Friday, February 4, 2011

Thomas Abraham’s rebuttal to ‘Why Parallel Importation of Books Should Be Allowed’ -- Round 2 (2m and copyright law)

[Thomas Abraham is MD, Hachette India; and former CEO, Penguin India]

[Gist explained earlier in plain English here:]

Since Pranesh Prakash updated his blog, here are further rebuttals from Thomas Abraham, MD, Hachette India

[Ref: proviso 2m of the copyright act.]

‘Why Parallel Importation of Books Should Be Allowed’  by Pranesh Prakash in Blog — Jan 25, 2011 07:50 PM  and rebuttals by Thomas Abraham + updates 5 Feb 2011

There has been much controversy lately with some publishers trying to stop the government from amending s.2(m) of the Indian Copyright Act, clarifying that a parallel import will not be seen as an "infringing copy". This blog post argues that the government should, keeping in mind the larger picture, still go ahead and legalise parallel imports.
[Updated Wednesday, February 2, 2011, to respond to Thomas Abraham's extensive and thoughtful rebuttal of the earlier version this post.]

First off, here is the controversial clause, with the proposed amendment (the insertion of a "proviso", in legalese) being emphasised in bold font-face:

The amendment

2(m) "infringing copy" means,—

    (i) in relation to a literary, dramatic, musical or artistic work, a reproduction thereof otherwise than in the form of a cinematographic film;
    (ii) in relation to a cinematographic film, a copy of the film made on any medium by any means;
    (iii) in relation to a sound recording, any other recording embodying the same sound recording, made by any means;
    (iv) in relation to a programme or performance in which such a broadcast reproduction right or a performer's right subsists under the provisions of this Act, the sound recording or a cinematographic film of such programme or performance, if such reproduction, copy or sound recording is made or imported in contravention of the provisions of this Act;

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 shall not be deemed to be an infringing copy.

Some claim that this amendment to s.2(m) ("provided that... copy") has the potential to destroy the publishing industry.  The most lucid explanation of this was in a recent op-ed by Thomas Abraham in the Hindustan Times, very ominously titled The Death of Books

TA--Thank you. The HT title was given by the paper itself. Mine was an equally ominous ‘Publish and be damned’. Both titles however effectively convey that writing and the books industry are under threat. My piece and the counter rebuttal below, I would like to clarify is mainly concerned with trade (general consumer) books though I will touch upon educational books too. The HT piece was necessarily short by limitations of space (1000 words) but I shall write a longer piece detailing why the amendment is bad for the industry, writers, and readers. But for now, I shall confine myself to responding to Mr. Prakash’s rebuttal.

However it seems to us that the publishing industry—especially foreign publishers with distributorships in India—don't want to open themselves up to competition in the distribution market, and are opposing this most commendable move.

TA--This is blatantly false and put down without checking any facts. Firstly foreign publishers came in here later, so competition already existed. And it is equally the indiscriminate flowing in (sometimes even of our own company’s books through jobbers!!) we are protesting, not some new ‘foreign hand’. The biggest publishers are already here, so there is not really much more competition to open up to. In fact let’s be clear this is not about competition at all (publishing and remainder selling are not really comparable as competition)—so not only is there no level playing field, it’s not even the same game anymore!

However the main point being, that this is not about ‘foreign’ publishers or Indian publishers. The API and FIP (the two major publishing associations in India) together are protesting this, and these two associations cover every major Indian publisher with domestic or foreign ownership. So you have (to name just a few) Rupa, Roli, Zubaan, Permanent Black, Navayana, Marg, Yatra books, westland-tranquebar equally protesting this alongside Penguin, HarperCollins, Random House, Hachette, Oxford University Press, McGraw Hill, Pearson, Macmillan, Cambridge University Press, Elsevier, Springer.

What is parallel importation?

Before getting into explanations of why allowing for parallel importation is good, and how the arguments otherwise fall short, we should examine what parallel importation is. 

"Parallel import, insofar as copyright is concerned, involves an “original” copyright product (i.e. produced by or with the permission of the copyright owner in the manufacturing country) placed on the market of one country, which is subsequently imported into a second country without the permission of the copyright owner in the second country. For instance, the copyright owner of a book produced in India places the book on the market in India. A trader buys 100 copies of the book from India and imports them to China without the permission of the copyright owner of the book in China. This act of the trader bringing the books into China is called parallel import, the legality of which depends on the copyright law of the importing country (namely China in this example)." (Consumers International, Copyright and Access to Knowledge: Policy Recommendations on Flexibilities in Copyright Laws 23 (2006).)
Some fear-mongers try to equate parallel importation with 'anarchy' in markets, and some confusedly claim that this amendment would allow infringing copies of books would be permitted. That is simply not true.  For parallel importation to be said to happen, the sale must itself be legal.  If it is an an illegally sold copy (a pirated copy of a book, for instance) that is imported, then it will count as a black market import—not as a parallel import.  Allowing for parallel imports will only dismantle monopolies over importation, and the amendment makes that amply clear.

TA--Again incorrect. You have to understand the dynamics of purchase and selling in a specific industry before making  generalizations. It is incorrect to equate exclusivity with monopolies which is a restrictive trade practice. This is an exclusive edition that is right priced and that is published with the author’s consent. This edition as I mentioned in my article  The Death of Books follows local pricing in each market and is best suited to serve local readers, the book and the author. What this law will ultimately result in--will benefit no one. There will be short term spoiler price undercutting, but to what purpose? Does the Indian reader really need a Rs 195 book at Rs 185 at the cost of Indian writing itself.

