The Copyright Act
There has been much controversy regarding the proposed amendments to the Copyright Act. Thomas Abraham, MD, Hachette India, recently did an article in HT: http://www.hindustantimes.com/The-death-of-books/Article1-652735.aspx
The article gave rise to counter-arguments in favour of the amendment. One of them is here:http://www.cis-india.org/advocacy/ipr/blog/parallel-importation-of-books
And here is Thomas Abraham’s rebuttal:
Why Parallel Importation of Books Should Be Allowed
by Pranesh Prakash in Blog — Jan 25, 2011 07:48 PM
Some claim that this amendment to s.2(m) has the potential to destroy the publishing industry. The most lucid explanation of this was in a recent op-ed by Thomas Abraham in the Hindustan Times, very ominously titled The Death of Books.
TA–Thank you. The HT title was given by the paper itself. Mine was an equally ominous ‘Publish and be damned’. Both titles however effectively convey that writing and the books industry are under threat. My piece and the counter rebuttal below, I would like to clarify is mainly concerned with trade (general consumer) books though I will touch upon educational books too. The HT piece was necessarily short by limitations of space (1000 words) but I shall write a longer piece detailing why the amendment is bad for the industry, writers, and readers. But for now, I shall confine myself to responding to Mr. Prakash’s rebuttal.
The publishing industry—or rather, foreign publishers in India—don’t want to open themselves up to competition, and are opposing this most commendable move.
TA–This is blatantly false and put down without checking any facts. Firstly foreign publishers came in here later, so competition already existed. And it is equally the indiscriminate flowing in (sometimes even of our own company’s books through jobbers!!) we are protesting, not some new ‘foreign hand’. The biggest publishers are already here, so there is not really much more competition to open up to. In fact let’s be clear this is not about competition at all (publishing and remainder selling are not really comparable as competition)—so not only is there no level playing field, it’s not even the same game anymore!
However the main point being, that this is not about ‘foreign’ publishers or Indian publishers. The API and FIP (the two major publishing associations in India) together are protesting this, and these two associations cover every major Indian publisher with domestic or foreign ownership. So you have (to name just a few) Rupa, Roli, Zubaan, Permanent Black, Navayana, Marg, Yatra books, westland-tranquebar equally protesting this alongside Penguin, HarperCollins, Random House, Hachette, Oxford University Press, McGraw Hill, Pearson, Macmillan, Cambridge University Press, Elsevier, Springer.
Some fear-mongers try to equate parallel importation with ‘anarchy’ in markets and make it seem that infringing copies of books would be permitted. That is simply not true. It will only dismantle monopolies over importation, and the original books would have to be legally purchased for the import to be legal (and the amendment makes that amply clear).
TA–Again incorrect. You have to understand the dynamics of purchase and selling in a specific industry before making generalizations. It is incorrect to equate exclusivity with monopolies which is a restrictive trade practice. This is an exclusive edition that is right priced and that is published with the author’s consent. This edition as I mentioned in my article The Death of Books follows local pricing in each market and is best suited to serve local readers, the book and the author. What this law will ultimately result in–will benefit no one. There will be short term spoiler price undercutting, but to what purpose? Does the Indian reader really need a Rs 195 book at Rs 185 at the cost of Indian writing itself.
And it is absurd to state that this law will not allow infringing copies to come into the country. That is precisely what it will do. What the new law will do is legalize infringement. Consider this scenario: a book by author x is successful in India, but fails in the US. By the fourth month with no legal territorial protection it is dumped into India at lower prices through a distributor. This is a completely ‘legal’ purchase transaction by both seller and buyer, but is against the author’s consent and in violation of a contract that exists between author and Indian publisher. Now add remainders to the mix and multiply this exponentially with the number of new titles every year and try and imagine what the market is going to turn into. If this is not anarchy, then what is?
