Rumpus about Karaoke Use Fee


By Our Special Correspondence

On 1 March 2004, 49 overseas and domestic records companies, including the Universal Music Ltd., Warner Music Group, EMI Music (Hong Kong) Ltd., Sony Music Entertainment (Hong Kong) Ltd., Emperor Entertainment Group, What’s Music International, Inc., China Records Company, Guangzhou Pacific Audio & Video Company, Guangzhou New Era Audio & Video company and China Audio-video Press, wrote a letter of warning to over 12,000 karaoke operators in Mainland China, requesting them to cease the infringing act of unauthorized use of MTVs, music videos and karaoke works produced thereby and to pay for the damages of the amount ranging from RMB 7,000 to 120,000 yuan depending on the scale of their karaoke premises.
 
Background Information
 
It has long been a common practice in China to pay for showing karaoke works. Some large-scale karaoke operators have paid for the fees for use to the Music Copyright Society of China, which, however, is entrusted to administer only the right of the music composers. Since no similar organisation for collective administration of copyright exercises the right on behalf of the records companies, the records companies have never claimed the right to show audiovisual products for commercial purpose. The 49 records companies, joint action is obviously encouraged by a recent case. On 18 November 2003, the Beijing No. 1 Intermediate People’s Court decided, in the case, the Hong Kong Go East Entertainment Co., Ltd. v. Beijing Chunyin Song & Dance Entertainment Co., Ltd., that the latter had constituted infringement by its unauthorized use of three MTV works produced by the former, and ruled, in the first instance, that the defendant pay the former over RMB 50,000 yuan in compensation of its economic injury. The judgement seems to indicate that it is based on law for the records companies to claim damages and to exercise their right of showing these works.
 
It is generally believed that, under the current laws and regulations, the records companies are producers of sound recordings or video recordings. Under Article 41 of the Copyright Law, a producer of sound recordings or video recordings has the right to reproduce, distribute, rent, or otherwise communicate, works to the public on a network, which is called the “rights relating to the copyright”, i.e. the neighbouring right, with the showing right excluded.
 
However, in Article 3 of the Copyright Law as revised in 2001, the cinematographic works and works created by virtue of an analogous method of film production are sorted with works under the copyright protection. Pursuant to Articles 10 and 15 of the Copyright Law, the copyright in works of the kind, including the showing right, is enjoyed by the producer.
 
It was based on this provision that the 49 records companies held that MTV and karaoke music were products created by virtue of an analogous method of film production, and they, as the producers, naturally enjoy the showing right.
 
Focus of Dispute
 
Obviously, whether or not MTV and karaoke music are the “works created by virtue of an analogous method of film production” has been the focus of dispute.
Under the Chinese Copyright Law, products consisting of a series of images have been divided into two classes: the cinematographic works and works created by virtue of an analogous method of film production and video recordings. The former is defined as “works which are fixed on some media, composed of a series of images, with or without accompanying sounds, and can be shown with the aid of suitable devices or communicated by other means”; the latter “the recordings of a series of related images, with or without accompanying sounds, other than cinematographic works or works created by virtue of analogous methods of film production” (see Articles 4 (11) and 5 (3) of the Implementing Regulations of the Copyright Law). According to the above definitions, the two classes are different in that the former are created, and the latter produced by way of recording. This simple definition seems more favorable to the MTV and karaoke music producers because there are more or less producer's creative elements in the works. In the case, Hong Kong Go East Entertainment Co., Ltd. v. Beijing Chunyin Song & Dance Entertainment Co., Ltd., it is just based on this ground that the judges of the Beijing No. 1 Intermediate People’s Court decides that the three MTV works in dispute are works created by virtue of an analogous method of film production.
Since Chine is not a case law country, and the judgement of a precedent does serve as the basis for any subsequent case, regarding the issue of whether or not MTV or karaoke works are cinematographic works, we have to wait for the Chinese legislators to make clear interpretation.
 
Response from Karaoke Operators
 
A large-scaled karaoke operator in Beijing took the lead in concluding agreement with the attorneys-at-law of the 49 records companies. It has paid the latter RMB 360,000 yuan in compensation regarding the showing right of the three regular karaoke houses affiliated thereto, and reconciled with the records companies.
Some karaoke operators in Nanjing called on the entire industry to unite to produce MTV and karaoke works themselves, in an effort to avoid the claim for damages by records companies.
 
Most karaoke operators in Chengdu responded actively to the damages claimed by the records companies. The president of the Asia-pacific area of the International Association of Phonograph Industry, who was in charge of the joint action, made a special trip to Chengdu to negotiate with the karaoke operators there regarding the fees for using MTV and karaoke works.
 
At a symposium held recently in Shanghai, some representatives of the karaoke industry said that, if the records companies come to collect fees for use, they might as well follow the practice of the large supermarkets which charge the enter-the-market fees from suppliers for their goods to be sold therein to charge fees from the records companies for their products to be shown or promoted.
 
Faced with the claim for damages, the karaoke operators in Guangzhou were relatively calm. Most of them stated that, once receiving letters from lawyers, they would consider to pay the fees. They, however, disagree on the amount claimed, and rate of fees charged by the records companies. They request the government to hold a public hearing to fix a reasonable rate of fees for using karaoke works.
The Shenzhen Jiazhouhong Industry Co., Ltd., the largest karaoke operation enterprise in Shenzhen, was the second company that have brought about reconciliation with the 49 records companies. However, an executive officer of the newly established Shenzhen Luohu District Association of Song & Dance Entertainment, with more than 100 music bars as its members, recently stated that the Association had asked its member units not to bring about reconciliation with any organisation alone before any regulation on the fees for using karaoke works was introduced.
 