And it is absurd to state that this law will not allow infringing copies to come into the country. That is precisely what it will do. What the new law will do is legalize infringement. Consider this scenario: a book by author x is successful in India, but fails in the US. By the fourth month with no legal territorial protection it is dumped into India at lower prices through a distributor. This is a completely ‘legal’ purchase transaction by both seller and buyer, but is against the author’s consent and in violation of a contract that exists between author and Indian publisher. Now add remainders to the mix and multiply this exponentially with the number of new titles every year and try and imagine what the market is going to turn into. If this is not anarchy, then what is?

Benefits of parallel importation
Dismantling distribution monopolies

The benefits that will accrue from allowing for parallel importations are huge.  Currently a large percentage of educational books in India are imported, but with different companies having monopolies in importation of different books.  If this was opened up to competition, the prices of books would drop, since one would not need to get an authorization to import books—the licence raj that currently exists would be dismantled—and Indian students will benefit.  This is especially important for students and for libraries because even when low-priced editions are available, they are often of older editions.

TA--Incorrect. The larger part of educational books that serve as text books are locally printed, at prices that go as low as a tenth of the corresponding US prices. These local printings are done through agencies that the original authors trust—they may be branches of the same publishing house , a license given to an Indian publishing house or even a local distributor. Should a completely anarchic market situation emerge, the rights-holders will be less ready to grant rights. yes there is occasionally the pernicious practice of supplying libraries with older editions—but this is not done by publishers, but by unscrupulous suppliers. So a law if any needs to take care of this—not throw the baby out with the bathwater. As standard practice, not a single old edition is sold by publishers when the new edition is out.

Allowing people to import goods without permissions (with appropriate duties) is taken for granted in all other areas, so why not copyrighted works?  After all, it is not the act of publication that gets affected, but the right of exclusive distribution.  And if that goes away after first sale internationally, that's not a bad thing at all.

--TA update—Because copyrighted works are different—that’s the basic contention. That there is a creator-content equation in copyrighted material (especially books) that is not quite the same as any other industry. That mature markets realize this and hence have territorial copyright. Because there are far reaching consequences in terms of larger educational, cultural and intellectual development linked to territorial copyright than there are in bringing in a ‘grey market’ cellphone (though I would not presume to comment further on this since I know nothing of the telecom industry).

And if one respects copyright, then the second allied right of publishing assignment (which is an expression of the copyright owner’s right to disseminate and economically benefit from his/her work) is derivative, complementary and linked. It is to my mind not a tenable legal position or just IPR system that we put the copyright owner in disadvantaged competition with a third-party—the wholsesaler or remainder merchant in this case! It is an unjust intellectual property system that tells an Indian author that you do not have the right to control how you should be sold (ergo derive an income from) in your own country because you have another edition elsewhere. There are about 30 remainder merchants (now) and over 50,000 authors—it is incredible that the govt wants to foster the growth of these merchants rather than authors!.

Helping book publishers

Book publishers will be benefited by parallel importation, just as they are benefited by the existence of libraries and second-hand book stores.  Libraries and second-hand book stores help with market segmentation, providing access to people who can't afford expensive books at much lower rates, often free.  However, the existence of second-hand book stores in almost every city in India—I have personally bought second-hand books everywhere from Jhansi (Leo Tolstoy's War and Peace) to Delhi's Darya Ganj market (Edmund Wilson's Letters on Literature and Politics)—does not prevent me from buying books first hand.  Indeed, Wilson's Letters is out of print, and cannot be bought in a store like Crosswords or Gangaram's.

Why do I emphasise second-hand books and libraries? They are artefacts of something variously known as the "first sale doctrine" or the "doctrine of exhaustion" in copyright law: After the first sale of a book, subsequent sales, rentals, etc., cannot be controlled by the copyright owner.  Parallel importation is simply a matter of applying this doctrine to the first sale of the book internationally rather than its first sale in India. 
Thus we see that the existence of second-hand books, libraries, and parallel imports, are all dependent on the same rule of copyright law: the first sale doctrine.  This doctrine is enshrined in s.14(b)(iv) of the Indian Copyright Act, and has been interpreted by the Delhi High Court to mean first sale in India.  The present amendment changes that to mean first sale internationally.

The introduction of the modern "public library" in the mid-19th century led to a surge in literacy, readership, and book sales, and not a decline.  Similarly, there is no reason to suppose that allowing parallel importations will lead to a decline in book sales.

--TA update: Second hand books and libraries/the principle of national exhaustion: The comparison is not the same. Both (second-hand and libraries) have had a first sale where the copyright holder has got his/her basic right—the designated royalty (my earlier rebuttal already explained how export royalties and remainder royalties are much lower). So here we come back to the basic philosophy—who has greater right on deciding on creative works. The creator or govt? A just answer would be the creator provided commercial dissemination fulfilled society’s needs—which in India’s case would be availability and right pricing keeping in mind socio-economic needs. Both are happening through local publishing and pricing of imports. But parallel imports would take away that right an author has of deriving a rightful income as per existing norms in all mature markets (including India so far). We are heading towards being a mature market and this has come about only because we are in the self perpetuating framework of publishing., writing, cultural development. 