Benefits of Parallel Importation
The benefits that will accrue from allowing for parallel importations are huge. Currently a large percentage of educational books in India are imported, but with different companies having monopolies in importation of different books. If this was opened up to competition, the prices of books would drop, since one would not need to get an authorization to import books—the licence raj that currently exists would be dismantled—and Indian students will benefit. This is especially important for students and for libraries because even when low-priced editions are available, they are often of older editions.
TA–Incorrect. The larger part of educational books that serve as text books are locally printed, at prices that go as low as a tenth of the corresponding US prices. These local printings are done through agencies that the original authors trust—they may be branches of the same publishing house , a license given to an Indian publishing house or even a local distributor. Should a completely anarchic market situation emerge, the rights-holders will be less ready to grant rights. yes there is occasionally the pernicious practice of supplying libraries with older editions—but this is not done by publishers, but by unscrupulous suppliers. So a law if any needs to take care of this—not throw the baby out with the bathwater.
An excellent report was prepared in 2006 by Consumers International, in which they studied the costs of textbooks in eleven countries, including India, by average purchasing power of each country’s citizens, instead of absolute cost. Based on that study, and a detailed investigation of international treaties on copyright and the flexibilities allowed in them, Consumers International recommended that India should amend our law to make it clear that parallel importation of copyrighted works is legal (on page 51 of the report).
TA–It is extremely ironical that Consumers International, an organization that states “we are fighting for a fair, safe and sustainable future for all consumers in a global marketplace” should recommend this; given the fallout will result in exactly the opposite. But not surprising because a blinkered view of ‘imports’ clouds the fact that it is not just imports that are affected here but local publishing too.
I will address three specific objections raised by Mr. Abraham and others.
1. Authors’ losing out on royalties
Authors do not lose out on royalties because of parallel importation. For parallel importation to take place, the books have to be purchased legally, and that will ensure that authors are paid royalties. Of course, publishing contracts often have a clause that unsold books will not garner royalties. But then the problem is not parallel importation, but non-selling/remaindering/stripping of books. Parallel importation does not in any way encourage any of those.
TA–Incorrect. I do wish some research had been undertaken before these blanket statements are put out in the public domain. Authors will lose out on royalty by parallel imports. Authors are paid royalties on cover prices for local editions and on net receipts where imports are concerned. So consider the following case of a hardback published here at Rs 495. The author on a 10% standard royalty will earn Rs 49.50 per copy. The same book when sold into India to match the price (we’re not yet talking remainders) will be supplied at a net price or discounts going up to 80%. So even if the net price is £2 (the higher side) then the author will earn 20p (10% of net receipts that the foreign publisher gets) which is just about Rs 15. This is the best case scenario. On remainders which are clearance sales the author gets almost zero.
Non-sale or stripping of books are not material to this discussion and do not affect anything, so am at a loss to see why these are clubbed with remainders. But yes, parallel importation will actively encourage remainder imports. It’s but natural that the moment the law changes and any non-pirated edition is legal in India, that remainder merchants will flood the market.
2. Remaindered books
Mr. Abraham claims that remaindered books will destroy the Indian book market. Remaindering of books has been happening for decades, mostly due to warehousing conditions. If remaindered books haven’t already destroyed all book markets worldwide, then it is unlikely that they will do so suddenly just because parallel importation of books is permitted in India.
TA–Incorrect again. Remaindering of books do not happen because of “warehousing conditions” whatever that may mean. Remainders happen in countries or markets that are mature as standard business practice (because of overstocks or end of shelf life; and because they do not upset the existing market dynamic). As I explained in my article the west is a ‘frontlist’ market— as in comprising largely of newly released books. So their shelf life is much shorter. And the reason why they have not destroyed book markets worldwide is because the mature markets exist with multiple strands (chains and high street stores, independents, direct sellers, online sellers, and supermarkets)—so a direct seller will sell the same book a high street store is selling at a much reduced price without it affecting the business of each strand. Each strand is discrete and price sensitivity does not matter the same way.
