Plaintiff: Wang Haicheng, Wang Haixing & Wang Haiyan (collectively the Wangs)

Defendant: Chongqing Three Gorges CD Development Co., Ltd. (“Three Gorges Company”)

Defendant: Guangdong Dasheng Culture Communication Co., Ltd. (“Dasheng Company”)

Defendant: Guangzhou Audio & Video Publishing House Defendant: Jiujiang Liansheng Plaza Supermarket Co., Ltd. (“Liansheng Company”) Defendant: Nanchang Department Store Inc.

(“Nanchang Department Store”)

 

The remuneration right is not as exclusive as the reproduction right or the publishing right is. It is a claim right that the copyright owner has on the basis of an agreement or a legislation. In the statutory licensing situation, a legal creditor-debtor relationship is formed between the copyright owner and the statutory licensed user. If the statutory licensed user does not pay, this does not result in a legal relationship of infringement, but a violation of the legal obligation. The copyright owner may not raise an infringement suit, but should sue for breach of contract.

 

Yakexi was a musical work created by Wang Luobin by rearranging a Turpan folk song and adding new lyrics in 1957. After his death in 1996, the Wangs, children of Wang Luobing signed a music copyright contract with the Music Copyright Society of China (MCSC) on March 1st, 1996, delegating to MSCS for management the rights of public performance, broadcast and recording of the work.

 

On July 5^th, 2004, Luo Lin, whose stage name is “Daolang”, entered into a contract with Dasheng, in which Luo Lin agreed to license Dasheng to make and publish phonogram products (CDs) of the Poplar of Kashgar, a singing album that Luo Lin produced for which he owned the copyright.

 

On December 3^rd, 2004, Guangzhou Audio & Video Publishing House and Dasheng Company entered into a publishing contract, which allowed Guangzhou Audio & Video Publishing House to make, publish and distribute the phonogram products of the Poplar of Kashgar. On December 8^th, 2004, Guangzhou Audio & Video Publishing House entrusted Three Gorges Company to reproduce 900,000 CDs of the phonogram. On December 24^th, 2004, Guangzhou Audio & Video Publishing House applied to MCSC for using the Snow Lotus on the Icy Mountain , the Drum the Tambourine and Sing and Yakexi , and including them in the Poplar of Kashgar album. It would make and produce 200,000 CDs of the album at the wholesale price of 6.5 yuan per CD and pay the royalties in an amount of 21,900 yuan. On March 17th, 2005, MCSC issued a receipt for the Royalty Payment for Exploiting Music Copyright. On March 2nd, 2005, the Wangs bought one CD of the Poplar of Kashgar album from Liansheng and another one from Nanchang Department Store. The album had its core and cover printed with the publishing code ISRC CN-F28-04-466-00/A.j6. It contained 11 songs, among which the eighth was Yakexi. The copyright information on the package read, “Statement: any and all audio copyrights and videos herein are jointly owned by Dasheng Culture Communication Co., Ltd. and Luo Lin, and any unlicensed use of them are strictly prohibited”, “This album is exclusively distributed nationwide by Guangdong Dasheng Culture Communication Co., Ltd.”, and “This album is published by Guangzhou Audio & Video Publishing House.”

 

The plaintiffs claimed that they owned the copyright in the music work Yakexi, and the above five defendants’ reproducing and distributing without the plaintiffs’ permission the phonogram products of the work in a large volume infringed upon the plaintiffs’ rights of reproduction and distribution. They brought the case to the court, seeking injunction against Liansheng and Nanchang Department Store from selling the phonogram products at issue, damages against Three Gorges Company and Dasheng in the amount of 455,000 yuan and the reasonable expenses in the amount of 40,000 yuan, with joint liabilities for Guangzhou Audio & Video Publishing House, and public apologies from Three Gorges Company, Dasheng Company and Guangzhou Audio & Video Publishing House on China Culture Newspaper .

 

Three Gorges Company countered that it had complete formal documents, and had no intent to infringe; and that the Wangs lacked standing because the copyright at issue has been placed in the hands of MCSC. Dasheng and Guangzhou Audio & Video Publishing House contended that Yakexi was a published music work; that the reproduction and distribution of the work complied with relevant statutory provisions; and that for the 200,000 CDs that had been reproduced and distributed, the royalties had been paid to MCSC.

Liansheng argued that the CDs concerned were supplied from a lawful source and were no longer offered for sale.

 

Nanchang Department Store did not file any answer.