So the argument is that second hand books and libraries foster reading without depriving the author of rightful royalty or ruining the market. Parallel importation does both. There is every reason to know that this will happen—that’s exactly the substantiation we are offering; and the advocates of parallel importation have none to offer—pricing (where is it high, and by how much should it come down?), what is not freely available and at special prices? So for what reason do we want the existing law—also made by lawmakers—to change the stated remit of exhaustion from national to international.

No book publisher objects to libraries or even second hand books. But they are all objecting to parallel importation. It is a tad patronizing to tell us what will help us—if so leave it to us to decide.

 Helping libraries and the print-disabled

Even currently, many people buy books directly from abroad and have them shipped to India.  This is especially necessary for libraries whose patrons—scholars and students—very often need access to the latest books.  Currently, libraries often buy books from abroad from Amazon, Alibris, etc.  Such acts, within a strict reading of the law, are not legal, since they fall afoul of s.51(b)(iv), since the import is not for the "private and domestic use" of the libraries.  This is also of especial concern for organizations working with print-disabled individuals, since the number of books legally available domestically in formats accessible by the print-disabled is very small, and often need to be imported.

--TA update: Helping libraries and disabled: This is completely false. No library needs to import from Amazon. And if it is a public library then they are actually wasting taxpayer money. Almost any book in the world they will still get at a special marked down price through Indian publishers or distributors. But by all means let the change in law confine itself to granting registered/authorized libraries the right to order upto 5 copies directly for self-use, and there will be no gripe from anyone. There are societies for the disabled to whom publishers give rights at almost no cost. The UK has a law that a copy must be made available at near cost for disabled. By all means have such a law here. Why try and use parallel importation as an excuse for this?

Increasingly what is emerging is govt inaction in fostering literacy, reading, facilities for the disabled,  and neglecting the library system. The solution for these is direct action that will address those specific issues --not parallel importation which will just result in the opposite of all these..

Helping all consumers

An excellent report was prepared in 2006 by Consumers International, in which they studied the costs of textbooks in eleven countries, including India, by average purchasing power of each country's citizens, instead of absolute cost.  Based on that study, and a detailed investigation of international treaties on copyright and the flexibilities allowed in them, Consumers International recommended that India should amend our law to make it clear that parallel importation of copyrighted works is legal (on page 51 of the report).

--TA--It is extremely ironical that Consumers International, an organization that stateswe are fighting for a fair, safe and sustainable future for all consumers in a global marketplace” should recommend this; given the fallout will result in exactly the opposite. But not surprising because a blinkered view of ‘imports’ clouds the fact that it is not just imports that are affected here but local publishing too. But please detail what is their recommended price for textbooks—and how much lower it should be.

 Rebutting objections

I will address a few specific objections raised by Mr. Abraham, Nandita Saikia, and others.

1. Authors' losing out on royalties

Authors do not lose out on royalties because of parallel importation, just as they do not lose out on royalties because of libraries, nor because of second-hand book stores. For parallel importation to take place, the books have to be purchased legally, and that first sale itself ensures that authors are paid royalties. 

Of course, publishing contracts often have a clause that unsold books will not garner royalties. But in that case, the problem is not parallel importation, but the overstocking and remaindering of books.  The authors wouldn't be paid even if the books weren't imported into India.  Parallel importation does not in any way encourage any of those.

TA--Incorrect. I do wish some research had been undertaken before these blanket statements are put out in the public domain. Authors will lose out on royalty by parallel imports. Authors are paid royalties on cover prices for local editions and on net receipts where imports are concerned. So consider the following case of a hardback published here at Rs 495. The author on a 10% standard royalty will earn Rs 49.50 per copy. The same book when sold into India to match the price (we’re not yet talking remainders) will be supplied at a net price or discounts going up to 80%. So even if the net price is £2 (the higher side) then the author will earn 20p (10% of net receipts that the foreign publisher gets) which is just about Rs 15. This is the best case scenario. On remainders which are clearance sales the author gets almost zero.

Non-sale or stripping of books are not material to this discussion and do not affect anything, so am at a loss to see why these are clubbed with remainders. But yes, parallel importation will actively encourage remainder imports. It’s but natural that the moment the law changes and any non-pirated edition is legal in India, that remainder merchants will flood the market.

TA update: Export royalty (which are not remainder royalties) computing has been put down above to demonstrate the fallacy of this line of reasoning. And to counter the second point—yes, authors won’t get royalties on unsold books, but they will lose royalties they were supposed to get on their local books. That’s the point we’ve been making. That the overstocked edition will come in and kill the local edition. And equally the point needs to be made that it is not just the authors with foreign editions who are affected—it is every single author. 

In fact in the long run, it is local authors who will be hit harder. Because every publishing house in India is able to invest in larger publishing programmes because of the 80:20 rule—the larger incomes from select bestsellers allow investments in more experimental genres or ‘local interest’ areas. For example I would not have been able to publish our Everyman classics range had I not had Stephenie Meyer or Stephen King as part of my core list. With margins reduced both for investment and marketing, the way books are published will change. There will be shrunk publishing programmes and reduced push (both critical to growth of a market) as well as reduced shelf space available because over time you will see retail stocking patterns change completely—to accommodate the cheaper inflow (they will have no option but to change)

2. Remaindered books

India has amongst the cheapest book prices in the world.  Then why would book publishers be wary of even cheaper books overrunning the Indian market?  The reason, Mr. Abraham tells us, is remaindered books.  He believes that remaindered books have the potential to destroy the Indian book market.  Remaindering of books has been happening for decades, mostly due to stocking conditions.  If remaindered books haven't already destroyed all book markets worldwide, then it is unlikely that they will do so suddenly just because parallel importation of books is permitted in India.

