Incoterms_® and Commercial Contracts

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1. Introduction to copyright in China

In China, the origins of copyright are presumed to coincide with the advent of printing. The first Chinese copyrights pre-dated their counterparts in Europe by several hundred years. The word “copyright” was first introduced into Chinese law in the Sino-American Treaty of Navigation of 1903 and the first Chinese copyright legislation was adopted by the Qing Emperor in 1910. Further norms on copyright were published under the Northern Warlords government in 1915 and by the Guomindang government in 1928.

After 1949 and prior to the reform movement, authors’ rights in books were largely governed by the provisions of a few standard form contracts for book publishing (covering creation of the work, its publication and the remuneration due to the author). While the draft copyright law was going through more than ten years of gestation, the authorities were nevertheless very active in issuing numerous provisions governing aspects of copyright. For instance, in 1986, the Civil Code provided special legal rights for the authors of literary, artistic and scientific works. In fact, the sheer number of these provisions multiplied the opportunities for inconsistencies and conflicts, thus aggravating the difficulties of effectively protecting copyright.

The Copyright Law was first enacted on September 7, 1990, by the 15th Session of the Standing Committee of the Seventh National People’s Congress (NPC) and it entered into effect on June 1, 1991. But, practical difficulties with enforcement of the rules engendered frustration and inspired the search for more effective protection of copyright. It was in this context that China and the United States signed bilateral agreements regarding the reinforcement of intellectual property protection in 1992 and 1995. As part of its commitment to the protection of copyright, China has also joined the Universal Copyright Convention, the Berne Convention for the Protection of Literary and Artistic Works, the Geneva Phonograms Convention and the World Intellectual Property Organization.

To improve enforcement of copyright, the authorities established in September 1994 a nongovernmental watchdog, the United Intellectual Property Protection Centre, to protect intellectual property recognized in China or internationally. Moreover, specialized intellectual property chambers were created within the people’s intermediate courts in Beijing, Shanghai, Guangdong, Hainan and Fujian. In July 1994, the NPC increased the maximum prison term for copyright violations from five to seven years.

The latest effort to further improve the intellectual property regime in China came with the revision of the Copyright Law, effective from October 27, 2001. Its provisions are completed by the Implementation Regulations with respect to the Copyright Law, issued by Premier Zhu Rongji on August 2, 2002, effective as of September 15, 2002 (the Copyright Implementation Regulations). The latest revisions expand the scope of works protected to comply with the Trade Related Intellectual Property Rights Agreement (TRIPs) within the World Trade Organization (WTO) and the Berne Convention, to improve the mechanisms for enforcement and increase the penalties for infringements.

Throughout this debate, the draftsmen have had to reconcile socialist purpose and individual initiative within a market economy.

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Considering that the authors of the Chinese legislation spent more than a decade reviewing the systems of copyright protection in other countries and given the framework of conventional norms to which China has subscribed, the Chinese model of copyright protection exhibits many of the best elements of other countries’ regimes. The regime of protection of copyright has been more vulnerable to criticism on the enforcement side. But the authorities are clearly making serious efforts, recognized as such by China’s major trading partners, to reduce the flow of counterfeit goods. A factor that will no doubt amplify this trend is the increasing desire among Chinese creators to be guaranteed adequate protection against local counterfeiting.¹

1.1. The general administrative framework governing copyright

While the National Copyright Administration of China (NCAC) is the State Council organization responsible for copyright issues, the General Administration of Press and Publication (GAPP) regulates publishing activities and related copyrights. They are actually the same structure with two different names and a common director. The NCAC is responsible for the nationwide administration of copyright² and software,³ as well as issues relating to the implementation of China’s international copyright treaty commitments.⁴ It drafts laws and regulations on publishing and copyright; proposes policies, standards and regulations with respect to press, publishing and printing activities, and supervises their implementation; approves the establishment of publishing houses and distribution units, of audio-video publishing units, of electronic publishing and production units, of newspaper groups, of collective copyright managing bodies and agents involving foreign investment; and it approves the founding of sino-foreign joint ventures and cooperative enterprises in the press and publishing industry, administers copyright matters, and manages the conservation of ancient books and documents.

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It is made up of nine departments: the general affairs office, the book publishing department, the newspapers and journals department, the audio-video and electronic publishing department, the distribution department, the printing industry department, the personnel and education department, the external cooperation department and the copyright department.

The Copyright Administration Departments of the people’s governments of each province, autonomous region or municipality directly under the central government are responsible for copyright administration within their own jurisdiction.⁵ Below, we use the designation Copyright Administrative Department to indicate its office at the level that is competent for dealing with the specific issue in discussion.

Other ministries and authorities also issue or join the above-mentioned copyright authorities in issuing legal norms affecting intellectual property and trade thereof, such as the Ministry of Commerce (MOFCOM),⁶ the Ministry of Information Industry (MII),⁷ the Ministry of Public Security, the State Administration of Radio, Film and Television, and the State Administration for Industry and Commerce (the SAIC).

