TaxTMI 
TaxTMI 
2009 (4) TMI 1037
X X X X Extracts X X X X
X X X X Extracts X X X X
....of; (ii) to sell or give on hire or offer for sale or hire, any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions; and (iii) to communicate the film to the public. 3. Film production, say the plaintiffs, is a complex, time consuming and costly process, needing a well defined distribution strategy for its commercial success. The plaintiffs refer to development of a well thought out distribution strategy to release the film on its completion, in different states. According to them, generally, the first phase entails release of the film on its completion, in different stages. This involves release of the film in theatres and/or cinema halls. After the film has run its course in the theatres and cinema halls, it is released in other formats and media such as home video, rental, cable and satellite TV. The time difference between the release in theatres and cinema halls and release on other formats may sometimes be separated by a few months and at times by a couple of years. This distribution strategy/system of release within the film industry is commonly referred to as "windows". 4. As the first stage of the distribution s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t permitted for sale or rental outside the US and Canada. 7. The plaintiffs allege that giving (a film) on hire or offering a film for hire without the copyright owner's license is an act of infringement. The plaintiffs allege that the defendant has no rental licenses in his favour and all such acts of rental amount to an act of infringement of copyright under the provisions Section 14 (d) (ii) read with Section 51 of The Copyright Act, 1957. The plaintiffs assert to being copyright owners and assignees of several such films. 8. It is alleged that DVDs are coded according to specific geographical zones. The DVDs meant for sale in the USA and Canada are Zone 1 DVDs. DVDs meant for sale in India are Zone 5 DVDs. Zone 1 DVDs are not authorized for sale or rental in Zone 5 countries like India. The DVDs stocked and rented by the Defendant are largely Zone 1 DVDs. The plaintiffs allege that the Defendant has a website at www.cinemaparadisoshop.com where it has been stated as under: First DVD store with all license Though DVDs are easily available, piracy is rampant, Cinema Paradiso is an exception. Great caution has been exercised to ensure that only original DVDs are stocked.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion and damages. 12. The defendant, in the written statement, disputes that the plaintiffs can maintain the proceeding; it is alleged that being associates and affiliated companies of assignees or co-owners of copyright in films is insufficient to clothe the plaintiffs with authority to maintain the suit. Hence the plaintiffs cannot raise claims in respect of works for which they are not themselves the owners of the copyright. 13. The defendant submits that in the absence of statutory exceptions to the infringement of copyright of cinematographic films, common law exceptions such as fair use apply to cinematographic films. Accordingly, the hire or circulation of a cinematographic film cannot per se be infringement without considering the circumstances in which the hire or circulation is made or its purposes. 14. The defendant further submits that this Court should also take into account the Constitutional imperative that providing entertainment is a part of the fundamental right of freedom of speech and expression. Therefore, when a business seeks to exercise its fundamental right to provide entertainment as part of its freedom of speech and expression limitations should be rest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d render the said Act unconstitutional. 17. The Defendant states that there is no infringement of the copyright of the plaintiffs as it (the Defendant) purchases the DVD's/CD's from the authorized sources outside India. Since, such copies of those movies are purchased by the Defendant from authorized sources, there cannot be any violation of the copyright owned by the plaintiffs. 18. The plaintiffs rely on a list of movies in which they own or are assigned copyrights; they have also produced CDs. In addition, they rely on other documents such as a letter written by Cinema Paradiso, claiming that only original copies of DVDs and CDs, bought from foreign stores, were offered for renting. The plaintiffs have also placed on record receipts allegedly issued by the defendant cinema Paradiso to indicate the amounts claimed as rental fee, and caution deposit. Copies of web-shots of the defendant's website have also been relied on by the plaintiff. 19. Initially, this Court, at the stage of entertaining the suit, had issued notice on an application for appointment of local commissioner, and later, required the defendant to file an affidavit in respect of the manner it kept ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aph films which are either first published in India or the author (producer) is a citizen of India. The plaintiffs contend that unlike trademarks and patents, existence of the right comes into being merely on creation. Trade mark rights are acquired by use or registration, patent and design rights require compulsory registration. For copyright protection, even on a world-wide basis, mere creation of the work is required. It is submitted that Section 40 extends copyright protection to all cinematograph films first published in a foreign country or the author (producer) is a citizen of a foreign country. The "foreign countries" are defined in the International Copyright Order, 1999. 22. The plaintiffs contend that the expression "copyright" connotes not one, but a bundle of rights. Section 14(1)(d) of the Act, thus spells out several rights. Under Section 14(d) the copyright owner has the exclusive right "to do or authorize the doing" any of the following acts- (i) to make a copy of a film - This will include the right to make a copy of the film on (a) celluloid, (b) VCD format, (c) DVD format, (c) Blue Ray format, (d) HD DVD format, (d) on the intern....
