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The Impact of Parallel Imports of Books, Films / Music and Software The Impact of Parallel Imports of Books, Films / Music and Software on the Indian Economy with Special Reference to Students Sponsored by: Ministry of Human Resource Development (Copyright Division, Department of Higher Education) Government of India January 2014 Foreword The economic and social development of a country depends on the continuous generation of creative ideas and access to those ideas from around the world. Such ideas originate from the efforts of authors of many kinds, including writers, artists, designers, dramatists, musicians, architects, scientists, and producers of sound recordings, films and software. To reward creativity, authors should to be rewarded suitably. Copyright rules and professional ethics provide the minimum protective safeguards the rights of authors over their intellectual property. While authors deserve this protection, an excessively rigid and inflexible protection regime may fail to generate the full social benefits expected from authors’ creations. A balance therefore often needs to be struck when there are conflicting interests of creators and of society. Certain exceptions may be required to protect the larger interests of society, of which authors, of course, form a part. In November 2010 Report, the Parliamentary Standing Committee with oversight over India’s Ministry of Human Resource Development made several observations on the need to amend the copyrights provisions for textbooks in the Indian Copyright Act, 1957 . The Committee urged the government to ensure that the purpose for which the copyright amendment was proposed, i.e., to protect the interests of students in India, was not lost sight of in moving forward. The parallel international trade in books and other copyrighted material is often understood as a grey-market trade that occurs through unofficial channels. Thus, while the goods themselves are genuine, the channels of trade are not the same as originally desired by the producers. In this context, the Standing Committee in its 2010 Report had suggested that a new proviso should be introduced in the proposed amendments stating, “provided that a copy of a work published in any country outside India, with the permission of the author of the work and imported from that country into India, shall not be deemed to be an infringing copy.” However, at the urging of industry representatives, the proposed proviso was not inserted into the Copyright (Amendment) Act, 2012. This led to intense debate in Parliament. The Union Minister for Human Resource Development, Shri Kapil Sibal, informed the House that the National Council of Applied Economic Research would be asked to examine the issue of the inclusion of the new proviso. The Ministry would then study the NCAER report and, if necessary, a further amendment would be introduced. The primary objective of this NCAER research study commissioned by the Ministry of Human Resource Development is therefore to examine parallel import restrictions and outline the issues of concern for the producers of copyright material who import their own or their subsidiaries’ goods produced abroad, and equally important, to outline the concerns of the consumers of these products in India. Parallel import restrictions refer to post-sale controls that prevent an alternate channel, other than the authorised agency, from selling legitimate IP products in a different country. At one level, restrictions on parallel imports go against the spirit of free trade that has been the core principle of multilateral and regional trade agreements. But the issues are complex because of the three regimes of national, regional, and international “exhaustion” of copyrights after the IP protected good is sold for the first time. And they are made more complex because an agreement on parallel imports could not be reached under WTO Rules, implying that each member country may adopt its own policy of exhaustion even as the Rules urge countries to adopt a balanced position catering both to the interests of producers and consumers. Against its goal, the NCAER Study does a thorough job of exploring the economic logic underlying the concerns expressed on both sides of the parallel book import divide. It is the first comprehensive, evidence-based attempt at documenting and assessing the views of the stakeholders in favor of and against incorporation of the new proviso in a further amendment of India’s Copyright Act. The specific focus of the Study, as desired by the Parliamentary Committee, is on the issue of the availability of academic textbooks for students. In this process, the NCAER team also consulted stakeholders in education, films and music, and computer software. The NCAER Study points to the near complete lack of understanding between the two sides of the divide, viz. the producers and their consumers. Producers argue that parallel imports, particularly of “remainders,” will destroy India’s publishing industry. Consumers argue that the fear of remainders is baseless. While producers must appreciate the economic logic of introducing the proviso as suggested by the Parliamentary Standing Committee, consumers must also look at safeguards to allay the fears expressed by publishers about the likely decay of publishing activity in India and the consequent loss for Indian students and other readers. A strong publishing sector adds value to knowledge as well as to the national income of a country. The NCAER Study takes the view that a mature publishing industry in India must mean an industry with a strong base in India of publishing, producing and printing, along with import and rational distribution regimes. It must provide ample opportunities for authors to generate ideas for new books, and publishers to design, copyedit, print, and sell. Where does the NCAER Study come out? I would urge readers to delve into the Study to learn this for themselves and to appreciate the balancing of concerns that the study team has attempted. The evidence does suggest that permitting parallel imports of printed books is not likely to have an immediate damaging effect on the publishing industry or on the economy. But, its impact does need to be monitored over time. The best way forward would be for mutual understanding and a healthy exchange of views between producers, consumers and other stakeholders to replace the current acrimonious debate between them. The evidence presented in this NCAER Study can help this process. In the end, as with much in policymaking, both parties and the economy stand to gain from arriving at an acceptable solution, even if it does not fully meet each side’s fullest initial demands. Shekhar Shah Director-General New Delhi January 24, 2014 Project Team Project Leader Rajesh Chadha Research Team Anjali Tandon Sourabh Bikas Paul Roopali Aggarwal Lekshmi R Nair D V Sethi Computer and Design Support Praveen Sachdeva Acknowledgements We would like to convey sincere thanks to the Ministry of Human Resource Development (Copyright Division, Department of Higher Education), Government of India for entrusting NCAER with this important study. The NCAER research team has received useful comments and suggestions from Mr G. R. Raghavender, Director (Copyright), Ministry of Human Resource Development. We owe our gratitude to him. We wish to convey sincere thanks to Dr Shekhar Shah, Director General, NCAER for his encouragement and support during the course of this study. The members of the study team met with stakeholders from 22 groups/ institutes/ organisations. They were generous in sharing their views with us. We are extremely thankful to them for their time. 1. Publishers’ Representatives 2. Consumers’ Representatives 3. National Council of Applied Economic Research, New Delhi 4. Delhi School of Economics, University of Delhi 5. Indian Institute of Technology, Delhi 6. Indian Institute of Technology, Madras 7. Tamil Nadu Government Dental College, Chennai 8. Voluntary Health Services, Chennai 9. Madras Medical College, Chennai 10. Institute of Financial Management and Research, Chennai 11. University of Calcutta 12. Indian Institute of Management, Calcutta 13. Ramakrishna Mission Vidyamandir, Kolkata 14. Indian Institute of Technology, Bombay 15. University of Mumbai 16. Indira Gandhi Institute of Development Research, Mumbai 17. Motion Picture Distributors Association (India) Pvt. Ltd (MPDA), Mumbai 18. Film and TV Producers Guild of India Ltd., Mumbai 19. Institute of Social and Economic Change, Bangalore 20. Mount Carmel College, Bangalore 21. Book Distributors Delhi 22. NASSCOM, Delhi The study has used data from a number of published sources which have been acknowledged to the best of our diligence. We shall be happy to rectify any inadvertent omission. Table of Contents 1. Introduction .............................................................................................................................................. 1 1.1. Context of this study ............................................................................................................................ 1 1.2. Objectives ............................................................................................................................................ 4 1.3. Parallel trade and the issue of copyright .............................................................................................. 4 1.4. Debate on parallel imports ................................................................................................................... 7 1.5. Intellectual property rights and
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