So how does it work? Websites such as Royalty Exchange (RE) list songs or entire catalogues, slices of which are available on sale via auction and potential buyers bid on these. It is important to note what exactly is on sale - the most common commodity on sale is a part of a royalty stream say 25% or 40%, though occasionally the entire royalty stream is also available for sale. Usually, the underlying copyright of the song/catalogue is retained by the seller. The royalty stream may be for life or for a period of 10 years or any other period described by the seller. Furthermore, there are different kinds of royalty streams. For example, there are mechanical royalties which involve the royalties paid every time there is a sale or legal download of a song. There are public performance royalties for when the music is heard in public through live concerts & gigs, at nightclubs, sports events or on the radio. There are separate royalty fees for use of songs in movies, video games and commercials. You could get royalties every time a song is streamed on say YouTube. So it is important to note which of these is up for sale, at what percentage and for what time period. Payment is made either quarterly or biannually either through RE or a third party royalty paying entity.

Examples of some artist’s songs that have been up for such transactions through Royalty Exchange include Evanescence “Bring me to Life”, Rihanna’s “Don’t stop the music”, “Nicki Minaj’s “Anaconda”, Dirty Dancing’s “Time of my Life, Drake’s “Fire & Desire”, Cardi B’s “Bodak Yellow” and Shakira’s “Dare.” Investors are also making bets on K-Pop due to its ever-increasing popularity. Royalty Exchange claims to have conducted $75 million dollars in royalty transactions as of May 2020 since its relaunch in 2016.

According to Nathan Jolly from The Music Network, the rights to Jay-Z and Alicia Keys’ ‘Empire State Of Mind’ for USD 190,500 seems at first like a wise investment, but this is only for the public performance rights, and only for a period of ten years. The last twelve-month period saw these rights net the owner USD 32,733, so assuming this rate continues, the buyer will have made USD 327,330, or a profit of USD 136,830 minus a broker fee of 15%, plus a one-off $500 payment for administration of royalties. Similarly, recently, the lifetime public performance rights for Dirty Dancing’s ‘The Time of My Life’ went for a whopping USD 493,500, but given it makes USD 47,008 in royalties every calendar year and the buyer will own the rights for the lifetime of the (still very alive) songwriters, plus 70 years according to copyright law, it seems like a sound investment. Yet another example includes the sale of a catalogue featuring songs from Sesame Street for USD 580,000 in 2017 for charity. It is important to note however, that not all royalty stream purchases are in the six-figures, many start from as low as USD 10,000.

So what’s in it for the buyers? Just like trading on the stock market, savvy investors can buy at a lower price and take a chance on a relatively unknown artist for a high payoff down the line. Or investors can buy into equity into songs of established artists expecting a steady passive income stream. There is always the chance that royalties may go up due to increased usage of a song due to events such as inclusion of a song in a TV show’s episode or movie soundtrack or the death of an artist. Holiday songs make more royalties as they are played each year usually over and over again. Similarly, if a song is reinterpreted in a new manner, both the original and new artist earn royalties. Another idea to consider is the popularity of mobile ring tones in India. Then of course, there is the simple joy of being a music lover and owning a piece of your favourite music. Royalty payments are not tied to the ups and downs of the stock market and this is favourably looked upon by investors. The buyer has the potential to further out-license an asset if they have bought the copyright to the song/catalogue. In the Indian context, it could be equitable to allow the creators of the music such as the instrument players and background singers to buy preferential shares into royalty streams at lower rates.

What’s in it for the seller? Well, according to Royalty Exchange, selling a portion of their royalty streams allows sellers to raise many years’ worth of royalty payments upfront without giving up control over their future earnings or going into debt. It hedges risk by protecting against a potential downturn in royalty streams in the future and it raises funds in the present for pursuing new projects, not to mention helping with any expenses.

As with any investment, there are advantages and disadvantages of partaking in royalty payment streams. On the upside, according to market research, royalties can bring in yields from 10-25% per year. This may be the reason for a growing trend seen of pension fund managers now jumping on the bandwagon. On the downside, the last 12-month period of royalties (which are heavily relied on for determining the auction/selling prices of royalty streams) may have been the only time the particular song or catalogue is popular and makes money so there is some inherent risk and investor discretion is advised.

While the investor is out shopping, other players in the market worth checking out include Songvest (the first song stock market) and Lyric Financial (which focuses on up and coming artists to finance them at an early stage of their career). Then there is the giant, Hipgnosis Songs Fund Limited, listed on the London Stock Exchange, and owning the rights to over 13,000 of the world’s best-known songs. Hipgnosis also keeps a list of its most popular songs i.e. its portfolio on Spotify and counts the Church of England as one of its investors. It’s a brave, new world. Perhaps, we may yet see companies carrying catalogues of evergreen artists like A R Rahman, Lata Mangeshkar and Sunidhi Chauhan or new age artists like Neha Kakkar on the Bombay Stock Exchange?

