Monday, October 30, 2017

Two cases & a sunrise sector, Prachi Arya, Head of Legal, writes for the Deccan Herald, 30th Oct

On March 22 this year, the Finance Bill 2017, became law, and paved the way for the enactment of the Tribunal, Appellate Tribunal and other Authorities (Qualifications, Experience and other Conditions of Service of Members) Rules. The two laws merged some tribunals, abolished others and pigeon-holed all into one set of Rules. The functions of the Copyright Board were transferred to the Intellectual Property Appellate Board (IPAB), including the administration of rights related to the broadcasting sector.

In the past few months, the Act and Rules have attained a reputation akin to infamy. It has attracted scathing criticism from a sundry group that includes environmentalists and the intellectual property industry, for being "prima facie in contravention of the directives of the Hon'ble Supreme Court" as observed by the Madras High Court. Since then, four other High Courts (including Bombay and Delhi) and the Supreme Court have issued notice to the government to justify the constitutionality of the laws.

While there has been no further movement on the judicial front, the government has selected Justice Manmohan Singh to chair the, hitherto headless, IPAB. The much-awaited appointment may provide some relief to the under-attended IP sector. It is certainly hoped that the industry will be steered with a forward-looking agenda. However, the multi-pronged litigation extends the conundrum as the validity of the laws and consequent actions remain subject to the Madras High Court's final judgment – and any other interim order from the five Courts.

To be fair, the abolished tribunals, such as the Copyright Board, were consistently languishing or had become defunct. The incessant vacancies at the Copyright Board and consequent litigations must have, in some part, prompted the government to strike it off the lawbooks and replace with the IPAB.

Perhaps this move was intended to ease business by improving adjudication. It has accelerated the appointment of IPAB's
Chairperson but what would be the point of merging one headless tribunal with another?

In truth, however, formulaic one-size-fits-all government interventions are becoming a worrying go-to fix for complex sectoral issues. The FDI framework saw similar sweeping reforms starting 2016 – allowing 100% infusion of FDI in certain facets of the broadcasting sector such as for cable and teleports; easing permission requirements for licensed industries such as broadcasting and telecommunications; and abolishing the Foreign Investment Promotion Board (FIPB) earlier this year.

Undoubtedly, it is beneficial to conduct generic reforms and shape the overall economic direction. However, it can only bring about meaningful change if fortified by bottom-up, sector-specific solutions.

Indeed, many of the widespread sectors impacted by the sweeping reforms need far more than well-intentioned legislations to flourish, foremost among which is the copyright industry. The Indian content industry has shown steep growth, and the broadcasting sector is rising fast among the myriad creators, earning the reputation of being a sunrise industry.

At the same time, a closer look at the sector highlights a negative trend. Illustratively, the government's concerted effort to streamline FDI is yet to provide sectoral relief, as the broadcasting industry continues to see large foreign corporates exit the country more persistently than new entrances that invigorate competition and enrich media and entertainment.

Notably, Walt Disney closed its Indian production unit despite the resounding success of one of its last movies, Dangal. After all, despite showing higher growth rates (28% in 2016 according to the Motion Picture Association of America), the Indian box office is much smaller at $1.9 billion ($7.3 billion when adjusted for PPP) compared to the North American figure of $11.4 billion in 2016.

More worryingly, not only is the broadcasting industry the primary benefactor of television and film content but is also bootstrapping India's nascent but promising cluster of over-the-top video services, such as Star supporting Hotstar, and Zee's venture Ditto TV. However, to sustain this two-partite growth story, the broadcasting sector needs the regulatory space to race alongside its online counterparts, many of which compete at the global level, such as Netflix, Disney's Hulu and Amazon Prime.

To compete with its global contemporaries in a highly disruptive era, legacy Indian broadcasters must diversify their content and meet the changing demands of a digital populace. For this to happen the lawmakers must adapt to the new, expanded market that has injected competition in media and entertainment far more effectively than any regulation or artificial stimuli.

The desired systemic reform is exemplified by another matter before the Madras High Court, where Star India and Vijay TV have challenged regulatory jurisdiction and the long-existing practice of imposing economic regulations on broadcasting organisations. Although the matter is currently awaiting final judgment, irrespective of the court's decision, the government is perfectly within constitutional vires to ease or erase economic regulation imposed on the market-based content industry that has so recently been infused with competitiveness.

The persistence of an archaic system, wherein market players are preemptively regulated on the basis of little empirical evidence, is going to bog down the broadcasting industry even further as media and entertainment moves online and remains open to further disruption. Regulatory practice must also be disrupted to respond to the novel opportunities offered by new forms of media and entertainment.

Unlike more controversial reforms such as the tribunal rejig, not only will reduced regulation lessen litigation, but also aid ease of doing business and facilitate investor confidence. It will allow the Indian media and entertainment sector, already popular among the domestic audience, to grow and compete at a global stage.

(The writer is head of legal research at Koan Advisory Group. Previously, she was an advocate at the High Court of Delhi and the Supreme Court of India.)

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