This article is written by M.Arjun, a 5th-year student studying in Government Law College, Thrissur. This article deals with the Essentials of a Music License Agreement.
If there is something in this diverse world which people all over accept and adore, it is quite obvious that “music” falls under this division. Music is loved for various reasons such as for entertainment, relief from stress and even for emotional recharge. Artists put in a lot of hard work for creating musical works. They get acknowledged and rewarded for their efforts only when their work is shared with the public. When a musical work is created, the artist gets the copyright of the song along with a bundle of other rights. Sharing of music has to be done in such a way that the rights of the musician and the commercial value of his work are preserved. A well-drafted music-license agreement can serve this purpose.
Need For A Music License Agreement
Artists who create musical works deserve fair compensation for their creation. A musical work created can be used in a plethora of situations such as in a movie, album, live performance, online streaming and so on. The primary purpose of a music license agreement is to facilitate the availability of the composition to a third party. It also ensures that the musicians get their fair compensation. A music license agreement mandates certain conditions and governs the use of the musical composition in relation to various circumstances. These include:
- Confirmation of royalties and mode of payment of royalties;
- Provisions relating to the time for which the use is permitted;
- The geography in which the music is permitted to use;
- Right of license owners to sublicense;
- Provisions relating to duplication of the song.
A music license agreement protects the rights of both parties and lays down special emphasis on preventing illegal use of the musical work which affects the commercial interests of the parties. Abstaining from entering into a music license agreement can be detrimental as the creator cannot commercialize his work effectively. A music license agreement protects the copyright of the musical work and minimizes the chances of infringement. Hence, a music license agreement, safeguarding the interest of parties enable the musical work to reach a wide number of audiences.
How Does It Work?
Owners or composers of a musical work cannot enter into a music license agreement with each and every party interested to use their music. Creating a music license agreement for each and every licensee is a cumbersome process. For this purpose, artists or owners of the musical work enter into a music license agreement with the publishing companies. Musicians themselves can publish their work on certain platforms such as the “Soundcloud”. But the majority of the publishing is done by the publishing companies. Artists are paid a lump sum amount or royalties as per sales in return. These publishing companies are mostly members of various copyright societies which are registered under section 33 of the Indian Copyright Act 1957.
Essentials of Music License Agreement
Some of the basic clauses that should be added to a music license agreement include:
This clause is the most important section within a music license agreement. It clarifies the nature and extent of the license. The licensor should expressly specify whether the license is a non-exclusive license or an exclusive license. An exclusive license prevents the licensor from further licensing the work. A non-exclusive license can allow the licensor to license the work with other potential licensees. The right of the licensee to further sublicense the work should be referred to in this clause. Even if a non-exclusive license is granted, the licensee or the publisher can restrict or impose certain conditions that prevent the licensor from licensing the work on different platforms such as CDs, websites or radio. The licensor can also mandate the geographical limit within which the license will be effective. As mentioned earlier, comes with a bundle of rights. For eg, the composer can grant a license exclusively for use in the film and retain the rights of the song in relation to online streaming, albums, public performances and so on. This clause should also provide the purpose and uses for which the license is granted.
Royalties and Payments
The musician or the licensor is paid a certain sum of money in return for the license granted to the licensee. These payments are either made on a lump sum basis or as royalties on each broadcast. The licensor can also contract for an initial amount along with royalties on further usage. The time limit within which the payment is to be made should also be specified along with the provisions regarding interest on late payments.
Rights and Obligations
This clause mainly sets out the rights and duties of the parties in relation to the license. The licensor shall provide a clause to reserve all the rights other than the ones licensed. He may also set out a provision to state his name as the owner in all promotional activities of the musical compensation. The main idea behind this clause is to prevent the licensee from using the ownership rights or any other rights which are not granted.
Term and Termination
The term specifies the date from which the agreement comes into force. The period for which the agreement shall remain in force should be stated under this clause. If there is any provision for automatic renewal, it should be explicitly mentioned. The conditions for termination and the notice period for avoiding the automatic renewal of the agreement should be mentioned without fail.
Effect on Termination
This clause specifies the effect of termination on the rights granted to the licensee. It also lists out various provisions that shall survive the termination of the agreement such as the payments and royalties clause.
The copyright owner shall indemnify the licensee from all the damages and third-party claims in relation to a breach committed by the owner of the copyright. Similarly, the indemnification clause also indemnifies the licensor from all damages and expenses caused by the use of the musical work by the licensee.
