On the evening of 10 April (Beijing time), the US, China and several other territories and jurisdictions co-ordinated a global press conference. At that conference, the “Event Horizon Telescope” project, which was collaborated on by multinational researchers, released the first “black hole image” that humans had successfully captured in history.
Subsequently, a domestic image copyright company (Company A) watermarked the “black hole image” and thus triggered a hot discussion on the copyright of the image. This article will discuss the administrative supervision related to the copyright storm of the “black hole image” and the reaction of the capital market.
DEVELOPMENT OF THE INCIDENT
On the day of releasing “black hole image”, Company A immediately put “black hole image” in the picture contents of its website and indicated that, “If this picture is to be used for commercial purposes, please call or consult our customer representative”.
This move caused a heated public discussion about the copyright and use of the “black hole image”, and the business model of Company A. The next day, Tianjin Internet Information Office (Tianjin Netcom Office), the regulatory department at the place where the company’s website operating entity is located, interviewed a relevant person in charge and ordered Company A to rectify the website, and temporarily closed the website during that period.
On 12 April, Company A issued an “Announcement on suspension of service of the company’s website”. Then, on 17 April, Company A issued a “Notice of abnormal fluctuations in stock trading”, which announced and explained the abnormal fluctuations in trading caused by the company’s website rectification. On 18 April, Tianjin Netcom Office imposed administrative penalties on the operating entity of the website.
Tianjin Netcom Office filed an investigation on this incident, and decided that the operating entity failed to perform its security management obligations, or to promptly discover and dispose of the contents published by users, which are prohibited by laws and administrative regulations from publishing or distribution, in the process of engaging in internet information services through operation of the website.
The above-mentioned behaviour violated the provisions of article 47 of the Cyber Security Law, and should result in the imposition of an administrative fine of RMB300,000 (US$43,360).
Although the reason why the Tianjin Netcom Office imposed penalties on the operating entity of the website was that the website failed to fulfil management obligations on the information published by users, the main dispute in this incident is whether Company A enjoys copyright of the pictures on the website, or has obtained authorization of the copyright holders, and whether Company A has the right to provide such pictures to others for use and charge fees.
Therefore, one of the key points of the company’s website rectification will be to review the copyright of various content on the website, and ensure that it has fulfilled its reasonable information management obligations. It is probable that a large number of copyright-unclear content will be removed after the rectification is completed.
COMPANY A’S BUSINESS OPERATION
The operating mode of Company A’s main business is as follows: (1) the company signs an agency agreement with contributors of the “copyright visual content” (including pictures, videos and music), and obtains the distribution rights of the contents; (2) users pay for license of using the copyrighted content through the company’s platform, and use the content widely in various scenarios such as websites, apps and social media (WeChat/Weibo, etc.); and (3) the content producers share the income according to the agency agreement.
On the other hand, Company A also tracks the use of its owned pictures on the internet through “Eagle Eyes”. The tracking results help to identify potential customers, and both parties may enter into co-operation, or enter a copyright dispute procedure. According to inquiries through public channels, the company was involved in a large number of litigation cases as plaintiffs, of which more than 4,000 cases were filed between 2017 and 2018, and its winning rate was over 90%.
Among them, more than 70% were disputes of infringement of information network communication rights, and more than 20% were disputes over copyright and infringement. The company’s main claim was requiring the defendant to delete and stop using the infringing pictures, compensate for economic losses and reasonable expenses, and bear the costs of litigation. The amount of compensation claimed was generally less than RMB100,000, and mostly RMB10,000. Meanwhile, the authors notice that the company has withdrawn multiple copyright disputes since the incident.
IMPACT OF THE INCIDENT
Impact on Company A’s stock price. After falling into the “black hole image” copyright storm, the company’s stock price hit downward limits for three consecutive trading days. On 12 April, the company’s stock price began to fall, with the stock price closing at RMB25.20; on 15 April, the stock price closed at RMB22.68; on 16 April, it closed at RMB20.41. On 17 April, Company A issued a “Notice of abnormal fluctuations in stock trading”, as the closing price of its stock had been falling for more than 20% in two consecutive trading days (15 and 16 April 2019), which was an abnormal fluctuation of the stock trading.
The announcement stated that the company was rectifying according to relevant laws, regulations and requirements of the regulatory authorities, the website would be temporarily closed during the period, and the time for the website to resume service would be announced separately.
Impact on Company A’s operation. In 2018, Company A’s main business, “visual content and services” realized an operating income of RMB782,902,800, accounting for 79.15% of its total operating income. Company A’s core competitiveness lies in its scarce internet platform-based business model and massive visual contents.
The platform simultaneously interfaces with visual content providers and visual content users. The website closed on 11 April and resumed operation on 12 May. During this period, content review, copyright operation management and new report function of the website were rectified. During the month of self-inspection and rectification, users could not access the website, which may have had an impact on the main business of Company A.
Shi Hanzi is an associate and Liang Qianqian is a paralegal at Hylands Law Firm
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