Copyright Bill Subcommittee: regulation of Collecting Societies

Meeting report

Ms Evelyn Masotja, Deputy Director-General: Department of Trade and Industry (dti), took the Sub-committee through the summary of recommendations of the Copyright Review Commission (CRC) report. The recommendations were as follows:

• South Africa should amend its Copyright Act by adopting inter alia the right to communicate literary and musical works to the public and the right to make available copies of sound recordings;
• The copyright law should be amended to allow the Registrar to take over the administration (as opposed to the withdrawal of accreditation) of any relevant collecting society ;
• Legislation should be amended to allow for one collecting society per set of rights with regard to all rights governed by the Copyright Act of 1978 (performance, needle-time and mechanical rights);
• The law should be amended to allow for all music rights collecting societies to fall within the ambit of the Regulations issued under the Act;

• The Copyright Act must be amended to allow rights holders as well as users to engage the Copyright Tribunal in disputes about the appropriate tariffs to be applied;

• The Act should be amended to provide that needle-time be divided equally between the owner(s) of the copyright in the sound recordings and the owner(s) of the neighbouring right to needle-time;

• The Copyright Act must be amended to include a section modeled on that of the US Copyright Act, which provides for the reversion of assigned rights twenty five (25) years after the copyright came into existence;

• The definitions of local music contained in the Electronic Communications Act should be enlarged;

• The Copyright Act should be amended to adopt the right ‘to communicate the work to the public’ and the ‘making available’ right as two new exclusive rights of copyright owners.

The amendments made to the Copyright Act in terms of collective management, music, royalties, tribunal, etc. were a direct result of the above recommendations to reinforce the regulation of collecting societies. The Companies and Intellectual Property Commission (CIPC) was the enforcement agency of the dti with respect to intellectual property (IP).

In respect of copyright, the Registrar of Copyright was responsible for registering, accrediting and regulating collecting services, which may include activities such as the approval of distribution plans and dispute settlement through the current Copyright Tribunal.

The CRC recommended that the CIPC, through the Registrar of Copyright, assumes all administration of collecting societies and not merely the removal of accreditation, as under the current Act. This was supported by the dti. Therefore, the amendment to the Act made provision for the CRC recommendations to strengthen the mandate of the CIPC in terms of Collecting Societies.

Since the promulgation of Regulations the following collecting societies had been accredited:

• SAMPRA (South African Performance Rights Association), for copyright owners of sound producers, entitled to issue licences, collect royalties and distribute them to its members, but had no responsibility towards performers;
• SAMRO (South African Music Rights Organisation), for composers, lyricists and publishers;
• CAPASSO (Composers, Authors and Publishers Association), a mechanical rights agency which collects and distributes royalties to its members: music publishers and composers;
• SARRAL (South African Recording Rights Association) for composers and publishers. SARRAL had been liquidated in 2009. The Company had been wound up due to misappropriating composers’ royalties. The royalties money had been used for management and running of the company.

The proposed legislation reinforced the intention of the regulations and provided for the establishment of a collecting society. The Bill also stood as a statutory measure for non-compliance of a collecting society. It provided for the accreditation and registration of collecting societies and allowed the Registrar -- the CIPC in this case -- to take over the administration. Collecting societies were also required to adhere to good corporate governance principles and comply with regulations. When collecting societies acted as agents for copyright holders, it was proposed that the rights of copyright holders remain with them and copyright holders should receive royalties from whoever exploits their rights. The freedom of association with regard to the collection of royalties was not impaired, as the CRC did not make it compulsory for artists to be part of a collecting society in order to get their royalties. Artists who wished to administer the collection of royalties for the use of their work could do so, using a contract.

The amendment of the legislation to allow for one collecting society per set of rights -- one collecting society for performance rights, one for needle-time rights, and one for mechanical rights. This was due to the confusion around certain collecting societies’ repertoires, arising as a result of the overlapping membership between organisations. This approach would assist the artists greatly by providing certainty to artists about who was collecting and which royalty was being collected. It would further assist in addressing the problem of collecting societies collecting for artists not registered under them.

The extension of the CRC recommendation concerned with one collecting society per set of rights beyond the music industry, was due to the fact that firstly, there were no collecting societies in other areas (Audio Visual sector/Artist Resale Right) that were copyright-based. Most significantly, it was important for purposes of consistency and legal certainty to have collecting societies.  Copyright-based industries had requested that their sector be allowed to have a collecting society, and similar provisions, if not the same, could be used to regulate the collecting society.