The Supreme Court of China (SPC) has issued several answers to questions, notices and interpretations that bear upon the application of copyright laws and regulations, for instance:

• the Notice on Certain Issues on Further Implementation of the Copyright Law of September 24, 1993;
• the Interpretations of the Application of the Decision of the Standing Committee of the NPC on punishing Crimes of Infringement of Copyright of January 16, 1995; and
• the Reply of the Civil Division to Legal Issues between the China Music Copyright Association and Music Copyright Owners.

On October 12, 2002, at the 1246th Meeting of its Adjudication Committee, the Supreme People’s Court (SPC) adopted the Interpretation Concerning Several Issues on the Application of Law in Hearing Correctly Civil Copyright Cases. The Judicial Committee of the SPC at the 1331st Session on November 2, 2004 and the Tenth Procuratorial Committee of the Supreme People’s Procuratorate at its 28th Session on November 11, 2004 adopted an Interpretation on Several Issues of Concrete Application of Laws in Handling Criminal Cases of Infringing Intellectual Property that became effective as of December 22, 2004.

1.2. General scope of the Copyright Law

The Constitution of 1982 imposes upon the State the obligation to promote the development of natural and social sciences and to disseminate the knowledge of science and technology, scientific research, technological innovations and inventions.⁸ The protection of copyright enhances the development of the socialist market economy.

The Copyright Law covers both personal rights (ren shen quan) and property rights (cai chan quan).

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For the purposes of the Law, works subject to protection include works of literature, art, natural science, social science, engineering and technology and other works created in forms such as:

• written works;
• oral works;
• musical, dramatic, folk arts (qu yi⁹) and choreographic works and acrobatic works;¹⁰
• works of fine art and architectural works;
• photographic works;
• cinematographic works and works created by similar processes; television and video works;
• graphic works such as drawings of engineering designs and product designs, drawings of product designs, maps, schematic drawings, etc. and three-dimensional model works as well as descriptions of such works;
• maps, sketches and other graphic works;
• computer software; and
• other works as stipulated in laws and administrative regulations.

The provision of consultations, material means or other supporting services for others in their creative activities are not considered to be acts of creation.¹¹

Chinese citizens are protected for their unpublished works. But foreigners, outside of any conventional framework or reciprocal treatment of Chinese copyright holders by any foreigner’s home state, must first publish their works in China to gain protection.¹²

1.3. Application of China’s copyright treaty commitments

The Provisions on the Implementation of International Copyright Treaties promulgated by the State Council, which came into effect on September 30, 1992 (the Copyright Treaties Implementation Provisions), regulate the conditions of implementation of China’s commitments in the Berne Convention and other treaties.

Under article 4 of these Provisions, covered foreign works include:

• works of which the author or one of the co-authors is a national or a permanent resident of a country party to international copyright treaties to which China is also party;
• works of which the author is not a national or a permanent resident of a country party to international copyright treaties to which China is party, but which have been first published or published simultaneously in a country party to international copyright treaties to which China is party; and
• works created on commission from a sino-foreign equity joint venture, a sinoforeign contractual joint venture or a foreign capital enterprise, which, by virtue of a contract, own the copyrights in the works.

Foreign works covered by the Berne Convention or bilateral or multilateral treaties are protected whether published or not.¹³

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Foreign works of applied art are protected for twenty-five years from their creation. But works of fine arts and designs, such as for cartoon characters, used in industrial goods are protected as industrial designs.¹⁴

Foreign computer programs are protected as literary works and their registration is not required before instituting legal actions.¹⁵

Foreign works created by compiling non-protected materials are protected subject to originality in their selection and in the arrangement of their contents.¹⁶

Foreign video recordings are protected as cinematographic works to the extent that international copyright treaties regard them as such works.¹⁷

Prior authorizations of copyright owners are required:

• to translate into the language of a minority nationality and to publish a foreign work created in Chinese;¹⁸
• to perform in public their works in any manner and by any means, or to communicate to the public their works;¹⁹
• to perform in public their cinematographic works, television works and video recordings;²⁰
• for newspapers and periodicals, to reprint foreign works, except the reprinting of articles on current political, economic and social topics;²¹ and
• for those authorized to distribute copies of their works, to rent them out.²²

Copyright owners of foreign works have the right to prohibit the importation of infringing copies as well that of copies coming from a country where their works are not protected.²³

Article 16 of the Provisions provides foreign sound recordings with the following protections:

• they are protected even when unpublished;
• they may not be performed in public without authorization;
• authorized distributors may not rent them without express permission; and
• it is prohibited to import infringing copies and copies coming from a country where they are not protected.

By virtue of article 19, China’s treaty commitments prevail over the Provisions.