X X X X Extracts X X X X
X X X X Extracts X X X X
...."making" but also extends to "importation". The main pre- condition is that such act should be in contravention of the provisions of "this Act" ie. the Copyright Act, 1957. 25. Elaborating what is "making" of a cinematograph film, the plaintiffs contend that the exclusive right to make or authorize the making a copy of a film is vested with the owner [Section 14 (d) (i) read with Section 17 (author shall be first owner) and Section 2(d) (author of a cinematograph film is the Producer) and Section 2(uu) (which defines who is a "producer")]. The act of "making or authorize the making" can be territorial in nature (Section 19(2) and Section 30A). A producer can therefore, authorize the making of a film in a particular territory only. It is submitted that reading the above provisions together, any copy of a film in which the producer has not assigned or licensed the right of making that copy in India, would be "in contravention of the provisions of "this Act", and therefore, an "infringing copy". The act of importing such an infringing copy would be an act of infringement of copyright [Section 51(b)(i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h a declaration. Violation of Section 52A makes the defendant liable under Section 68A. 29. It is submitted that in State of Andhra Pradesh v. Nagoti Venkataramanna 1996 (16) PTC 634 SC the Supreme Court held that: The object of amending the Copyright Act by amendment 65 of 1984, as noted above, was to prevent piracy which became a global problem due to rapid advances in technology. The legislature intended to prevent piracy and punish the pirates protecting copyrights. The law, therefore, came to be amended introducing Section 52A. Thereafter, the piracy of cinematograph films and of sound recordings etc. could be satisfactorily prevented. Moreover the object of the pirate is to make quick money and avoid payment of legitimate taxes and royalties. The uncertified films are being exhibited in a large scaled. Therefore, apart from increasing the penalty of punishment under law it also provides the declaration on the offence of infringement and video films to display certain information on recorded video films and containers thereof. It is contended that Section 16 stipulates that no person can claim any entitlement "to copyright or any other similar right in any work".....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... territory (but not for the UK).... ....Thus the owner of the UK copyright, or the UK exclusive licensee, can object to the importation of and subsequent dealings in copies made abroad without his license. This is so even though the article made abroad were legitimately purchased there on the open market (so called "grey copies"), since the sale of articles in the ordinary course of business in one territory without restrictions on resale does not carry with any implied license to import and sell those articles in another territory. The purchaser obtains the same rights as the purchaser of any other chattel, and the rights which flow from acquisition and ownership do not involve any such implied license. UK copyright law has never recognized the principle of "international exhaustion", and is now bound by European Directive not to do so in relation to sales outside the EC. 32. Parallel imports or "grey imports" are banned in most countries around the world, say the plaintiffs. They rely on World Copyright Law by J.A.L.Sterling, 1998 Ed. 309. 33. It is submitted that In fact, providing for rental rights is enshrined in Article 11 of the TRIPS Agreem....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lasses of works. In the case of original copyrightable works, namely, literary, musical, dramatic or artistic works even issuance of the copies to the public is an exclusive right exercised by the owner. However this right does not apply in relation to cinematograph film and sound recordings since they are derivative works, which embody original works. In the case of cinematograph films and sound recordings, the exclusive rights of the owner are restrictive in nature. Even in relation to original literary works once a copy is in circulation, no rights can be exercised by the owner. This is also clear from the Explanation to the section itself. Once a sale is made, it is clear that the owner cannot exercise control. It is submitted that, for instance, once a rental Copy is sold in the USA to a Rental library the owner would not be entitled to prescribe the price on which the video library will rent the said DVD. Any contrary interpretation would mean that owners have a "long hand control" on the DVD sold by them. Since Section 14(d) (i) refers to making a copy of the film which is an exclusive right of the owner, once the owner makes a copy of the film and thereafter, sell....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds in the market or otherwise dealing in those goods by that person or by a person or by a person claiming under or through him is not infringement of a trade by reason only of - (a) the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods: or (b) the goods having been put on the market under the registered trade mark by the proprietor or with his consent. (4) Sub-section (3) shall not apply where there exists legitimate reasons for the proprietor to oppose further dealings in the goods in particular, where the condition of the goods has been changed or impaired after they have been put on the market. 38. The Notes on Clauses, to the above provision, say the defendants, specifically state that the section recognizes the principle of "exhaustion of rights". It also specifically states that marketing of goods in a geographical area cannot be prohibited once they are lawfully acquired by a person. The said note on sub-clauses (3) and (4) of Section 30 reads as follows : Sub-clause (3) and (4) recognize the principle of "exhaustion of rights" by preventing the trade mark owner fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cate that they have to be used in a particular territory. The defendant submits that zoning is a matter of convenience in terms of technology and not a copyright notice, as claimed by the plaintiffs. The mere mention of zone 1 does not either expressly or impliedly mean that the said DVD cannot be used or sold in a Zone 2 territory. It is a convenient method of informing retailers and purchasers about technologies and compatibility and is not to be construed as a limitation in the negative i.e. if it is a PAL DVD there is no bar on using it in a NTSE environment so long as it is technically feasible and possible. At best zoning, say the defendants, is a way of asserting market dominance rather than enforcing an Intellectual property right. None of the Rental DVDs available and openly sold in the USA have a prohibition on renting outside of the USA. If the copyright owner does not put conditions on the DVD, no right can be enforced. 