Response from the Legal Community
 
The legal community in China are cautious about the joint action of the 49 records companies.
 
A legal expert of the Music Copyright Society of China holds that “works created by virtue of an analogous method of film production” refer to video works, such as TV series with plots of story. MTV and karaoke works, mere demonstration of the existing musical works, should not be protected as cinematographic works. He believes that it is not required in the international conventions, nor is it in line with the China's practice situation in which the audiovisual industry was weak to accord karaoke works the same level of protection as cinematographic works.   
In respect of the right to show MTV works, Lin Xiao, attorney-at-law of the Beijing Borong Law Firm holds that the MTV producers enjoy only the “right to show video works”. MTV and karaoke works were works of cooperation. Even if there does exist the showing right, this right is to be enjoyed jointly by the lyricist, composer and the producer of a video work, and the artist and photographer thereof. He believes that the records companies’ claim for the showing right alone is possibly an abuse of the right.
 
At a recently held expert forum, all the copyright experts present agree that the matter should not be treated in like manner in all cases as to whether or not MTV and karaoke music woks should be protected as works analogous to cinematographic works, and account should be taken of the creative elements therein. The experts generally hold that it is relatively appropriate to exercise the right of the kind by way collective administration, and the government may exercise necessary supervision over the fee-collecting organisation and over the rate of fees charged.
 
International Practice
 
Conception of IP law theory is different between the countries with the common law tradition and those with the civil law tradition. In terms of copyright, the difference lies in the "copyright" and "the author's right". The latter has been developed in the European continent, while the UK and USA have a copyright system. Most producers, "authors" of phonograms and motion pictures, object to the author's right. For them, it impedes the development of the audiovisual industry. Within the common law copyright system, the rights of producers of audiovisual products and radio-television organizations are both regarded as the copyright. The law encourages the authors to transfer their right to producers by virtue of a single equitable remuneration. Producers of audiovisual products, as copyright owners of works, may independently exercise their rights, including the performance right and showing (broadcasting) right. In the law of the European countries with the civil law tradition, the concepts of copyright and neighbouring right are strictly set apart, audio visual products are not classified as works, and the producers only enjoy the neighbouring right, while the performance right and showing (broadcasting) right, falling within the substantive copyright, are generally rights that go to the authors who create works.
 
In Japan, the rights in MTV and karaoke works are under the uniform administration by the Japanese Music Copyright Association as music copyright. In its judicial precedents, MTV and karaoke, as cinematographic works, enjoy all the copyrights, including the right of showing. Since the lyrics, music and video of MTV and karaoke works are created by different people, the video producers cannot exercise the showing right in such works of cooperation in the precedents, but can claim their right with other rightholders of the work through the Japanese Music Copyright Association.
 
Article 15 of the WIPO Performances and Phonograms Treaty (WPPT) has provided for the "right of broadcasting" of the performers and phonogram producers, that is, they shall enjoy the right to a single equitable remuneration for the use of phonograms published for broadcasting or for any communication to the public. Accordingly, the producers of audiovisual products should also enjoy the same right. However, WPPT also provides that the contracting parties may reserve this right.
 
Impact on Legislation
 
To date, most wait-and-see karaoke house operators are hoping that the law-makers will work out an express explanation as to whether or not the records companies enjoy the right to show MTV and karaoke. Since this incident has bearings on the entire entertainment industry including the karaoke houses and nightclubs, the law makers are compelled to address the issue as soon as possible, so as to accelerate the process of relevant legal construction in the following aspects:
 
As early as November 2001, the National Copyright Administration (NCA) authorised the China Audiovisual Association to prepare to set up the China Audiovisual Copyright Association, an organisation for the collective administration of audiovisual Copyright. Early establishment of the association and formulation of the standard fees approved by the Government will address, to a large degree, such issues as charging fees by the record companies and paying the fees by the karaoke operators.
 
The Regulations for the Collective Administration of Copyright (draft) is now under review. The issue arising from this incident will be considered in the course of the review of the Regulations.
 
Besides, infringements of the relevant rights in audiovisual works communicated in large quantities on the Internet often arise at present. This incident will also indirectly spur the NCA to accelerate the formulation of the Regulations for Information Communication on Networks.
 
In the course of legislation, the legislators should, besides considering the social juristic and legal impartiality, take account of the efficiency and cost of enforcement. In the several MTV copyright cases closed now, the judges have made the determination of the copyright in the works involved before the court. To prevent waste of the judicial resources and reduce the cost of enforcement, the character of works is explicated at the time of marketing or distributing them. For example, MTV and karaoke works may be classified as film and non-film products. The registration system is adopted for the former. Once a film is registered, its class must be indicated at the time of distribution. The non-registered are non-film MTV and karaoke products in which there is no right of showing. By virtue of the classification, the karaoke operators can get to know whether they should remunerate the producers when showing these MTV and Karaoke music. Under the impact of the market demands and business competition, a non-film MTV and karaoke production industry would probably be generated.
 
There are some other relevant issues, such as whether the fees are reasonably charged or whether the fee-collection procedure is convenient, will all require special attention in the law-making process.