But that is not the case in India. We’re talking of a country that has less than 450 trade bookshops. The whole modern retail phenomenon is recent and their expansion is new. We have a lot of important players seriously capitalizing the market. Imagine crossword or landmark or reliance or oxford or odyssey setting up to find that they couldn’t stock up or promote a book because they were living in perpetual fear of some cheaper book coming in. Visualize this as a pattern over years, and you’ll see publishers and retail not investing in the business and the market just turning into traders and stockists hub whose shelves will be full of whatever’s the cheapest.
So surplus stock is a standard feature, as are remainders. Remainders currently exist, but exist as a trickle. They are not big enough to be worth a legal prosecution from the lawful local publisher. Because, make no mistake, they are illegal by law today. But with this amendment, the trickle will become a flood.
3. Non-printing of low-priced editions for India because of “unsecure” market
Parallel importation, which is what the amendment to s.2(m) allows for, affects only importation. It does not in any way affect publication in India or exports. Exporting low-priced Indian editions to New Zealand, Mexico, Chile, Egypt, Cameroon, Pakistan, Argentina, Israel, Vietnam, South Korea, Japan, and a host of other countries which allow for parallel importation of books, is currently legal. The amendment does not change that position. The incentives to print low-priced editions hence does not decrease. If anything it will increase because currently books that are not available as low-priced editions cannot be imported without exclusive licensing, and with a change in this position, the incentive to compete in the form of low-priced editions will increase.
TA–Completely false as the arguments above have shown as regards royalties, retail stock-up, market stability, publisher investments. The amendment will change all of this reducing the incentive to publish. Lack of a stable and secure market means original rights holders will also be reluctant to grant reprint rights (because these very same books may flow back and damage the market of the original edition) and local publishers (with investment capability reduced and security eliminated) will not buy rights the same way. None of the countries mentioned above have a growing, thriving indigenous publishing business in English—not even new Zealand, which may be a developed country, but in terms of both revenue or publishing output (India has 17,000 registered publishers and is the third largest producer of books after the US and UK) is far smaller than India.
Rhetoric flourish and the law
Mr. Abraham asks how many authors one can name from open markets like Malaysia, Singapore, and Hong Kong, as a sign of the ‘history of creativity’ in each of these countries and territories. It might be just as well to ask how many authors he can name from closed markets like Bhutan, Kazakhstan, Cambodia, Papua New Guinea, Indonesia, Jordan, and Ukraine. Additionally, the ‘mature’ markets which he wishes India to emulate—United States, the United Kingdom, and Australia—are more ambiguous on parallel importation than he would have us believe.
TA–Yes I do ask that to establish the fact that the one quality ‘brand’ we have established internationally is our authors—building slowly from Tagore and Narayan down to the explosion one saw in the nineties (Vikram Seth, Amitav Ghosh, Arundhati Roy, Vikram Chandra and many, many more) and that has steadily progressed—enabled by the growth of publishing houses (Indian and foreign owned!) and the interest literary agents/foreign Houses have evinced in the writing that has flowered here. This has in turn propagated a local publishing scenario where brands exist locally and slowly but steadily this market is maturing—in the kind of writing, in the kind of selling, and in the kind of investments made. So the point is not how many brand authors failed to emerge from a closed market but how many have ever emerged from an open market culture.
In the United States, the legality of parallel importation of copyrighted goods reached the United States Supreme Court last year in Costco v. Omega, but the Supreme Court split on it 4-4, and did not deliver a binding precedent on the legality of parallel importation. In the United Kingdom, as per European Union law, parallel importation is permitted from anywhere within the EU. And in Australia, in contrast with neighbouring New Zealand, parallel importation of parallel goods is allowed, with an exception being made for books.
TA–We are talking of contractually copyrighted books. Neither the US nor the UK allow a book published in their territories (with contractual rights for those territories) to be infringed. That’s the whole point made regarding a level playing field—Indian publishers can now be infringed but cannot sell their books to the protected markets. Yes the EU follows the principle of exhaustion, but equally has territorial copyright. If the UK has contractually exclusive rights for a book in Europe, a German bookseller cannot then buy the US edition, or ship that into UK.
