Jurisdiction - China
Reports and Analysis
China – National Copyright Administration Releases Draft Amendments to the PRC Copyright Law.

20 April, 2012

 

Legal News & Analysis – Asia Pacific – China – Intellectual Property

 

On 31 March 2012, the National Copyright Administration of P.R.C. (the “NCAC“) released a draft of proposed amendments to the P.R.C Copyright Law (the “Draft“), inviting the public to provide comments by 30 April 2012.The proposed amendments, if approved, will become the 3rd and most comprehensive revision of the Copyright Law to date2.
 
This note highlights noticeable amendments that are proposed in the Draft; discusses issues that would need clarifications from the lawmaker or judiciary; as well as potential impacts on copyright proprietors.
 
1. KEY SUMMARY
 
From an overall perspective, the Draft does not propose any ground-breaking amendments to the existing Copyright laws. The amendments set out the Draft are in response to legal issues in the market place as well as the development of new technologies or media.
 
In brief, the Draft proposes the following noticeable
amendments: 
 
(a) To extend the scope of copyrightable works (discussed in paragraph 3 below);
(b) To encourage copyright registration (discussed in paragraph 4 below);
(c) To expand the scope of copyrights to include resale royalty rights (discussed below in paragraph 5 below);
(d) To offer clearer rules governing copyright ownership relating to joint works, employees’ works, audio-visual works and commissioned works (discussed in paragraph 6 below).
(e) To amend the restrictions applicable to certain copyrights (discussed in paragraph 7 below);
(f) To make copyright protection available to all technical protection measures whether on or off the Internet (discussed below in paragraph 8 below);
(g) To increase the maximum statutory damages from the current RMB 500,000 to RMB 1 million and allow punitive damages for repeat wilful infringement (discussed below in paragraph 10); and
(h) To grant more powers to administrative copyright enforcement agencies (i.e. local subordinates of the NCAC, hereinafter referred to as the NCAC).
 
2. EXTENDED SCOPE OF COPYRIGHTABLE WORKS
 
2.1 What does the Draft propose?
 
Article 3 of the Draft Amendments proposes to update the current list of copyrightable works by: 
 
(a) adding “works of applied art” which are defined as “artistic works with utilitarian functions”;
(b) replacing “cinematographic works and works created by virtue of an analogous method of film production” with “audiovisual works”;
(c) replacing “computer software” with “computer programs”; and
(d) making the list more open-ended by including, at the end of the list, “other literary, artistic and science works” instead of “other works prescribed by the law and administrative regulations”. 
 
Items (b) and (c) simply offer a more accurate terminology to respond to the development of new technologies and media in the market place. The items (a) and (d) are noticeable amendments aimed at covering a wider range of works in the law.
 
2.2 Works of applied art
 
Under the existing law, copyright protection is available to foreigners’ works of applied art but arguably not available to Chinese copyright owners. The Draft, if adopted, will hopefully resolve such issues. The Draft, however, fails to address how to determine whether a work of applied art is eligible for copyright protection. This may continue to result in inconsistent  judicial evaluation of the copyrightability of works of applied art.
 
2.3 More room for the courts
 
Currently, the courts cannot go beyond the works “prescribed by the law and administrative regulations” (i.e. the laws enacted by the National People’s Congress, the Standing Committee of the National People’s Congress or the State Council) to determine new kinds of copyrightable works. A more open-ended list of copyrightable works, as proposed in the Draft, would provide more leeway for Chinese courts to recognize new types of copyrightable works in the future.
 
3. COPYRIGHT REGISTRATION ENCOURAGED
 
3.1 What does the Draft Propose?
 
The Draft does not propose to change the principle that copyright registration should be on a voluntary basis. It however encourages proprietors of copyrights and related rights to register their rights with the NCAC by providing the following:
 
(a) Copyright registration documents are prima facie evidence of the information/items recorded by such documents (Article 6 of the Draft).
(b) Recorded copyright assignment agreements and recorded exclusive copyright licences can be enforced against third parties (Article 57 of the Draft).
(c) The maximum statutory damages RMB 1million is applicable to cases where the
infringed copyright is registered with the NCAC (Article 72 of the Draft).
 
3.2 Prima facie evidence
 
In practice, the NCAC, Chinese customs and the police have considered copyright registration certificates as proof of copyright subsistence and ownership. Article 7 of the Opinions on Application of Laws Concerning Trials of Copyright Civil Dispute Cases4, provides that copyright registration certificates “can be evidence” of copyright but fails to clarify what evidential weigh should be given to such certificates. The Draft takes a step further by clarifying that copyright registration certificates can serve as prima facie evidence of copyrights.
 
3.3 What does this mean for copyright proprietors?
 
The Draft will likely motivate copyright proprietors (in particular foreign ones) to register their copyrights in China. Currently, registration of foreigners’ copyrights does not require legalization of documents coming from outside China. Foreign copyright proprietors may want to register their copyright in China first and then bring the registration certificate to the court as evidence of their copyright. This may save the burdensome overseas legalization process which foreign copyright proprietors often suffer when they initiate copyright litigations in China.
 