Representation and Warranties
The licensor of a music license agreement should make certain warranties in the agreement. The publisher or the owner of the musical work shall be required to make a representation to the licensee that he is a member of a registered copyright society. Similarly, he will also be directed to make a representation that the musical work is new and original such that it does not violate the intellectual property of any third party. The licensor shall also authenticate that he owns all the exclusive rights concerning the musical work.
A dispute resolution clause, as vital for any agreement also forms a crucial part of a music license agreement. The parties should agree to the laws according to which the agreement shall be construed or interpreted. If the parties prefer arbitration as the dispute resolution mechanism, they should agree upon features such as the number of arbitrators, the place of arbitration, method and so on. The choice of law and dispute resolution should be dealt with utmost importance, especially in cross border licensing.
Apart from these provisions, various other clauses can be added. A separate provision regarding the method for serving the notice among parties can be discussed under a notice clause. A mechanism for alteration and amendment of the agreement can be set out in a separate clause. Various other provisions such as the binding of the agreement on the successors of the parties and clauses giving the agreement the dominant status can be added. Apart from these clauses, various boilerplate clauses such as on waiver and severability should also be a part of the music license agreement.u
Role of Copyright Societies
Copyright societies play an important role throughout the music licensing process. Copyright societies registered under section 33 of the Indian Copyright Act 1957 works for the management and protection of copyright owned by the authors of the work. They can issue licenses for any copyrighted work in accordance with the Copyright Act. They provide a license to all the third parties and collect the license fees from them. After deducting their administrative fee, these amounts are distributed among the creators of the copyrighted work. Hence, a lot of musicians, composers, and publishing companies are members of copyright societies. Copyright societies act like middlemen in safeguarding the copyrights as well as ensuring that the owners of the copyrights are rewarded for their work. Third parties like copyright societies are specialized in what they do and can effectively monitor the rights to prevent any sort of infringement
PPL (Phonographic Performance Limited) and IPRS (Indian Performing Rights Society) are the two most popular public performance licensing entities in India. Initially, both of them were registered as copyright societies under the Act but the 2012 Amendment of the Act brought in a lot of uncertainties among the copyright societies. With the 2012 amendment, they had to re-register under the Act and agree to new rules and procedures. Meanwhile, IPRS in 2017 got itself re-registered as a copyright society under the Act. PPL, the UK based performance rights organization has not re-registered and yet continues to function as a private limited company registered under the Companies Act.
There are a lot of ambiguities concerning the functioning of various third party licensing organizations in India. Section 33 of the Copyright Act prevents any third party other than a registered copyright society to issue and grant a license for the copyrighted works. However, the Bombay High Court, in the case of Leopold Café Stores v. Novex Communications Pvt. Ltd held that Novex Communications, a non-registered third party licensing organization, cannot issue a license under section 33 of the Act. But, the court also held that as per section 30 an owner of a copyright can authorize an agent for issuing a license for his copyright works. The contradictory provisions enumerated by these 2 sections are now being legally utilized by these non-registered licensing organizations. However, licensing under this provision can only be done under the name of the original owner and not the third party association.
Music License Agreement and End-Users
End-users refer to common users who consume music. They aren’t directly related to a music license agreement. On the other hand, the aftermath of a music license agreement is directly related to the end-users. A musical work is governed among the end-users through an end-user license agreement. Online streaming platforms such as Gaana, Hungama, and YouTube are the most common platforms where a lot of musical content is consumed by the end-users. Users of these platforms are required to sign or agree to an end-user license agreement. These agreements prevent illegal distribution or commercial use of the musical work without authorization, thereby enforcing the standards of protection laid down the native music license agreement. Users cannot play copyrighted music or sound recording in public performances and in places such as restaurants, bars, and saloons without the authorization of proper organizations. For instance, for playing a sound recording you will have to obtain a license from PPL. Whereas for playing the music and lyrics, the license is granted by IPRS.
It is no brainer that the next big thing after the creation of a musical work is to avail the musical composition for its mass consumption. The role of a music license agreement in this process is of paramount importance. There has not been much change in the past few years considering the way a musical work is licensed. But quite a lot has changed in the consumption of music. Thanks to new generation technologies and ever-rising popularity of the internet. Any content made available is always prone to infringement. The same goes applicable to musical works.
But the online music streaming industry has reduced the infringement of music. The convenience and cost efficiency offered by these platforms helps a lot in preventing musical piracy. The digitalization of the licensing process has turned out to be a boon for the industry. Licensing organizations such as the PPL(Phonographic Performance Limited) has implemented this change. As per the “Music consumer study” of 2018, the old physical licensing process has contributed only to a 10.8% revenue. Similarly, the transition to the digital licensing processes resulted in more licensing activities thereby increasing revenues of the music licensing industry.
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