New areas required a form of collective management. The royalty streams were not many, and therefore one collecting society could collect for their set of rights. For the artist resale right, for example, there was a royalty stream linked only to the resale of the work. In terms of the audio visual sector, the royalty stream would stem from the four economic rights in the Beijing Treaty for audio visual performances, and would replace the two existing rights. In this sector, no one was collecting, save for one individual who assisted some performers in collecting their repeat fees from the broadcaster, and this left out many who had no assistance.

The Intellectual Property Laws Amendment Act (IPLAA) of 2013 provides for the protection of indigenous work through the Intellectual Property system to prevent misappropriation, but the Act was not in force. The current system of collective management for music was applicable to songs that were indigenous, because copyright was part of the IPLAA. The CIPC would need to advise on how collection may occur in the interim. This should be limited to music, as the IPLAA provides for its own mechanisms of protection. Any amendment made by the Copyright Act would form part of the IPLAA, but was not dependent on the IPLAA being in force.

With regard to the maximum period that a collecting society may retain royalties before distributing them, this could be addressed by taking into account that Section 22B (5) of the Copyright Amendment Bill (CAB) provides that the registration certificate of a collecting society was valid for a period not exceeding five years. Therefore it could be deduced that a collecting society had a maximum period of five years. In the CRC, SAMRO explained that after three years, the unclaimed royalties were written back to income and distributed to the members based on the normal distribution criteria. This provision was to ensure that monies were not left for years without distribution, or that distribution occurred timeously to the correct recipients. This was a mechanism to ensure the correct recipients received the correct distribution. The CRC found the practice of distributing unclaimed royalties to be problematic.

The need to prescribe a maximum administration fee was that, according to the CRC report, collecting societies like SAMRO were retaining 30% in administration fees. The CRC report provided that the cost- to-royalty income ratio, which was the administration costs as a percentage of total collections, for the collecting societies selected for international benchmarking, varied between 10% and 24%, bearing in mind that the maximum allowable ratio was 20% in terms of the current local regulations for needle-time. Therefore, retaining 30% was excessive in relation to the international average. Capping it at 20% was reasonable and in line with other jurisdictions, and ring-fenced the administration fees which capped unneeded profits, whereby a portion could rather be used to assist the industry.

Regarding the need to prescribe reporting by users in order to facilitate royalty payments, the CRC report noted that music log sheets were kept mainly by broadcasters, and that general music users tended not to retain any log sheets. Collecting societies were therefore not able to accurately distribute royalties based on music usage. In cases where there were no log sheets, collecting societies used the available usage information as a mechanism for distributing unlogged royalties. Furthermore, some of the submissions to the CRC requested an amendment to the legislation, to force every music user to retain cue sheets in order to eliminate the above-mentioned problem. Therefore, this was critical, as collecting societies had to have systems in place to capture correct data in the long term. The latter would ensure the payment of royalties to correct recipients. There may be a need to prescribe reporting, to facilitate royalty payments.

Mr Kadi Petje, Senior Manager: Copyright, CIPC, said the need for SA to have a system of one collecting society per right had been an area of much focus during the Copyright Review Commission (CRC) in 2010, and the industry had agreed. Different categories of right holders being members of one collecting society had created practical challenges. Members had pursued opposing interests on how the collecting society should administer the rights entrusted to them.

Owners of sound recordings, who were often performing artists and composers, changed positions depending on where the most benefit emanated, and in the absence of a shared interest there was a likelihood of advancing opposing developmental goals. Users resisted royalty payments when approached by more than one collecting society on the same right. Imagine ten collecting societies on the same rights -- it became quiet challenging to set a tariff where different right holders were members of one collecting society in instances where the court had not determined a tariff. There was a need for performers in the audio-visual sector to earn royalties by virtue of a statute, and collective management of rights would become the machinery to achieve that goal. He pointed out there was an imbalance between producers and actors, because actors depended on contractual agreements.

The collecting societies in the audio-visual sector would be preparing South Africa to join the World Intellectual Property Organisation (WIPO) Beijing Treaty on the protection of audio-visual performances. Both actors and producers of audio-visual works would participate and be represented equally in the decision-making process in the collecting societies, in the same manner as the administration of rights in sound recordings (needle-time). The sector had been engaged and workshops had taken place.

