Indian Film Industry and Controversies in Distribution

Sector
(Submission of assessment in the subject of Commercial Transaction)

Submitted By: Submitted To:

Kaushal Mishra (1674) Dr. Bipin Kumar
B.A.LL.B. (Hons.) Faculty of Law, Commercial
Transactions
Semester III

NATIONAL LAW UNIVERSITY, JODHPUR

SUMMER SEMESTER
(JULY-NOVEMBER 2019)
 ACKNOWLEDGEMENT

On the completion of this project, we take the opportunity of thanking the people who
contributed in the completion of it. Without whose aid, contribution and help this project
wouldn’t have seen practicability.
First we extend our heartfelt gratitude to, our mentor and Commercial Transactions teacher,
Dr. Bipin Kumar, whose continuous guidance and support provided us with the much-needed
impetus and gave us a better insight into the topic. His support and enthusiasm for new
endeavours of learning provided us with a new perspective into my research. We are also
grateful to the IT Staff for providing all necessary sources and facilities for carrying out our
research and executing this work. We thank all members of the Library Staff for providing us
the assistance whenever needed.
We also thank our friends and batch mates for providing us the much-needed aid whenever
needed. Most importantly, we would like to thank our parents for providing us the much-
needed force for accomplishing this project.

2
 TABLE OF CONTENTS

Introduction................................................................................................................................4

Film Distribution Process...........................................................................................................5

1. Type and Scope of Rights sold........................................................................................6

2. Rights insisted by the Film Distributor...........................................................................6

3. Advances and Minimum Guarantees..............................................................................7

4. Distribution of Revenues and Share of Producers..........................................................9

5. Assignment of copyright in the film...............................................................................9

6. Marketing on part of Distributor.....................................................................................9

7. Term of Assignment or Licence......................................................................................9

Copyright Issues In Distribution Contracts..............................................................................10

Producer as Author and Owner of Copyright.......................................................................10

Distribution Rights...............................................................................................................13

Assignment.......................................................................................................................13

License..............................................................................................................................15

Non-Adherence to Competition Obligations and Conflict between the Parties......................16

Abuse of Dominant Position in Film Industry.....................................................................17

Exclusive Supply Agreements..............................................................................................18

Conclusion................................................................................................................................19

Bibliography.............................................................................................................................21

3
 INTRODUCTION

Indian Film Industry, inclusive of Bollywood (Hindi Cinema), Kollywood (Tamil Cinema),
Tollywood (Telugu Cinema) and others; is a significantly commercialised industry with total
box office clocking to over $2.31 billion per annum with production of highest number of
films in the world. It involves multi-billion dollar producers and distribution agencies
dedicated to making multi-fold profits through the delivery of various kinds of films to the
Indian audience.

As the stakes involved are huge with much more higher risks of production of some big
blockbuster movies running into hundreds of millions of dollars, the legality of the
transactions in the distribution and production of such films cannot be ignored. The
controversies that exist in the distribution sector of this industry are manifold.

Firstly, the frequency of disputes between the exhibitors and distributors cum producers over
the refund of the advance money paid by the exhibitors when the film fails at box-office
which tends to come under constant scrutiny of Competition Commission of India. Secondly,
the unconscionable bargained terms included in the clauses of the Distributor Agreements to
unduly favour the million dollar distributor agency while the local independent filmmaker
have to compromise their rights and lose the autonomy over their own rights. Thirdly, the
monopoly of the existing distributor giants and their dominance over screen sharing while
leaving the independent films to suffer with minimal reach with partly any screen on part of
their just share thereby violating the various aspect of Competition Law. Fourthly, the
manner in which the current distribution market is manipulated by the distribution agencies
than leaving it free to attain its own equilibrium to ultimately manoeuvre release of only one
single star studded movie over a single particular weekend. Lastly, various problems existing
in the contracts across the sector concerning copyright and competition rights of the
exhibition.

In fact the prevalent belief is that the business of making films has become more important
than the actual film itself. Yet the coming together of notions of ‘art’, ‘culture’ and
‘enterprise’ is arguably common to cinematographic productions worldwide. The boundaries
between the three have become increasingly blurred, to such an extent that the position of the

4
filmmaker as creator and entrepreneur has strengthened. However, the present distribution
process although mature but is inefficient, unorganised and lacks a good legal framework.

So as to integrate creative cultural works into development policies and safeguard an industry
that is considered a cultural asset, countries should expand on their efforts to protect and
promote the interests of their national film industries and address the conflicts that silently
ignored in current Film industry as commercial reality.

FILM DISTRIBUTION PROCESS

The creative process and business models of film industries are being refined as new
technologies are used to develop, produce, finance, distribute and market film productions.
Distribution as a sector constitutes a significant part in this mammoth task for
commercialisation of art i.e. cinema. In fact the prevalent belief is that the business of making
films has become more important than the actual film itself. Therefore, at first understanding
the distribution in its entirety is helpful to understand the problems inherent.

“Buying” or “selling” of a picture in the film industry means the licensing of a theatre to
show the picture for a certain number of days for a certain price. 1 To undertake such exercise
requires the producer go through the whole process of film distribution to actually sell the
film.