Most importantly, none of the markets held up as role models are developing countries. India is not. This makes all the difference, as the Consumers International report underscores.
TA—-None of those countries have been held up as role models to blindly emulate—we need to see what best practices exist and why they exist and then adapt them to our local needs. Equally we don’t just blindly rush into something because of an unsubstantiated notion that parallel importation is good or that prices will fall or students will be better off. So the developed country example makes no difference. In this context, the developing country paradigm is relevant only to pricing. India is already the lowest priced market in the world and there is absolutely no monopoly either pushing prices up or withholding books from readers. There is thus neither scarcity, nor over-pricing. India while retaining its low pricing is rapidly heading towards being a mature market—in terms of a renaissance in writing across segments, a resurgence in publishing and these inevitably lead to a stronger grounding in culture and knowledge. Dumping grounds never foster real quality.
On one point we are in complete agreement with Mr. Abraham is in his point regarding lack of adequate consultation. While there was a good amount of consultation during the drafting stage, when a wide-ranging public consultation was held in 2006, this was not repeated in 2010 by the Standing Committee. While Mr. Abraham states that only the Authors Guild was represented before the Standing Committee, by going through the report prepared by it, we see that the Federation of Indian Publishers and the Association of Publishers in India
For instance, not a single consumer rights organization or library association is represented before the Standing Committee.
TA–The FIP and API are the publishers’ body (I write as a member of the same bodies, though these views are personal) who are protesting. They were but consulted in name. Their representations have not been taken cognizance of; and not a single point debated. Contrast this with the committees formed for the ‘Bollywood amendments’ or even the same minister consulting telecom industry leaders.
Department’s and Standing Committee’s views
We reproduce below four paragraphs from the Standing Committee’s report, which elucidate many of the reasons for going in for this particular amendment.
TA—and each of them have been annotated.
All the reservations/objections raised by the various stakeholders were taken up by the Committee with the Department with the intent of having full understanding of the background necessitating the proposed amendment and its exact impact on the various stakeholders. As clarified by the Department, the main purpose of this amendment was to allow for imports of copyright materials (e.g. books) from other countries. It was in accordance with Article 6 of the TRIPS Agreement relating to exhaustion of rights whereunder developing countries could facilitate access to copyright works at affordable cost. Exhaustion of rights (popularly called as parallel import) was a legal mechanism used to regulate prices of IPR protected materials. This was viable only if the price of the same works in the Indian market was very high when compared to the price in other countries from where it was imported to India.
TA– Exhaustion of rights as defined here so far existed in the regimes of trademarks and patents. That copyrighted books in India are different is precisely the debate and the biggest stakeholders—publishers, authors and readers were not consulted in a detailed way.
Committee’s attention was drawn to the fact that majority of educational books used in India were imported from other countries particularly from US and EU. There was an increasing tendency by publishers to give territorial licence to publish the books at very high rates. The low price editions were invariably the old editions than the latest ones. This provision would compel the Indian publishers to price the works reasonably so that it would not be viable for a distributor to import same works to India from other countries. This would also save India foreign exchange on the payment of royalties (licence fee) by the Indian publishers to foreigners.
TA–A preposterous statement, that proves no due diligence was ever undertaken. The “committee’s attention was drawn to the fact”– by whom, where are the facts?. Name one single major book (college text or fiction/nonfiction blockbuster) that is not available in India at the same time and much cheaper. Also please demonstrate where “low price editions are invariably the old ones”. “This provision would compel Indian publishers to price reasonably”—please indicate current prices and substantiate where they are unreasonable. Prices as mentioned above even drop to a tenth of overseas prices.
Committee was also given to understand by the representatives of the publishing industry that Scheme of the Copyright Law was entirely different from the Trade Marks Act, 1999 and the Patent Act, 1970. The application of the standards and principles of these two laws through the proposed amendment of section 2(m) would completely dismantle the business model currently employed, rendering several industries unviable. On a specific query in this regard the Department informed that the concept of international exhaustion provided in section 107 A of the Patent Act, 1971 and in section 30 (3) of the Trademarks Act, 1999 and in section 2 (m) of the copyright law were similar. This provision was in tune with the national policy on exhaustion of rights.
