High Court Judgment on Constitutionality of Equitable Remuneration Right and Copyright Collective Management

skiza safaricom caller ringback tone service copyright license collective management society

 

Previously we reported here that two content service providers and three individual copyright owners had filed a constitutional petition at the High Court challenging the content of the equitable remuneration right in section 30A of the Copyright Act, the application and implementation of section 30A by the collective management organisations (CMOs) and the manner of licensing and supervision of the CMOs by Kenya Copyright Board (KECOBO).

Recently in the case of Petition No. 317 of 2015 Xpedia Management Limited & 4 Ors v. The Attorney General & 4 Ors Lady Justice Mumbi Ngugi (known to many readers for her landmark decision on anti-counterfeit law and access to medicines here) delivered a judgment at the High Court dismissing claims by content service providers and the copyright owners that the contents and implementation of section 30A are unconstitutional.

From the outset, it is important to state the present Xpedia petition (which for our purposes we shall refer to as the ‘Skiza I case’) was supported by the petitioners in Petition No. 350 of 2015 David Kasika & 4 Ors v. Music Copyright Society of Kenya which we shall refer to as the ‘Skiza II case’ since it was also heard and determined by Justice Ngugi who noted that although Music Copyright Society of Kenya (MCSK) resisted consolidation of the petitions in Skiza I and Skiza II, the two cases raised the same issues regarding section 30A and its application in relation to the use of the caller ringback tones service known as “Skiza Tunes” owned by mobile network operator, Safaricom. Therefore the court stated that notwithstanding the non-consolidation of the two petitions, the findings and conclusions on some issues in the Skiza I case will apply to Skiza II case.

The petitioners in the Skiza I case made three separate claims: firstly that section 30A infringes on two constitutional rights namely freedom of association (Art. 36) and right to property (Art. 40); secondly that the manner in which the CMOs were applying and implementing section 30A also violated the said constitutional rights and finally, that the manner in which KECOBO carries out its statutory functions of licensing and supervising the CMOs in question contravenes the petitioners’ constitutional right to fair administrative action (Art. 47).

With regard to the alleged violation of Article 36, the petitioners made two separate arguments. Firstly they argued that by compelling users of certain copyright works to pay license fees directly to the related rights CMOs, the effect of section 30A is that only those right holders who are members of the said CMOs could receive royalties collected under the section. Secondly, they argued that since section 46(5) of the Act does not permit the existence of more than one CMO for the same category of works and the same category of rights, this limits the rights of copyright holders and compels them to remain in a CMO even if they are unhappy with it.

However the court disagreed with petitioners and agreed with KECOBO’s submissions that there was nothing in section 30A that creates a mandatory obligation on copyright holders to join CMOs. More importantly, the court agreed that one does need to become a member of a CMO in order to receive remuneration as the CMOs collect and remit payment to members and non-members. The crucial passage from the court judgment reads as follows:

“Taking all matters into consideration and the above provisions of the Copyright Act, I am unable to find a violation of the petitioners’ right to freedom of association. As submitted by KECOBO, the intention behind section 30A was to enhance the collection of royalties for copyright holders through the use of CMOs. In practical terms, it would be impossible for copyright users to go to each individual user to collect royalties, which is certainly the case in respect of the Skiza Tunes platform which is at the centre of this petition. I therefore find that section 30A of the Copyright Act does not derogate from the right guaranteed under Article 36 of the Constitution.”

With regard to the alleged violation of Article 40, the learned judge rightly dismisses the petitioners’ claim by pointing out that the effect of Safaricom’s license with CMOs under section 30A for caller ring-back tones service amounts to replacing one middle man, the content service providers with another middle man, the CMOs. In this connection, Mumbi J stated in part as follows:

“As is evident from the petitioners’ pleadings, their case is not that they are not receiving their remuneration. Rather, they are aggrieved that they will not be receiving their remuneration directly, but through CMOs. I pause here to observe that given the relationship that the 1st and 2nd petitioners [the content service providers] have with the artists [the 3rd, 4th and 5th petitioners] with whom they have entered into contracts, this does not seem like a legitimate complaint for them to raise. As I understand it, and indeed as submitted by KECOBO, the 1st and 2nd petitioners are in effect operating as a CMO, though not licensed under section 46 of the Copyright Act. Thus, the artists whom they have contracted do not receive remuneration directly, but the payment is made to the 1st and 2nd petitioners, who then remit it to the artists. The artists thus receive remuneration, but indirectly.

What is the distinction then between the relationship between the 1st and 2nd petitioners and artists whom they have signed on, and the CMOs and their members? With the exception that the CMOs are required to be companies limited by guarantee, non-profit making and to work in the interests of their members, while the 1st and 2nd petitioners are limited liability companies working with the artists for profit, I can see none in relation to the collection of remuneration for copyright holders, and the indirect receipt thereof by the copyright holders.”

With regard to violation of Article 47, the petitioners failed to adduce evidence on the basis of which the court could find that their rights, or those of any other person, have been violated in the manner of licensing and supervision of the CMOs by KECOBO. In our opinion, this was another missed opportunity for the petitioners to invite the court’s view on whether the statutory framework is adequate for regulation of CMOs.

Finally, with regard to the alleged abuse of powers by CMOs in implementing section 30A, the court distances itself from an oversight role and instead emphasises the supervisory role of KECOBO. The crucial passage from the court judgment reads as follows:

“Should a licensed CMO fail to carry out its mandate in accordance with the provisions of the Act, then its members have a right to complain to the Board, which has the mandate to take appropriate action, including cancelling the license or registering another CMO that will carry out its functions in the best interests and to the satisfaction of members. In this regard, KECOBO has the duty to ensure that CMOs account to members and non-members whose royalties they collect from Safaricom, and that they remit the amounts collected to the rights holders.”

Despite this finding by the court, the crux of the matter is that KECOBO’s enabling statute, the Copyright Act does not adequately spell out its supervisory powers which in the past has resulted in KECOBO imposing sui generis (and arguably ultra vires ) licensing terms and conditions on CMOs such as a 70:30 royalty-cost ratio, six-month long licenses, external audits, quarterly reports, fixed number of board meetings, fixed number of board committees, rules for operations and distribution accounts, anti-trust rules among competing CMOs among other administrative requirements.

Thankfully, KECOBO has recognised the need to strengthen the legal and regulatory framework for collective administration of copyright and has recently made some forward-looking proposals seeking to amend the Copyright Act and create new Copyright Regulations, which we have discussed previously here.

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One thought on “High Court Judgment on Constitutionality of Equitable Remuneration Right and Copyright Collective Management

  1. A well-grounded judgement this is. However, with regard to your assertion that this was another missed opportunity to “invite the court’s view on whether the statutory framework is adequate for regulation of CMOs”, I believe that would be caught on the wrong end of Mumbi, J’s citing of U.S vs Butler [1936] at para 98. Thoughts?

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