Distribution/sale of films is taken forward through various agreements between a film

distributor (Corporations who would then further deal with theatre owners known as
exhibitors or Corporations who themselves own theatre/multiplex chains across various
territories) and the producer. The producer then, will license assign rights acquired by him at
the development stage (from culmination of works by various artists), against remuneration
and the prospect of the film being exploited in key markets.2

In order to distribute the films, the rights that produces assigns or licences are divided into
primary and secondary rights (also termed as ancillary rights). While what is contained in
each rights differs from country to country, however conventionally; former tends to be

1
Entertainment and Amusement, 30A CORPUS JURIS SECUNDUM (2007).
2
WORLD INTELLECTUAL PROPERTY ORGANISATION, CREATIVE INDUSTRIES BOOKLET NO.2, RIGHTS, CAMERA
AND ACTION!: IP RIGHTS AND THE FILM-MAKING PROCESS (2015).

5
defined simple as those which relate to the primary market for films, - i.e. the multiplex
chains and latter includes all ancillary rights that follow the cinema release, namely DVD, TV
premieres and the newly emerging various OTT platforms. 3 It must be noted that no one
standard agreement for all rights in an inclusive manner can be made. This is the very basic
reason why Producer is made the owner of rights of film 4 as he helms the arduous task of
distributing the film through various contracts to different means of display by assigning
them appropriate rights to earn the maximum profit. Further, not only such contacts are
different in relation different display platforms but also dealing with different distributors,
each active in one or two market segments or territories (Eg. Cinema or video/ one in
northern India and other in southern India) and thus may need to license those rights
separately. The process that goes through is likely in such key points:

1. Type and Scope of Rights sold

As per lex marcatoria; distributors put pressure on the producer to assign or license all
available rights particularly in India, where such process is highly unorganised. Following,
the producer may not have the choice as he may be lacking in bargaining power, either
because he desperately needs screens to satisfy its investors by getting an return on
investment as early as possible or needs distributor to provide an advance which held move
the film from script to production. 5 This paves way of one type unconscionable bargaining
that prevails in distribution sector.

However, producer may try as much as possible to reserve those rights which are either of no
importance to the distributor’s business or which distributor has no solid expertise in
exploiting. This is done to maximise as much as profit in revenues as possible. 6 These may
include advertising rights; promotional rights in case of public performance rights, brand-
association rights etc which may bring added visibility to the film in the long run.

2. Rights insisted by the Film Distributor

The legal arena of copyright comes into play in this space where appropriate rights are given
by either by assignment or licence to the film distributor. Firstly, Theatrical rights – meaning
the irghts to the exploitation of the film in commercial cinemas. It is still seen as the strategic
launch market for most films; the success and failure of the film in cinemas is still an
important factor to determine the pricing of rights over other display platforms, although such
3
SAIRAM BHATT, LAWS OF BUSINESS CONTRACTS IN INDIA 221-252 (2009).
4
Copyright, Design Right and Related Rights, 9(2) HALSBURY’S LAWS OF ENGLAND (4TH ed. 2006).
5
TOM JEFERRY, FILM BUSINESS: A HANDBOOK FOR PRODUCERS 95 (1995).
6
Supra foot note no. 1.

6
practise is changing with the onset of OTT platforms such as Netflix. 7 The DVD rights which
were exclusively under the Distributor hands no more are significant rights to be sanctioned
as OTT platforms coming up as separate distributors as defining a new supplementary and
subsequent display platform to whom rights are given. However, theatrical market is almost
always a loss-leader for the distributor, which creates all the more for his investment to be
recovered in subsequent segments of value chain.8 Value chain includes Gross box office
receipts over the cinema release period, less exhibitor’s share, Distributor’s gross receipts,
less recovery of distributors’ prints and advertising expenses, less Distributor’s commission
(as decided in contract), less net from the cinema exhibition of the film.

Secondly, Satellite television rights – these refer to the television showcase rights post the
release. These services are usually supported through income sources such as advertising,
sponsorship and viewership.9 The selling of such rights depends on success and failure of
films at cinemas. As per market practise, the films that fail in cinemas are showcased early in
TV platform to receive the ROI to set off the loss suffered through such income sources as
mentioned above.

Lastly, Distributor’s agreements also contain clauses to ensure that hey have the right to
make necessary changes to the film for the purpose of distribution. Changes to title, cuts
designed to comply the film classification/ censorship requirements, dubbing and sub-titling,
etc. are included in such clauses.10 The producer should therefore obtain relevant consents
from the author/creative contributors to the work as if a misunderstanding to such change
arises, it may lead to copyright legal action by a right holder whose consent was not sought,
for breach of exclusive rights or moral rights. This poses another problem whether producer
as a full owner of copyright11 can sanction such changes.