South Africa had not yet passed an Act of Parliament to protect indigenous knowledge. Therefore, it was not possible to avail the collective management of rights where the works were not enjoying protection under law. The protection of indigenous knowledge was still a topic of discussion at the WIPO. Another point was that the CIPC was still waiting for a directive on whether the dti or the Department of Science and Technology (DST) would be given the legislative mandate on indigenous knowledge.

It may be practically challenging to legislate on the maximum period that collecting societies may retain royalties before distribution. The CIPC had advised that the Sub-committee must consult with the collecting societies to gauge if this would not hamper the administration and management of the rights. The CIPC knew that users were licensed by collecting societies for different periods. The CIPC had advised that the legislation should regulate where necessary, and not stifle the business of rights administration. This was imperative, so that collecting societies did not accumulate unneeded profits to the detriment of its members, the right holders.

If the collecting societies indeed maximised the commercial exploitation of the rights under its administration, it would favourably affect the administration costs. Administration costs were very important in the business of rights management simply because they talked directly to governance aspects - transparency and accountability. This was imperative, although the culture and respect for IP by South African businesses and society at large was not encouraging. The CIPC had seen collecting societies in other jurisdictions bearing the costs relating to the reporting of usage, and this might be an option for South Africa. Technology was readily available to provide a solution in this regard, and collecting societies could consider it. Data of usage was the basis of distribution, as the absence of data led to the incorrect payment of beneficiaries. 

Collecting societies, or a system of collective management of rights, should be seen as another way of unifying the creative sectors.  When unified and organised, they were likely to share the same strategic and developmental goals. Currently, the creative sectors remained fragmented and there was a likelihood of advocating different positions and, therefore, maintaining the status quo.

Another area that required legislative intervention was the concluding of reciprocal agreements by collecting societies with their counter-parts in other jurisdictions. Reciprocal agreements must bring value to members of the collecting societies. They should not be concluded to avoid one-way royalty trafficking.

Discussion

Mr G Cachalia (DA) asked if the CIPC was envisaging a situation where people voluntarily signed up to join the collecting society, or they would just do their own thing. Were there other sectors they were thinking of involving, if the CIPC stated it intended to extend the collecting societies beyond music? He wanted to establish if there was a mechanism in place to monitor reporting by users for the royalty programme, or if the CIPC was going to look beyond SA’s borders.

Mr Lloyd Matseembi, Executive: Legal Support Copyright, CIPC, indicated that collective management tried to help organisations to see the value of the business because it was difficult for individuals to collect their own royalties, so the collecting societies assisted the individuals to maximise the collection of their monies or royalties. Regarding monitoring, whether it was foreign or local work, what was important was the music played and its frequency. Monitoring was generally there, whether the artist was local or foreign. Distribution was based on the frequency of the work used.

Mr Petje added that the focus had been on music, but artists and actors were experiencing many challenges regarding royalties even though they worked according to contracted agreements.

Mr S Mbuyane (ANC), asked if there was already a collecting society in place, or if the CIPC was planning to have only one collecting society to collect on behalf of others, because gaps that had been pointed out in the presentation. Did the existing collecting societies have an impact on each other? Did the collecting societies have a structured membership and were registered with the CIPC. What did the term 'needle-time' mean? Was there a tribunal in place for members to go to when they were not getting their money from the collecting society? He asked for clarity on what 'covering cost for music usage' was.

Mr Matseembi explained that the issue of one collecting society for one right was still a new set-up. The current collecting societies were not regulated, but were regulated only for recordings. Others just collected for audio-visual recordings. SAMPRA and the Independent Music Performance Rights Association (IMPRA) were the only two collecting societies that were accredited for representing owners of music companies.

With regard to the impact of the collecting societies, he indicated the societies had different revenue streams. It all depended on how the market behaved and whether one decided to use sound recording or mechanical rights. Some collecting societies were registered, while others were not. The CIPC did not regulate SAMRO, but SAMPRA and IMPRA were supervised by the CIPC. There were two collecting societies per right, and some had dual memberships. For those not regulated, members could invoke internal remedies using the Companies Act. That was why the collecting society per right would deal with these practical challenges that had been observed through time.

