The third draft the PRC Copyright Law amendment was released and will be submitted to the State Council Legislative Affairs Office (SCLAO) for further review and to the Standing Committee of the People’s Congress of China for final review and promulgation.

The third and last draft of the PRC Copyright Law amendment was released by the National Copyright Administration of China (“NCAC”) in October, 2012. No collection of opinion from the public - as it was the case for the last two versions – will be organized. This third draft will be submitted to the State Council Legislative Affairs Office (SCLAO), for further review and will be submitted to the Standing Committee of the People’s Congress of China, the top legislative body of China, for final review and promulgation.

Therefore, the third draft has attracted huge attention from the industry, professionals as well as the public.

Adjustments to the Definition of Subject Matters

“Works of Applied Art”

According to the current Implementing Rules of the Copyright Law of PRC, Works of Fine Arts are divided into two categories, “works of (pure) fine art” and “works of applied arts”. Chinese courts and the NCAC have in the past adopted the view that as long as a work of fine art is physically separable from the functional elements of an industrial article, it will be protected as pure “fine art”. By contrast, where a work has both functional and aesthetic elements that are not separable from each other, the work should be classified as “applied art”. In the last two draft amendments of the Copyright Law, the “works of applied art” were classified as a subject matter independent from “the works of fine art”, with requirement of relatively high standard of artistic level and functionality, in comparison to other forms of works of art.

Article 3.9 of the Draft confirms this independent new category “works of applied art” and adds a more detailed description: “toys, furniture, accessories and other two dimensional or three dimensional artistic works that possesses both practical function and artistic merit”. The three categories “toys”, “furniture”, “accessories” are only mentioned as example for understanding and determining the scope of this new category.

Note: This detailed definition for the works of applied art and the fact that it is upgraded as an independent category of works, will probably justify further implementing regulations to provide even more complete and detailed protection.

“Audiovisual Works”

In the last two drafts of the law the terms “cinematographic work and works expressed by a process analogous to cinematographic works” were replaced by one single term: the audiovisual works.

The new Draft reverts to a more detailed definition providing examples: “cinematographic work, television series and other works expressed by a process analogous to cinematographic works”.

Note: This terminology is in line with China’s execution on “Beijing Treaty” on Audiovisual Performances1 and laws of other countries, such as US.

“Computer Programs”

The last two drafts treated separately the computer program and the computer software, while the computer file was regarded as a category of written work.

In the third Draft, the definition of computer program is changed to “the instruction expressed by either source program or object program that is used with computers or other information solution devices”.

Note: In comparison to the definition provided in the “Computer Software Protection Regulation” stipulated by the State Council, this law amendment simplifies and clarifies the definition of computer program for the better understanding and performance of the law by the public. It also expands its application to other information processing devices than computers; more importantly, it emphasizes the fact that source programs and object programs are identical works.

Amendments to Exclusive Rights

Deletion of the Right of Making Cinematographic Work

The current Law provides for the “Right of making cinematographic works”, which refers to the fixation of works on a carrier by film production or by virtue of an analogous method of film production. The last two draft amendments maintained such provision but altered its name as “the right to edit other kind of works into audiovisual works”.

However, according to the collection of public opinion and discussions that took place about the last drafts, Chinese officials, experts and practitioners think that the right of making cinematographic work should be regarded as a right of reproduction of component works in a broader sense, which resulted in the deletion of this provision in the third Draft.

Exploitation of Audiovisual Work and Distribution of Profits

The first two amendments provided that the exploitation of an audiovisual work is subject to the authorization from both the owner of the audiovisual work and the owners of the component works, e.g. novel, music or drama, that are adapted into an audiovisual work. The authors of such component works enjoy the right of authorship and remuneration.

In the third Draft provides additional details. The amendment further specifies that both rights (authorship and remuneration) can be decided according to an agreement between the producer of the audiovisual work and the authors of those component works. Even if there is no clear agreement, the authors of the component works shall enjoy a “reasonable remuneration” deriving from the exploitation of the audiovisual work. The third Draft also provides that the author of those component works enjoys the exclusive right to his own work embodied in the audiovisual work unless it is stipulated otherwise in the agreement.