3. Advances and Minimum Guarantees

In ideal sense, organised and mature film markets is characterised by the capacity of local
film distributors be it the large or small players to participate fully in the financing of films
by investing them against future revenue projections. Hollywood is almost seen as an
accomplished model fpr distributor led financing by advances and minimum guarantees.
Majority of high budget US Films are financed through a studio distribution deal (producer

7
Id.
8
Supra foot note no. 2.
9
Supra foot note no. 1.
10
Supra foot note no. 4
11
Id.

7
cum distribution model) which covers almost 40 to 100% of the cost of production. Such
studio such as Walt Disney, Warner Bros, 21st Century are some of the large global
distribution and marketing entity able to acquire significant amount IPRs beforehand (current
Spiderman controversy between Marvel and Sony pictures12) and exhibit them on worldwide
scale. Such model is held in almost high regard as opposed to Indian model where such
distributor led financing is limited only to dominant payers. In India’s matured model, film
distributors are fragmented and seldom involved in business of financing films. In India, the
so-called hero films, i.e. those starring the most eminent male stars, can attract distributors’
advances sometimes equal to – or in excess of – the cost of production. In the latter case, this
means the production may be in profit even before it starts! However, the overwhelming
majority of the 1,000 films made in India each year start production without a distributor
being involved in the financing. This means they start filming without a single intellectual
property right sold to ensure the commercial exploitation of the films. Some do receive
distributor finance, even then, unless a bankable hero is cast, the distributor’s advance will
generally be well below half the budget and the producer will always struggle to cover the
gap from other sources.13

As a general rule, most independent low-budget film makers wherever in the world they live
and work, will find it very difficult to attract a distributor into their financing plan before the
start of production. Most successful films in this section of the worldwide film market are
picked up by distributors after completion i.e. either through festivals or preview screenings.14

Minimum Guarantee for such purposes is where the distributor guarantees to the producer
that the film will either earn a certain sum in revenues or that he will pay the producer the
guaranteed projected sum, whether or not he generates enough revenue from the exploitation
of the film to cover this sum. The distributor is therefore at risk. In some cases, he may agree
to advance the value of the MG to help the producer make the film; alternatively, the
producer may be able to discount the value of the MG contract with a bank, which requires a
letter of credit as a condition. In a discounting deal, the bank agrees to cash-flow the value of
the MG contract. It is discounted in that the cash advanced by the bank rarely covers 100
percent of the value of the contract.15

12
Alex Abad, Spider-Man will leave the MCU, as Marvel and Sony end their partnership, VOX, Aug. 20, 2019,
available at: https://www.vox.com/culture/2019/8/20/20825631/spider-man-marvel-sony-dispute-mcu-deal-
film-rights.
13
Supra foot note no. 4.
14
Supra foot note no. 1.
15
Supra foot note no. 4.

8
Advance on the other hand, deals with when the distributor advances a sum of money against
future revenues to the producer. The advance may be cash-flowed in part or in full and is
recoverable by the distributor out of first income form the film’s commercial exploitation,
sometimes with interest charged on top, before the producer can share in revenues. The
advance also puts the distributor at risk because the revenue generated by the film’s
exploitation may not match the amount of the advance, but he will generally secure a bigger
share of the revenues if the film is successful.16

The dispute may arise in case of advances when the films fails and distributors and exhibitors
don’t receive there part of advances, in case of which they may ask producers to refund their
advances.

4. Distribution of Revenues and Share of Producers

Producer receives a share of the net income the distributor receives from sales. This is
received by the producer from the point after which distributor has recovered its commissions
(as set out in the distribution contract which are based on conventional usage). Recovery of
the advance or a share of the net profit if the advance is a sizeable one is done by
distributor.17

Right from exhibition of the film in the theatrical market, distributor receives a certain
percentage as mentioned out of the film exhibitor’s gross. Then from distributor’s gross
producer receives his share as foresaid. The remaining balance is retained by the cinema i.e.
exhibitors to cover its overhead costs, i.e. costs of operating the cinema or multiplex. While
some countries have statutory prescriptions for such ratio of share, countries like India are
driven by individual market negotiations which leads to more of unconscionable bargains and
exploitation as will be discussed further.

Subsequently, producer may receive its share out of video/DVD rights, OTT platforms rights
etc the revenue may inflow in manner of one-time assignment of rights or as per viewership
or sales.

5. Assignment of copyright in the film

Often distributors tries to negotiate for full assignment or transfer of copyright in the film.
Such thing may enable control over copyright will enable him to exploit the film fully in all
markets in without any obstacles in event of film being distributed by a third party. Such
transfer and ownership would be discussed further.
16
Id.
17
Deepak Kapoor, The Indian Entertainment Industry, MEDIA AND ENTERTAINMENT INSIGHTS, May 2005.

9
6. Marketing on part of Distributor
Each distributor needs bear expenses of marketing and physical print costs in order that film
is well-marketed to gets its best chance in marketplace. These are called Post-Production
costs.18 The producer will also try to negotiate consultation rights over the shape and direction
of the marketing campaign to support the release of the film.