4. RESALE ROYALTY RIGHTS ADDED
 
4.1 Article 11 of the Draft Amendments adds a resale royalty right into the family of copyrights in order to “promote the development of theartistic works market”5. The resale royalty right entitles an author, his or her inheritors or devisees to share the proceeds from each resale of the original work or manuscript of the author. The resale royalty right is not transferrable and cannot be waived.
 
4.2 The Draft is silent concerning: (a) how the proceeds from the resale should be shared between the reseller and the resale royalty right holder; (b) how to determine who is an eligible resale royalty holder; and (c) what remedies the right holder may claim for infringement of the resale royalty right. These issues need to be clarified before the implementing of any rules regarding resale royalty rights.
 
4.3 For other moral rights and property rights concerning copyrights, the Draft provides more precise definitions in response to changes in the market place caused by the Internet, digitalization and new technologies. For example under Article 11 of the Draft:
 
(a) The reproduction right is amended as a right to make one or more copies of a work through printing, photocopying, recording, remaking or digital methods or any other methods.
(b) The right to broadcast is amended as a right to broadcast a work through wireless and/or cable transmission.
 
5. OWNERSHIP OF WORKS
 
5.1 The Draft provides amendments relating to ownership of joint works, audio-visual works, employee’s works, and commissioned works. The amendments provide much clearer rules in terms of who owns the work and what restrictions apply to the owners. These are designed to reduce the disputes over exploitation of works.
 
5.2 Joint works
 
The existing Copyright Law fails to clarify how co-authors or co-owners should exercise their copyrights when they cannot agree and when their work is not divisible. In response to this, Article 14 of the Draft proposes:
 
(a) Absent a mutual agreement and reasonable grounds, any co-authors shall not prevent other co-authors from using or licensing the joint work to others provided that the proceeds will be reasonably allocated to all co-authors.
(b) Any co-author may file a lawsuit in his or her name alone against infringement of joint work but the damages shall be reasonably allocated to all co-authors.
 
5.3 Audio-visual works
 
The default rule set out in the existing Copyright Law is: the producer owns the copyright in an audio-visual work but is subject to certain restrictions, such as naming the authorship of the scriptwriter, director, cinematographer, lyricist and composer; paying for the use of the script, lyrics and music when applicable. The Draft proposes to have the ownership issue be dealt with by a written contract among the producers and other parties. In the absence of such a contract, the default rule mentioned above would continue to apply. The Draft continues to recognize that, for scripts and music that can be separated from the audio-visual work, their authors are entitled to use their works independently. The Draft however adds that such use shall not interfere with the normal use of the audio-visual work as a whole.
 
5.4 Employees’ works
 
For the ownership of employees’ works, the Draft proposes, as the first step, to refer to the agreement between the employer and employee. Where no agreement is available, the employee shall own the copyright except for project engineering drawings, product design drawings, computer programs and works hired for publication. This is different from what is provided under the existing Copyright Law.
 
The existing Copyright Law requires that the employee obtains the employer’s consent to mgrant a similar licence to third parties within two years from the completion of the work. This requirement is removed in the Draft.
 
Under the existing Copyright Law, the employer enjoys “prioritized use” of the employee’s work within its business scope but it is not clear whether the employer should pay for the use. The Draft clarifies that the employer is entitled to free use but only within its business scope.
 
5.5 Commissioned works
 
The Draft does not change the rule governing copyright ownership of commissioned works but  it clarifies that the entrusting party is entitled to
free use of the commissioned work within the scope of the entrustment.
 
6. PERMISSIONS NOT REQUIRED FROM COPYRIGHT PROPRIETORS
 
6.1 Articles 40, 41 and 42 of the Draft set out the “fair-use” circumstances where use of a work does not require permission from the copyright proprietor or require payment for the use. They are consistent with the existing Copyright Law.
 
6.2 Permission not required for use of published works
 
The Draft proposes the following additional circumstances where a copyright proprietor’s permission is not required for use of a published work:
 
(a) Computer programs (Article 43 of the Draft)
 
When during licensed use a licensee is unable to obtain a computer program’s compatibility information through a normal approach, he is allowed to copy and translate the relevant part of the computer program without the permission of the copyright owner. However, the part of the compatibility information obtained in the preceding manner shall not: (i) be used for any purposes other than the compatibility of the computer program; (ii) be provided to others; (iii) be used for the development, production or sale of significantly similar computer programs; or (iv) be used for any infringing activities. The Draft is silent on what constitutes “being unable to obtain a computer program’s compatibility information through a normal approach”. The clarification from the law maker or the judiciary is needed to assess how much the software industry should be concerned about the Draft’s proposal in this regard.
 
(b) Newspapers
 
Article 45 of the Draft provides that the works published in a newspaper may be republished by other newspapers without permission of the author unless the first publishing newspaper has the exclusive right and publishes a noticeable announcement prohibiting the republication.
 
