Changes to copyright protection of music still slightly off-key

By Wang Yadong and Zhang Jing, Run Ming Law Office
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Apublic call for comments on the PRC Copyright Law (draft amendment) went out recently, stirring lively debate in the music world, with the provision on “statutory licensing of sound recordings” being the focus.

Article 46 of the draft specifies that: “Three months after the first publication of a sound recording, other producers of sound recordings may, pursuant to the conditions set forth in Article 48 hereof, use the former sound recording to produce their own sound recordings without the permission of the copyright holder.” Article 48 specifies the conditions that must be satisfied to use the published work of a copyright holder without his or her permission, including payment of a royalty to the collective copyright management organisation at the rate set by the State Council’s copyright authority within one month after use. Numerous famous musicians, including Liu Huan and Gao Xiaosong, have expressed the opinion that this provision will abet pirating and could easily lead to monopolisation by the collective management organisation.

Wang Yadong, Executive Partner, Run Ming Law Office
Wang Yadong
Executive Partner
Run Ming Law Office

Articles 46 and 48 jointly constitute the “statutory licensing of sound recordings” in intellectual property law, but this is not unique to the current draft. In the current PRC Copyright Law, the “statutory licensing of sound recordings” is found in the third paragraph of Article 40, namely: “When a producer of sound recordings produces a sound recording of a musical work which has previously been lawfully produced as a sound recording, it need not obtain permission from the copyright owner but shall pay remuneration in accordance with regulations, unless the copyright owner has declared that use is not permitted.” The main differences between Articles 46 and 48 of the draft and the third paragraph of Article 40 of the current Copyright Law are: (1) the addition of a time limit of three months in the draft; (2) deletion of the exclusionary provision, “unless the copyright owner has declared that use is not permitted”, from the draft; and (3) the draft’s specifying of the conditions for implementation of statutory licensing.

Immediate significance

Based on the law and taking into account past practice, what “statutory licensing of sound recordings” limits is the copyrights of sound recording copyright holders, not the neighbouring rights of producers of sound recordings and performers. Statutory licensing only permits other record companies to invite other performers to perform or sing on non-public sound recording premises, such as a recording studio, etc., produce the same as a sound recording and publish and distribute the same, but does not give them the permission to use such sound recording to carry out performances for a profit, or to pirate the existing sound recording for the purpose of selling it.

The main objectives of statutory licensing are to ensure wide dissemination of musical works and prevent monopolisation by a single record company, and to ensure that copyright holders can receive royalties from producers each time their musical works are produced as sound recordings. Accordingly, statutory licensing of sound recordings has the immediate significance of preventing monopolisation by record companies and halting infringement through permitting conditional statutory licensing.

Objective flaws

The argument that Articles 46 and 48 abet pirating is somewhat over the top. The provisions are progressive, but the draft contains certain objective flaws, and the worries of musicians are not completely without foundation.

The draft sets a limit of three months before the lawfully produced sound recording of another may be used. It is generally felt in the music world that the three-month period is too short, and insufficient in practice to satisfy the requirements of realising returns on a musical work, and the industry proposes instead that it be revised to three years. It can be seen that it is important to set a time limit that is reasonable.

Zhang Jing Lawyer Run Ming Law Office
Zhang Jing
Run Ming Law Office

Second, the draft deletes the provision that permits a copyright owner from declaring that use is not permitted. In other countries, the retention by copyright holders of the right to not permit statutory licensing can affect realisation of the objective of preventing monopolisation. However, the awareness of intellectual property rights in the PRC remains weak, and pirating in the PRC’s music market is rampant, particularly the heavy blow that is landed on the record industry by illegal online broadcasting and downloading via the internet. As a basic law balancing the rights of copyright holders and the public interest, it remains necessary for the Copyright Law to favour protection of the rights and interests of copyright holders and to emphasise regulation of use and dissemination. It would seem that the time for deleting this provision is not yet here.

Third, differences in the participating entities and invested costs for musical works may lead to differences in the values of different works. However, pursuant to Article 48 of the draft, the rate for the royalties to be paid for the statutory licensing of sound recordings are to be set by the State Council’s copyright authority. How can royalty rates centrally determined by an administrative authority accurately reflect the value of different musical works? And can they flexibly react to changes in the market? When a copyright holder disagrees with a rate, the draft also fails to provide him or her with a reasonable method of resolution.

Furthermore, pursuant to Article 48 of the draft, the payee of royalties is the collective copyright management organisation, but the draft is silent as to the period of time for forwarding payment of the royalties to copyright holders by the collective management organisation, the method of payment, the management fee and the rate it charges therefor. At present, the lawful rights and interests of copyright holders are not accorded vigorous protection, at least in law.

With respect to a draft that intends for “one stone to give rise to a thousand-storey wave”, the Copyright Administration has stated that it welcomes discussion by all concerned. The Music Copyright Society of China has also publicly stated that “the creation of musical works is the foundation of the music industry, and protecting the creative enthusiasm of authors is the top priority”. We would like to see the music industry, administrative authorities and the collective management organisation cooperate well so as to allow the birth of a “good law”, consistent with the current PRC intellectual property environment and market, after the full knocking around of ideas by all concerned.

Wang Yadong is the executive partner and Zhang Jing is a lawyer at Run Ming Law Office

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