7. Term of Assignment or Licence

Onset of pay-per-view, OTT platforms and other digital media, this aspect of has become
more rationalised and complicated. However, there is no specific thumb rule for the term of
an assignment or licence. With distributors fighting for long terms and producers often
attempting to negotiate shorter periods.19

The parameters defining such is the performance expectations. At most basic, this means the
agreements protect the producer against the distributor making no effort to release or exploit
the film in other media and ensures the rights revert to him after a period of time during
which no exploitation of the rights has taken place.

COPYRIGHT ISSUES IN DISTRIBUTION CONTRACTS

Film distribution process as noted before includes various stages and is a driving force behind
the film industry. One of the most important aspect of such a process is protection and
acquisition of copyright as that is how the film will ultimately be available for viewership.
Film is a collection of works of to name a few – artists, producers, writers and directors.
Various contracts are set out to protect the copyright interest of each. However, various issues
emerge where unconscionable bargains prevail in transfer of such copyrights and their
exploitation by producers and record companies to garner the various copyrights that subsist
in the underlying works that form parts of the composite whole such as a film.

Indian copyright paradigm is governed by the Copyright Act, 1957 20 (“the Act”). Section
13(1)(b) of the Act offers copyright protection inter alia to cinematograph films. The Act
defines a “cinematograph film” as a;

18
Supra foot note no. 1.
19
Supra foot note no. 4.
20
§13, The Copyright Act, 1957 (No.14 of 1957).

10
“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”21

Thus, distinction between the film as an original work of expression and its setting in a
recording is blurred; the Act makes only the recording part amenable for copyright protection
and the former is even excluded from the scope of “dramatic work”.22

Producer as Author and Owner of Copyright

The first owner of the copyright is always the author, except when the work is made in the
course of employment under a contract of service, in which case the employer becomes the
first owner.23 The use of the term “author” suggests that the actual creator of the work is
sought to be protected and thus when used in relation to cinematograph films, the Act
bestows the copyright ownership on the producers. 24

As per Halsbury Laws of England; ‘Author’, in case of films is the person by whom the
necessary arrangements have been made for creation of the work undertaken i.e. the film;
which unarguably is the producer. He is responsible for organising the making of the film. 25
The dual justification that is often given for making the producers the author is that it is their
capital and skill that leads to the production and distribution, and that it is practically
unfeasible to offer copyright protection to the host of actual creators that participated in the
process of production. Secondly, there exists a historical justification, as copyright law
originated as a demand made by publishers, booksellers and printers to protect their business
investment, rather than from authors. Consequently, common law tradition generally viewed
copyright a little more than the right to copy.26

It must be noted that film should stand in its own as a separate original work by contribution
of various artists and forms then only it will lead to be said as a “Joint Work” under Section
2(z) of the Act.27 A collaborative contribution will not produce a joint work, and a contributor
will not obtain a co-ownership interest, unless the contribution represents original expression
that could stand on its own as the subject matter of copyright. Joint work may not be created

21
Id.
22
Supra footnote no. 3.
23
Id.
24
Id.
25
Id.
26
Supra foot note no. 2.
27
Supra foot note no. 3.

11
where one of two collaborators contributed only unprotectible expression.28 Film as joint
work can be even interpreted in Indian paradigm as large scale of movies are produced by a
major production company with director’s production company making producer as well as
director the co-owner of the copyright of the film.29

Controversy over authorship or co-authorship is one major issue that such contracts tend to
avoid. Aalmuhammed v. Lee30 puts forward principles in the same regard. Warner Brothers
contracted with Spike Lee and his production companies to make the movie Malcom X. Lee
co-wrote the screenplay, directed, and co-produced the movie, which starred Denzel
Washington as Malcolm X. Washington asked Jefri Aalmuhammed to assist him in his
preparation for the starring role because of plaintiff’s knowledge of Malcom X and Muslim
culture. He reviewed the script and suggested extensive script revisions which led to addition
of various scenes and events as per his expertise and suggestions. Some of these suggestions
were present in released version of the film. As asserted by him, he helped to rewrite, to mate
more authentic the script. He said since he substantially contributed to the film and he be
declared as co-author of the film and such credit be given to him. The court asserted;

“The plaintiff failed to establish that he was one of its “authors”. We hold that
authorship is required under the statutory definition of a joint work, and that
authorship is not the same thing as making a valuable and copyrightable
contribution…..For a movie, the author might be the producer who raises the
money as he causes something to come into existence. Further, the creative
contribution does not suffice to establish authorship of the movie, which is an
inseparable whole in itself. Hence, Aalmuhammed did not at any time have
superintendence of the work. Warner Brothers and Spike Lee controlled it…..
Also neither Aalmuhammed, nor Spike Lee nor Warner Brothers made any
objective manifestations to have an intent to be coauthors. It was rather a ”work
for hire” agreement. Progress would then be retarded rather than promoted, if
an author could not consult with other and adopt their useful suggestions
without sacrificing the sole ownership of the work.”31

28
PAUL GOLDSTEIN, 1 GOLDSTEIN ON COPYRIGHT (3rd ed., 2005).
29
Santosh Mehta, SRK’s Zero is all set to hit the theatres, PATRIOT, Sept. 5, 2019, available at:
http://thepatriot.in/2018/10/04/zero/: Herein, Anand L. Rai, the director co-produced the film with the major
production house; Red Chillies Entertainment.
30
202 F.3d 1227 (9th Cir. 1999).
31
Id.