41. The defendant relies on the following extract from Laddie, Prescott & Vitoria's Modern Law of Copyright & Designs" 2000 (3rd edn): 32.27 : We now arrive at one of the most difficult topics in copyright law. It is our ambition to expound....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g to the trade, to prevent traders being taken unawares. If he fails to take this precaution he may not be able to oppose parallel imports.... In fact there is neither any prohibition nor any specific stipulation in the Indian statute prohibiting import of genuine rental copies. In view of the absence of such express prohibition the Principle of International Exhaustion has to be incorporated into the statue in as much as Article 6 of the TRIPS specifically recognizes the right of nations to apply principles of Exhaustion as they deem fit. In India, as a principle of public policy International Exhaustion of IPRs has been recognized and copyright is no exception to that. The provisions of the Act have to be read in a manner so as to recognize international exhaustion and not in a manner inconsistent with that principle. Article 6 of TRIPS is relied upon; it reads as follows: Article 6 Exhaustion For the purposes of dispute settlement under this Agreement subject to the provisions of Articles 3 and 4 nothing in this agreement shall be used to address the issue of the exhaustion of intellectual property rights. The rights of commercial rental, world over, have been introduced b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... new enactment. Unlike other laws, the definition clause does not define copyright, instead it is left to Section 14 to spell out what is copyright, in relation to different activities or creative manifestations such as literary works, dramatic or musical works, computers programs, artistic works, cinematographic films, sound recording etc. 43. Copyright, under Section 14 is declared as the "exclusive right" - "subject to provisions of the Act, to do or authorize any of the ..... acts in respect of a work or any substantial part thereof"; after which the various rights in respect of each class of work, be it literally, dramatic or musical [Section 14 (a)] ; computer programs [Section 14 (b)]; artistic works [Section 14 (c)]; cinematographic films [Section 14 (d)] and sound recording [Section 14 (e)] are spelt out. 44. Section 2 defines various terms such as adaptation [Section 2 (a)]; "artistic work" is defined in Section 2 (c); it means painting, sculpture, drawings, an engraving or a photograph regardless of whether they possess artistic quality, works of architecture or other works of artistic craftsmanship. Section 2 (d) defines author, which is ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e film made on any medium by any means; (iii) In relation to a sound recording, any other recording embodying the same sound recording, made by any means; (iv) In relation to a programme or performance in which the such a broadcast reproduction right or a performer's right subsists under the provisions of this Act, the sound recording or a cinematographic film of such programme or performance, If such reproduction, copy or sound recording is made or imported in contravention of the provisions of this Act;]. 45. Section 3 and 4 spell out the circumstances in which publication of a work is deemed or not deemed to be so, as the case may be. They read as follows: 3. Meaning of publication - For the purposes of this Act, "publication" means making a work available to the public by issue of copies or by communicating the work to the public. 4. When work not deemed to be published or performed in public- Except in relation to infringement of copyright, a work shall not be deemed to be published or performed in public, if published, or performed in public, without the licence of the owner of the copyright. 46. For the purposes of this case, Sections 13, 14, 40 and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in any medium by electronic means; (ii) to issue copies of the work to the public not being copies already in circulation; (iii) to perform the work in public, or communicate it to the public; (iv) to make any cinematograph film or sound recording in respect of the work; (v) to make any translation of the work; (vi) to make any adaptation of the work; (vii) to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in sub Clauses (I) to (vi) (b) In the case of a computer programme,- (i) to do any of the acts specified in Clause (a) (ii) to sell or give on commercial rental or offer for sale or for commercial rental any copy of the computer programme: Provided that such commercial rental does not apply in respect of computer programmes where the programme itself is not the essential object of the rental.] (c) In the case of an artistic work,- (i) to reproduce the work in any material form including depiction in three dimensions of a two dimensional work or in two dimensions of a three dimensional work; (ii) to communicate the work to the public; (iii) to issue copies of the work to the public not bei....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on relating to copying to which India is also a party), the Central Government shall be satisfied that foreign country has made, or has undertaken to make, such provision, if any, as it appears to the Central Government expedient to require for the protection in that country of works entitled to copyright under the provisions of this Act; (ii) the order may provide that the provisions of this Act shall apply either generally or in relation to such classes of works or such classes of case may be specified in the order; (iii) the order may provide that the term of copyright in India shall not exceed that conferred by the law of the country to which the order relates; (iv) the order may provide that the enjoyment of the rights conferred by this Act shall be subject to the accomplishment of such conditions and formalities, if any, as may be prescribed by the order; (v) In applying the provisions of this Act as to ownership of copyright, the order may make such exceptions and modifications as appear necessary, having regard to the law of the foreign country; (vi) the order may provide that this Act or any part thereof shall not apply to works made before the commencement of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovision Section 13 (2) carves out an exception in respect of those works to which provisions of Section 40 (which shall be presently discussed) would apply, i.e. works that are published abroad. 