Based on the work of the Copyright Review Commission (2011) the Minister of Trade and Industry has published the Copyright Amendment Bill 2015 (‘the amendment Bill’) for public comment. The amendment Bill contains a number of noteworthy provisions that have implications for the functions of a collecting society as well as the composition of members and the board of directors.

It is as a matter of principle widely accepted that collecting societies fulfil an important public function that cannot be matched by any other means. In the absence of collective rights management, individual consumers and copyright holders would be at a serious disadvantage in negotiating and enforcing contractual arrangements for the exploitation of their rights.

Section 9B relating to the functions of a collecting society is aimed at ensuring that there shall be only one collecting society per set of rights. It is said that the best international practice is premised on the same principle. There could otherwise be a duplication of functions among collecting societies and reduction in economies of scale.

The principle that only a single collecting society may operate in respect of each type of copyright work appears to restrict the ability of a collecting society independently to decide on its own admission criteria. If the law limits to one the number of collecting societies per type of copyright work it might be incongruous if applicants for membership may nonetheless be rejected at the discretion of the one and only collecting society for specific rights.

According to regulation 5 (1) of the Collecting Society Regulations membership shall be open to all persons. The provisions of the Companies Act 71 of 2008 prohibiting unfair discrimination in restricting membership of a non-profit company are equally applicable as many collecting societies operate as non-profit companies. It is also proposed that the Companies and Intellectual Property Commission will exercise an oversight function with the ability to suspend or cancel licenses to operate as a collecting society.

Section 9B which provides that there shall be one collecting society per copyright and per set of rights specifically states that this requirement applies to “music rights”. Since performers’ rights contemplated in the Performers Protection Act 11 of 1967 which include singing, performances on musical instruments, dancing and acting are neither “copyright” nor necessarily “music rights” they do not fall within the ambit of this provision.
Even though the Copyright Review Commission was careful to recommend amendment of both the Copyright Act and Performers Protection Act this proposal has not presently been taken up by the Department of Trade and Industry. If a corresponding amendment of the Performers Protection Act is not introduced the rights of performers may well be left out of the current law reform.

Section 9D (1) provides that a collecting society shall be subject to the collective control of the owners of the rights it administers. The aim appears to be to provide for participation by rights holders in the decision making structures. This provision, as well as section 9C dealing with administration of rights, requires amendment insofar as it does not include rights holders under a licence as apart from the copyright owners.

Based on a recent address by the chief director, consumer and corporate regulation division at the Department of Trade and Industry it appears that section 9D (1) of the amendment Bill is aimed at control at the board level (although it could also apply to the members).

According to regulation 5(2) of the Collecting Society Regulations in the case of a society having as members both owners of copyright in sound recordings and performing artists the governing structure of the society must provide for equal representation of both classes of members in the decision making processes of the highest executive organ and in the general assembly of members. This indicates an interest on the part of the legislature to provide for participation by rights holders at both board level and the members’ general meetings.

When applied to the members the concept of collective control seems easily understandable. It means that the members comprising rights holders collectively participate in the decision making processes of members. This leaves open the question whether the membership shall be made up exclusively of rights holders, which is addressed in regulation 5(1).

In relation to the board the concept of collective control by rights holders could result in unintended consequences. An interpretation that results in the rights holders occupying one hundred percent of the board positions is in my view impractical. The legislation should clarify the position by for instance providing for a minimum number of rights holders on the board or other applicable criteria. This essentially is a governance issue and therefore care ought to be taken not to reinvent the wheel.

A challenge might arise when there is a shortage of the skills required on the board among the rights holders. A collecting society would for example require skills in information technology governance, statistical sampling procedures for computation of royalties or even cross border tax. Many copyright holders possess the technical skills required but as a matter of governance the skills question remains ever pertinent.

A distinction is made in our company law between an executive and non-executive director. The former is involved in the day to day management of the company whereas the latter is a part time director concerned primarily with management strategies and monitoring the activities of the executive directors. A further distinction is made for independent non-executive directors, namely that the director does not have any relationships with the company which could materially interfere with his or her independent judgment.

The King III report recommends that a board should ideally be constituted by a majority of non-executive directors and that the majority of the non-executive directors should be independent. The argument is that this reduces the possibility of conflicts of interests and promotes objectivity. On the other hand the recommendation of the Copyright Review Commission was that independent non-executive directors should number at least one-third of the board of a collecting society, but even this proposal is not achievable on the current wording of section 9D (1).

Another key recommendation of the Copyright Review Commission was that adherence to the principles of corporate governance in King III should be made compulsory for all collecting societies. This proposal has not been included in the amendment Bill but collecting societies may of-course voluntarily decide to adopt the applicable principles.
On the topic of royalty distribution the amendment Bill provides that royalties shall be distributed in proportion to the “use” of the copyright works under management. For the sake of clarity this provision could rather refer to the proportion of performance of the restricted acts in the Copyright Act such as reproduction, public performance or communication, broadcasting or transmission in a diffusion service.

Some of the other apparent shortcomings of the amendment Bill include the introduction in section 9B of terminology not used by the Copyright Act such as “mechanical rights” instead of “reproduction rights” as well as the terms “creators” in the place of “authors” who have very specific rights under the Copyright Act.

There is also a provision in section 9B (2) that if there is no collecting society, contractual arrangements between copyright owners and “creators” shall be allowed as prescribed by the Minister of Trade and Industry. If the goal is an arrangement concerning collection and distribution of royalties to rights holders it seems that the contracts in question should instead be concluded between rights holders and anyone proposing to perform one or more of the restricted acts as opposed to creators.

The objectives of the proposed copyright law reform are laudable and the process is long overdue. However, there is in my view a lot of work still be done on the amendment Bill in order to achieve the desired goals without potentially confusing an already complex topic.

Written by Reggie Dlamini, Senior Associate, Spoor & Fisher