High Court Upholds Freeze of Collecting Society’s Bank Accounts: Ruling in MCSK v Chief Magistrate, Inspector General

Music-Copyright-Society-of-Kenya-MCSK-CEO-Maurice-Okoth People Daily

This blogger has recently come across an astute ruling by the High Court in the case of Music Copyright Society of Kenya v Chief Magistrate’s Court & Inspector General of Police [2015] eKLR. Justice L. Kimaru sitting in the High Court was approached by the authors’ collecting society, Music Copyright Society of Kenya (MCSK) to stay orders issued by the Magistrate’s Court freezing all the bank accounts of MCSK following a request by the Serious Crimes Unit under the Directorate of Criminal Investigations (DCI). DCI requested that MCSK’s accounts be frozen as it investigates complaints made by MCSK members in regard to alleged misappropriation and theft of funds at the collecting society.

After carefully evaluating the facts before him, Kimaru J ruled that the investigations were lawful and based on several complaints received by DCI from MCSK members and that the orders to freeze MCSK’s accounts were within the precincts of the law.

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Blind Opposition to Caller Ringtone Deal between Safaricom and Collecting Societies: High Court Case of Irene Mutisya & Anor v. MCSK & Anor

Robert Collymore CEO Safaricom

This blogger has recently come across Nairobi High Court Civil Case No. 262 of 2015 Irene Mutisya & Anor v. Music Copyright Society of Kenya & Anor. In this case Mutisya and another copyright owner Masivo have filed suit against Music Copyright Society of Kenya (MCSK) and mobile network operator Safaricom Limited for copyright infringement. The copyright owners filed an urgent application on 30th July 2015 for a temporary injunction to restrain Safaricom from remitting license fees to MCSK pursuant to a recently concluded license agreement for caller ring-back tones (CRBT) made available through Safaricom’s Skiza platform. The copyright owners also asked the court to restrain both Safaricom and MCSK from implementing the CRBT License Agreement pending the hearing of the application.

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Legality of Equitable Remuneration Challenged: High Court Petition of Xpedia & 4 Ors v. Attorney General & 4 Ors

equitable remuneration

Editor’s Note: On 31st July 2015, the urgent application in this Petition No.317 of 2015 dated 29th July 2015 was heard and certain interim orders were granted. A copy of the orders is available here.

This blogger has confirmed a recent media report that two content service providers and three copyright owners have jointly filed a petition challenging the constitutionality of the right to equitable remuneration under the now infamous section 30A of the Copyright Act. The Petition was filed against the Attorney General, Kenya Copyright Board (KECOBO), Kenya Association of Music Producers (KAMP), Performers Rights Society of Kenya (PRiSK) and Music Copyright Society of Kenya (MCSK).

As stated above, the crux of the Petition filed by Xpedia Management Limited, Liberty Afrika Technologies Limited, Elijah Mira, Francis Jumba and Carolyne Ndiba is that KAMP, PRiSK and MCSK should be stopped by the court from receiving or collecting royalties under section 30A of the Copyright Act in respect of works owned or claimed by the Petitioners.

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‘One Society, One Right’? 50 Years of Collective Administration of Music Copyright in Africa: Changes at SAMRO and MCSK

Last year, a Commission under the Department of Trade and Industry in South Africa was appointed to investigate collecting societies in South Africa. The Commission’s Report was recently released and can be accessed in full here.

This 223-paged report on collecting societies in South Africa made a number of key recommendations. For instance, this is what the Commission had to say, in part, about the Southern African Music Rights Organisation Limited (SAMRO):

“The constitutive documents for SAMRO are not aligned to the Companies Act of 2008 and good corporate governance standards and should be revised to fairly protect the members.” (see 7.3.2 in Chapter 7)

In the wake of this recommendation, SAMRO has recently uploaded a youtube video clip of SAMRO CEO Mr. Nick Motsatse calling all SAMRO members to participate in a consultative drive to seek members’ views on desired changes that SAMRO should make in order to comply with South Africa’s current company laws. As Motsatse explains in the video below, SAMRO currently operates as a company limited by guarantee (so does MCSK in Kenya) but it is now faced with a choice to either become a non-profit organisation, a for-profit organisation or another legal entity. The SAMRO CEO advocates that SAMRO should change into a cooperative because, it is best suited for it to accomplish its mandate as a collective management organisation. The full video is available below:

SAMRO recently celebrated 50 years, making it the largest and oldest collecting society in Africa. The total collections for music royalties (performance, needletime and mechanical rights) for 2010 amounted to approximately R357,9 million. Over and above the royalty collections, SAMRO has investments in excess of R300 million in different classes of assets. Over the last three years, these investments generated income of between R41 million and R66 million per annum.