Copyright may not be obtained in works whose publication or distribution is prohibited by law.²⁴

Foreign copyright management organizations are subject to the Interim Measures for the Administration of Foreign-Related Copyright Agency Organizations, promulgated jointly by the SAIC and the NCAC on April 15, 1996.

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2. Copyright protection

2.1. Qualifications of authors and copyright owners and their rights

Individuals, legal persons and other organizations may enjoy copyrights (zhu zuo quan).²⁵

In principle, copyrights in a work belong to its author, that is, its creator.²⁶

According to article 15 of the SPC’s Copyright Judicial Interpretation,²⁷ works created on the same theme by different authors, the expressions of which are creative and independently completed, give rise to independent copyrights.

Authors stake their claims by affixing their names on their works.²⁸

Copyrights in commissioned works are attributed by agreement of the interested parties, otherwise they belong to the commissioned party.²⁹

Where a work is created under the auspices, or according to the intention, of a legal person or other organization, the copyright belongs to the latter.³⁰

According to article 16 of the Copyright Law, works created by individuals in the context of employment by a legal person or other organization give rise to a rights split between the copyright (zhu zuo quan) belonging to the individual author and the exploitation rights to which the employer enjoys a priority for use in its professional activities. For two years following completion of a work, the author may not, without the consent of the employer, authorize exploitations by third parties similar to those of the employer. In the following specific cases, the work of the employee is deemed to give rise to rights of authorship (shu ming quan³¹) in favor of the employee, with all other copyrights accruing to the employer:

• drawings of engineering designs, product designs, computer software, maps and other works created mainly using the material and technical resources of the employer and under its responsibility;³²
• works created in the course of employment, copyrights in which are vested in a legal person or other organization by laws, regulations or contracts.

According to article 13 of the Copyright Law, if two or more authors jointly create a work, the authors jointly own the copyright and jointly bear the duties arising in connection therewith.³³ Where the work can be divided, each co-author may own a separate copyright in the part he created, provided the exercise of that right does not prejudice the work as a whole. When joint authors unreasonably fail to agree on how to use a copyright, none may prevent the others from doing so, provided that the copyright cannot be transferred, and the gains must be shared by the joint authors in a reasonable manner.³⁴

When a work is created by the adaptation, translation, annotation or arrangement of a pre-existing work, the copyright belongs to the author of the derivative work, provided that there ensues no prejudice to the copyright in the original work.³⁵ A similar rule applies to compilations of works or data.³⁶

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In connection with cinematographic, television and video works and other works created by analogous processes, the producer enjoys the copyrights, while the artistic contributors (such as the directors, screenwriters, lyricists, composers and cameramen) are vested with the right of attribution and the right to receive remuneration pursuant to contracts with the producer. If elements of the cinematographic work can be exploited separately, such as for music, then the authors of the works constituting the cinematographic work may exploit their contribution separately.

In granting the right to create cinematographic works based on their individual works, copyright owners accept necessary alterations, provided that the original work is not distorted or mutilated.³⁷

Copyrights may be transferred by succession.³⁸

Where copyrights are vested in a legal person or organization that ceases to exist, the successor to the legal person’s or organization’s rights assumes the rights and obligations relating to its copyrights. In the absence of a successor, the State inherits such rights and obligations.

2.2. Definition of copyright

According to article 10 of the Copyright Law, copyright includes the following “personal rights and property rights”:³⁹

1. the right of publication, that is, the right to decide whether to make a work available to the public;
2. the right of attribution, that is, the right to claim authorship and to be cited as author;
3. the right of alteration of one’s work;
4. the right of integrity, that is, the right to protect one’s work against distortion and mutilation;
5. the right of reproduction, that is, the right to produce one or more copies of the work by means of printing, photography, lithography, sound recording, video recording, duplicating, or re-shooting, etc.;
6. the right of distribution, that is, the right to sell or donate to the public original or copies of works;
7. the right of rental, that is, the right to non gratuitously permit others temporarily to exploit a cinematographic work, a work created in a way similar to cinematography, or computer software, unless the computer software is not the main object of the rental;
8. the right of exhibition, that is, the right to publicly display originals or reproductions of works of fine art and cinematographic works;
9. the right of performance, that is, the right to publicly perform works, and to publicly transmit the performance of works by various means;
10. the right of projection, that is, the right, using technical equipment such as projectors and episcopes, to present in public works of fine art, photographic works, cinematographic works and works created by processes similar to cinematography;
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11. the right of broadcasting, that is, the rights to broadcast or disseminate works to the public by wireless means, to disseminate broadcasted works to the public by wired dissemination or to re-broadcast them, and to disseminate broadcasted works to the public by audio amplifier or other similar instruments for transmission of signs, sounds or images;
12. the right of dissemination through information networks, that is, the right to provide the public with works by wired or wireless means, so as to give the public access to the works at individually selected times and places;
13. the right of cinematographic production, consisting in the right to fix works on a medium by cinematography or similar means;
14. the right of adaptation, that is, the right to modify a work for the purpose of creating a new work;
15. the right of translation, that is, the right to transform the language of a work into another language;
16. the right of compilation, that is, the right to choose or edit works or fragments of works so as to form a new work.