TA--Incorrect again. Remaindering of books do not happen because of “warehousing conditions” whatever that may mean. Remainders happen in countries or markets that are mature as standard business practice (because of overstocks or end of shelf life; and because they do not upset the existing market dynamic). As I explained in my article the west is a ‘frontlist’ market— as in comprising largely of newly released books. So their shelf life is much shorter. And the reason why they have not destroyed book markets worldwide is because the mature markets exist with multiple strands (chains and high street stores, independents, direct sellers, online sellers, and supermarkets)—so a direct seller will sell the same book a high street store is selling at a much reduced price without it affecting the business of each strand. Each strand is discrete and price sensitivity does not matter the same way. But that is not the case in India. We’re talking of a country that has less than 450 trade bookshops. 

The whole modern retail phenomenon is recent and their expansion is new. We have a lot of important players seriously capitalizing the market.  Imagine crossword or landmark or reliance or oxford or odyssey setting up to find that they couldn’t stock up or promote a book because they were living in perpetual fear of some cheaper book coming in. Visualize this as a pattern over years, and you’ll see publishers and retail not investing in the business and the market just turning into traders and stockists hub whose shelves will be full of whatever’s the cheapest.

So surplus stock is a standard feature, as are remainders. Remainders currently exist, but exist as a trickle. They are not big enough to be worth a legal prosecution from the lawful local publisher. Because, make no mistake, they are illegal by law today. But with this amendment, the trickle will become a flood.

Furthermore, what happens with excess stock is controlled by the publishers.  They can choose to pulp them, burn them, push them into the discrete channels that Mr. Abraham points out exist in mature, frontline markets where remaindering happens:

Since those multiple strands of commerce exist, each of which would enable the seller to get a better profit (being in a developed country) than in India, there is no reason to fear overrunning of the market with remainders.

TA update: Not quite. This visualizes a status quo abroad when the law changes. Currently surpluses have to be contained in those markets—yes where multiple strands exist—by and large they stay within those strands because it is illegal to sell/send them here. Now visualize what happens when the law changes here. Stockists there will freely order more because they have additional avenues to dump stock. Currently the few remainders and/or infringing editions that come in (that are irritants but not of serious destructive capability) are not because they are sold from there (our law stops them) but because a few remainder merchants from here go to clearance fairs and buy stock there and ship it here. What we will see is this multiplied hundred fold—with active legal selling/shipping into India now permissible.

3. Dumping of books

An extension of the remaindered books concern is that of India becoming a land where all books will be dumped.  This hasn't happened in case of countries like New Zealand, Mexico, Chile, Egypt, Cameroon, Pakistan, Argentina, Israel, Vietnam, South Korea, Japan, and a host of other countries, all of which allow for parallel importation of books.

--TA update : We’re talking English language/international markets. New Zealand, and Singapore are the only valid examples here. And the reason it does not matter there is because they are high priced markets. 

Remainders/parallel editions still cause irritation there too (talk to publishers/booksellers there and you’ll confirm this), but a lack of price sensitivity means that (a) the first sale happens fairly quick (customers who want the books will buy it quick not waiting for the remainder) and (b) because it is high priced market booksellers will not alter buying or stocking patterns. Those who want the book (customers and booksellers) buy it without worrying about price or the fact that remainders will come in. In India that is not the case. Stocking will go down fearing export flow-ins.

Even assuming that this fear is well-founded, copyright law is not the best way to deal with the problem.  Dumping of books should be regulated by dumping laws.  Using copyright law to regulate apprehended book dumping practices (which might not happen) is like using a trawler hoping to catch only shrimp: it is naive to think that there won't be unintended bycatch, and the consequences can be disastrous for the knowledge environment in case of books.

--TA update: Why anti-dumping laws will not be practical: Firstly this is not like consumer goods—microwave or refrigerator that is being dumped in here. We’re taling of multiple product lines--there will be 40,000 plus  titles to track, and the damage would have been done by the time you invoke the law. And assuming we want to invoke anti-dumping law, what parameters will be fixed? what discount are we going to cap? What quantity? I’ll explain why this will never work. There are no real averages to draw lines and say this much and no more for either discount or price or quantity. To understand why we need to understand cost to price structures. Indian publishing (both publishing and imports) is essentially low margin. Our books are priced to market; that means from cost our mark up is about twice or 2.5 times for imports and about 3-4 on average for local publishing—to enable the prices you see prevalent now. Abroad it is roughly 8-10 times from cost. To enable low pricing in India, we already have overseas terms that exceed 70% discounts, going into ‘net pricing’ (not standard discounts but individual book exceptions that are sold on net prices) for the ones that we pick to push big. Once the market is opened up, you will have two things—(a) targeted remainders as against the minor trickle now and (b) surplus clearance or even targeted sale to undercut the existing lawful edition.