Mr Petje, regarding 'covering cost for music usage', said that collecting societies were there to assist music producers to monitor the sound recording usage. Reciprocal agreements were a mechanism to monitor the usage of local and foreign music. He explained 'needle-time' meant a sound recording usage. Needle-time simply referred to the rights in sound recordings, and the terminology ‘needle-time’ was derived from olden days when music was played on phonograms which used a needle to play. The beneficiaries of the needle-time system were owners of sound recordings (record labels) and performing artists whose performances were featured in the sound recordings. Payment of royalties to these beneficiaries took place when the sound recordings were consumed with any air play by users such as radio broadcasters.  Pertaining to the tribunal, he said there was currently a copyright tribunal. It was presided over by a high court judge. The CIPC acted as a registrar - it opened the file and took it to the judge.

Mr Matseembi added that the Act allowed the user, broadcaster, performer or retailer to approach a tribunal for arbitration. The beneficiaries had the right to approach the arbitrator.Adv A Alberts (FF+), asked what the current reaction was of the current collecting societies to what was being proposed. He wanted to know if there would be an Act that would deal with money that would be lost, to ensure good corporate governance. Would the rights of copyright holders be transferred to collecting societies when they acted as agents for copyright holders? What was the position of the broadcasters regarding the Beijing Treaty and what was being given to the actors? He enquired how money was going to be collected if there was no engagement with reciprocal agreements and people just continued to play the music for compliance, seeing that SA was part of the Beijing Treaty.

Mr Petje, regarding engaging current societies on what was proposed, said that people in this business changed their positions now and again. They were dealing with a sector that decided when to agree and when not to. During the CRC engagements, the collecting societies had agreed with them, but now that the societies had to appear before Parliament, they were singing a different tune. Regarding corporate governance, he said the collecting societies were supposed to be run by members and not be profit-making organisations. Things were explained to them, but they kept on changing their positions. Their rules for corporate governance should be aligned with the Companies Act so that there was full accountability regarding fiduciary duties. This would also take care of the tensions among the collecting societies. On the rights of copyright holders, he said the whole issue was about right-holders. The copyright holders should retain their rights and not be violated.

Ms Meshendri Padayachy, Deputy Director: Policy and Intellectual Property Laws, dti, pointed out that as far as the Beijing Treaty was concerned, the broadcasters were going to give a lot of kickbacks. They forced the actors to take it or leave it when it came to contracts. The Beijing Treaty provided a repeat right. It gave actors the right to be paid when their work got played, and when it was repeated. Broadcasters did capture data of usage to locate beneficiaries. The Treaty also provided a rental right which applied to DVDs, and another right covered streaming for actors to be in the value chain. The Treaty was also trying to protect the performers as well. When one had two collecting societies, they ended up in court because it was time for distributing. This created a monopoly, and there was not healthy competition. It affected the artists, and broadcasters took advantage of the court cases. There were contracts that had been re-worked and crafted. They were going to be presented to, and negotiated with the broadcasters, and etv was already on board.

Mr Petje added that the Beijing Treaty provided an opportunity for actors to earn royalties that emanated from the statute. It sought to protect the rights of performers of audio-visual works so that the use of audio-visual works can earn a royalty for performers. This would entitle performers to earn a royalty when the audio-visual works incorporating their performances was broadcast, reproduced, distributed, rented, and made available. All these were economic rights which should be distinguished from moral rights, as the latter were not transferable and yielded no commercial gains.

On the repeats of TV soapies by SA broadcasters, the CIPC had been advised that they were being paid for by some users, but there was no clear framework forming the legal basis. If SA joined the Beijing Treaty, actors through the Performers Protection Act of 1967 would earn royalty on any use of the audio-visual works which incorporated the actors’ performances.  The CIPC had a duty to protect the work of other countries, and that was why there was a reciprocal agreement in place as a mechanism to ensure people were given their rights.

Dr Ria Nonyana-Mokabane, Chief Director: Legislative Drafting, dti, remarked it was important for the CIPC to set up criteria for the registration of collecting societies to ensure they were properly assessed and royalties were distributed in time.

The Chairperson reminded the Committee that this was its first meeting on the matter and lots of questions had been asked. The Committee needed to get a list of regulated and unregulated societies, and all of these should be discussed when the Committee met again on 18 April.

The meeting was adjourned.