12
Hence, through these principles and findings, Aalmuhammed was not considered as a co-
author.

But there exists a strong criticism of the said judgement. The case’s expanded authorship can
create problems. Legislature never intended to include among co-authors such superintending
individuals as a film producers because if for no other reason; these people rarely contribute
copyrightable expression to a work; it was rather to accommodate the economic interests of
these individuals and their employees that Legislature created the fiction of work for hire and
not for such exercise of it. At the same time, its focus on a single creative force – makes the
decision under-inclusive, as rarely it will be able to include a work which will have more than
two or three authors who meet this criterion; usually it will have one.

However, as per Moral Rights; there’s the right to be identified as author of a work or the
director of a film as the case may be. It is also known as ‘right of paternity’. 32 As per this;
even the director of a film has the right to be identified whenever the film is shown in public
or communicated to the public or copies of the film are issued to the public. 33 But it must be
noted that doesn’t make such directors co-owners of the copyright. Thereby, the directors
have right to be identified as a director in the post-movie credits but not ownership to the
copyright. However, such a right of screenwriters in Indian Film Industry, is often violated
wherein, the credits for the identification of scriptwriter are ignored in the film poster and are
not given importance. Such violation is prevalent in Bollywood.34

Distribution Rights
Whatever be the disadvantages of concentrating copyright protection of the film in the hands
of the producer, it is perhaps best to see this as a necessary evil. 35 Producer takes upon
himself the task of distributing the movies where he as an copyright owner; gives exclusive
right to distribute, and authorizes distributors and others to distribute, copies of the
copyrighted work to the public by sale or other transfer of ownership i.e. assignment or
licence.36 It can also be done by transferring or terminating an interest, right or licence in
respect of the copyright.37

32
Supra foot note no. 3.
33
Id.
34
Prashant Singh, Voices of the Bollywood pen pushers, INDIA TODAY, Jan 9, 2010, available at:
https://www.indiatoday.in/latest-headlines/story/voices-of-the-bollywood-pen-pushers-64610-2010-01-09.
35
Supra foot note no. 2.
36
Supra foot note no. 27.
37
Supra foot note no. 2.

13
Blind selling and Block booking is one thing that can found prevalent in Indian Film
Industry. Blind selling is a practise whereby a distributor licences a feature before the
exhibitor is afforded an opportunity to view it. 38 In unorganised Indian Industry, majority of
films except of star studded films are taken by distribution enterprises without exhibitor i.e.
the cinemas noting their say in it. Secondly, Block booking is the practise of licensing, or
offering for license, one feature; or group of features, on condition that the exhibitor shall
also licence another feature or group of features released by the distributor during a given
period.39 This was done by Yash Raj Films during screening of Ek Tha Tiger and Jab Tak
Hai Jaan.40

Assignment
Assignment of copyright is the industry practise, except when published music is being used
for a film, in that case it is more common for the record company to give non-exclusive
license to the film producer.41 This is such only one set of individual right out of bundle of
various rights owned by record label is licensed instead of assignment of all rights wherein
producer would have had the power of full alteration etc. Section 18 of the Act; allows
assignment of copyright, wholly or partly and for the entire term of the copyright or less.42

Assignment entails that the assignor parts with all his rights with the assignee. Assignor in
return receives a consideration as a sum of money paid down usually a one-time payment
against assignment of rights, often known as royalty payments. 43 When an author agreed that
the publisher should have the exclusive right of producing, publishing and selling a work, it
can be construed as an assignment of copyright.44 For instance, often distributors tries to
negotiate for full assignment or transfer of copyright in the film. Such thing may enable
control over copyright will enable him to exploit the film fully in all markets in without any
obstacles in event of film being distributed by a third party. 45 Such a transfer is an
assignment. This may take place usually where a foreign film is to be released in India. In
such case, the foreign distributor who may have assigned rights would further transfer the
rights to Indian distributor in form of assignment so he may have the exclusive right to alter

38
Entertainment and Amusement, 30A CORPUS JURIS SECUNDUM (2007).
39
Id.
40
Ajay Devgn Films v. Yash Raj Films Pvt. Ltd., 2013 CompLR 903 (CompAT).
41
Id.
42
§18, The Copyright Act, 1957 (No.14 of 1957).
43
Supra foot note no. 3.
44
Id.
45
Supra foot note no. 1.

14
the film to meet censor demands, dubbing and other necessary changes for regional
screening.

Further, a salient feature of most scriptwriter agreements in the film is the transfer of full
copyright and all rights subsisting therein, to the producer. As depending upon the bargaining
power of the original creator (if only they are some influential writer such as Javed Akhtar or
Gulzar), they may be able to bargain with the producer to retain certain rights regarding such
things. Further, standard procedure is to hire writers on a work-for-hire-basis, in which case
the producer becomes the first owner.46 Such a practise will not ever enable a scriptwriter to
own a film that he/she may have written and rather receive a fixed royalty after assignment.
The only recourse is when the scriptwriter itself becomes the director and co-produces the
film with his/her production house. Such a practise hinders the creative process and an artist
to take up such a work for existence of unconscionable bargain, where there inclusion in
shooting and post-production may be entirely dependent on the whims and fancies of the
producer. This is in line the criticism of Aalmohammed Case as presented in above section.