48. Now as to the meaning of copyright, before analyzing Section 14, it would be worthwhile noticing as to what is the content of copyright, summarized most inimitably by Justice Holmes in While-Smith Music Pub. Co. v. Apollo Co. 209 U.S. I 1908: In copyright property has reached a more abstract expression. The right to exclude is not directed to an object in possession or owned, but is in vacuo, so to speak. It restrains the spontaneity of men where but for it there would be nothing of any kind to hinder their doing as they saw fit. It is a prohibition of conduct remote from the persons or tangibles of the party having the right. It may be infringed a thousand miles from the owner and without his ever becoming aware of the wrong. It is a right which could not be recognized or endured for more than a limited time, and therefore, I may remark in passing, it is one which hardly can be conceived except as a product of statute, as the authorities now agree. The ground of this extraordinary....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in conjunction with Section 14(1) (c) (iii) that the term "cinematograph film" includes a sound track associated with the film. In the light of these provisions, it cannot be disputed that a "cinematograph film" is to be taken to include the sounds embodied in a sound track which is associated with the film. Section 13 recognises 'cinematograph film' as a distinct and separate class of 'work' and declares that copyright shall subsist therein throughout India. Section 14 which enumerates the fights that subsist in various classes of works mentioned in Section 13 provides that copyright in case of a literary or musical work means inter alia (a) the right to perform or cause the performance of the work in public and (b) to make or authorise the making of a cinematograph film or a record in respect of the work. It also provides that copyright in case of cinematograph film means among other rights, the right of exhibiting or causing the exhibition in public of the cinematograph film i.e. of causing the film in so far as it consists of visual images to be seen in public and in so far it consists of sounds to be heard in public. Section 13(4) on which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e cinematograph film and he cannot be restrained from doing so. In other words, the author (composer) of lyric or musical work who has authorised a cinematograph film producer to make a cinematograph film of his work and has thereby permitted him to appropriate his work by incorporating or recording it on the sound track of a cinematograph film cannot restrain the author (owner) of the film from causing the acoustic portion of the film to be performed or projected or screened in public for profit or from making any record embodying the recording in any part of the sound track associated with the film by utilising such sound track or from communicating or authorising the communication of the film by radio-diffusion, as Section 14(1)(c) of the Act expressly permits the owner of the copyright of the cinematograph film to do all these things. In such cases, the author (owner) of the cinematograph film cannot be said to wrongfully appropriate anything which belongs to the composer of the lyric or musical work. Any other construction would not only render the express provisions of Clauses (f), (m), (y) of Section 2, Section 13(1) (b) and Section 14(1)(c) of the Act otiose but would also ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nment - No assignment of the copyright in any work shall be valid unless it is in writing signed by the assignor or his duly authorised agent. (2) The assignment of copyright in any work shall identify such work, and shall specify the rights assigned and the duration and territorial extent of such assignment. (3) The assignment of copyright in any work shall also specify the amount of royalty payable, if any, to the author or his legal heirs during the currency of the assignment and the assignment shall be subject to revision, extension or termination on terms mutually agreed upon by the parties. (4) Where the assignee does not exercise the rights assigned to him under any of the other sub sections of this section within a period of one year from the date of assignment, the assignment in respect of such rights shall be deemed to have lapsed after the expiry of the said period unless otherwise specified in the assignment. (5) If the period of assignment is not stated, it shall be deemed to be five years from the date of assignment. (6) If the territorial extent of assignment of the rights is not specified, it shall be presumed to extend within India. (7) Nothing in sub s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oadcasting rights; those in Para 5 relate to applicability of Section 32 of the Act. The United States of America is listed in Part I of the Schedule, at Sl. No. 115. The combined operation of Section 40 and provisions of the Order, therefore, results in copyright in works - including copyright in cinematograph films, vesting in the author, in India, even though they are first published in the United States. Resultantly, the question which has to be addressed is whether the plaintiff's copyright is violated, by the defendant's importation of copies sold in the United states, for the purpose of renting out. 53. The defendant argues that once the plaintiffs placed their copies in the US market, and they were purchased legitimately, "long arm" restrictions expressed on the concerned copies are of no consequence; it lost or "exhausted" the right to control further sale or commerce in that copy. They draw inspiration from what is termed as the doctrine of "exhaustion". Reliance is placed on two decisions of the US Supreme Court, and an English decision, Zino Davidoff, in support of this contention. The plaintiffs, on the other hand, argues that tho....