 

At the first-instance trial, the People’s Court of Jiujiang City, Jiangxi Province, found that according to Article 40, Section 3 of the Copyright Law, Yakexi , which had been published and made into phonogram products long before the reproduction and distribution of the phonogram products that the case was concerned with, might be used by anyone without permission of the copyright owner by paying to the owner a payment pursuant to relevant rules, unless the owner declares to the contrary. Since the Wangs did not allege any such declaration, Guangzhou Audio & Video Publishing House and Dasheng were statutorily licensed to use the music work to produce phonogram products without permission from the Wangs, by paying them the fee. Since the Wangs had transferred to MCSC the management of the music work, MCSC had the right to grant licenses to other users. Guangzhou Audio & Video Publishing House had requested permission from MCSC for the use of the music work and paid to the copyright owner a fee for reproducing 200,000 CDs of the music work as indicated in the application. But, in fact, it then entrusted Three Gorges Company to reproduce 900,000 CDs, and did not pay the copyright owner for the additional 700,000 CDs. It had infringed the remuneration right of the Wangs, and should be liable to pay infringement-based damages. The judgment was rendered as follows: (i) Dasheng and Guangzhou Audio & Video Publishing House should be severally and jointly liable to pay the Wangs damages in the amount of 318,500 yuan and reasonable expenses in the amount of 15,433 yuan; and (ii) all the other requests of the Wangs should be dismissed.

 

Unsatisfied with the first-instance judgment, Dasheng and Guangzhou Audio & Video Publishing House appealed to the Higher People’s Court of Jiangxi Province, arguing that the Wangs lacked standing; that the first-instance court miscalculated the amount of damages using 11 songs rather than the only one song that they used; and that they were not at fault and their acts were not an infringement of the remuneration right of the Wangs. They requested the High Court to dismiss the requests of the Wangs. The Wangs, Liansheng, Nanchang Department Store and Three Gorges Company petitioned the High Court to affirm the first-instance judgment.

 

On appeal, the second-instance court ruled as follows: (i) the first-instance judgment is vacated; (ii) Dasheng, Guangzhou Audio & Video Publishing House and Three Gorges Company are enjoined from reproducing or publishing the phonogram products of the Poplar of Kashgar; (iii) Dasheng and Guangzhou Audio & Video Publishing House should be liable jointly and severally to pay the Wangs 150,000 yuan in damages; and (IV) the other requests of The Wangs were rejected.

 

Dasheng filed for reconsideration, stating that the case was concerned with statutory license rather than infringement, and that there was an erroneous application of laws when the original trial court abused its discretionary to compute damages because the user fee was readily available.

 

The Wangs filed an answer that as the phonogram product Yakexi was produced by Luo Lin, the production and distribution of the product by Dasheng Company should have required the permission of the phonogram producer, performer and copyright owner in accordance with Article 42, Section 2 of the Copyright Law.

 

Three Gorges Company filed an answer that the actions of Guangzhou Audio & Video Publishing House and Three Gorges Company did not constitute infringement, and that the use of the music work by these companies should be governed by statutory license, for which a payment should be made to the copyright owner pursuant to relevant legal criteria.

 

Liansheng Company and Nanchang Department Store accepted the original judgment.

 

After the retrial, the Supreme People’s Court held that once a music work has been made public by the copyright owner in the form of phonogram products, any other person who intends to make other phonogram products of the music work for reproducing or distributing purposes does not need to obtain a license from the copyright owner.

 

Therefore, in this case, the defendants’ making, reproducing and distributing the Poplar of Kashgar using the music work concerned comply with the statutory license provision and do not constitute infringement, but a payment should be made to the copyright owner.

 

The controversy central in this case, apart from different understanding of the statutory license provision under Article 40, Section 3 of the Copyright Law, lies in whether a statutory licensee has, after complying with the statutory requirement, infringed the copyright when failing to pay remuneration. The Supreme People’s Court clarified this point by indicating that the statutory licensee, under such circumstances, does not infringe the copyright, but does create liability for remunerations. The relationship between the statutory licensee and the copyright owner is statutorily a creditor-debtor relationship.

 

In this case, the opinion of the first-instance trial court represents the general understanding of the issue in theoretical research and judicial practice. As clearly provided in Article 10 of the Copyright Law, the copyright owner has the right to be paid for licensing or transferring to any other person any property right in his work.

 

Article 47(7) states that “Anyone who commits any of the following acts of infringement shall bear civil liability for such remedies as ceasing the infringing act, eliminating the effects of the act, making an apology or paying compensation for damages, depending on the circumstances: ...

 

(7) exploiting a work created by another person without paying the remuneration that is due ...”

 

For these provisions, the failure of the statutory licensee to pay remuneration is believed to infringe the right of the copyright owner to receive remuneration for his work. In this case, the owner has the right to sue for infringement damages.

 

The above view is supported by an understanding that the remuneration right that the copyright owner enjoys is an exclusive right as parallel to the reproduction right and the distribution right. The understanding is prevalent in judicial practice and theoretical research. As in judicial practice, the complaint of the copyright owner or the court judgment often contains a sentence to the effect that “the defendant infringes upon the right of the plaintiff to reproduce, distribute or receive remuneration for the work.” In theoretical research, quite a few scholars believe that the remuneration right is a major property right in the bundle of rights under copyright.

 

 

(1) That the remuneration right is absolute lacks a legal basis; First from the perspective of the legislative evolution of the Copyright Law: According to Article 10 (5) of the 1990 Copyright Law that provides for the property rights under copyright, the remuneration right is one of the property rights as parallel to the user right. But, in the revised 2000 Copyright Law, the personal and property rights under copyright are made into the more specific 17 rights, which do not include the remuneration right. Also, the phrase “the right to receive remuneration” is replaced by “ the right to receive remuneration according to an agreement or any relevant provision herein.”