Assignment can also be Partial47 to suit the needs as stated earlier. An assignment may be
partial, that is, limited so as to apply to one or more, but not all, of the things the copyright
owner has the exclusive right to do, but not the whole, of the period for which the copyright
is to subsist. In consequence of such assignment, different persons are entitled to different
aspects of copyright in a work, the copyright owner for any purpose is the person who is
entitled to the aspect of copyright relevant for the purpose. Such assignment are more useful
in Film Industry, particularly in assigning of rights to OTT platforms, Satellite TV and
merchandising rights.

License
An alternative to transfer of ownership, creators may choose to transfer only an interest. This
is known as Licence as provided under Section 30 of the Act, but still it is required to be in
writing.48 However, this would not usually be acceptable to produces as later on distributors,
investor and other ancillary parties would insist on establish a specific chain of title wherein
here producer would not be the owner of such copyright as only an interest is imparted to
him/her.49

46
Supra foot note no. 2.
47
Supra foot note no. 3.
48
§30, The Copyright Act, 1957 (No.14 of 1957).
49
Supra foot note no. 2.

15
In licence, all the rights out of owner of the copyright are not transferred to the licensee. It is
not a partial assignment of copyright; it is merely leave to do something which would
otherwise be unlawful. A licensee has however, the right to make alterations, except in so far
as his licence expressly or impliedly restricts the right. 50 Herein, the share of profits is
present, which may be in sole and exclusive licence conferred on say for example by
Producer to Distributor in exhibiting films particular region. The copyright would not vest in
Distributor but in the producer instead.

There two licences; exclusive licences and non-exclusive licences. The difference is that, a
licensee unless he is an exclusive licensee, cannot sue for infringement of copyright.
However, The licensee may sue the assignor for damages for the breach of contract if the
latter does not protect his interests.51 Exclusive license means a licence in writing, signed by
or on behalf of the copyright owner, authorising the licensee to the exclusion of all other
persons including the person granting the licence, to exercise a right which would otherwise
be exercisable exclusively by the copyright owner.52

Implication of non-exclusive licence has been stated above while of exclusive licence is
particularly used in while granting rights to distribution companies wherein they are given
exclusive rights to distribute a particular film which no other distributor is entitled and they
are sole earner of the revenue and bearer of marketing costs. Such is a licence as copyright
owner is still the producer and by exclusive licence producer gives the right of exhibition of
film in cinemas to a distributor exclusively.53

NON-ADHERENCE TO COMPETITION OBLIGATIONS AND CONFLICT BETWEEN

THE PARTIES

Indian Film Industry as stated before is filled with anti-competitive practices. At various
stages of distribution process competition obligations are not met. Firstly, in assignment of
copyright to the producer by scriptwriters is based on their bargaining power they might
possess as stated earlier is violative under Abuse of Dominant Position by the big production
50
Supra foot note no. 3.
51
Id.
52
Supra foot note no. 27.
53
Supra foot note no. 1.

16
houses such as Yashraj Films, Dharma Productions etc. Secondly, regarding share of
revenues between the exhibitors and the production houses and former’s exploitation as
majority of distribution companies are owned by production houses themselves. This issue
also concerns the advances furthered by the distributors cum exhibitors and refund of the
same in case the movie fails. Thirdly, the anti-competitive agreements are sustained due to
such cases are rarely ever taken to the court. 54 The exclusive supply agreements with regard
to only certain distributors enjoying the share of large number of screens which ultimately
hinders the small budget films to perform due to lack of screens.

Further, the extent of restrictive covenants in a contract are directly related with the seniority
and the popularity and position of the artist in the industry.55 While younger and newer actors
with low bargaining power are often made to enter into contracts with extremely restrictive
covenants, the more established artists don’t allow such terms to be dictated to them. Thus,
the legal framework in this regard is not adequate. There is protection available both in
Contract law (under unconscionable bargain) and Competition Law (Abuse of Dominant
Position and Exclusive Supply agreements).

Enterprise is defined in Section 2(h) of The Competition Act, 2002 (“the Act”) which must
deal in goods or services. Explanation (c) to the above clause provides that ‘goods’ means
goods as defined in the Sale of Goods Act, 1930.56 In several cases intangible property as a
‘good’ has been recognised under the Sale of Goods Act, which can be interpreted to include
Motion Pictures under definition of ‘goods’.57 Following, CCI has also recognised Motion
Pictures as ‘goods’ as provided under the Act.58

Abuse of Dominant Position in Film Industry

Section 4 of the Act provides for the abuse of dominant position directly or impliedly if an
enterprise or a group puts an unfair condition in purchase or sale of goods. Herein, it also
indulges in practice or practices resulting in denial of market access or uses its dominant
position in one relevant market to enter into or protect, other relevant market.59

Explanation to the Section provides that dominant position means a position of strength,
enjoyed by an enterprise in the relevant market, in India which enables it to either operate
54
Supra foot note no. 2.
55
Id.
56
The Sale of Goods Act, 1930 (No. 8 of 1930).
57
First National Bank of Springfield v. Department of Revenue, 421 N.E.2d 175.
58
Film & Television Producers Guild of India v. Multiplex Association of India (MAI), Mumbai, 2009
CompLR 413 (CompAT).
59
§4, The Competition Act, 2002 (No.12 of 2003).