And yes parallel importation (the current trickle) does see enforcement the logical way. Our margins do not allow us to hire expensive lawyers. So far (believe me, each of us keeps tabs) we have ‘unaware imports’ and ‘deliberate imports’. It is an irritant but is gradually reducing as the market matures. But the moment it touches key brands or serious revenue streams, legal action is taken; and if it’s not fixed by just sending a notice (which works 95% of the time), then the matter is taken to court.

It would also be helpful to keep in mind the experience in some other countries.  In a 1998 judgment, the United States Supreme Court, some parallel imports of copyrighted goods were legal.  That ruling did not cause the downfall of the US book market, despite cheaper books being available outside the US.

--TA update: But the US remains a protected market for books. Parallel importation is not allowed there. Let us see if we can export a single edition into the UK or US where they have contractual rights. Please ensure that we have the same level playing field (let the same principle prevail—let us sell our books into the US or UK) and by all means pass the law.

4. Non-printing of low-priced editions for India because of "unsecure" market

Parallel importation, which is what the amendment to s.2(m) allows for, affects only importation.  It does not in any way affect publication in India or exports.  Exporting low-priced Indian editions to countries which allow for parallel importation of books, is currently of doubtful legality.  [Update: Earlier an incorrect claim was made that such export was legal.  The legal status is not that clear.  While there is a Delhi High Court case that makes exports of low-priced editions illegal in the context of sale to the United States, it specifically states that the decision does not depend on whether India allows for parallel importation or not.] 

TA--Completely false as the arguments above have shown as regards royalties, retail stock-up, market stability, publisher investments. The amendment will change all of this reducing the incentive to publish. Lack of a stable and secure market means original rights holders will also be reluctant to grant reprint rights (because these very same books may flow back and damage the market of the original edition) and local publishers (with investment capability reduced and security eliminated) will not buy rights the same way. None of the countries mentioned above have a growing, thriving indigenous publishing business in English—not even new Zealand, which may be a developed country, but in terms of both revenue or publishing output (India has 17,000 registered publishers and is the third largest producer of books after the US and UK) is far smaller than India.

The amendment does not change that position, for reasons explained at greater length in a separate post.  The incentives to print low-priced editions hence does not decrease.  If anything it will increase because currently books that are not available as low-priced editions cannot be imported without exclusive licensing, and with a change in this position, the incentive to compete in the form of low-priced editions will increase.

TA update: Which books are not available as low priced editions? Any distributor/bookseller can order any book they want and the low priced mechanism would automatically kick in. Hachette publishes thousands oif books across its various companies as do other publishers. We do not for space and demand reasons stock all of them. But what is called a procurement system exists—any book anybody wants is made available at the same marked down regime on order. Parallel importation will not change this aspect at all. Surpluses will be dumped. But the rarte and obscure will still be imported the same way.

 5. Rhetoric flourish and the law: Open and closed markets

Mr. Abraham asks how many authors one can name from open markets like Malaysia, Singapore, and Hong Kong, as a sign of the 'history of creativity' in each of these countries and territories.  It might be just as well to ask how many authors he can name from closed markets like Bhutan, Kazakhstan, Cambodia, Papua New Guinea, Indonesia, Jordan, and Ukraine. One's ability to name authors from a country has less to do with the open/closed nature of its market and more to do with one's general knowledge.

Additionally, the 'mature' markets which he wishes India to emulate—United States, the United Kingdom, and Australia—are more ambiguous on parallel importation than he would have us believe. 

--TA--Yes I do ask that to establish the fact that the one quality ‘brand’ we have established internationally is our authors—building slowly from Tagore and Narayan down to the explosion one saw in the nineties (Vikram Seth, Amitav Ghosh, Arundhati Roy, Vikram Chandra and many, many more) and that has steadily progressed—enabled by the growth of publishing houses (Indian and foreign owned!) and the interest literary agents/foreign Houses have evinced in the writing that has flowered here. This has in turn propagated a local publishing scenario where brands exist locally and slowly but steadily this market is maturing—in the kind of writing, in the kind of selling, and in the kind of investments made. So the point is not how many brand authors failed to emerge from a closed market but how many have ever emerged from an open market culture.

In the United States, the legality of a segment of parallel importation of copyrighted goods reached the United States Supreme Court inQuality King v. L'anza in 1998, in which the court held in favour of the importer.  The question reached the US Supreme Court again last year in Costco v. Omega, but the court split on it 4-4, and did not deliver a binding precedent on parallel importation.  In the United Kingdom, as per European Union law, parallel importation is permitted from anywhere within the EU.  And in Australia, in contrast with neighbouring New Zealand, parallel importation of parallel goods is allowed, with an exception being made for books on the following of strict conditions.

TA--We are talking of contractually copyrighted books. Neither the US nor the UK allow a book published in their territories (with contractual rights for those territories) to be infringed. That’s the whole point made regarding a level playing field—Indian publishers can now be infringed but cannot sell their books to the protected markets. Yes the EU follows the principle of exhaustion, but equally has territorial copyright. If the UK has contractually exclusive rights for a book in Europe, a German bookseller cannot then buy the US edition, or ship that into UK.

--TA update: And Australia went through the same exercise that we are going through and ruled that parallel importation not be allowed for books. They always had the ‘30 day rule’ and still have that. Detailed debate happened there, and they saw fit not to open up the market.

Most importantly, none of the markets held up as role models are developing countries.  India is.  This makes all the difference, as the Consumers International report underscores.

