purposes of:

 private use, including research;

 Criticism or review, whether of that work or of any other work.
 As part of the activities of a club or similar organisation which is not established
or conducted for profit.
 An amateur club or society, if the performance is given to a non-paying audience,
or for the benefit of a religious institution;
 Reporting current events.
o In a newspaper, magazine or similar periodical, or
o By broadcast or in a cinematograph film or by means of photographs.
 The reproduction in a newspaper, magazine or other periodical of
o An article on current economic, political, social or religious topics.
o A report of a lecture delivered in public.
 The making of not more than three copies of a book.

Modern fair use is usually an affirmative defence for infringement in two significant
areas, which are 1) private non commercial copying, and 2) copyrighted material that
contains information of public interest. Courts have also favourably applied the fair use
doctrine in cases where the use of the copyrighted work was minimal, or where the
allegedly infringing work results in an entirely new product even while it incorporates
some portion of the protected work. Fair use is most strongly protected in instances

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where the use of the copyrighted work results in achieving some educational goal, and
is less protected for works that are defined as entertainment.

2.2 Digital World

Digital music is advancing rapidly. Technology is changing faster than ever imagined,
and copyright legislation has struggled to stretch itself to accommodate the new
possibilities provided by digital music. The constant changes leave everyone guessing
about what the next development will be. It is unclear whether current copyright laws
are sufficient to address the new issues raised by new digital music technology.
However, the flow of technology cannot be stopped, so it is imperative that artists and
the recording industry work to take advantage of new distribution methods rather than
attempting to stop them. The system needs to incorporate ideas for potential legislation
or other actions that could alleviate the clash of interests between users, artists, and
copyright owners, and concludes that in order for copyright law to survive, policy
makers must shift focus away from the record industry and back to artists and users,
thus regaining the copyright balance. Now that users have tasted the benefits of
programs like Napster, if such programs exist, it is unlikely that music fans will forego
use of them. As the recent past has shown, regardless of its illegality, downloading
copyrighted music will continue as long as the technology exists. Some music piracy is
inevitable, as it has always been. However, by accommodating consumer preferences in
a legal answer to programs such as Napster, a solution can be developed that will
simultaneously preserve the interests of consumers of music while not destroying the
incentive system that helps maintain the production of great music. It is obvious that
the recent advances in technology have called into question the sufficiency of existing
copyright law and the existing system of music.

There are two copyrights implicated in every piece of pre-recorded music. One is the
copyright for the sound recording, that is, the recording of the actual performance of the
song; the other is the copyright for the musical work that underlies the song. Copyright
law affords a bundle of rights to copyright owners. Included in the bundle are the rights:

1) To publicly perform the copyrighted work;

2) To publicly display the copyrighted work;

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3) To reproduce the copyrighted work in copies or phonorecords;

4) To distribute copies or phonorecords of the copyrighted work to the public by sale or

other transfer of ownership, or by rental lease, or lending;

5) To publish the copyrighted work (publication refers to the specific distribution of a

work to the public);

6) In the case of sound recordings, to transmit the copyrighted work by means of a

digital audio transmission.

The right to perform the copyrighted work is reserved for public performances; it does
not extend to private performances. For example, playing a CD at home for family
members is a private performance, and thus would not require a license. The term
“copy” refers to “a material object from which a work can be read or visually perceived
either directly or with the aid of a machine or device.” The rights afforded under the
Copyright Act are exclusive only to some extent. The major exemption is uses of
copyrighted works that fall under fair use.

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3. INTERNATIONAL PERSPECTIVE ON MUSIC AND COPYRIGHT

3.1 International Treaties

The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an

international agreement administered by the World Trade Organization (WTO) that sets
down minimum standards for many forms of intellectual property (IP) regulation as
applied to nationals of other WTO Members. It was negotiated at the end of the Uruguay
Round of the General Agreement on Tariffs and Trade (GATT) in 1994.

Specifically, TRIPS contains requirements that nations' laws must meet for copyright
rights, including the rights of performers, producers of sound recordings and
broadcasting organizations; geographical indications, including appellations of origin;
industrial designs; integrated circuit layout-designs; patents; monopolies for the
developers of new plant varieties; trademarks; trade dress; and undisclosed or
confidential information. TRIPS also specifies enforcement procedures, remedies, and
dispute resolution procedures. Protection and enforcement of all intellectual property
rights shall meet the objectives to contribute to the promotion of technological
innovation and to the transfer and dissemination of technology, to the mutual
advantage of producers and users of technological knowledge and in a manner
conducive to social and economic welfare, and to a balance of rights and obligations.

3.1.1 WIPO TREATY

The World Intellectual Property Organization Copyright Treaty, abbreviated as the

WIPO Copyright Treaty, is an international treaty on copyright law adopted by the
member states of the World Intellectual Property Organization (WIPO) in 1996. It
provides additional protections for copyright deemed necessary due to advances in
information technology since the formation of previous copyright treaties before it.
There have been a variety of criticisms of this treaty, including that it applies a 'one size
fits all' standard to all signatory countries despite widely differing stages of economic
development and knowledge industry.

It ensures that computer programs are protected as literary works (Article 4) and that
the arrangement and selection of material in databases is protected (Article 5). It
provides authors of works with control over their rental and distribution in Articles 6 to
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8 which they may not have under the Berne Convention alone. It also prohibits
circumvention of technological measures for the protection of works (Article 11) and
unauthorised modification of rights management information contained in works
(Article 12).

The WIPO Copyright Treaty is implemented in United States law by the Digital
Millennium Copyright Act (DMCA).

3.1.2 WPPT

The WIPO Performances and Phonograms Treaty (or WPPT) is an international treaty
signed by the member states of the World Intellectual Property Organization was
adopted in Geneva on December 20, 1996. The Digital Millennium Copyright Act is the
United States’ implementation of the treaty.