Copyright holders may not use their rights in any manner that violates the Constitution or the laws or that causes prejudice to public interests.⁴⁰

2.3. Term of protection of copyright

The author’s rights of attribution, alteration and integrity last indefinitely.⁴¹

The duration of the rights of disclosure, exploitation and to remuneration depends on the origin of the copyright.

For works of individuals, the copyright term expires on December 31 of the 50th year after the author’s death and rights in joint works terminate 50 years from the death of the last surviving author.⁴²

For works in connection with employment, the rights of disclosure, of exploitation and to remuneration owned by the employer expire on December 31 of the 50th year after publication of the work, provided publication occurred within 50 years of the work’s creation. The same is true of any cinematographic or similar work.

Foreign works of applied art are protected for 25 years from the date on which they are made,⁴³ to the exclusion of fine arts used in industrial goods (for example, cartoon characters).

Foreign computer programs are protected as literary works for a term of 50 years from the end of the year of publication and no registration of foreign computer programs is required before instituting legal actions.⁴⁴

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2.4. Exceptional uses of copyrighted works without permission

Under article 22 of the Copyright Law, provided that the author’s name and the title of the work are mentioned and provided the other rights enjoyed by the copyright owner are not harmed, works may be used without permission of, or payment to, the author in the following circumstances:

• for personal study, research or enjoyment;
• as quotations for the purpose of introduction to or comment upon a work or for the demonstration of a point;
• unavoidable uses of published works in newspapers, periodicals, radio programs, television programs or newsreels for the purpose of reporting current events;
• reprinting by newspapers or periodicals, or rebroadcasting by radio stations or television stations, of editorials or commentators’ articles on current political, economic or religious topics already published by other newspapers, periodicals, radio stations or television stations;
• publication in newspapers or periodicals, or broadcasting by radio stations or television stations, of a speech delivered at a public gathering, except where prohibited by the author;
• translation or reproduction in a small number of copies of a published work for use by teachers or scientific researchers in classroom teaching or research, provided that the translation or reproduction is not published or distributed;
• use, to a reasonable extent, by a public organ of a work for the purpose of performing its official duties;
• reproduction of a work in its collections by a library, memorial hall, museum, art gallery or similar institution to preserve a copy of the work;
• free performance of a published work, where there is no charge collected from the public and no remuneration paid to the performers;
• copying, drawing, painting, photographing or video recording of an artistic work located or displayed in an outdoor public place;⁴⁵
• translation of a published work by a Chinese citizen, legal person or other organization from the Han language into the languages of a domestic ethnic minority group for publication and distribution within China; and
• transliteration of a work into Braille and its publication.

For textbooks used in the nine-year system of compulsory State education, published works may be compiled without the copyright owners’ permission, but not against their express prohibition, provided that remuneration is paid, and their names and the title of their works are indicated.⁴⁶

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3. Licensing and assignments of copyright

According to article 24 of the Copyright Law, other than in the case of a legal exception, no one may use a copyrighted work without concluding a license contract, which must include the following clauses:

• a definition of the manner of exploiting the rights being licensed;
• an indication whether the license is exclusive or non-exclusive;
• the geographic scope and term of the license;
• the amount of remuneration and the method of payment; and
• definitions of liability for breaches of contract.⁴⁷

Assignments of economic rights listed in items 5–16 in article 10 of the Copyright Law discussed above must be reduced to a written contract⁴⁸ that must contain:

• the title of the work;
• the rights being assigned and the geographic scope thereof;
• the assignment price;
• the date and method of payment; and
• liability for breach.⁴⁹

Unless agreed by the licensor of a copyright, the licensee may not grant sub-licences.⁵⁰

Transfers of ownership in a work of fine art do not transfer copyrights in the work other than the right of exhibition of the original work.⁵¹

A schedule of remuneration for works is maintained by the NCAC, although parties are free to adopt other bases of remuneration.⁵²

Unless agreed otherwise by their authors, or except when it is impossible due to their special character, when works are used by persons other than their author, the latter’s name and the title of the work must be clearly indicated.⁵³

On December 28, 2004, the State Council promulgated the Copyright Collective Management Regulations to allow that collective management organizations be authorized by copyright holders to exercise their rights. In particular, they may be authorized:

• to conclude licensing contracts for use of the copyright and related rights with users;
• to collect royalty fees from users;
• to transfer collected royalty fees to the copyright owners; and
• to participate in litigation or arbitration involving the copyright or related rights.

To qualify to undertake copyright collective management, an organization:

• must comprise at least fifty copyright holders,
• its business scope cannot overlap with that of existing CMOs;
• it must be able to represent the interests of the relevant copyright holders throughout the country; and
• it must have draft articles of association, draft standards for collection of royalties and methods for transferring royalties to copyright holders.