X X X X Extracts X X X X
X X X X Extracts X X X X
....discussion by the court is found in the following passage: It is significant that this provision does not categorically prohibit the unauthorized importation of copyrighted materials. Instead, it provides that such importation is an infringement of the exclusive right to distribute copies "under Section 106." Like the exclusive right to "vend" that was construed in Bobbs-Merrill , the exclusive right to distribute is a limited right. The introductory language in Section 106 expressly states that all of the exclusive rights granted by that section-including, of course, the distribution right granted by subsection (3)-are limited by the provisions of Section 107 through 120. 12. One of those limitations, as we have noted, is provided by the terms of Section 109(a), which expressly permit the owner of a lawfully made copy to sell that copy "not with standing the provisions of Section 106(3)." 13. After the first sale of a copyrighted item "lawfully made under this title," any subsequent purchaser, whether from a domestic or from a foreign reseller, is obviously an "owner" of that item. Read literally, Section 109(a) unambiguously....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er of the copyright or right of the author, as the case may be.... Section 602(a): Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under Section 106, actionable under Section 501.... 56. In Zino Davidoff (supra) the principle of exhaustion of rights was explained thus: O+nce the rights holder has put protected products on the market or has consented to such marketing, he loses all rights to object to further exploitation. This effect is indefeasible" What is exhaustion 57. The doctrine of exhaustion of copyright enables free trade in material objects on which copies of protected works have been fixed and put into circulation with the right holder's consent. The "exhaustion" principle in a sense arbitrates the conflict between the right to own a copy of a work and the author's right to control the distribution of copies. Exhaustion is decisive with respect to the priority of ownership and the freedom to trade in material carriers on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nada, the Supreme Court, in a recent illuminating decision, Euro Excellence Inc v. Kraft Canada Inc 2007 SCC 37, demarcated the legitimate concerns underlying different intellectual property regimes. The plaintiff, Kraft Canada Inc. sought to prevent Euro-Excellence Inc., from, importing, for the purpose of selling, renting, distributing or trading, genuine Toblerone and Côte d'Or chocolate bars into Canada, without obscuring the logos of those chocolate bars, on the basis that the logos are copyrighted. The court said: 89 As mentioned above, para. (e) of Section 27(2) prohibits the importation into Canada of any copy of a work that would have infringed copyright had it been made in Canada by the person who made it, if that importation is for the purpose of doing anything referred to in paras. (a) to (c) of Section 27(2). Liability under para. (e) therefore relies on a finding that the defendant intended to commit on act enumerated in paras. (a) to (c), which prohibit the selling, renting out, distribution with a prejudicial effect, or dealing with by way of trade of copies of a work. How are we to interpret these prohibitions in light of the foregoing review of the pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....such program), and in the case of a sound recording in the musical works embodied therein, neither the owner of a particular phonorecord nor any person in possession of a particular copy of a computer program (including any tape, disk, or other medium embodying such program), may, for the purposes of direct or indirect commercial advantage, dispose of, or authorize the disposal of, the possession of that phonorecord or computer program (including any tape, disk, or other medium embodying such program) by rental, lease, or lending, or by any other act or practice in the nature of rental, lease, or lending. Nothing in the preceding sentence shall apply to the rental, lease, or lending of a phonorecord for nonprofit purposes by a nonprofit library or nonprofit educational institution. The transfer of possession of a lawfully made copy of a computer program by a nonprofit educational institution to another nonprofit educational institution or to faculty, staff, and students does not constitute rental, lease, or lending for direct or indirect commercial purposes under this subsection. ************** ************* (4) Any person who distributes a phonorecord or a copy of a computer p....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... He says that the device of zoning, whereby the plaintiffs restrict the licensee owner to use it in territories other than what is indicated by them, is artificial, and unenforceable. Such "long arm" conditions are inapplicable. Particular reference is made to the explanation to Section 14, which describes the content of copyright; it clarifies that "For the purposes of this section, a copy which has been sold once shall be deemed to be a copy already in circulation.