Closer to home, IPKenya believes that this report by the South African Copyright Review Commission provides important insights into three hotly contested issues involving our own music collecting societies: Kenya Association of Music Producers (KAMP), Performers Rights Society of Kenya (PRISK) and of course, Music Copyright Society of Kenya (MCSK). These three issues are: 1) mechanical rights licensing in the digital domain, 2) ratio of distribution of royalties to administrative costs and 3) the existence of performing rights in a musical download aka “double dipping” debate.


Separate Collecting Society for Mechanical Rights?

In Kenya, mechanical rights licensing in the digital domain is largely dealt with by MCSK, as the collecting society for authors, composers and publishers of musical works. However the sticking appears to be the split or rather lack thereof before the artist and the producer in respect of royalties from mechanical rights licenses. Indeed, IPKenya has often wondered why producers and performers don’t seem to be getting their dues from ringtone downloads and the like. Perhaps one of IPKenya’s more informed readers can explain to us why related rights are sidelined from the mechanical rights cake? As one ponders on this issue, one possible solution that arises is the creation of a mechanical rights society of Kenya to properly and equitably administer licensing and royalties particularly in digital downloads.

In this connection, the recent case of JB Maina’s copyright tussle with Safaricom, Liberty Afrika and MCSK is worth mentioning. The Business Daily now reports that Safaricom is working on an out-of-court settlement with JB Maina. IPKenya wonders whether Safaricom is tacitly acknowledging that it may not have acquired mechanical rights from JB Maina despite the alleged existence of a valid and enforceable content provision agreement as well as a deed of assignment.

In South Africa, royalties payable in respect of mechanical rights are currently collected by SAMRO and NORM, an incorporated association collecting mechanical royalties on behalf of about 300 South African music publishers and composers. Originally, the sole licensing body in South Africa was SARRAL, but this entity collapsed and it is now under liquidation. The recent CRC report recommended that the legislation be amended to allow for only one collecting society per set of rights with regard to all music rights governed by the Copyright Act. IPKenya submits that this recommendation could easily be applicable to Kenya as explained above.

Ideal cost-to-royalty income ratio for collecting societies?

The costs-to-royalty income ratio (i.e. administration costs as a percentage of total collections) for collecting societies selected for international benchmarking purposes varies between 10% and 24%.
It is no secret that MCSK’s ‘deregistration’ by the Kenya Copyright Board (KECOBO) was due, in no small part, to a perceived mismanagement of funds largely attributed to a high costs-to-royalty income ratio. To put it bluntly, MCSK was accused of spending more on its own expenses while distributing less as royalties to its members. For more on this and other issues, please refer to IPKenya’s recent discussion with MCSK CEO Maurice Okoth.

MCSK has consistently taken the view that KECOBO‘s 70:30 is arbitrary and has no basis in law i.e. Copyright Act or Copyright Regulations. MCSK adds that the 70:30 is inconsistent with some but not all of its distribution classes. For instance, MCSK claims that an 80:20 split may be possible in broadcasting distribution but impossible for public performance because the latter is more difficult to collect hence increasing MCSK’s administrative costs.

Meanwhile in South Africa, the maximum allowable ratio is 20% in terms of current local regulations. Therefore the CRC believes that SAMRO’s current ratio of approximately 30% is excessive in relation to the international average. This is confirmed by the fact that when compared with other collecting societies, SAMRO has the lowest average ratio of revenue collected to labour costs. The CRC recommends that SAMRO be given three years to resolve this matter. It is clear that to comply with Regulations, which require a maximum of 20%, SAMRO will have to improve its levels of collection and reduce cost.

Performing rights in a music download?

In the US case of re Application of Cellco Partnership D/B/A Verizon Wireless, the court declined to hold that a sound recording (set as a ringtone) is performed in public each time a user’s phone rings. The court held that Verizon (a mobile service provider) did not need a public performance licence for musical compositions because it provides ringtones to its customers. This, of course, did not exonerate the service provider from paying the mechanical royalties, the communication right to the copyright owner and the ‘making available’ right for every sound recording it delivers to a customer.

However MCSK and SAMRO have both taken the view that indeed a performance royalty is payable on the downloading of music works. This view is supported by a number of persuasive judicial precedents from the United Kingdom. In South Africa, the Wireless Application Service Providers’ Association (WASPA) has denied this liability but agreed that mechanical royalties must be paid for all downloads, and that performance royalties must be paid for any kind of streaming of sound recordings or music.

This is an interesting debate to follow in Kenya, as MCSK will now attempt to get telcoms and broadcasters to buy in into this “principle of licensing performing rights”.

Concluding remarks:

IPKenya has come to realise that the copyright industry is as fiercely competitive and territorial as any other capitalist industry. Although collective management organisations like MCSK and SAMRO were once intended to exist solely to assist copyright holders in the collective administration of their rights under copyright and related related rights, these bodies have evolved into corporate entities aggressively pursuing profit-making objectives ostensibly for the benefit of their members.

