IP Rights but Netflix Only Cares About the ‘I’

IP Rights but Netflix Only Cares About the ‘I’: IPR Club

Written by Nandita Goyal & Pranjal Shah [ Gujarat National Law University, Gandhinagar]

‘Love is sharing your password,’ so Netflix tweeted in 2017. Companies have tolerated password sharing for multiple reasons despite disregarding intellectual property rights, commercial accountability, and revenue arrears. The prime reasons for such toleration being — Firstly, it is difficult for companies to track who shares passwords and to what extent. Secondly, enforcing the terms of service and pursuing legal action against users who share passwords could create negative publicity and harm customer relationships. Lastly, allowing password sharing may benefit these companies by expanding their user base and increasing the exposure of their content.

Also Read: How to get a Patent in more than one Country?– IPR Club

However, the end of 2022 hailed a shift in its policies as Netflix decided to put a leash on password sharing. It tested a ‘password sharing fee’ model coupled with cheaper ad-supported plans in Latin America and charting a booming increase in revenue, the same was implemented in Canada, New Zealand, Portugal, and Spain in February of this year. This policy begs the question of what intellectual property rights the subscribers are entitled to as against the intellectual property rights owned by Netflix in the works exhibited on its platform. In this article, we shall attempt to find answers to this question.

Netflix’s Terms of Use

Currently operating four plans — mobile, basic, standard, and premium plans, Netflix caters to an economically diverse audience. Each plan allows the subscriber to have five profiles, indicating the freedom to share the subscription with four others. The authorized number of devices that can stream simultaneously regulate the  differences between the plans. In other words, five individuals are authorized to use one account without any violation of the terms of use. Furthermore, there is no mention of the effect of password-sharing on the intellectual property rights owned by Netflix in its Terms of Use.

Clause 4.2 of Netflix’s terms of use states the following:

“4.2. The Netflix service and any content accessed through the service are for your personal and non-commercial use only and may not be shared with individuals beyond your household unless otherwise allowed by your subscription plan. During your Netflix membership, we grant you a limited, non-exclusive, non-transferable right to access the Netflix service and Netflix content. Except for the foregoing, no right, title, or interest shall be transferred to you. You agree not to use the service for public performances.”

Reading this in conjunction with clause 5 leads to the inference that password sharing is allowed with the reservation that the account holder is responsible for such access and all the changes made to the account after such access. Therefore, the relevant part of the clause has been reproduced below for reference:

“You are responsible for any activity that occurs through the Netflix account. By allowing others to access the account (which includes access to information on viewing activity for the account), you agree that such individuals are acting on your behalf and that you are bound by any changes that they may make to the account, including but not limited to changes to the subscription plan.”

The above clauses, combined with India’s copyright laws, prevent the unauthorized sharing of passwords. Although, due to a lack of clarity with regards to the term ‘unauthorized,’ a general conclusion may be drawn that as long as the use of the Netflix platform is of personal and non-commercial nature and authorized by the account holder, it cannot be stated as illegal to share the password of one’s Netflix account.

Intellectual Property Rights held by Netflix

The IP Rights held by Netflix can be broadly divided into two categories – firstly, regarding Netflix originals, Netflix owns the bundle of rights collated under the garb of Copyright, and secondly, regarding instances where Netflix is the licensee of the creative work. Depending on the agreements with respective production houses, the latter holds a mix of rights to host, broadcast, and distribute.

In other words, Netflix holds copyrights to its original content, including movies, TV shows, and documentaries produced by the company. It also licenses content from other producers and studios for distribution on its platform. These licenses are typically exclusive and granted for a specific period, and Netflix is responsible for ensuring that it does not infringe any copyrights held by other parties.

The Copyright Act of 1957 governs copyright laws in India, and Netflix has to comply with these laws to protect its copyrighted content from infringement. Netflix uses various technological and legal measures to protect its copyrighted content in India. For example, the company uses digital rights management (DRM) technologies to prevent unauthorized access, copying, and sharing of its content. Netflix also monitors its platform for any instances of copyright infringement and takes legal action against infringers when necessary.

Password Sharing vs. Intellectual Property Rights of Netflix

Whether password sharing can amount to infringement of intellectual property rights is yet to be decided. While the users may fail to see it as such, it does not prevent Netflix from holding a contrary view. The United Kingdom Patent and Trademark Office has declared password sharing to be violative of copyright, illustrating that the Intellectual Property Rights enforcement bodies of different nations may also side with Netflix. In such a scenario, it is worthwhile to discuss and analyze the various defenses which might be available against a claim for copyright infringement.

From an account holder’s perspective, the following defenses can be raised for password sharing:

1. Authorized use: As mentioned in Netflix’s terms of use, when authorized to use one’s Netflix account, the person is acting on behalf of the account holder, and hence sharing the password for the same should be allowed. The fact that five profiles are allowed in each account indicates Netflix’s inclination towards password sharing with one’s family and friends.
2. Fair use: The use of a Netflix account for personal and non-commercial use is permitted as per Netflix’s terms of use, and it may be considered fair use under Copyright Law if the same is complied with.
3. De minimis use: This legal doctrine refers to the use of copyrighted material that is so minor or trivial that it does not constitute an infringement of the copyright owner’s exclusive rights. For example, in the case of a movie, if one shares the password of their account with a friend to simply watch one movie, the use of the material can be seen as minor.
4. Contra Proferentem Rule: This legal principle means “against the offeror” and interprets ambiguities in a contract against the party who drafted it. The rationale behind the rule is that the party who drafts the contract is in a better position to ensure that the terms are unambiguous. Therefore, if there is any ambiguity in the contract’s language, it is presumed that the drafting party intends to assume the risk of any loss or confusion resulting from that ambiguity.

Conclusion

Netflix has historically exhibited leniency towards password sharing and refrained from pursuing legal action against individuals who engage in such conduct. However, recent developments have exposed Netflix users to potential vulnerability stemming from the ambiguities present in its Terms of Use. Netflix has cited copyright infringement behind implementing measures to restrict password sharing, prompting an examination of the relationship between copyright and password sharing in this article.

In the Indian context, Netflix holds numerous copyrights, including original productions, international content, Bollywood movies, and regional content, making it crucial for account holders to gain clarity regarding their rights and their obligations with respect to copyright. While the authors of this article do not believe that such conduct constitutes copyright infringement, the ultimate determination of this issue lies with the Intellectual Property Rights authorities. As a result, we must await the decision of the Indian Patent Office before arriving at a definitive conclusion.