Recent developments in protecting the copyrights of musical works

The spread of the internet and electronic technology has changed the way music is created and distributed.

In little more than a decade, the music industry has undergone a series of profound change. Music went from being distributed via records to CDs to digital files online. Record sale profits have shifted to relying mostly on membership and advertising fees.

More piracy

The convenience and ease of distributing music online have also made unauthorized uploading and downloading of music extremely simple. Piracy now far outstrips what it was during the cassette and CD era and poses unprecedented challenges for the music industry, as well as its closely linked copyright system.

The Chinese music market remains in a slump, impacted by the online free of charge model. Music copyright holders generally have been somewhat passive in protecting their rights due to its high cost and slow nature. However, certain recent developments in protecting musical copyright have drawn our attention.

Legislation

Legislative revision can provide legal assurance for strengthening the copyright protection of musical works. The Trademark Law and Patent Law were recently revised, effective 2014 and 2015 respectively, and a revision appears to be on the horizon for the Copyright Law, last revised in 2010.

In June 2014, the State Council released for public comment a draft amendment to the Copyright Law submitted by the National Copyright Administration for deliberation. Pursuant to the Tort Liability Law, the draft adds provisions on the commercial and civil liability of online service providers.

The draft also revises provisions on the measure of damages from being sequential to offering a choice. The rights holder will be permitted to choose from among its actual losses, the illegal income of the infringer, a reasonable multiple of the rights transaction fee or an amount of up to RMB 1 million (US$156,000).

In terms of administrative legal liability, the draft increases the amount of fines from three times the illegal business turnover to five times the turnover (RMB 100,000-250,000). Further, the draft specially authorizes administrative authorities with the ability to seal and seize suspected infringing items. All these herald that copyright protection is being intensified at the legislative level.

Global trends

Greater attention is being paid to protecting music copyright in China and around the world, providing a favourable environment for rights protection. The theme for the 2015 Intellectual Property Day is “Get Up, Stand Up. For Music”.

Recently, the National Copyright Administration issued a notice ordering online music service providers to take down all unauthorized music available for download by 31 July, failing which those in violation will be subject to stricter investigation and handling.

Further, the authors have found through extensive case study that increasing damages for infringement, including of musical works, has become a common point in court trials. Although the seriousness of musical work infringement has reached a significant degree, the protection of music copyright has again become a focus of Chinese and international attention.

New vigour

Online music services may become the new force promoting the move to genuine versions, setting the industry up for a reshuffle. Unlike the past when music was distributed via CDs and records, today music is much more likely to be distributed via a music service. For the user, the advantage of using an online music service platform is that they can, based on their needs, select at their discretion the music they like from a whole sea of works.

In recent years, the number of users of online music services has continued to climb. Online music services such as Tencent’s QQ Music have sprouted like weeds as well.

Securing exclusive content is without a doubt the best way to increase user number and loyalty. Accordingly, service providers with the size and resources to purchase genuine copyrights have gained ground by securing exclusive rights. Their investments here have been substantial.

There is little doubt that the wide-spread availability of music to sample and download for free online sans authorization has roused the fury of authorized providers.

As competition in online music services has become increasingly fierce, copyright has become a sharp weapon to secure the competitive advantage. For example, QQ Music established a digital music rights alliance with a number of domestic and foreign record companies, including Huayi Music and JVR Music. QQ Music’s suits against Kuwo Music and Baiduyun Music in 2014 signalled that the copyright battle between music services is bound to become ever fiercer and that large music services may replace creators and labels in the battle over rights, motivated either by protecting rights or finances.

Upcoming copyright war

In sum, from a legislative and judicial perspective, the music market will follow the film industry in seeing the benefit of moving to legitimate copies. The focus of competition will then be between media service providers in China and around the world. One could say that legitimate media are the trend of the times.

The legal risks faced by music platforms whose main business model is infringement will increase as a result. They will only be squeezed further. For online music services of a certain size, the increasing price of selling legitimate copyright music may raise operational costs in kind. A major copyright war is brewing just around the corner, a sign that the industry is about to be reshuffled – are you ready?

Wang Yadong is the executive partner and Lu Lei is a partner of Run Ming Law Office