TA----None of those countries have been held up as role models to blindly emulate—we need to see what best practices exist and why they exist and then adapt them to our local needs. Equally we don’t just blindly rush into something because of an unsubstantiated notion that parallel importation is good or that prices will fall or students will be better off. So the developed country example makes no difference. In this context, the developing country paradigm is relevant only to pricing. India is already the lowest priced market in the world and there is absolutely no monopoly either pushing prices up or withholding books from readers. There is thus neither scarcity, nor over-pricing. India while retaining its low pricing is rapidly heading towards being a mature market—in terms of a renaissance in writing across segments, a resurgence in publishing and these inevitably lead to a stronger grounding in culture and knowledge. Dumping grounds never foster real quality.

Standing Committee consultations
Lack of wide consultation

On one point we are in complete agreement with Mr. Abraham, which is his point regarding lack of adequate consultation.  While there was a good amount of consultation during the drafting stage, when a wide-ranging public consultation was held in 2006, this was not repeated in 2010 by the Standing Committee. Further, the Standing Committee only gave fifteen days for responses to its call for comments.

Publishers were represented

While Mr. Abraham states that only the Authors Guild was represented before the Standing Committee, by going through the report prepared by it, we see that the Federation of Indian Publishers and the Association of Publishers in India were also called to testify before the Standing Committee.  

TA—That is not what I said (that publishers were not represented). The FIP and API are the publishers’ body (I write as a member of the same bodies, though these views are personal) who are protesting. They were but consulted in name. Their representations have not been taken cognizance of; and not a single point debated. Contrast this with the committees formed for the ‘Bollywood amendments’ or even the same minister consulting telecom industry leaders before formulating the policy he has rolled out.

Libraries, students, consumers were not represented

However, while the authors supported it, and the publishers opposed it, no one got to hear the voice of the readers, the students, the libraries, the book buyers.  For instance, not a single consumer rights organization or library association was called before the Standing Committee.  Internationally, organizations like Consumers International, the International Federation of Library Associations, and EIFL (an international library organization) are invited to meetings of the World Intellectual Property Organization and their views are taken with seriousness as they are a very important part of the copyright environment.

--TA update: ‘Authors’ have not supported it, as our campaign will show. There is no evidence at all that any impacted author was consulted. Four members of a body called the ‘authors’ guild’ deposed before the committee. Not one of them is affected by the amendment. They made a vague statement about newer editions concurring with the ministry’s unsubstantiated statement. There was no record of who they are, how many members they had or what larger consultations they undertook to canvass opinion on this major move.

Department's and Standing Committee's reasoning

We reproduce below four paragraphs from the Standing Committee's report, which elucidate many of the reasons for going in for this particular amendment.

All the reservations/objections raised by the various stakeholders [including the Federation of Indian Publishers and the Association of Publishers in India, whose objections are quoted in an earlier paragraph of the report -ed.] were taken up by the Committee with the Department with the intent of having full understanding of the background necessitating the proposed amendment and its exact impact on the various stakeholders. As clarified by the Department, the main purpose of this amendment was to allow for imports of copyright materials (e.g. books) from other countries. It was in accordance with Article 6 of the TRIPS Agreement relating to exhaustion of rights whereunder developing countries could facilitate access to copyright works at affordable cost. Exhaustion of rights (popularly called as parallel import) was a legal mechanism used to regulate prices of IPR protected materials. This was viable only if the price of the same works in the Indian market was very high when compared to the price in other countries from where it was imported to India.

TA-- Exhaustion of rights as defined here so far existed in the regimes of trademarks and patents. That copyrighted books in India are different is precisely the debate and the biggest stakeholders—publishers, authors and readers were not consulted in a detailed way.
Committee's attention was drawn to the fact that majority of educational books used in India were imported from other countries particularly from US and EU. There was an increasing tendency by publishers to give territorial licence to publish the books at very high rates. The low price editions were invariably the old editions than the latest ones. This provision would compel the Indian publishers to price the works reasonably so that it would not be viable for a distributor to import same works to India from other countries. This would also save India foreign exchange on the payment of royalties (licence fee) by the Indian publishers to foreigners.

TA--A preposterous statement, that proves no due diligence was ever undertaken. The “committee’s attention was drawn to the fact”-- by whom, where are the facts?. Name one single major book (college text or fiction/nonfiction blockbuster) that is not available in India at the same time and much cheaper. Also please demonstrate where “low price editions are invariably the old ones”. “This provision would compel Indian publishers to price reasonably”—please indicate current prices and substantiate where they are unreasonable. Prices as mentioned above even drop to a tenth of overseas prices.

TA update: And royalties paid to foreign content owners will always be substantially less than the bulk imports payments that will ensue; or did the ministry think that these new imports would be paid for in the Indian rupee?

Committee was also given to understand by the representatives of the publishing industry that Scheme of the Copyright Law was entirely different from the Trade Marks Act, 1999 and the Patent Act, 1970. The application of the standards and principles of these two laws through the proposed amendment of section 2(m) would completely dismantle the business model currently employed, rendering several industries unviable. On a specific query in this regard the Department informed that the concept of international exhaustion provided in section 107 A of the Patent Act, 1971 and in section 30 (3) of the Trademarks Act, 1999 and in section 2 (m) of the copyright law were similar. This provision was in tune with the national policy on exhaustion of rights.