However, operation of these rules also hit by roadblock of series of petitions. Reacting to this grim situation a writ petition was filed in Mylan Laboratories v Union of India & Ors  before Delhi High Court to seek intervention of the court to invoke “doctrine of necessity” to allow disposal of urgent cases by Chairman and the only appointed Member(PVRT).

The non-functioning of IPAB also came under the scanner of the Delhi High Court in Merck Sharp And Dohme Corp. vs Union Of India  And Ors. on 27 February, 2020 where Justice Prathiba M. Singh observed that

5. The non-functioning of the IPAB is a serious cause for concern inasmuch as cases like the present which involve patent rights which have a fix term are being unduly delayed due to non-constitution of the Tribunal itself. This position has continued for the last several years and has repeatedly been the subject matter of various writ petitions filed before this Court.

……….

11. It is matter of record with that there are more than 4000 cases including 1600 patent cases, which are pending before the IPAB and hence non-assembling and non-availability of infrastructure to the IPAB has severely dented the disposals before the IPAB, and the delays have affected substantive rights of IP owners.

Resumption of hearing in IPAB

It took almost three months for the new Chairman IPAB to adjust to the Covid created crisis, which further dented the normal hearing in the Board. In order to resume hearings post Covid lockdown three office orders were passed by the Board in May 2020 to streamline future hearings and filings during the ongoing COVID-19 pandemic. These orders of the Board in fact led to normal resumption of work as the IPAB registry resumed receiving petitions on urgent matters through e-filing. Additionally, IPAB streamlined the process to be followed in cases of urgent mentioning and requests for adjournment, by sending email to the Deputy Registrar at ipab.tn@nic.in in advance.

Procedure for online hearing

Video conference platform established by IPAB would help to facilitate the disposal of urgent matters now. The petitioners/Litigants who are willing to joint video conference proceedings can now forward their requests to IPAB registry through email giving details such as their names, case title, case number, date of hearing along with their contact details well in advance of the hearing date. Registry would provide link and pin for joining the online hearing along with the time slot of the hearing to the petitioners /litigants by through email.

Recent decisions of IPAB

With appointment of all technical members, IPAB is now operational and moving full throttle in conducting hearing through video conference and disposing the urgent appeal matters. With IPAB resumption of functioning, we see now series landmark decisions on the appeal cases.

Looking beyond Computer program per se

In Ferid Allani v Union of India & Ors, IPAB looked beyond computer program per se and allowed patent on computer related invention based on the ground of having technical effect. This case would also be known for being rejected by Controller on multiple times even when High Court clearly interpreted computer program exceptions should be limited to mere programs alone. The IPAB ruling on patentability of computer-related inventions demonstrating “technical effect” or “technical contribution” would perhaps break the jinx of such rejections at IPO and would give much needed relief to inventors.

In an another interesting order (Novertis AG vs Natco Pharma Limited )[OA/20/2019/PT/DEL dated 29 September 2020] IPAB questioned the virus of the post grant opposition, where insufficient fee was paid and the Controller allowed the deficient fee to paid after the expiry of the prescribed period. IPAB Ruled that

23.2 The post-grant opposition was not maintainable ab initio for lack of filing proper prescribed fee. The Controller should not have acted upon the post -grant opposition as the proper fee …………... within the prescribed time period of filing the opposition. ……………………..How come an opponent having stature of legal entity, pay a fee applicable to natural person? The balance fee was remitted on 08/11/2017 after the statutory time period expired on 30/09/2017. Therefore, the post- grant opposition itself was not maintainable and the office of the Learned Controller is expected to exercise due diligence in future. On this ground, we hold that the order passed by Controller on 16/08/2019, being an order on non- existent post- grant opposition, does not have merit to stand.

This case would be also be known for restraining the Controller to resort to hindsight analysis in novelty rejections as IPAB held that

“But for the “hindsight analysis”, it was not possible to arrive near to the structure of the instant patent. The “hindsight analysis” is not allowable under “inventive step” determination let alone “novelty” consideration. “

The Board also questioned Controller refusal of the patent by ignoring the recommendations of the Opposition to the contrary, without giving any reasons. The Board ruled

23.6 The Learned Controller ought to have considered the view of the members of the opposition board who were of the opinion that “the present opposition may be dismissed and the current patent may be allowed to stand.”

IPAB quipped that the views of members of opposition board appears very crucial and

“If at all the Learned Controller was to differ from the opinion of the opposition Board, the point of disagreement should have been annotated in the order, which is not present in the order….”

In this case IPAB granted the patents after finding also that “the other grounds such as “lack of inventive step’, objection under section 3(d) and that related to “insufficiency of disclosures” were also decided without proper reasoning.”

This is a classic case of overall examination of evidence, application of hindsight and improper interpretation of the recommendation of crucial analysis of the opposition board. This decision would go a long way to guide the future oppositions proceeding before the Controller.

