On July 6th, the National Copyright Administration of People’s Republic of China (NCAC) released the second draft reversion of the Copyright Law (second draft revision). The current revision of the Copyright Law marks the third amendment to the law since it was enacted. compared with the prior two amendments, the current revision has aroused wider attention and sparked more heated debates.

China made the first version of the Copyright Law in 1990. However, at that time it was not a member country of the International Copyright Protection System. As the reform and opening up deepened, bilateral and multilateral conflicts over copyright issues occurred from time to time. In 2001, in order to satisfy WTO entry requirements, China conducted the first revision of its Copyright Law. The number of legal provisions increased from 56 to 60 and the amendment focused mainly on nine issues: (i) the application for “national treatment;” (ii) the definition of protected objects; (iii) the integration of “copyrights;” (iv) the copyright renewal limitations in accordance with international rules; (v) the completion of the neighboring right system; (vi) the organization of the copyright “collective management” system; (vii) the resolution of copyright transfer problems that had been controversial for over ten years; (viii) strengthening copyright protection; and (ix) other copyright protections necessary under the new technological environment.

In 2010 the WTO issued a judgment to resolve certain Sino-U.S. copyright disputes. China made two revisions to the Copyright Law pursuant to that ruling. First, Article 4 was revised to state: “Works, the publication or dissemination of which are prohibited by law, shall not be protected by this law. The state shall supervise and administer the publication and circulation of works according to law.” In addition, a new article (Article 26) was added to state that, “The pledge of copyright shall be registered by the pledger and the pledgee with the copyright administrative department of the State Council.” The final revised Copyright Law consisted of 6 sections and 61 articles.

It is clear that the above two amendments were conducted both passively and partially. On July 13th, 2011, China formally started the third revision of the Copyright Law. While the revisions in 2001 and 2010 were passive reactions to make China’s Copyright Law consistent with international standards, the third revision is an active process aimed at stimulating the development of China’s cultural industry based on China’s own national conditions. It demonstrates that Copyright Law revision in China has matured from passive reactions to active reforms. However, questions over some specific provisions in the third draft revision have also been raised, which includes the issue of “secondary remuneration.” The second draft revision released on July 6th by the NCAC explicitly provides in Article 17 (3) that original authors, screenwriters, directors, lyricists, composers and main performers are eligible for “secondary remuneration” in secondary uses of audiovisual works.

Arguments triggered by “14.32 yuan”

Although provision on secondary remuneration had attracted wide attention, what placed it in the eye of the storm was a film copyright royalty payroll of 14.32 yuan. Because his film Sunflower was used by a Spanish unit, director Zhang Yang received the nominal payment from the user. He Ping, director of film Warriors of Heaven and Earth , also received a nominal payment when his film was used. The payments were used as supporting evidences of the need to introduce “secondary remuneration” into the draft revision of the Copyright Law.

As celebrity charm collides with the proposed third revision of Copyright Law, directors, screenwriters and producers each air their own views.

Li Shaohong, President of the China Film Directors’ Guild (CFDG), expressed through Weibo that the CFDG filed appeals requesting that directors be deemed as authors of audiovisual works and be eligible for secondary remuneration in the bill of Copyright Law revision. Director He Ping, Secretary General of the CFDG also posted on Weibo and stated, “Film directors are authors who transfer written materials to audiovisual works.”

Reportedly, Li further indicated that the CFDG has already submitted a corresponding bill of amendment to the Policies & Regulations Department of the General Administration of Press and Publication of the People’s Republic of China (Policies & Regulations Department), hoping that the new Copyright Law could clearly provide that “directors are the authors of films.” Later, Li confirmed her points and attitudes and stated that, “The CFDG has formally submitted the bill of amendment to the Policies & Regulations Department, in which we expressed clearly our appeals that: (i) directors should be deemed as the authors of audiovisual works; (ii) authors should have the right of secondary remuneration; and (iii) the term of copyright protection should be extended to 70 years.”

Directors’ views were refuted by screenwriters. While directors called themselves authors, screenwriters challenged: “If directors are the authors, who are we?”