+" Though attractive, this contention is unfeasible for more than one reason. The reference to copies in circulation is in the context of copyright in literary, artistic, dramatic or musical work, - not computer programme - (Section 14 (a); the statute enables the copyright owner to "issue copies of the work to the public not being copies already in circulation". But for the explanation, it could arguably be said that the copyright owner lost his domain, or right to control the manner of further dealing in copies which were in circulation. Yet, a careful reading of Section 14 would reveal that the content of copyrights in respect of each nature of work (literary, dramatic, or musical work,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....recording, might for instance, decide to distribute his products, through licensees. These licensees can be limited, in terms of period; in terms of copies entitled to be sold, or hired, or in terms of number of performances and so on. They can also - by reason of Section 19, be limited geographically. If the defendants' contentions were to be accepted, the moment such licensees gain copies, the copyright owners would exhaust their rights, enabling the licensees to exploit the copies uninhibitedly. Thus, for instance, if a distributor is given a copy to exhibit a film in territory A, or hire them in that territory; he could, by extension of the defendants' logic, travel beyond that territory, or use a rental copy to exhibit the film, in another territory, where it has not been released, or even rent it in such territory, and so on. To give another instance- the purchase of a rental copy meant to be used in the southern region, in India, designated by the copyright owner, analogically, can according to the defendant, be rented out in other regions too, whether or not such films are released in those regions. Such renting out may have catastrophic commercial consequences: one....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lication. This, Section 14(a) (ii) to the extent it exempts the copyright owners' right in respect of copies in circulation, is by way of a proviso or exemption; there is a long line of decisions, that such provisos or exemptions, embrace only the field covered by the main provision, and carving out an exemption, or exception (to such main provision) and to no other (See Ram Narain Sons Ltd v. Asst CST; [1955]2SCR483 ). In J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers (1997)ILLJ722SC , it was thus held that: A proviso qualifies the generality of the main enactment by providing an exception and taking out from the main provision, a portion, which, but for the proviso would be a part of the main provision. A proviso must, therefore, be considered in relation to the principal matter to which it stands as a proviso. A proviso should not be read as if providing something by way of addition to the main provision which is foreign to the main provision itself. 68. As far as TRIPS is concerned, the question of how to deal with rental rights, of copies of cinematograph films is left open to be dealt with suitably by the concerned party state. This is evident from th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ortation". 71. What is parallel importation ?The following excerpt from an article by "Parallel Imports and International Trade" by Christopher Heath, (Max Planck Institute for Foreign and International Patent, Copyright and Competition Law, Munich) throws light on the issue: The term "parallel importation" refers to goods produced and sold legally, and subsequently exported. In that sense, there is nothing "grey" about them, as the English Patents Court in the Deltamethrin decision (Roussel Uclaf v. Hockley International, decision of 9 October 1995, [1996] R.P.C. 441) correctly pointed out. Grey and mysterious may only be the distribution channels by which these goods find their way to the importing country. In the importing country, such goods may create havoc particularly for entrepreneurs who sell the same goods, obtained via different distribution channels and perhaps more expensively. In order to exclude such unwelcome competition, intellectual property rights have sometimes been of help. If products sold or imported by third parties fall within the scope of patents, trademarks or copyrights valid in this particular country, such sale or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of protected products such as books, sound recordings and films without the consent of the local right holder (not usually granted) where the products are acquired not for private individual use but for commercial resale. In sum, where trading nations allow copyright owners to restrict the free passage of grey market products across their external borders, owners are able not only to engage in cross jurisdictional price discrimination but also stagger the release of new products so that smaller markets in developed economies have to wait longer for new products or new models of existing ones. The debate over parallel importing restrictions is waged between those stakeholders who push the principle of national exhaustion of rights and those who support the counter notion of international exhaustion of rights. The first group comprises, in the main, copyright owners and their licensees who have joined forces across national boundaries in order to present their time honoured trading advantage (the explicit right to prevent the cross border passage of grey market goods) as both natural and indispensable, instead of the historical accident that it arguably is. They assert that rights ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....similar issue, in Penguin (supra). The court held that: counsel for India Distributors, argued that importation of lawfully published books from America into India is not an infringement under the Copyright Act, 1957 (the Act) . This is a fallacious argument. The expression "owner of copyright" includes an exclusive licensee. (Section 54 (a) ) . Exclusive licensee is defined in Section 2 (g) as a licensee having "any right comprised in the copyright" in a work to the exclusion of all other persons including the owner of the copyright. Licences may be limited in time, territory and scope. Assignment either wholly or partially of the rights of the copyright owner is permissible under the Act. (Section 18) . 