(c) Music
 
Article 46 of the Draft provides that, after three months from the first publication of a sound recording, other recorders may use the recorded music to make sound recordings without the permission from the copyright owner of the music.
 
(d) Radio and TV
 
Article 47 of the Draft provides that radio and TV stations may broadcast works that have been aired (except for audio-visual works where the producer’s permission is required).
 
6.3 Permission required for recordation and royalties for use of published works Article 48 of the Draft provides that use of another’s published work under Article 44 (using another’s published work for compiling textbooks for compulsory education); Article 45 (a newspaper’s or periodical’s republication of another’s published work); Article 46 (using a musical work that was recorded as a sound recording to produce another sound recording); and Article 47 (a radio or television station broadcasting a published work) shall meet the following requirements: 
 
(a) Record the use with the NCAC before such use;
(b) State the name of the author, the title of the work and the source of the work (i.e. where the work published);
(c) Pay the royalties to the copyright collective administrative organizations designated by the NCAC within one month after the use.
 
6.4 Concerns
 
The Articles 46 and 48 of the Draft have caused great concern among musicians. They argue that three months is too short for them to retain their exclusive rights in the music and secure revenues from licensing the music.
 
7. PROTECTION OF TECHNICAL PROTECTION MEASURES (“TPMS”) AVAILABLE NOT ONLY FOR INTERNET
 
7.1 The Regulations on the Protection of Rights to Information Information Network Communication(“Information Network Regulations”) offer protection for TPMs as well as copyright administration information. As the Information Network Regulations are designed to apply to copyright issues arising from the Internet, it gave rise to an argument that TPMs are not available for works that are disseminated or distributed off the Internet. The Draft clarifies that copyright protection is also available to TPMs that are used off the Internet (Article 64 of the Draft).
 
7.2 The scope of the protection provided under the Draft (see Article 68 of the Draft) for TPMs is identical to that provided by the Information Network Regulations, i.e. no organization or individual may: (i) intentionally circumvent or destroy the TPMs in a work; or (ii) intentionally manufacture, import or supply technology, devices, or components mainly used for the purpose of circumventing or destroying the TPMs; or (iii) provide technical services for others’ circumvention or destructive activities. The Draft remains silent on what constitutes “intentional”. We hope this issue can be further interpreted by the judiciary.
 
7.3 Article 74 of the Draft provides that unauthorized circumvention of TPMs may constitute a criminal offence. However, under the criminal law, unauthorized circumvention of TPMS is not yet a criminal offense. If the criminal law is not further amended to make unauthorized circumvention a criminal offence, Article 74 of the Draft will be of no consequence.
 
8. EXEMPTION PROVIDED TO NETWORK SERVICE PROVIDERS
 
Article 69 of the Draft provides that network service providers who provide storage, search or linking services are not obliged to review information relating to copyrights or related rights. This will make it easier for network service providers to avail themselves of the safe harbour rules, thus causing concern among copyright proprietors.
 

9. MAXIMUM STATUTORY DAMAGES IS RMB 1MILLION
 
Article 72 of the Draft raises the maximum statutory damages from the current RMB 500,000 (around USD 80,000) to RMB 1,000,000 (USD 160,000) on the condition that the infringed copyright has been recorded with the NCAC. In the case of repeat wilful infringement, the court may award damages that are 100-300% of the statutory damages, which may result in damages as high as RMB 3 million (about USD 480,000).
 
Copyright proprietors should welcome the increase of statutory damages as it will send a stronger message to infringers and hopefully have a more deterring effect.
 
10.THE ENFORCEMENT AUTHORITY IS MORE EMPOWERED
 
Article 75 of the Draft empowers the NCAC to seize or detain the infringing products or tools of infringement and to examine and copy the commercial documents and financial statements or books in relation to infringement activity. This amendment is proposed in response to complaints that the existing Copyright Law fails to grant sufficient powers for the NCAC to act against copyright infringement.
 
11.CONCLUSION
 
The NCAC is collecting public comments on the Draft until 30 April 2012. So far, no specific timeline has been publicized concerning adoption of the amendments, however sources indicate that there is willingness to publish the third amended Copyright Law in October 2012.
 
The NCAC will likely make further amendments before the People’s Congress reviews them. We will continue to update you with any development in the amendment process.
 
 
For further information, please contact:

Deanna Wong, Partner, Hogan Lovells
deanna.wong@hoganlovells.com
 
Rae Yan, Partner, Hogan Lovells
rae.yan@hoganlovells.com 
 
Feng Zhen, Partner, Hogan Lovells
zhen.feng@hoganlovells.com
 
William Fisher, Partner, Hogan Lovells
william.fisher@hoganlovells.com 
 
Henry Wheare, Partner, Hogan Lovells
henry.wheare@hoganlovells.com
 
Gabriela Kennedy, Partner, Hogan Lovells
gabriela.kennedy@hoganlovells.com
 

 

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