Wang Hailin, Associate President of China Film Literature Association and Executive Director of the Working Counsel of the TV-Series Screenwriters Committee, said that screenwriters are the authors of audiovisual works. According to Wang, authors were those who write the stories, therefore, screenwriters who create stories and enter into copyright deals with producers should be deemed as authors. According to the current law, directors are only given the right of authorship and secondary remuneration. Directors are not given copyright protection, therefore they should not be considered as authors. “I noticed that Article 16 of the first draft revision, which was released in March, was changed and had become Article 17 in the second draft revision. In my opinion, the former Article 16 was better. It was an intact legal provision in which the subjects were unified and it clearly provided that screenwriters, lyricists, composers and other associated authors were eligible for secondary remuneration. In that context, the law was coherent. However, the coherency was damaged after directors were included. I think original authors should be added to the new Article 17. In other words, it should state original authors, screenwriters, lyricists and composers are all eligible for secondary remuneration. However, it further stipulated that directors are also an eligible subject. I do not think that directors should be included in this article. Their secondary remuneration should be discussed separately.”

With respect to the arguments between directors and screenwriters, Zhang Weijun, Director of the Research Center of Intellectual Property Law and Competition Law in Tongji Law School holds that, in accordance with Article 15 of the current Copyright Law: “The copyright of a cinematographic work or a work created in a way similar to cinematography shall be enjoyed by the producers, while any of the screenwriters, directors, cameramen, lyricists, composers and other associated authors of the work shall enjoy the right of authorship, and shall be entitled to obtain remuneration as agreed upon in the contract between each party and the producer.” Directors have already been included as authors, but they are not considered the exclusive authors of audiovisual works. He also pointed out that Article 17 of the second draft reversion explicitly provides that original authors, screenwriters, directors, lyricists, composers, etc. are eligible for reasonable remuneration for others’ use of the audiovisual works. Therefore, according to Zhang, “the secondary remuneration right which the directors are seeking has already been provided to them in the revision. Directors and screenwriters belong to the same group since they are both eligible for payment of audiovisual works.”

Practical plights

If directors and screenwriters are on the same side, then producers, who are the other most important party involved in secondary remuneration, are surely on the other side.

Most domestic movie and television companies oppose the revision. Recently, major Chinese movie and television companies, including Huayi Bros. Media Group, Beijing Ciwen Film Distribution Co., Ltd., HaiRun Movies & TV, Beijing Enlight Media Co., Ltd., Beijing Forbidden City Film Co., etc., have submitted negative feedback to the NCAC in written form, calling for the NCAC to strike out the provisions on secondary remuneration.

As the Legal Director of a well-known production company, Wang Dongmei thought that secondary remuneration was not only a matter of profit distribution. If the provision is written into law, it might spread profits too thin and cause the industry to wither. It will be disadvantageous to all parties involved and cause a large number of disputes. Ma Zhongjun, Executive Associate President of the Beijing Broadcast Television Programs Producing Association (BBPA), has his concerns as well. He feels that if directors, screenwriters, lyricists and composers can seek ongoing payments for reproductions, it will be hard to recoup original production costs because those costs will constantly be increasing. Thus, a vicious circle will be formed. As the investment in the industry decreases, big-budget productions will become a wish gone by.

In terms of who should pay for secondary remuneration, apparently, it is the producers that will be flayed. Therefore, producers’ grievances and complains are commonly heard in discussions on this issue. If the producers do not pay then the question remains, who should pay?

“Original authors, screenwriters, directors, lyricists, composers, etc.” are all eligible for reasonable payment, but from whom shall they ask for money? For example, if a movie is broadcasted on the Internet, should the producer or the website pay them? If a TV series is shown on TV, should the producers or the TV station pay?

There are varying opinions on this issue in legal circles. Li Mingde, Professor of the IP Center of the Chinese Academy of Social Science, believes that the parties should enter into contracts to determine whether a party receives a one time fixed payment or several payments. He holds that since a producer enters into an audiovisual contract with the screenwriters, the directors and the performers, it is clear that the payment should be made by the producer.

Wang Qian, Professor of East China University of Political Science and Law, holds that producers should not be considered the exclusive source of payment. Interested parties could seek payment from the users of the works as well, depending on specific situations and provisions. Zhu Lixin, attorney at the Beijing H&J Law Firm echoed this opinion. He thinks that “users shall pay for secondary remuneration.” While the producer may as well be a user, he may also need to pay a second time, unless the contract stipulates otherwise.

In the draft revision of the Copyright Law, whether the provisions concerning secondary remunerations could be enforced efficiently, clarifying the payment form and standard is an important guarantee. Secondary remuneration will affect the interests of producers and users. “If the money is paid by producers, it means that part of the producers’ income shall be paid back to authors. However, the draft revision fails to provide clearly the forms and standards of the payment, which may be left for contracts negotiations between producers and authors (such as screenwriters and directors). Meanwhile, the draft revision also skips the issue of whether the right to residuals can be given up, thus, it is totally possible for producers to add a term of no secondary payments in the contracts,” said Zhang Weijun, who supports that users should be the payer. However, he also indicated that if users of films need to pay fees to screenwriters, directors, lyricists, composers and other associated authors one after the other, then the legal provisions stating producers are the copyright holders of films will be rendered meaningless.