18. Now Penguins are exclusive licensees as they are the assignees of copyrights from the authors in some cases and publishers in others and have an exclusive right to print, publish and market these twenty three titles in India. Section 55 (1) provides "civil remedies" for infringement of copyright, namely, injunction, damages, accounts "as are or may be conferred by law for the infringement of a right". So Penguins are entitled to sue ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the expression "infringing copy" has one meaning in Section 51 (b) (iv) and a different in Section 53. The essence of the thing is unauthorised appropriation or use of another man's property. It amounts to taking what is not yours. It is an improper use of that which does not belong to you. It has been well said : "The position of the person dealing in infringing copies is in fact similar to that of the 'receiver', the person dealing in stolen property. (S.M. Steward - International Copyright 1983 ed. p. 80). In importation it is the locale that matters. Territorial division and geographical area are of importance. Outside a defined territory the sale of a copyrighted work constitutes a sale of an "infringing copy". Because there is infringement of territorial restrictions. Penguins' case is that they hold a territorially exclusive licence coupled with an interest so far as India is concerned. Generally speaking whenever there is misappropriation of intellectual property of which the primary beneficiary is the copyright owner there is infringement of copyright. Copyright is a property right. Throughout the world it is regarded as a form o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o India will be in breach of the provisions of Monopolies and Restrictive Trade Practices Act. I am not impressed by this argument. It is true that copyright is a monopoly. But all monopolies are not evil. This monopoly is a statutory creature. (See Section 16) . Copyright is the creation of the Act. As at present advised I am not prepared to hold that these provisions are in conflict with the statutory provisions contained in the Monopolies Act or the Contract Act. 75. The Supreme Court too, had occasion to deal with the issue of importation of copyright goods, in Gramophone Co. of India Ltd (supra). The Gramophone Company of India Ltd, was the owner of the copyright in song recordings. It received information from the Calcutta Customs that a consignment of pre-recorded cassettes sent by Universal Overseas Private Ltd., Singapore to Ms Sungawa Enterprises, Kathmandu, Nepal, had arrived at Calcutta Port by ship and was awaiting despatch to Nepal. The appellant learnt that a substantial number of cassettes were "pirated works", due to the broken condition of the consignment lying in the docks. The appellant sought the intervention of the Registrar of Copyrights for action....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... which is of direct relevance as it deals with 'importation of infringing copies' needs to be fully extracted. It says: 53. (1) The Register of Copyrights, on application by the owner of the copyright in any work or by his duly authorised agent and on payment of the prescribed fee, any, after making such enquiry as he deems fit, order that copies made out of India of the work which if made in India would infringe copyright shall not be imported. (2) Subject to any rules made under this Act, the Register of copyrights or any person authorised by him in this behalf may enter any ship, dock or premises where any such copies as are referred to in Sub-section (1) may be found and may examine such copies. (3) All copies to which any order made under Sub-section (1) applies shall be deemed to be goods of which the import has been prohibited or restricted under Section 11 of the Customs Act, 1962, and all the provisions of that Act shall have effect accordingly : Provided that all such copies confiscated under the provisions of the said Act shall not vest in the Government but shall be delivered to the owner of the copyright in the work. This provision empowers the Regist....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... India". But we do not propose to have recourse to Customs Act to interpret expressions in the Copyright Act even if it is permissible to do so because Section 53 of the Copyright Act is made to run with Section 11 of the Customs Act. 29. It was submitted by the learned Counsel for the respondents that where goods are brought into the country not for commerce, but for onward transmission to another country, there can, in law, be no importation. It was said that the object of the Copyright Act was to prevent unauthorised reproduction of a work in India and this object would not be frustrated if infringing copies of a work were allowed transit across the country. If goods are brought in, only to go out, there is no import, it was said. It is difficult to agree with this submission though it did find favour with the Division Bench of the Calcutta High Court in the judgment under appeal. In the first place, the language of Section 53 does not justify reading the words 'imported for commerce' for the words 'imported'. Nor is there any reason to assume that such was the object of the Legislature. We have already mentioned the importance attached by international op....