TA--Why then was territorial copyright protected so far? Were the earlier lawmakers unaware of the differences? What huge lapses were noticed that needed this amendment to redress by doing away with territorial copyright? In the face of the obvious disadvantages, what good would the amendment do, given that every single decision made (based on completely unresearched assumptions) is going to cause more harm than good.

After analysing the viewpoints of all the stakeholders along with the clarifications given thereupon by the Department, the Committee is of the view that proposed inclusion of the proviso in the definition of the term 'infringing copy' seems to be a step in the right direction, specially in the prevailing situation at the ground level.  The present practice of publishers publishing books under a territorial license, resulting in sale of books at very high rates cannot be considered a healthy practice. [Emphasis added.] The Committee also notes that availability of low priced books under the present regime is invariably confined to old editions. It has been clearly specified that only those works published outside India with the permission of the author and imported into india will not be considered an infringed copy. Nobody can deny the fact that the interests of students will be best protected if they have access to latest editions of the books. Thus, apprehensions about the flooding of the primary market with low priced editions, may be mis-founded as such a situation would be tackled by that country's law. [emphasis added.] The Committee would, however, like to put a note of caution to Government to ensure that the purpose for which the amendment is proposed, i.e., to protect the interest of the students is not lost sight of.

TA--Not a single substantiation of this “high price” that would qualify enough for an amendment to be made. The ‘permission of the author” is laughable. The very same authors are saying no to the amendment, and do not give consent to other editions coming in to infringe the one that was exclusive. The first point I made in my article was that the two rights (copyright and assigned territorial rights) are linked. It is an unjust law that refuses to take cognizance of the author’s wishes.

It is clear that allowing for parallel imports is not likely to hurt publishers, but will result in an expansion of the reading market.  It is mainly foreign publisher's monopolies over distribution which will be harmed by this amendment, while Indian publishers, Indian authors, and Indian readers, especially students, will stand to gain.

TA--False. On what basis are these completely unsubstantiated claims being made? As stated earlier, this is one issue that Indian and ‘foreign’ publishers are protesting together. As are authors—Indian and foreign. Readers will see short term spoiler pricing, that may gain them a few rupees in the short term, but in the long term will lose them good books.

Thomas Abraham


  1. a serious issue ...well protested by Divya....justified arguments... I too am against this...

  2. Missing the trees for the woods, that is exactly what Pranesh Prakash is doing here. The publishing industry works in a unique way and unless he makes the effort to understand how it really operates, he will continue to make uninformed comments on this subject.
    I attended the press conference in Delhi and found that there was a huge information gap that publishers will need to fill for the media, the standing committee and these free trade lawyers before we expect that they can actually understand what will happen with this amendment. Concepts like geographically defined editions, remainders and low cost pricing are unique in book publishing and unlike in any other industry. If they won't do their homework, the onus is on us to make this understood.
    Thanks for getting this thread started Divya.
    -Vinutha Mallya, Senior Editor, Mapin Publishing

  3. That's what I'm afraid of. It's like cutting off your nose to spite your face; or trying to win the battle and lose the war.

  4. Divya, I've tried to pass this on to as many people as possible--publishers, writers and in the media. Your blog should receive several hits in the next few days!

  5. Thanks, Devaki. I do wish more publishers and authors would post their comments/views/thoughts. I believe a lot of people are still struggling to figure out the legal jargon. I've put up the gist of the matter in plain English here too:

  6. If the publishing industry in India is unique, let's petition the government to introduce a specific policy to override the Copyright Act for Indian publishers.

    Let us not hardcode that into the Copyright Act itself, which affects way more industries than just Indian publishing.

  7. @ Sol: This is really like trying to cut off your nose to spite your face.

    Why anti-dumping laws will not be practical: Firstly this is not like consumer goods—microwave or refrigerator that is being dumped in here. We’re taling of multiple product lines--there will be 40,000 plus titles to track, and the damage would have been done by the time you invoke the law. And assuming we want to invoke anti-dumping law, what parameters will be fixed? what discount are we going to cap? What quantity? I’ll explain why this will never work. There are no real averages to draw lines and say this much and no more for either discount or price or quantity. To understand why we need to understand cost to price structures. Indian publishing (both publishing and imports) is essentially low margin. Our books are priced to market; that means from cost our mark up is about twice or 2.5 times for imports and about 3-4 on average for local publishing—to enable the prices you see prevalent now. Abroad it is roughly 8-10 times from cost. To enable low pricing in India, we already have overseas terms that exceed 70% discounts, going into ‘net pricing’ (not standard discounts but individual book exceptions that are sold on net prices) for the ones that we pick to push big. Once the market is opened up, you will have two things—(a) targeted remainders as against the minor trickle now and (b) surplus clearance or even targeted sale to undercut the existing lawful edition.

    And yes parallel importation (the current trickle) does see enforcement the logical way. Our margins do not allow us to hire expensive lawyers. So far (believe me, each of us keeps tabs) we have ‘unaware imports’ and ‘deliberate imports’. It is an irritant but is gradually reducing as the market matures. But the moment it touches key brands or serious revenue streams, legal action is taken; and if it’s not fixed by just sending a notice (which works 95% of the time), then the matter is taken to court.

    At least make an effort to sit down with a couple of senior publishers and discuss this in detail. You cannot argue for the heck of it. At the end of it, you may land up winning the battle but you’ll lose the war.