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independently of competitive forces prevailing in the relevant market or affect its competitors
or the relevant market in its favour. 60

It must be noted that a dominant, a firm must be in a position of such economic strength that
it can behave to an appreciable extent, independently of its competitors and customers.
Therefore, to assess dominance it is important to consider the constraints for an enterprise
faces on its ability to act independently. Its not the large share of the dominant but the entry
barriers that are in favour of the dominant restricting others to share revenues or enter the
market.61

Likewise, various cases have been instituted before CCI on the basis on share of screens by
exhibitors. In Ajay Devgn Films v. Yash Raj Films Pvt. Ltd.62, it was all alleged that YRF
before the release of the movie “Ek Tha Tiger” had put a condition on single screen theatres
that if they wanted to exhibit the film Ek Tha Tiger they would have to simultaneously agree
to exhibit the other film Jab Tak Hai Jaan at the time of Diwali. It was urged that single
screen owner (exhibitor) did not agree to booking his theatre for both the films was not to get
the right to exhibit a single film. Further, while some theatres agreed to enter into agreement
with the aforesaid parties some did not agree to this and did not enter into an agreement.
Contention raised was that the agreement effectively ensured that exhibitors only screen one
particular film produced by one particular producer to the exclusion of the others in and
therefore it amounted exclusive supply agreement and abuse of dominant position by YRF.
However, the Commission observed that firstly thee agreement were voluntarily accepted by
the alleged theatre owners and its was their decision whether to accept such agreement or not
to accept. This apart from the fact that these agreements were also for a particular period
therefore it could not be as if the theatre owners were coerced not to show any other movie
after that period. Thus such agreement was not held to be exclusive supply agreement and
YRF was not abusing dominant position.63

However, if we apply principles of abuse of dominant position, YRF can stand independently
of its competitors because of such dominance in production of movies and having its own
distribution arm. Further, the though exhibitors on paper voluntarily agreed to such
agreement however, the other disputes as said before wouldn’t be brought before the court.
Such a decision establishes the dominant nature of big production houses leaving very less
60
Id.
61
S M DUGAR, GUIDE TO COMPETITION ACT, 2002 (Sudhanshu Kumar ed., Lexis Nexis) (7th ed. 2018).
62
2013 CompLR 903 (CompAT).
63
Id.

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leeway for new entrants to exhibit their movies without restraints as such dispute will not
ever arise before courts.64

Exclusive Supply Agreements

Section 3 of the Act provides for Anti-Competitive agreements. Clause (4)(c) provides for
exclusive supply agreement. Explanation subject to such section provides that a Exclusive
Supply Agreement includes any agreement restricting in any manner the purchaser in the
course of his trade from acquiring or otherwise dealing in any goods other than those of the
seller or any other person.65

This is the part of Vertical Agreements which are agreements between the enterprises that are
at different stages and levels of the production chain and therefore, in different markets. The
above mentioned case was also disputed under the Exclusive Supply Agreements.

In Film Industry; Producers, Distributors and Exhibitors are at different levels of film
production and distribution process. They in itself constitute a different markets. Majority of
time, equitable number of screens are not given to low budget films as exhibitors have paid
advance which constitutes as a production cost for the big budget films and ultimately such
films are reserved exclusively in such screens of the exhibitors. This is known as Pre-Sale
Right by which films are in profit even before the release. 66 This creates an exclusion because
of pre-investment which is based on the dominant nature of such production houses which
hinders low level players to shine, thus violating the competition obligations, ultimately being
in anti-competitive agreements.

Raghavan Committee provided that to upheld that Perfect Competition Principles should
prevail i.e. on demand side close substitutes for consumer should be available freely and on
supply side, all the producers should have the ability with their existing resources shift to
production of other substitutes. Ultimately meaning that market equilibrium in respect of
market forces of supply and demand should regulate the market rather than cartels or big
enterprises doing so. In current film industry, the major production houses coupled with self-
owned distribution chains control the exhibition of film in manner that in some cases only
one of the major movie in put on show on a particular weekend and low budget can’t find
place and have to struggle for revenues. Even such intention behind Competition Law is not
in consonance with such practices.