Violation of the procedural fairness

In another case (Hawar Technologies Limited Vs COP 9(OA/56/2020/PT/DEL dated   12^th September 2020 IPAB found clear violation of hearing principles as laid down in the patent act and rules .The board observed in relation to the violation of the hearing principle that

23. “it is clear that the Patent Acts and rules framed thereunder are code in itself and prescribes the contents of the natural justice and hearing principle. The natural justice in the context of the Patents Act is not merely confined to the hearing orally which according to us in the present case was mere formality and was not done a substantial hearing. But in fact the Patent Act and rules framed thereunder also provides for the provisions of the written submissions.

The Board heavy relied on ruling of landmark Dharampal Satyapal’s case relating procedural fairness, natural Justice and hearing principles to highlighted the importance of written submission and observed that

Rule 28(7) of the Patents Rules 2003 provides as follows: (7) In all cases of hearing, written submissions and the relevant documents, if any, shall be filed within fifteen days from the date of hearing.” Therefore, the contents of the natural justice or hearing principle in the context of the Patents Act is prescribed by the delegated legislation which are rules framed thereunder in the form of Rule 28 (7). In such kind of cases, as per Dharampal (supra), the instrument has to be followed and the same cannot be ignored. Therefore, no provisions of the Act or Rules should be rendered superfluous and the interpretation, which should make the provisions workable, should be followed.

This decision would go long way to earmark the guiding principle of hearing that must be followed by the Controllers while conducting hearing of contested cases. In this case Board ruled that

If the present case is tested on the touchstone of the principles culled out above from the Dharampal Satyapal’s case, it is clear that not merely there is a violation of the reasoned decision principle which is part of the procedural fairness, but in fact there is also violation of the hearing principle as well and thus there exists a complete violation of the procedural fairness in the present case.

This case would also be known for imputing the concept of expended version of natural justice in context of patent Act where Controller is dealing with technical matters, which involve application of scientific principles along with the legal principles.

According to the Board,

“ A brief hearing of hour or so may not suffice as the evaluation of the prior arts and understanding requires extensive readings, appreciations as well as the deduction so as to form an opinion on novelty and inventive step.”

Highlighting the value of the written submissions in patent cases Board observed that

“ the rules of procedural fairness including natural justice as per the Patents Act and Rules framed there under do not end with the hearing and in fact the natural justice continues until the filing of the written submissions  which is provided under the Rules dealing with the prior arts enabling the controller to have a reading, appreciation and apply the same.

Board’s finding on the violations of the procedural fairness in the present appeal lead to rule that

“the trigger for violation of the procedural fairness is both the unreasoned decision as well as the violation of the expanded hearing principle, the contents of which are prescribed under the Patent Rules in the form of Rule 28 (7) of the Patent Rules. Therefore, the said violations of the procedural fairness vitiate the impugned order warranting interference in an appeal applying the correction standard.

While remanding this case back to Controller the Board also accepted the request for change of controller, invoked 73(4) of the Patents Act, 1970, and directed that in the best interest of justice, the case may be referred to some other Controller.

Looking forward

The above proactive initiatives by IPAB for conducting hearing in urgent matters are welcome, as it would reduce the backlog of over 4000 cases that were pending for quite a long time. Appointment of new members, we can hope would hasten the disposal of revocation related matters as well. With finalisation of the Tribunal, Appellate Tribunal and other Authorities Rules (Qualifications, Experience and other Conditions of Service of Members), 2020 on 12.02.2020 by the Ministry of Finance, we can look forward for the IPAB to be functional uninterrupted now onwards. The timely intervention of Supreme Court brought the relief in terms of continuation of the appointed Chairman of IPAB first up to September 2020 and now up to December 2020. With operation of IPAB in full swing, we can expect more prudence in patent office decisions now.

According to the published draft, some of the major patent matters proposed for amendment are as follows:

1. Genetic Resources (GRs), Genetic Material, Derivative and Traditional Knowledge (TK): Inventions that have used such GRs or TK must disclose the source, access and benefit sharing plan in the patent application.
2. Grace Period: The disclosure of subject matter of an invention within twelve months before the date of a patent application will not be deemed a defeating disclosure if the disclosure was due to, or made in consequence of, the subject matter having been obtained unlawfully or the disclosure of the subject matter was made by the inventor, the patent applicant or persons authorized by the inventors or the applicants.
3. Introduction of Two-time Publication in the Patent System: Patent applications will be published twice. The first publication will be made within 18 months from the application’s filing date in Thailand. The second publication will be made after the substantive examination is completed and the patent is granted. The opposition period is 90 days from this second publication date.
4. Divisional Application: Division of a patent application can be requested by the applicant before the second publication of the patent. In the current Patent Act, divisionals are not allowed and dividing a patent application is at the discretion and on the instruction made by the patent examiner only.
5. Reduction of Time to Request Substantive Examination of a Patent: Permissible time for requests for substantive examination of a patent application will be reduced from the current five years from the publication date to three years from the filing date in Thailand.
6. Increase of Time to Request Substantive Examination of a Petty Patent: Permissible time for requests for substantive examination of a petty patent application will be increased from the current one year to six years.