Prior to the discussion of “who should pay,” many legal specialists have questioned the definition of what constitutes “use” in the draft revision. The provision states, “...The original authors, screenwriters, directors, lyricists and composers shall have the right to receive a reasonable payment from any other person who uses such audiovisual work.” Wang Jun, attorney at Yingke Law Firm who specializes in copyright in the film and broadcasting industry, said that this expression of the provision was ambiguous. What on earth does “use” refer to? Besides box offices, there are many ways to recover the costs of a movie, such as audiovisual copyright, TV copyright, network copyright, international copyright, derivative products, etc. According to Wang Jun, if all these are considered as “use,” then the so-called secondary remuneration will result in countless repayments. For the “users,” each copyright transfer and broadcasting of the audiovisual work will generate unpredictable payment obligations to uncertain right holders. It will be troublesome for the distribution market of audiovisual works.

Director Zhang Weijun questioned this definition as well. What actions should be considered “use” or “secondary use” here? Doesn’t it mean the duplication, distribution, rent, broadcast, dissemination, and adaptation, etc. of the audiovisual works? Aren’t the aforesaid actions the first, rather than secondary uses of the work? According to common sense, authors can get payment through the above actions. However, now that authors’ rights have been statutorily transferred to producers, it is the latter who are collecting the payments. In this case, why should there be a “secondary” remuneration?

“How to distribute the money” is a question more sophisticated than “who should pay.” Essentially, secondary payment means getting paid once or many times, depending on the usage. However, there is no existing standard defining the terms of the payment percentage each time. Maybe, after the proposed draft revision of the Copyright Law is passed, relevant regulations or interpretations of the Supreme Court will be issued. But for the time being, the concerns of the parties involved have shown that the distribution norm of secondary remuneration is critical. Meanwhile, a bigger worry is whether the movie and media industry could afford to continue to sustain investments and remain innovative if market regulation is replaced by some statutory regulations.

It is foreseeable that if producers or users are forced to make second payments but the law provides no specific standards, they will definitely seek the lowest payment, which could render the payment meaningless for authors. Attorney Wang Jun predicts that should this situation occur and the parties cannot settle over the 11-12/2012 China IP 31 www.chinaipmagazine.com payments, authors are very likely to launch litigations, and the courts will have to resort to professional assessors to evaluate and measure the value of the contributions of right holders in the work. In Wang Jun’s eyes, since audiovisual works are collective works, there is no means to guarantee the objectivity and fairness of the assessments.

Idealism clashes with realism

China’s current laws do not provide for “secondary remuneration,” namely, the right for authors to receive residuals from secondary uses of audiovisual works. The third draft revision proposed three adjustments to the current law: (i) it recommends that the copyright ownership of an audiovisual product as a whole can be stipulated in contract, as provided in the first revision, be changed back in accordance with the current law: the copyright ownership shall belong to the producer based on the actual condition of the industry while referring to the legislation practices of the major countries and regions around the world; (ii) it explicitly provides that the original authors shall be entitled to the right of authorship to the audiovisual work; and (iii) it explicitly provides that five types of authors, including original authors, screenwriters, directors, lyricists and composers, shall be eligible for “secondary remuneration” in the “secondary uses” of the works.

The views of the industry insiders and legal specialists suggest that the smooth application of the “secondary remuneration right” will require solutions to many practical difficulties.

“To argue is to seek progress: we argue only because we are seeking to complete the law. We argue to clarify our thoughts and to find a mutually-beneficial method, and if we find that method, it will be a progress,” said Ma Qiance. From his perspective, secondary payment is feasible. However, he feels that the answer may not necessarily require legislations since contract stipulations can also fulfill the purpose, and there is no need for screenwriters and directors to treat producers as enemies. Meanwhile, relevant departments should fully consider the practical stage of development of China’s film and television industry when making laws. Ye Kuangzheng said that for the law to be revised, a matter much more important than ascertaining the author of audiovisual works must be addressed, and that is how to regulate the rules which implement copyright protection. “Only in this way can the newly revised law serve to protect copyright in real life,” said Li Shaohong.

(Translated by Monica Zhang)