  8. How does copy-pasting from Thomas's reply even answer my question? I've read it already.

    "At least make an effort to sit down with a couple of senior copyright policy lawyers and discuss this in detail. You cannot argue for the heck of it. At the end of it, you may land up winning the battle but we'll all lose the war."

    Sigh. Apologies again.

  9. Sol, that's exactly what the publishers have been trying to do -- if the policymakers would let them do it.

    And certainly, the publishers can do without your patronising attitude.

  10. There is a serious attitude problem here...why this hostility against publishers? Why is there this assumption that we are merely protesting to protect our bread and butter (I don't know why we shouldn't as we are certainly not being given a viable alternate career are we?). The only way to turn this around though is to get high profile authors to visibly join the debate.

  11. @Sol:

    @Divya The problem is that most book publishers are not aware of how the legal policy framing really works. The ground realities are very different.

    --Can you think of a better reason for wanting to change the law? Publishers are not aware of the law. Laws are supposedly made to handle problems. And it is ridiculous that a bunch of copyright lawyers will decide for the industry what is good for us, ignoring all our protestations.

    2.Copyright policy wonks have lived and experienced the problems; they're not up in arms for no reason. I apologize for the above patronizing comment. But I was hoping for engagement on the substantive issues rather than vague generalities.

    -- And yet they stick to just the vaguest of generalities. Would you please look at the facts?

    # On enforcement anti-dumping laws Enforcement of anti-dumping laws is done via the same mechanism as parallel importation: the customs.

    --No. Parallel importation is fixed in the courts (‘on discovery’), not at customs -- as I found out. Someone's accountable. Anti-dumping will be impossible to manage.

  12. # On defining parameters for anti-dumping laws In his rebuttal, Thomas points out the parameters: quantity and price differential. He fails to point out why they won't work. Instead he goes into a detailed explanation of pricing in the book market, which seems to undermine his point about price differential. That leads one to ask: If is isn't dumping, and is legit competition, then why are you worried about it? If you have difficulties defining it, I'll be glad to point out some able people in India working in the fields of trade economics and international trade law. They'll help magnificently.

    --You're most welcome to try if you find it that simple. The point is you can’t define it by either price or qty or discount. What laws are you going to fix to check dumping?
    • Price? Say it shouldn't be less than half the original price? Given that India's a low-priced market, such books will be brought in and priced just marginally lower. That might undercut prices for a short while, but will not last long.
    This is not 'competition'. It disregards the rights and wishes of the creator (the contracts they sign, and lowered royalties), and the investor who's taken risks with his investments in getting fair returns from his work.
    • Discounts? That it shouldn’t have a discount less than 70%? The invoice will show 70% and the rest will be passed as credit note or marketing grant.
    • Qty? That can range from 10 copies to 100,000 copies that will be hit. How do you propose to control that?

  13. But please, for the love of all that's sacred and true, do not engage with it in a knee-jerk manner born of fear. Please understand that copyright policy isn't just about giving control to copyright owners. It is a balance. The law allowing for second-hand bookshops represents that balance. I still haven't seen any convincing argument from Thomas or you as to how parallel importation differs from second-hand bookshops from a policy angle.

    --Fact (1): The author has already got his/her first royalty once on an old book. And (2) The number is far smaller. Remainders and targeted undercutting sales will cause damage on a much larger scale.

    In both cases, a copy of the book is sold once with the permission of the owner. Subsequent sales of that copy don't need the owner's permission.

    --Why don't you let the author decide? That's what happens in ‘mature markets’.

  14. Criminalising a large class of activities (single instances of import of an out-of-print book by a library) and simply saying, "but we are fine with it" doesn't do. Let the law state that it is fine. Unless parallel imports are allowed, the law makes criminals of all those librarians. – Sol

    --Why not revise the amendment to clearly say that librarians can order/import non commercial quantities to be limited to 5-10 copies per year, rather than subjecting the whole publishing industry to this?

  15. I am amazed that the government is considering this ammendment. Territorial copyright is issued with a purpose and it should be honoured.

    I speak as a reader and an aspiring writer. Some of the arguments given by the advocates of the ammendment are really ridiculous but the one on second hand books takes the cake.

    The author should have a say on who has the authority to sell books in a given territory. He has signed a legally binding document. There is absolutely no need to undermine it with such ammendment.

  16. Kshitish, care to explain what you mean by "the one on second hand books takes the cake"?

    Why should second hand books sold first in India be legal in India, while second hand books sold first abroad be illegal in India?

  17. I am the founder of Pearson Education India. I initiated Pearson's low price edition programme in India. Today I head Pearson's internaional higher education business based in the UK. The Indian Copyright Act is being sought to be amended by people with no knowledge of the publishing business. What is most appalling is that industry experts or key stakeholders are not being consulted or heard and their views, when expressed, are being met with by arguments from lawyers in a most patronizing manner, to the point of saying "we know what is good for you and the public". The lawyers can argue till the cows come home. I am not going to argue with them as I do not have the time. The amendments are going to be a problem and my response will be to withdraw from India all licenses for printing of low price editions of Pearson books published in the US and UK.

  18. Thanks, Subroto. That's another alarm bell. I really don't know why the lawyers are showing this stubborn refusal to understand a genuine problem. They are 'not convinced' because they refuse to be convinced, that's all.