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The Regulations provide details on application procedures to set up a collective management organization, how to establish a members’ assembly, to appoint a board of directors, to implement decisions of the members’ assembly, how to provide for operational management, how to implement a copyright database inquiry system, the legal liabilities of collective management organizations, their supervision by the NCAC, the setting of fees, the procedures for collecting royalties, for calculating their fees, and for the onward remittance of royalties to the copyright holders.

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4. Copyright in specific sectors

4.1. Rules specific to publication of books, newspapers and periodicals

The book publisher may be liable for failure to publish a work within the allowed time. The publisher has the right to reprint newspaper and periodical articles unless the author has objected at the outset,⁵⁴ however the publisher must pay royalties. Where the publisher decides not to reprint the work, the author may terminate the contract once the publisher’s stocks are exhausted.⁵⁵

A publisher may abridge the work or make editorial modifications subject to permission of the author. Newspapers and periodicals are free to revise or abridge a work for reasons of style but must obtain the author’s permission to revise the content.⁵⁶

When publishing an adaptation, translation, annotation, arrangement or compilation of a pre-existing work, the publisher must obtain permission from, and pay remuneration to, both the owner of the work and the owner of the adaptation, translation, annotation, arrangement or compilation.⁵⁷

A publisher has the right to permit or forbid others from using the layout of its books and periodicals. This right lasts ten years from the date of first publication using the layout.⁵⁸

Publishers and producers have the burden of proving the authorizations for the content of their publications and productions, as do distributors and lessors for their reproduced products.⁵⁹ Publishers bear the burden of proving that they have exercised reasonable care in verifying the sources and the signatures of the manuscripts and the contents of their publications. Where the copyright owners cannot show that the publishers knew or should have known of the infringements in their publications, the publishers’ liability is limited to cessation of the conduct.⁶⁰

4.2. Copyright in performances

Performers must obtain permission and pay remuneration before performing copyrighted works. Where a work is created through adaptation, translation, annotation or collection of pre-existing works, the permission of the original owners and copyright owners of the adapted works must be obtained. Remuneration must be paid to the author(s) and the holder(s) of the rights of adaptation, translation, annotation or arrangement.⁶¹

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According to article 37 of the Copyright Law, performers enjoy the right:

• to claim the performances as theirs; and
• to protect from distortion the image inherent in a performance; as well as the following rights subject to permission from and remuneration for the copyright owner:
• to authorize others to make live broadcasts and public transmissions of their performances;
• to authorize others to make sound recordings and video recordings of their performances;
• to authorize others to reproduce or distribute sound recordings and video recordings incorporating their performances; and
• to authorize others to communicate their performances in public over information networks.

Except for the first two above-mentioned rights, which last in perpetuity, the other rights expire on December 31 of the 50th year after the performance.⁶²

Performances by foreigners in China are protected under the Copyright Law and the Implementation Regulations⁶³, as are their audio recordings.⁶⁴

4.3. Sound recordings and video recordings

Producers of sound recordings or video recordings who exploit works created by others must obtain their permission and remunerate them.⁶⁵ Producers who exploit derivative works must obtain permission from, and pay remuneration to, the owners of the copyrights in the original works and to the owners of the copyrights in the derivative works.⁶⁶

According to article 39 of the Copyright Law, producers of sound recordings who exploit the musical works of others to produce sound recordings need not obtain their permission if they respect their rights to prohibit such uses and to receive remuneration.

Producers of sound or video recordings must conclude contracts with the performers and must remunerate them.⁶⁷

Producers of sound recordings or video recordings enjoy the right to authorize others to reproduce, distribute, rent and communicate them to the public on an information network, as well as the right to obtain remuneration.⁶⁸

The term of protection of such rights expires on December 31 of the 50th year after the recording was first produced.

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4.4. Broadcasting by radio or television stations

According to article 42 of the Copyright Law, radio or television stations that broadcast unpublished works must obtain permission from and remunerate the copyright owners.

A radio station or television station that broadcasts a published work does not need permission from the copyright owner, but must pay remuneration.⁶⁹

Radio and television stations that produce programs may prohibit:

• their re-broadcasts;
• their recordings onto a sound or video medium and the reproduction of such sound or video medium; and
• their reproduction or distribution.⁷⁰

The term of protection of these rights is 50 years expiring on December 31 of the 50th year after the first broadcasting.⁷¹

Except where the broadcast is not intended for commercial purposes, a television station intending to broadcast another’s cinematographic work must obtain permission from the producer of the work and pay remuneration. When broadcasting another’s video recordings, the permission of the copyright owner must also be obtained and remuneration paid.⁷²

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5. Copyright-related disputes

Violations of copyright may give rise to civil, administrative and criminal liabilities.⁷³

5.1. Civil liabilities

Article 46 of the Copyright Law provides that the following acts constitute infringements for which civil liability arises:

• publication of a work without permission from the copyright owner;
• publication of a joint work as if it were one’s own alone;
• affixing one’s name to another’s work for fame and profit where one has not participated in the creation of the work;
• distortion and mutilation of a work;
• plagiarizing another’s work;
• unless otherwise provided by the Copyright Law, and without permission from the copyright owner, the use of a work for exhibition, film-making or similar processing or for adaptation, translation, annotation;
• use of another’s work without paying where remuneration should be paid;
• unless otherwise provided by the Copyright Law, rental of cinematographic or similar works, computer software or sound or video recordings without the permission of the owners of the copyright or of the owners of the rights of adaptation, translation or annotation;
• use, without the publisher’s permission, of the layout of a book or periodical;
  and
• live broadcast, public transmission or recording of a performance without the performer’s permission.

One of the most important revisions of the Copyright Law places on publishers and producers of reproductions, as well as distributors and renters of reproductions of cinematographic works, works created by methods analogous to film production, computer software, sound and video recordings the burden of proving the origin of their rights to do so.⁷⁴

Disputes over copyright may be settled by mediation or, by virtue of contracts, by arbitration.⁷⁵ Where the arbitration award is not executed, the dispute may be brought before the competent people’s court. In the absence of an arbitration agreement, either party may bring the dispute before the competent people’s court.⁷⁶

The territorially competent courts are those where the alleged infringements occurred.⁷⁷

The civil courts may impose fines upon infringers, provided that the Copyright Administrative Department has not already done so.⁷⁸

Collective copyright management agencies have standing to bring actions before the people’s court where authors have given them such powers.⁷⁹

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The limitation period applicable to legal proceedings relating to the infringement of copyright is two years from the date on which the copyright owner or any interested party knew or should have known of the infringing act.⁸⁰ Beyond two years, actions may be brought against ongoing violations and the people’s courts may enjoin infringements, but damages are calculated only with respect to the previous two years.⁸¹

Infringers may be ordered to cease infringements, eliminate their effects, apologize and pay damages based on the losses suffered by the copyright owner, including costs associated with enforcement.

Injunctive relief to stop acts of infringement prior to commencement and orders to preserve evidence may also be obtained where there is a risk of irreparable harm otherwise.⁸²

Damages for copyright infringements are calculated based on actual losses but, if the actual damages are difficult to calculate, then a court may quantify them by reference to the illegal income derived from the infringement. If both are difficult to calculate, the people’s court may impose statutory damages not to exceed RMB 500,000.⁸³

The courts may exercise their jurisdiction in parallel with procedures before the Copyright Administrative Department.⁸⁴

5.2. Administrative liabilities

In the cases mentioned below, and where the public interest has been harmed by copyright violations, the Copyright Administrative Department may issue injunctions, order seizures of infringing goods and illicit gains from infringements, as well as impose fines:⁸⁵

• the reproduction, distribution, performance or projection, broadcasting or compiling of a work or its communication through an information network to the public without the owner’s permission;
• publishing a book where another has the exclusive right of publication;
• reproducing or distributing sound or video recordings of a performance or communication of the same via an information network without the permission of the performer;
• reproducing or distributing a sound or video recording or communicating same through an information network to the public without the producer’s permission;
• re-broadcasting or reproducing a radio or television broadcast without permission;
• deliberately hacking or circumventing technical measures taken by copyright owners or by owners of rights of adaptation, translation or annotation to protect their sound and video recordings;
• deliberately removing or modifying the electronic rights control information in a work, sound or video recording without the copyright owner’s permission; and
• producing or selling works bearing counterfeited signatures.

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Anyone objecting to an administrative fine may appeal to the people’s courts within three months.⁸⁶

The copyright administration may apply to the people’s court for enforcement of the laws and regulations.⁸⁷

5.3. Criminal liabilities

The violations listed in article 47 of the Copyright Law as related above may in serious cases constitute crimes.

The Criminal Law, in its article 217, prohibits gains in “large amounts”, or when there are other “serious circumstances”, earned from:

• copying and distributing without permission copyrighted works (written, musical, cinematographic, video, computer software);
• publishing books the copyrights in which belong to others;
• duplicating and distributing audiovisual works without the permission of their producers; and
• producing and selling artistic works bearing forged signatures.⁸⁸

Those convicted of such offences may be sentenced to fines and/or a maximum of three years’ fixed-term imprisonment or criminal detention. When the illicit gains are “extremely large” or when there are other “particularly serious circumstances”, sentences of not less than three years and not more than seven years’ fixed-term imprisonment may be imposed in addition to fines.

Distributors of such illicit goods for very large gains are subject to the same sanctions.