 

This wording has been kept in the most recent version of the Copyright Law.

 

Second from the perspective of the system of provisions: Article 10 consists of three sections: Section 1 includes the 17 personal and property rights, and Item No. 17 is an all-inclusive “any other rights that shall be enjoyed by the copyright owner.” Sections 2 and 3 provide how the copyright owner may use his rights, that is, the copyright owner may license or transfer to any other person any of the property rights in Section 1, and receive remuneration for so doing.

 

The system of the provisions indicates that the remuneration right is not parallel to, but is resulted from the exercise of, the reproduction right or the distribution right in Section 1. Such exclusive rights as the reproduction right or the distribution right are at a level different from the remuneration right. In other words, the former are the right per se, and the latter is the consequence or effect.

 

Third from the perspective of the Provisions on the Causes of Action in Civil Cases of the Supreme People’s Court: The 2011 Provisions on the Causes of Action in Civil Cases provides in detail for 17 causes of action for copyright related infringement dispute, which corresponds to the 17 rights in Article 10, Section 1 of the Copyright Law. But, there is no cause of action for infringement upon the remuneration right.

 

Any remuneration-related dispute arising from the copyright owner’s licensing or transferring his work should be incorporated into the “copyright license contract-related dispute” or the “copyright transfer contract-related dispute.”

 

(2) The remuneration right is characterized by features different from an absolute right; First, the remuneration right is not as against things as an absolute right is. An absolute right is so against things that except the right subject, any other person is obligated to not infringe upon, interfere with or hinder the right. It must be respected by any person. For the remuneration right, the copyright owner is not entitled or possible to claim remuneration against any person other than the user or transferee of his work. The obligation subject is specific. On the other side, for an absolute right, the obligation subject is obligated to not act, that is, he will not be held liable as long as he does not act to interfere with the right owner’s exercise of his right. On the contrary, for the remuneration right, the obligor must act to pay remuneration; otherwise, he will be liable for damages for his failure to pay the amount payable.

 

Second, the remuneration right is not as controlling as an absolute right is. The term “controlling” means to possess, exploit, gain an income from or dispose of the object of the right.

 

The reproduction right is a controlling right, that is, the copyright owner may decide whether to reproduce his work or not at his will, as long as permitted by law; at what scale the work may be reproduced; and by whom the work may be reproduced, that is, by himself or by anyone else he entrusts. The same applies also to the distribution right and the information network communication right. But, the remuneration right is not that controlling. When his work is used by any person without payment, the copyright owner is not entitled to directly control the person, nor directly control the paying act of the user. Although he can only request the user to pay, when and how the payment is made are beyond his control.

 

Because the right to claim for infringement related damages will not occur until an absolute right is damaged, and because the remuneration right is not an absolute right, the copyright owner may not sue for infringement-related damages when the statutory licensed user fails to pay remuneration. In fact, the copyright owner and the statutory licensed user have between them a creditor-debtor relationship.

 

The copyright owner, who enjoys the creditor’s right against the statutory licensed user, has the remuneration right as a claim right that ensures the realization of the creditor’s right---- he may request the statutory licensed user to pay him a remuneration pursuant to an agreement or any legal provision. Although it is termed as a “right”, the “remuneration right” is not a right per se, but a capacity or the effect of a right; it is so named for the convenience of academic reference.

 

A civil legal relationship can be absolute or relative, according to the content of the right concerned. An absolute legal relationship is a legal relationship between a specific right subject and a non-specific obligation subject, where the non-specific obligation subject incurs the obligation to not infringe the absolute right of the right subject. A relative legal relationship is a legal relationship between a specific right subject and a specific obligation subject, where the obligation subject generally needs to act and pay. As the copyright is an absolute right, except the copyright owner, any other person has the obligation to not infringe the right. However, in the case of statutory license, the user’s trespass upon the special control area of the copyright owner is allowed by the Copyright Law, which does not breach the user’s obligation to not act. But, the original absolute legal relationship between the user and the copyright owner is now transformed into a relative legal relationship. For the statutory licensed user, the obligation to not act is replaced by the obligation to act and pay.

 

For the above, the remuneration right is not an absolute right; in the case of statutory license, the copyright owner and the user form a creditor debtor relationship; the failure of the user to pay remuneration does not infringe the remuneration right of the copyright owner; and the copyright owner may not seek for remedies by suing for infringement-related damages, but should hold the user liable for not performing his debt by suing for breach of contract. Otherwise, it will not only lead to numerous unnecessary concurrences between actions of breach of contract and actions of infringement, thereby damaging the boundary between the contract law and the tort law, but also result in the statutory licensed user being unfairly liable. In intellectual property related infringement actions, the right owner may compute damages using his own losses, the infringer’s gains or the statutory compensatory criteria. The right owner’s losses are usually set to be three to five times the remuneration that he may receive. As a result, the right owner may acquire higher damages in an infringement action than in an action of breach of contract. In the case that we discuss here, the first-instance court, which held that the defendants’ actions constituted infringement, acquired damages that are twice as much of the normal remuneration.

 

This increased the liability on the statutory licensed user.