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the words 'import and export', in the given context, had something to do with the idea of a terminus and not an intermediate state of a journey. We are afraid the case is really not of any guidance to us since in the context of a 'terminal tax' the words "imported and exported" could be construed in no other manner than was done by the Court. We must however say that the 'original package doctrine' as enunciated by Chief Justice Marshall on which reliance was placed expressly disapproved first by the Federal Court in the Province of Madras v. Boddu Paidanna 1942 FCR 90: AIR 1942 FC 33 and again by the Supreme Court in State of Bombay v. F. N. Balasara [1951]2SCR682 . Apparently, these decisions were not brought to the notice of the court which decided the case of Central India Spinning and Weaving & Mfg. Co. Ltd., The Empress Mills, Nagpur v. Municipal Committee, Wardha [1958]1SCR1102 . So derive no help from this case. As we said, we prefer to interpret the words import' as it is found in the Copyright Act rather than search for its meaning by referring to other statutes where it has been used. 31. The learned Counsel for the appellant inv....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The Register is not bound to make an order under Section 53 of the Copyright Act so soon as an application is presented to him by the owner of copyright. He has naturally to consider the context of the mischief sought to be prevented. He must consider whether the copies would infringe the copyright if the copies were made in India. He must consider whether the applicant owns the copyright or is the duly authorised agent of the copyright. He must hear those claiming to be affected of an order is made and consider any contention that may be put forward as an excuse for the import. He may consider any other relevant circumstance. Since all legitimate defenses are open and the enquiry is quasi-judicial, no one can seriously complain. 77. In this case the copies that are being let out for rent/hire by the Defendant are not made in India. Rather, they have been made in the US and imported into India. As noticed earlier, copyright in a work published abroad, in a Berne Convention country, like the United States, entitles its owner to assert copyright in India; such rights are "as if" the works were published in India (Section 40 and provisions of the Order). An infringing copy....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Trademarks Act, 1999. It provides that when goods are lawfully acquired by a person, through "sale of the goods in the market or otherwise " dealing in those goods by that person or by a person or by a person claiming under or through him is not infringement of a trade by reason only of... (b) the goods having been put on the market under the registered trade mark by the proprietor or with his consent." It would also be useful to notice Section 107-A of the Patents Act, 1970 which reads as follows: 107A. CERTAIN ACTS NOT TO BE CONSIDERED AS INFRINGEMENT. For the purposes of this Act,- (a) any act of making, constructing, using, selling or importing a patented invention solely for uses reasonably related to the development and submission of information required under any law for the time being in force, in India, or in a country other than India, that regulates the manufacture, construction, [ 218 use, sale or import of any product; (b) importation of patented products by any person from a person who is duly authorised under the law to produce and sell or distribute the product, shall not be considered as a infringement of patent rights" In the opin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....52), a copy of the certificate granted by the Board of Film Certification under Section 5A of that Act in respect of such work; (b) the name and address of the person who has made the video film and a declaration by him that he has obtained the necessary licence or consent from the owner of the copyright in such work for making such video film; and (c)the name and address of the owner for the copyright in such work The above provision makes it clear that cinematograph films have to be certified in terms of the Cinematograph Act, as a condition of their publication. This certification does not exist in the copies hired out by the defendant. This infringes the provision. If the importation were to be in accordance with the Act, the copyright owner would authorize the certification under Section 52A. 81. In view of the above discussion, the second issue too, is answered in favour of the plaintiffs; the defendant's action, giving on hire or rent in India, copies of cinematograph films authorized for sale or rental in a particular territory outside India, in which cinematograph films the plaintiffs claim copyrights, would constitute infringement of copyright under Section 51(b)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... non-copyrightable facts and ideas and the latitude for scholarship and comment traditionally afforded for fair use.." Recently, in Elderd v. Ashcroft 537 US 186 (2003), the US Supreme Court upheld the Sonny Bono Copyright Term Extension Act, rejecting the challenge to extension of copyright term, to 70 years. 86. Copyright law, and the protections afforded to owners and those entitled to it, under Section 14, is a balance struck between the need to protect expression of an idea, in a given form to promote creativity, on the one hand, and ensure that such protection does not stifle the objective, ie. creativity itself. Copyrights are part of intellectual property law, which are but a species of property law. Unlike in the case of material or tangible objects, these laws protect specific concepts - in the case of trademark, distinctiveness, in copyrights, originality of an expression and in the case of patent, inventiveness. Just as the owner of real property, or a material object is entitled to legitimately assert his domain over it, and protect it from unfair appropriation by another, the intellectual property owner is, by these laws, enabled to protect unwarranted exploitat....