According to the Interpretation of Several Issues Relating to Specific Application of Law to the Treatment of Criminal Cases of Intellectual Property Infringement, issued jointly by the SPC and the Supreme People’s Procuratorate in December 2004 (the Criminal Infringement Interpretation),⁸⁹ illegal gains of RMB 30,000 or more constitute “large gains”, those of RMB 50,000 or more are considered to be “very large”, while “extremely large” gains are those in excess of RMB 100,000.⁹⁰ Under article 11 of the Interpretation, a licensee’s conduct beyond the scope of the license is treated as equivalent to acting without authorization. The article further characterizes communication on an information network as corresponding to reproduction and distribution.⁹¹

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6. Protection of software

Since the inception of protection for computer software under Chinese law, a debate has been conducted as to whether software should be protected as a literary work or as a separate category of intellectual property.

The Copyright Law adopted in 1991 was itself unclear on this point. In fact, computer software was protected as a “work” under article 3 of the Copyright Law but the exact scope of this protection might be considered as compromised by the provision of article 5 that formulas could not be protected. Moreover, article 53 of the Law provided that separate measures were to be implemented by the State Council to protect computer software. Yet the Copyright Law contained substantive measures relating to software protection; for instance, article 16 provided that the work of employees in developing software was deemed to have given rise to rights of attribution for the employee with all other rights accruing to the employer.

6.1. The Software Regulation of 1991

Finally, in June 1991, the first regulations on computer software protection were promulgated. These regulations were largely inspired by the provisions of the Copyright Law, such as those regarding the persons entitled to claim copyright. But there were differences.

The protection against alterations and the right to integrity as defined with respect to general works were not carried over to software, as is frequently the case in other national legislations; this decision reflected the need for users of software to customize their products for use on their computers.

Whereas reproduction for personal use of other works was tolerated, such reproductions of software were excluded, no doubt taking account of the economic harm suffered by software producers if a buyer could reproduce a program as many times as necessary to equip all its employees.

None of the statutory licensing programs applied to software.

Contrary to the situation of works in general, certain software was subject to the State Plan, such as that developed by entities belonging to the whole people and considered to be of great significance for national and public interests.

As a condition for pursuing claims in China on the basis of copyright in software, the plaintiff was obliged to register the software in question with the Center for Software Registration, though this procedure was intended to be a mere formality.

The term of protection was set at 25 years, subject to renewal for an additional 25 years.

6.2. The US – China Agreement of 1995

The Memoranda of Understanding between the PRC and the United States of 1995 (MOU), which was meant to bring China’s protection of software up to international standards, included the following provisions.

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In the short term, large-scale producers and distributors of infringing products were to be closed, as were all illegal CD manufacturers, and border patrols were to be intensified to prevent exports of illegal products.

China agreed to adopt over the long run a multi-level enforcement system, with cross-jurisdictional coordination, an enforcement system modeled on that of the United States and improved training in intellectual property for all participants in the sector; further, the authorities were to institute a verification system to prevent illegal production and all forms of illegal sales of American audiovisual products, including those arising from participation of American interests in production of local works; there was to be equal treatment of American rights holders before the Chinese judicial system.

China made a commitment to the United States on the removal of quotas on the importation of American audiovisual products, and access to the local market for their entire catalog of works, subject only to censorship laws. Also, the Chinese negotiators agreed that American intellectual property holders would be allowed to establish joint ventures for the production and marketing of their products in China.

The courts were expected to be active in pursuing pirates of intellectual property.

The provisions of the MOU were not intended to benefit citizens and companies from countries other than the United States, except indirectly through application of the GATT rules against discrimination following China’s accession to the WTO.

6.3. The 2001 Software Regulations

With China’s accession to the WTO in 2001, its legal regime governing foreign software had to be brought into conformity with the TRIPs Agreement.

Article 10 of the TRIPs Agreement provides that both the source and object code of computer programs must be protected as literary works under the Berne Convention as amended in 1971. Also, databases are to be subject to sui generis protection for the selection or organization of the contents, but not for the contents themselves.

In connection with China’s efforts to conform to the standards of the WTO, the regulations of 1991 were abrogated and replaced by the Regulations on Computer Software Protection promulgated by the State Council on December 30, 2001, which entered into effect on January 1, 2002 (the Computer Software Regulations).

The source code and object code of the same computer program constitute one work.

Article 3 defines computer programs as “coded instruction sequences which are written for the purpose of obtaining a certain result and which may be executed by devices with information processing capabilities such as computers, or symbolic instruction sequences or symbolic statement sequences which may be automatically converted into coded instruction sequences”.

Under article 4 of the Computer Software Regulations, to be protected, software must have been developed independently and have been fixed on material supports. Under article 9, copyrights in software belong to its developers. In the absence of evidence to the contrary, the natural person, legal entity or other organization whose name is indicated on the software is deemed to be its developer.

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Software protection is not extended to ideas, handling processes, operating methods or mathematical conceptions.⁹²

Foreign copyrights need not be registered in China for their owners to be recognized, but such rights may be registered with the Copyright Administration Department. The certificates issued by the registry organs are useful, for instance, in justifying foreign royalty payments.

