TikTok, Clock Ticks?

7th April, 2020 - 4:47 pm Categories: Legal Issues 0 Comments

TikTok is a video sharing application that allows users to create and share 15 second videos, owned by the Chinese company ByteDance, after merging with its predecessor- Musical.ly. The App allows its users to record their reactions to videos and further edit them with filters, music, animation, special effects etc., and like all other social applications, other users can share, follow, like and comment on everything that they see.

However, a major flaw in Tiktok’s business plan seems to be that they do not offer any substantial means to the creators to earn directly through the App. The App does not pay or offer any incentives to the creators, and the primary way that the creators on TikTok generate money is by shifting their fan base to other paying Apps like YouTube, Instagram, Snapchat and Twitter[1]. Athough, currently, TikTok is free and without any advertisements.

Therefore, in order to be a successful TikTok influencer, creators need to first create an interesting TikTok account with substantial content to generate as many followers as possible. To do this, creators are required to follow and create content based on the songs and concepts trending on the internet. Once a fan-base has been established, creators link their YouTube, Instagram, Snapchat and Twitter accounts to their TikTok account. If the creator can successfully do so, based on the views and engagement count on their accounts on the other platforms, the creators may be approached by various brands and sponsors to showcase their products, by offering money in exchange for promotions.

This brings us to the legal bit of the article, i.e. is TikTok liable under The Copyright Act, 1957? Primary of the TikTok content consists of videos using music from the App’s official library containing the licensed content- which is fine. The problem arises because TikTok also allows the users/creators to upload their own audio, and further edit them on the App. For all the songs being featured and used on the TikTok videos, created by various artists, there are two basic copyrights that are triggered-

1. Moral Rights (owned by the songwriter/composer)
2. Economic Rights (in most cases owned by the record label)

Section 38 of the Copyright Act pertaining to the performer’s rights, gives exclusive right and authority to the performer in any act in context to the performance to receive royalty, hence not prejudice the right of the authors. Therefore, this section enables the performers’ payment of royalties. In the case of Myspace Inc. vs Super Cassettes Industries Ltd[2] the division bench at Delhi High Court had held in view of equity, that it was the responsibility of  Super Cassettes to provide the details of the specific work that was being infringed, along with their URL/Links on the MySpace Site as per the infringement, so that the contents may be removed/blocked by MySpace within the statutory limit of 36 hours, as provided under the Information Technology (intermediaries guidelines) Rules, 2011. The was done since the Court had decided that Myspace should be given a safe harbor as an intermediary, and therefore, be exempted from liability for any third party information, data or communication link made available or hosted by it.

On 3^rd April 2019, the Madras High Court banned the download of TikTok by an interim order in lieu of a PIL filed against the App pursuant to safety concerns for women and children due to potential misuse of the App for explicit distribution of the content. However, the ban got lifted on 24^th April 2019 based on the grievance mechanism of the law and the self-regulatory mechanism of TikTok, whereby, the App claimed that they were merely a platform for sharing of content, and are therefore, covered under the description of an “intermediary” under the Information Technology Act, 2000.

This judgement by the Court could prove to be problematic, since the precedential effect of the same would be reflected on the future judgements pertaining to TikTok and their user policies. While TikTok Makers have never really advertised their business practices, most tech websites claim that the App pays some amount of royalties to the right holders, therefore, most of the music on TikTok is licensed that way, and that is how TikTok has been avoiding thousands of lawsuits for the misuse of their intellectual property. In an article published by TechJunkie the author says that the most likely model is that if a licensed music is played, the right holders get a cut and if the licensed music is sold, the right holder gets a percentage[3].  

However it is seen that based on the veil of an intermediary platform, for all this while, TikTok has been attempting to get away with a model of forced licensing whereby they force artists to either enter into a license agreement with them on their terms or take up the matter with the respective legal authorities. A Musical.ly official has been stated saying, “It’s either you can sign this contract and get paid something, or don’t sign the contract and your music’s still going to be here but you’re not going to get paid anything. You’re going to have to deal with DMCA takedowns. Goodbye” as claimed by Pitchfork^[4].

Considering the mechanism of how TikTok works, the App clearly allows the creators/users to modify, edit and share their content for monetary gain. The Information Technology Act, under Section 2 (w) has defied intermediaries as someone who, on behalf of another person, receives, stores or transmits the records or provides any service with respect to that record includes telecom services providers, web-hosting service provides, search engines, online payment sites, online auction sites, online market places and cyber cafes[5]. When comparing the definition of an intermediary to the User Interface of TikTok, the difference becomes blatant. An intermediary is only supposed to be a platform wherein users exhibit their content; they act as facilitators and have no role in providing any other resource. In the case of Christian Louboutin Sas v Nakul Bajaj [6]did not only form a link between the customer and the seller, but also provided other services, therefore, to constitute as a intermediary, you need to be a passive platform, like E-bay, MySpace, Facebook, etc. When the platform starts providing a value added service and plays an active role in providing such services, it no longer acts as simply an intermediary, and therefore, is not liable to be covered by the safety harbour of Section 2 (w) of the Information and Technology Act, 2000. TikTok on the other hand, allows the users to edit, modify and change the music being used.