It is reported that SAMRO acquired a property in Braamfontein, South Africa valued at R94 million to house its operations and save on future rental costs. SAMRO also has investments in shares, unit trusts and properties, which generate significant amount of income that ought to be, in turn, distributed to its members. Meanwhile the younger MCSK has been expanding its revenue base by setting up regional offices all over the country and employing their infamous agents to collect license fees from all and sundry dealing with copyright works. At one point, MCSK was rumoured to be eyeing property in the Kileleshwa area for purposes of permanently setting up its headquarters.

While there is merit in actively pursuing profit-making, MCSK and indeed SAMRO have a primary responsibility to their members and therefore discontentment about royalty payments and other issues relating to good governance definitely strike a bad note.

However, it hasnt been all sour tunes for MCSK. Recently, it has received favourable press for its introduction of scientific distribution of royalties and license fees using the WIPOCOS software as well as its 24-hour monitoring software for broadcasts in partnership with local IT firm Digital Linkage Technologies. Other positive events to be noted are the uncharacteristically sober manner in which new MCSK Board Members were voted recently as well as the successful MCSK gala night organised to celebrate Kenya’s best talents. More recently, MCSK set up the MCSK Foundation which has been established to cater for the social and cultural activities of its members. This Foundation is intended to provide members’ allowances for transport, medical assistance, funerals, benevolent payments and others.

IPKenya is counting on the newly constituted Competent Authority aka Copyright Tribunal to conclusively address these emerging issues in the administration of copyright and related rights in Kenya.

Uganda: Is it copyright infringement to use a politician’s speeches as ringtones?

New Vision in Uganda has reported that ex-Kampala Mayor Al Haji Nasser Ntege Sebaggala is suing leading telecommunications company MTN Uganda for copyright infringment by using his speech recordings as ringtones. It is reported that MTN has acknowledged that the recording is indeed Sebaggala’s voice but contends that he did not make the recording nor did he acquire any copyright for the speeches.

Sebaggala’s demands:
– all the proceeds collected by MTN in relation to the ringtones. In this connection he is reportedly demanding an audit to ascertain the money collected by MTN.
– a 20% monthly interest on the ascertained audited figure above, together with a 20% monthly interest on damages and costs of the suit, from the date of judgement until full payment.

MTN’s defences:
– Ssebaggala is not the author or the physical person who created work of the sounding recording or ringtones, and as such is not entitled to protection under the copyright law.
– The ringtones were procured and uploaded by SMS Media Limited, which signed a service provision agreement with MTN.
– Sebaggala’s speeches were publicly broadcast as current news of public interest and political events.

Comment:

A ringtone is defined as a sound file that is played by a cellular or a mobile phone. Copyright law would therefore recognise SMS Media Limited as the copyright owner of the ringtone.

However under copyright law, the act of Sebaggala reading his speeches is considered a performance and the law recognises performers’ rights as one of the types of related rights under copyright.

Therefore if Sebaggala’s case were being heard in Kenya, the court would consider Section 30 of the Copyright Act (as recently amended) which lays down the exclusive rights of a performer such as Sebaggala:

Subject to section 30 of this Act, a performer shall have the exclusive right to carry out any of the following acts:

(f) distribution of a fixation of his performance or copies thereof, to the public.
(g) the making available to the public of his fixed performance, by wire or wireless means in such a way that members of the public may access them from a place or a time individually chosen by them. [Emphasis added]

Furthermore, Section 30A of the Copyright Act creates a right of equitable remuneration for performers therefore Sebaggala would be entitled to compensation:

30A (2) If a fixation of a performance is published for commercial purposes or a reproduction of a fixation of a performance is used for broadcasting or other communication to the public, or is publicly
performed
, a single equitable remuneration for the performer shall be paid by the user to the collective management organization.
(3)The right of equitable remuneration under this section shall subsist from the date of publication of the sound recording or fixed performance until the end of the fiftieth calendar year following the year of publication, provided the sound recording or fixed performance is still protected under section 28 and 30.
(4) For the purposes of this section, sound recordings and fixations of performances that have been made available by wire or wireless means in such a way that members of the public may access them from a place and a time individually chosen by them shall be considered as if they have been published for commercial purposes. [Emphasis added]

Therefore under the Copyright Act of Kenya, Sebbagala would have a strong case for copyright infringement of his neighbouring rights as a performer. Uganda’s Copyright Act of 2006 also provides under section 22 that a performer has the right to authorise the following acts:
– the direct or indirect reproduction of a fixation of his or her performance in manner or form;
– the distribution or making available to the public of the original or copies of the fixation of his or her performance through sale or other transfer of ownership.

However unlike in Kenya, the Uganda Copyright Act does not provide a right to equitable remuneration for performers.

Another ground upon which Sebaggala can seek relief is image rights. The ringtones were made from the sound of his voice, which is a part of his likeness therefore any attempt to appropriate any aspect of a person’s likeness would be actionable as unjust enrichment. IPKenya will be keenly following this case and is confident that the IP-friendly Judge Madrama will take this opportunity to provide useful jurisprudence in this rather obscure area of law.