The rights protected under the Computer Software Regulations are those found in the Berne Convention without distinction between moral and economic rights in the European fashion.⁹³

The parties cooperating to develop software enjoy autonomy in deciding the allocation of their rights.⁹⁴ In the absence of an agreement, a complex set of alternative solutions is stipulated.

In the absence of an agreement between a commissioning and a commissioned party, copyrights in developed software belong to the commissioned party.⁹⁵ On the other hand, software developed by employees belongs to the employer if it was developed in the context of employment, as a foreseeable or natural result of employment activities or using mainly the means of the employer.⁹⁶

The term of copyright in software is the lifetime of the natural person authors plus 50 years and for legal entity authors, 50 years from publication.⁹⁷

Upon the death of a natural person copyright holder during the term of the copyright, the heirs inherit all rights subject to making known the identity of the developer.⁹⁸

The legitimate owner of an item of software may duplicate it on a computer in order to use it, make “backup duplicates”, which however cannot actually be used, and make necessary revisions to “use it in an actual environment” or “to improve its functions and performance”, provided that the improved software may not be put into circulation.⁹⁹

Items of software may be used to study the concepts and principles underlying its design without the consent of, or financial obligation toward, the software’s copyright owner.¹⁰⁰

Software licensing and assignment agreements must be concluded in writing.¹⁰¹

Exclusive licenses to or assignments of software copyright may be registered with a registry organ designated by the Copyright Administrative Department.¹⁰²

Where Chinese citizens, legal entities or other organizations license or assign their software copyright, they must comply with the relevant provisions of the Regulations on Technology Import and Export Administration.¹⁰³

Holders of duplicates of software bear the burden of proving their authorizations.¹⁰⁴

Infringements “due to limited alternatives of expression” are exempted from pursuits.¹⁰⁵ Those in possession of duplicate software can excuse themselves by proving that they were unaware of the copyright owner’s rights. Furthermore, if “stopping the use of, or destroying, the infringing duplicate causes great losses to the user of the duplicate, the user of the duplicate may go on using it after paying the software copyright owner the appropriate fees”.

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Holders of infringing duplicates of software are exempted if they do not know, nor have any reasonable grounds to know, that they are committing an infraction. But upon learning of the infringement, they must stop using and destroy the duplicate.¹⁰⁶ If stopping the use of, or destroying, the infringing duplicate causes great losses to the user of the duplicate, the latter may go on using it subject to paying the software copyright owner the appropriate fees.

6.4. Software-related disputes

Article 23 of the Computer Software Regulations provides that the following acts give rise to civil liability to stop the infringement, to eliminate any harm caused, to apologize and to make reparations:

• making public or registering an item of software without the consent of the software copyright owner;
• making public or registering, as one’s own, an item of software developed by another person;
• making public or registering, as a work completed on one’s own, an item of software developed in cooperation with others without the consent of the co-operators;
• putting one’s own name on an item of software developed by another person or changing the name indicated on an item of software developed by another person; and
• altering or translating an item of software without the consent of the software copyright owner.

Civil damages may be sought to compensate harm suffered as a result of software copyright infringements.

Copyright owners may initiate summary proceedings before the people’s courts to stop software copyright infringements that might cause irreparable harm as well as to obtain conservatory measures.¹⁰⁷

In addition to civil liabilities for the above acts, article 24 of the Computer Software Regulations stipulate that infringers may also incur administrative sanctions by the Copyright Administrative Department if their infringements fall under the list below and cause harm to the public interest. The Copyright Administrative Department may issue injunctions, confiscate unlawful income, confiscate and destroy infringing duplicates, and impose fines. Where the circumstances are serious, the Copyright Administration Department may also confiscate the materials, tools and equipment used for making the infringing duplicates. In the event of criminal conduct, infringers may be prosecuted before the people’s courts for:

1. duplicating the software of a copyright owner;
2. distributing, renting, or communicating to the public on an information network the software of a copyright owner;
3. intentionally circumventing or destroying the technological measures taken to protect copyright in software;
4. intentionally deleting or altering electronic rights managements systems of software protection; and
5. assigning, or licensing others to exploit copyrights in software belonging to a copyright owner.

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Where acts (1) or (2) are committed, fines from RMB 100 per piece to five times the value of the goods may be imposed; where acts (3), (4) or (5) are committed, fines of no more than RMB 50,000 may be imposed.

In cases of software infringements, and if the public interest is affected, complaints may be brought before the Copyright Administrative Department, which may order cessation of the activity and impose maximum fines of RMB 50,000.¹⁰⁸

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7. Conclusion

China’s much maligned record on the enforcement of copyrights should be appreciated in the context of rates of infringement observed in other countries. Actually, China has ratified and transposed into national law most of the significant international norms for the protection of copyright. Under increasing pressure by local copyright owners, the authorities are waging a vigorous effort to combat piracy.

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