64
Supra foot note no. 2.
65
§3, The Competition Act, 2002 (No.12 of 2003).
66
Supra foot note no. 1.

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 CONCLUSION

We find that the legal framework in the current scenario of Indian Film Industry is
unorganised, inefficient, anti-competitive and inadequate to meet the standards of market.
The major problem as identified is while the protection in law exists as elaborated under
various aspects of law, however, what governs is the dominance and seniority in the industry
to negotiate the terms and result is that none of the disputes come before the court of law. The
problem is much larger when the dealings are more of in the ad-hoc nature for many of the
dealings, the high influence wielded by power and money, and overall ignorance of the artists
to understand their rights.

The distribution process although complex in nature is apt enough to meet the demands of
such a large scale industry that exists in India. However, at every level, it is fraught with
various problems and conflicts between various parties.

In order to distribute the film, foremost task is to deal with copyright. With Producer being at
the helm of ownership of copyright, writers are not given the due identification rights and
only recourse for them to be identified and own the film is to become a director and start their
own production company ultimately killing the artistic instinct. The criticism of
Aalmuhammed case is to be noted for the approach of absolute control by the producer in an
unorganised manner gives way for exploitation of various artists who; leave the ownership
right are not even given the identification right as a moral right. Such violations are
prominently seen in Indian Film Industry which does not give much credit to the scriptwriters
and they are not even mentioned in the Film Posters.

Further, in transfer of copyrights, assignment and licencing paves way for unconscionable
bargain which though has the recourse in Contract Law but such a recourse is not taken.
Scriptwriters or songwriters for the films are excluded from the production and post-
production process and even are said to transfer their rights by assignment without leaving
any interest to them until and unless they have higher threshold of bargain in terms of
seniority and influence. Such exercise of assignment may ultimately lead to alteration of the
final product i.e. the film which writer may have never intended and since rights are in
assignment, he/she can not question such violation as now the authorship of the copyright is
in the hands of Producer.

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While such distribution process is followed, various competition obligations are not met and
solutions in laws are stated above where such issues can addressed and solved. Primarily,
major production houses like YRF, Dharma Productions etc with their own distribution
subsidiaries exercise dominance in distribution market where they ultimately favour and try
to exhibit their own produced movie excluding the low budget movies which paves way for
anti-competitive agreements. Issues regarding refunding of the advances advanced and
conflict of interest in cases where exhibitors favouring the screening of movies for which
they set advances beforehand leads to various conflicts and violations which have been even
addressed by Competition Commission of India, which has taken proactive role in resolving
such issues.

Taking account of such issues, although to come out with solutions would not be easy to arise
but recognising of such issues and addressing that resolution in law does exist for such
conflicts is much more important to start a debate and discussion to seek the course of law
and not to let it prevail in absolute ignorance.

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 BIBLIOGRAPHY

Acts
 The Copyright Act, 1957 (No.14 of 1957).
 The Sale of Goods Act, 1930 (No. 8 of 1930).
 The Competition Act, 2002 (No.12 of 2003).

Books
 WORLD INTELLECTUAL PROPERTY ORGANISATION, CREATIVE INDUSTRIES BOOKLET
NO.2, RIGHTS, CAMERA AND ACTION!: IP RIGHTS AND THE FILM-MAKING PROCESS
(2015).
 SAIRAM BHATT, LAWS OF BUSINESS CONTRACTS IN INDIA 221-252 (2009).
 TOM JEFERRY, FILM BUSINESS: A HANDBOOK FOR PRODUCERS 95 (1995).
Cases
 Ajay Devgn Films v. Yash Raj Films Pvt. Ltd., 2013 CompLR 903 (CompAT).
 First National Bank of Springfield v. Department of Revenue, 421 N.E.2d 175.
 Film & Television Producers Guild of India v. Multiplex Association of India (MAI),
Mumbai, 2009 CompLR 413 (CompAT).
 Aalmuhammed v. Lee, 202 F.3d 1227 (9th Cir. 1999).

Commentaries
 PAUL GOLDSTEIN, 1 GOLDSTEIN ON COPYRIGHT (3rd ed. 2005).
 S M DUGAR, GUIDE TO COMPETITION ACT, 2002 (Sudhanshu Kumar ed., Lexis
Nexis) (7th ed. 2018).

Websites
 Alex Abad, Spider-Man will leave the MCU, as Marvel and Sony end their
partnership, VOX, Aug. 20, 2019, available at:
https://www.vox.com/culture/2019/8/20/20825631/spider-man-marvel-sony-dispute-
mcu-deal-film-rights.

 Deepak Kapoor, The Indian Entertainment Industry, MEDIA AND ENTERTAINMENT

INSIGHTS, May 2005.

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  Santosh Mehta, SRK’s Zero is all set to hit the theatres, PATRIOT, Sept. 5, 2019,
available at: http://thepatriot.in/2018/10/04/zero/.
 Prashant Singh, Voices of the Bollywood pen pushers, INDIA TODAY, Jan 9, 2010,
available at: https://www.indiatoday.in/latest-headlines/story/voices-of-the-
bollywood-pen-pushers-64610-2010-01-09.

Encyclopaedias
 Copyright, Design Right and Related Rights, 9(2) HALSBURY’S LAWS OF ENGLAND
(4TH ed. 2006).
 Entertainment and Amusement, 30A CORPUS JURIS SECUNDUM (2007).

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