While, it seems that TikTok is slowly growing more aware of the legal fatalities it could fall under prey to if they continue to function on the basis of their current model. In January 2020, to secure economic rights over the music they have been using, TikTok has signed their first biggest deal with Merlin, a global agency that represents thousands of independent music labels and many more artists. It has been further seen that starting April, 2020, TikTok has struck short term deals with Universal Music Group, Sony Group and Warner Group, as well as Kobalt and BGM’s recording and publishing entities.

In India ByteDance, has stuck a with Sony and WMG for a new App- Resso, launched last month, which is a social music streaming site and unlike Spotify and Apple Music, is more social and interactive for the user. This has been done in an attempt to generate more revenue by the company, since the royalties being paid by the App Company to the record labels and artists is quite insignificant, and if continued, could lead to the downfall of the App^[7]. Shemaroo has also tied-up with TikTok to give the users access to a wide variety of famous Bollywood music and Dialogue from Shemaroo’s extensive portfolio[8]. According to Techcrunch, TikTok has also partners with Vedantu, Topper, Made easy and GradeUp in India to provide educational content on TikTok[9], most like to nullify the effect of the PIL against it filed in the Madras High Court. It is said that now TikTok has over 8000 licensing deals, primarily inherited from its predecessor, Musical.ly[10].

However, to have a wider ambit of protection and to avoid the infringement of Intellectual Property Rights, TikTok not only needs to secure the economic rights from the record label companies, but also the moral rights of the songwriters and composers by striking deals with Indian Performing Rights Society, Phonographic Performers Limited and Novex Communications, or they will be dragged into further legal complications as has been the case in the UK, where the ICE and TikTok have progress into an arbitration to resolve the terms for the licensing of the TikTok Platform in context to the artistic workd represented by the ICE. In July 2019, TikTok had approached UK’s Copyright Tribunal to deal with a licensing dispute between TikTok and ICE[11]. Therefore, unless TikTok makes some quick moves, time is only a ticking clock.

Author: Suvangana Agarwal, Litigation Associate, at Khurana & Khurana, Advocates and IP Attorneys.  In case of any queries please contact/write back to us at suvangana@khuranaandkhurana.com.

References:

[1] Raphael, Shannon. “Here’s How Much You Can Make From Being Famous on TikTok.” Distractify. Distractify, August 7, 2019. https://www.distractify.com/p/can-you-make-money-on-tik-tok.

[2] Myspace Inc. vs Super Cassettes Industries Ltd 236 (2017) DLT 478

[3] “How Does Tik Tok Use Music Legally?” Tech Junkie. Accessed April 6, 2020. https://www.techjunkie.com/how-does-tik-tok-use-music-legally/.

[4] Cooper, Duncan. “How TikTok Gets Rich While Paying Artists Pennies.” Pitchfork. Pitchfork, February 12, 2019. https://pitchfork.com/features/article/the-great-music-meme-scam-how-tiktok-gets-rich-while-paying-artists-pennies/.

[5] Section 2 (w) Information Technology Act, 2000

[6] Christian Louboutin Sas v Nakul Bajaj CS (COMM) 344/2018

[7] Staff. “TikTok Bags First Major Licensing Deal with Merlin.” BGR India. BGR India, January 24, 2020. https://www.bgr.in/news/tiktok-signs-major-licensing-deal-with-merlin-can-soon-use-music-from-independent-labels-in-videos-872016/.

[8] www.ETBrandEquity.com. “Shemaroo Entertainment Forges Bollywood Licensing and Merchandising Partnership with TikTok, Vigo Video – ET BrandEquity.” ETBrandEquity.com, August 17, 2018. https://brandequity.economictimes.indiatimes.com/news/media/shemaroo-entertainment-forges-bollywood-licensing-and-merchandising-partnership-with-tiktok-vigo-video/65434952.

[9] Singh, Manish. “TikTok Makes Education Push in India.” TechCrunch. TechCrunch, October 17, 2019. https://techcrunch.com/2019/10/17/tiktok-education-edutok-india/.

[10] Hale, James. “TikTok Strikes Short-Term Licensing Deals With Sony, Warner, Universal (Report).” Tubefilter, April 1, 2020. https://www.tubefilter.com/2020/04/01/tiktok-music-licensing-sony-warner-universal/.

[11] “ICE and TikTok Agree to Enter into Arbitration Following Rights Dispute.” PRS for Music: royalties, music copyright and licensing. Accessed April 7, 2020. https://www.prsformusic.com/m-magazine/business-and-money/ice-and-tiktok-agree-to-enter-into-arbitration-following-rights-dispute/.