WPPT was adopted with an objective to develop and maintain the protection of the
rights of performers and producers of phonograms in a manner as effective and uniform
as possible.

3.2 The Digital Millennium Act 1998

Enacted in October of 1998, the Digital Millennium Copyright Act (DMCA) was an
attempt to bring existing copyright law up to date with the explosion of new digital
technologies. Title I of the DMCA implemented two World Intellectual Property
Organization (WIPO) treaties, the WIPO Copyright Treaty and the WIPO Performance
and Phonograms Treaty. The treaties strengthened copyright protection for works
published online, and provide protection for U.S. works abroad. The main goal of the
treaties was to ensure that each member country provides for the protection of
copyrights held lawfully in other member countries.

Digital rights management systems are problematic because they are unable to
distinguish between infringing and non- infringing uses, thus creating the risk of
reducing fair use privileges. While the DMCA provided an anti-circumvention exemption
for libraries, archives, educational institutions and other organizations that traditionally
rely on the doctrine of fair use, fair use is not limited to these institutions. Any person
can exercise their fair use privilege for a variety of reasons, including criticism,

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scholarship, commentary, parody, or even making personal copies for home use. As the
law becomes increasingly complex, many struggle to understand the expansive
provisions and how they will affect the distribution of music. Recent amendments to the
law have constructed new rights for copyright holders, and have enacted new
provisions meant to protect the enforcement of copyright law.

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4. CERTAIN CONTROVERSIES

4.1 The Sony Case (in the United States of America)

Sony Corp. of America v. Universal City Studios, Inc. also known as the "Betamax case",
is a decision by the Supreme Court of the United States which ruled that the making of
individual copies of complete television shows for purposes of time-shifting does not
constitute copyright infringement, but is fair use. The Court also ruled that the
manufacturers of home video recording devices, such as Betamax or other VCRs cannot
be liable for infringement.

In the 1970s, Sony developed Betamax, a video tape recording format. Universal Studios
and the Walt Disney Company sued Sony and its distributors alleging that because Sony
was manufacturing a device that could potentially be used for copyright infringement,
they were thus liable for any infringement that was committed by its purchasers. Two
years later, the District Court ruled for Sony, on the basis that non-commercial home
use recording was considered fair use. However, this ruling was reversed in appeal,
which held Sony liable for contributory infringement.

4.2 The Napster Case (in the United States of America)

Napster is a company that will go down in history as changing conceptions of copyright

law. Napster began as the brainchild of Shawn Fanning in 1998. Fanning designed the
program for his friends to facilitate searching the Internet for music. As Fanning
developed the software, he realized its enormous potential, leading him to incorporate a
company in 1999. News of the software, offered for free on Napster’s website, spread
quickly by, and within weeks there were millions of users. A revolution had begun.

A&M Records, Inc. v. Napster, Inc. was a landmark intellectual property case in which
the Court affirmed that Napster could be held liable for contributory
infringement and vicarious infringement of the plaintiffs' copyrights. This was the first
major case to address the issue of peer-to-peer file-sharing. Napster was closed down;
however, new programs and sites came up for the same purpose. It is very difficult to
police such a large no. of sites.

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4.3 Super Cassette Industries v. Bathla Cassette Industries Pvt. Ltd (in India)
In this case an application for injunction was filed with a claim that the defendant had
copied and distributed plaintiff’s remix of an original musical soundtrack of song ‘Chalo
Dildar Chalo’ from the film ‘Pakeezah’. The court decided against the plaintiff as the
remix was made without permission of the copyright owner. When the plaintiff himself
did not have any copyright over the musical recording which he claims, he cannot avail
a right to remedy.

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5. CONCLUSION

The current disagreements between the recording industry and media distribution
companies like Napster also raise questions about how much current copyright law has
strayed from its original constitutional intent. On the one hand, Napster is illegal. It
violates artists’ and copyright holders’ rights to be paid for their works, and does not
give artists a choice over how their music is reproduced and distributed. On the other
hand, it is also important to remember the reasons for which the incentive system
exists. The Constitution established copyright law for the benefit of the public, to
“promote the Progress of Science and the useful Arts.” The purpose of copyright is to
encourage creativity and development by establishing exclusive rights for those who
did the creating, but only to the extent that the works would be disseminated to the
public.

Online digital distribution of music has the potential to offer various benefits to artists,
the recording industry, and consumers. For artists, the Internet provides a method with
which a broad audience may be reached at very little cost. For record companies,
container less music offers vast savings from the elimination of both manufacturing
costs associated with CDs and losses from overproduction. For consumers, online digital
music distribution allows them to choose the music they want to hear, when they want
to hear it, without the hassles of going to the record store or ordering an album online.
Purchasing could become much more efficient, and consumers would have access to an
unprecedented catalogue of music only a few clicks away.

If music continues to be distributed illegally at no cost over the Internet, musicians may
be deprived of compensation for their work, ultimately destroying the incentive system
carefully crafted by copyright law. At its heart, copyright law attempts to provide
creators with enough economic incentives to encourage the creation and dissemination
of creative works, to the benefit of the public.

Piracy exists because of a market dysfunction. Consumers want access to a wide variety
of music at low cost from the comfort of their homes, and technology has empowered
them to have it. A successful alternative will need to:

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 be interactive;
 be available at low cost;
 offer extra content; and,
 Offer a large selection of current and past music.

The interests of both users and rights holders must be carefully taken into account in
attempting to develop a new system of digital music distribution. Simultaneously, the
role of artists as creators but not copyright owners must also be fit into this framework.
Developing successful policy will rely on accommodating interests of the three parties
involved in music copyright law: users, rights holders, and artists.

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