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Novex Communications Versus Trade Wings Hotel

By - King Stubb & Kasiva on February 23, 2024

In a landmark judgment delivered on January 24, 2024, the Bombay High Court addressed the contentious issue surrounding the locus standi of entities like Novex Communications Private Ltd. and Phonographic Performance Limited (PPL) to issue licenses without being registered as Copyright Societies under Section 33(1) of the Copyright Act, 1957. The ruling stands in stark contrast to the Madras High Court’s earlier decision, intensifying the debate within the legal community.

Case Timeline and Facts:

The legal saga unfolded with Novex Communications Private Ltd. v. Trade Wings Hotels Limited and connected matters.[1] The dispute primarily revolved around the rights of assignees of copyright, challenging the requirement for entities to be registered as Copyright Societies under Section 33(1). The complainants, Novex and PPL, argued that they were legitimate owners with the right to issue licenses, emphasizing partial assignments under Section 18(1) and contractual agreements with rights owners.

Issues Raised: The core issue revolved around whether entities like Novex and PPL, acting as assignees, could legitimately issue licenses without being registered as Copyright Societies, as mandated by Section 33(1). The conflicting judgments from different High Courts added complexity to the matter.

Arguments Advanced:

Complainants:

Novex and PPL based their case on various provisions of the Copyright Act, contending that assignees could issue licenses in line with Section 30. They differentiated copyright societies, emphasizing that such entities administer rights in others’ works, unlike assignees who own the rights. The complainants also highlighted the denial of PPL’s registration as a copyright society, claiming a right to issue licenses despite being de jure denied registration.

Defendants:

In response, the defendants, including Lemon Tree in the Delhi High Court, challenged the validity of assignment agreements, asserting that they circumvented regulatory requirements. They argued that such agreements lacked specificity on “works” as required by Section 19(2) and failed to address royalty payments mandated by Section 19(3).

The counsel for the defendants also relied on clauses in Novex and PPL’s Memorandum and Articles of Association (MOA and AOA) and annual reports, asserting that both companies were self-proclaimed in the business of issuing licenses.

Court Observations and Order:

The Bombay High Court, in its detailed judgment, declared the assignments in favour of PPL and Novex as valid partial assignments, categorizing them as “owners” under paragraph 136 of the judgment pronounced. The court ruled that Section 30 indeed empowered owners to be assignees with the authority to grant licenses. It distinguished the role of copyright societies, interpreting Section 34(1)(b) to mean that authors/owners could issue licenses independently of a society.

The court opined that Parliament did not intend to disable authors/owners from issuing licenses independently, emphasizing the public interest in making works available to users. It rejected the argument that Section 33(1) could curtail the owner’s power to grant licenses under Section 30. The court upheld the leading provision rule, asserting the hierarchy between Section 30 and Section 33.

Analysis:

Despite the ruling in favour of Novex and PPL, critical aspects remained unaddressed. The court did not appreciate the defendant’s argument that assignment agreements were void due to non-specification of works, absence of royalty provisions, and the lack of actual ownership rights. The significance of the phrase “in its individual capacity” in Section 33(1) was seemingly overlooked.

The court’s interpretation of Section 34(1)(b) may be subject to debate, as it appears to blur the distinction between individual licensing by owners and the business of issuing licenses. The potential misuse of assignment agreements to circumvent regulatory oversight was not adequately considered.

The court’s acceptance of the leading provision rule may raise concerns about potential contradictions between Section 30 and Section 33. The court’s reliance on public interest might be viewed skeptically, considering the regulatory intent of Section 33(1) to balance the interests of owners and users.

As the copyright society conundrum persists, with conflicting judgments, a resolution from the Supreme Court becomes imperative to settle the prevailing uncertainty within the industry.

Conclusion:

In conclusion, the Bombay High Court's ruling in Novex Communications v. Trade Wings Hotels marks a significant development in the ongoing discourse about the powers of assignees and the regulatory framework for entities issuing licenses. This decision opens up opportunities for further legal interpretation, and the anticipation is high for the Supreme Court to offer valuable clarity on this intricate and crucial legal matter in the future.

[1] Commercial Ip Suit No. 264 of 2022


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