TA–Why then was territorial copyright protected so far? Were the earlier lawmakers unaware of the differences? What huge lapses were noticed that needed redressal by this amendment which would do away with territorial copyright? In the face of the obvious disadvantages, what good would the amendment do? Particularly given that every single assumption made is backed by no research; and the resultant ill-informed decision is going to cause more harm than good.
After analysing the viewpoints of all the stakeholders along with the clarifications given thereupon by the Department, the Committee is of the view that proposed inclusion of the proviso in the definition of the term ‘infringing copy’ seems to be a step in the right direction, specially in the prevailing situation at the ground level. The present practice of publishers publishing books under a territorial license, resulting in sale of books at very high rates cannot be considered a healthy practice. [Emphasis added.] The Committee also notes that availability of low priced books under the present regime is invariably confined to old editions. It has been clearly specified that only those works published outside India with the permission of the author and imported into india will not be considered an infringed copy. Nobody can deny the fact that the interests of students will be best protected if they have access to latest editions of the books. Thus, apprehensions about the flooding of the primary market with low priced editions, may be mis-founded as such a situation would be tackled by that country’s law. [emphasis added.] The Committee would, however, like to put a note of caution to Government to ensure that the purpose for which the amendment is proposed, i.e., to protect the interest of the students is not lost sight of.
TA–Not a single substantiation of this “high price” that would qualify enough for an amendment to be made. The ‘permission of the author” is laughable. The very same authors are saying no to the amendment, and do not give consent to other editions coming in to infringe the one that was exclusive. The first point I made in my article was that the two rights (copyright and assigned territorial rights) are linked. It is an unjust law that refuses to take cognizance of the author’s wishes.
It is clear that it is mainly foreign publishers whose monopolistic pricing will be harmed by this amendment on importation, while Indian publishers, Indian authors, and Indian readers, especially students, will stand to gain.
TA–False. On what basis are these completely unsubstantiated claims being made? As stated earlier, this is one issue that Indian and ‘foreign’ publishers are protesting together. As are authors—Indian and foreign. Readers will see short term spoiler pricing, that may gain them a few rupees in the short term, but in the long term will lose them good books.
Additional note on legal points from Saikrishna Rajagopal, IPR lawyer
The fundamental legal infirmity that I find in Mr. Prakash’s argument are twofold:
1. That current Indian Law allows export of low priced editions;
2. That the proposed proviso would not include within its scope ‘exports’.
As regards the argument that current Indian Law allows export of low priced editions, the two John Wiley cases of the Delhi High Court of May 2010, make it abundantly clear that current Indian Copyright Law precludes export of low priced editions. Pertinently, an appeal was preferred in one of the Wiley cases and was dismissed. These judgments are therefore final now and therefore authoritatively, interpret Indian Copyright Law as it stands today.
As regards Pranesh’s argument that the proposed amendment does not cover ‘exports’, this argument is completely specious. In order to determine at what stage a copyright owner loses its right to control further sale and distribution of a copyrighted product, the statute itself needs to be looked into to determine what standard of exhaustion of rights has been contemplated. If the proposed proviso becomes law, it would be a clear indicator to a Court that Indian Copyright Law follows international exhaustion, namely, that once a product is legitimately sold anywhere in the world market, the copyright owner loses/exhausts the right to control further distribution and sale, including export and import. It is because the copyright owner exhausts rights globally that the proposed amendment is allowing for genuine copies of books sold in the international market, to be legally imported into India. This being the case, there is almost unanimity amongst IP Lawyers that export of low priced editions would also be considered legal, in view of the proposed amendment. This is not just our Indian view, but also the view of other international IP experts who have had an opportunity to look at the implications of this proviso.
Most pertinently, when the Wiley judgments which related to export of low priced editions, were being pronounced in Court, the Hon’ble Judge casually remarked that the law laid down in cases may soon become redundant if the proposed legislation comes into force.