Note: In comparison to the last two drafts, the third draft specifies that authors of component works enjoy the authorship right as well as the right to receive the corresponding profit through either contracts or at a statutorily “reasonable amount”. Such provision will remarkably strengthen the protection to right owners of copyright of component works.

Employer’s Exclusive Right to the Use of “Works for Hire”

The last two drafts provided that the employer enjoys the right to use, free of charge, the works for hire made by the employee. The third Draft further provides that such right is exclusive for a period of two years.

The draft provides that such right authorize the employer, within the scope of employment, to exclude others including the authors from using the work during the two years period. In return, the law requires the employer to provide rewards to its employee-author as well as to retain the employee-author’s right to compile such works into its other publications.

Orphan Works

The provision on Orphan Works in the last two drafts was widely regarded as reflecting the needs to use works, whose copyright owner cannot be identified or contacted, particularly in situations such as establishment of digital libraries.

The new Draft removes “the proprietor of an original copy of the works” from the list of right owners, leaving the copyright owner as the sole target of the diligent search for proving whether the authorship of the works is unidentifiable.

The amendment provides that if the identity of the copyright owner is unclear or the copyright owner cannot be contacted in spite of diligent search, the work can be used in digital form with payment to the NCAC.

Note: The amendment narrows the scope of targets for diligent search by removing the proprietor of a copy, which will facilitate the establishment of orphan works and facilitate their use to a certain degree.

Fair-Use of Computer Programs

Providing Devices or Parts “Solely for Altering Programs” is not a “Fair-use”

In the previous two drafts, the amendments allowed the authorized user of a computer program works to install, make a backup copy, or make necessary alterations as necessary for the program to achieve its function in its environment, while prohibiting the supplying of the altered program to any third party without authorization.

With regard to the third aspect, this Draft further adds that the user shall not provide any third party the devices or parts that are solely for the alteration of a computer program.

Note: Article 19 of the Protection Regulation of Right for Information Network Transmission prohibits the manufacture, importation or provision of devices or parts that are mostly use to avoid or destroy technical protection devices, which is regarded as an extended protection for copyright of computer program.

Likewise, this draft further prohibits the provision of devices and parts that are solely for altering computer programs, which further extends the scope for acts of infringements, in order to prevent the use of altered programs by third party that exceeded the scope of fair use.

Circumvention of Technical Protection Measures and Fair-Use

In the last two drafts, the law provided that the circumvention of Technical Protection Measure can be regarded as fair-use and not infringing, if it is (1) for the purpose of school education or scientific research; (2) for the purpose of non-profit use by blind persons or (3) for the purpose of public work by administrative or judicial organs.

The new draft further adds the following two circumstances as fair-use, if it is for (1) Research of encryption or (2) Reverse engineering of computer program.

Collective Management of Copyright and Extension of Competence of Copyright Collective Management Associations

Mechanism for Collective Management of Copyright

Collective Management of Copyright (“CMC”) is a mechanism under which the copyright owners authorize an independent Collective Organization of Copyright Administration (“COCA”) to exercise their copyrights or related rights, such as to initiate law suits on their behalf.

Extension of Competence of Copyright Collective Management Associations

The setting of Extension of Competence of Copyright Collective Management Associations aims to encourage and facilitate copyright licensing, in particular to assist those users who want to pay royalties but feel difficult to locate the appropriate right owners.

Under this provision, the Collective Organization of Copyright Administration (“COCA”) acting nationwide, may exercise the copyrights or related rights on behalf of both the right owners who are member of the organization and those who are not members; however, the COCA shall not exercise the rights of authors who have made a written reservation declaring that their rights are not to be managed by the organization.

This Draft and the past two drafts provide that a standard license-fee for the licensing of works managed by the COCA shall be published by NCAC.

Given the strong opposition made by major local musician associations and audiovisual producer associations, the new Draft removed from the list of applicable subject matters of this provision the published written works, musical works, artistic works and photographic works, leaving only the self-service song system, i.e. Karaoke establishment as the sole applicable subject.

The third Draft further specifies that the standard license-fee is provided by the COCA and shall be published by NCAC afterwards. Relevant parties are authorized to submit opposition against such published standard, which will be finally decided by a Professional Committee, whose members include judges, public servants of administrations as well as lawyers.

Note: Such CMC mechanism has been challenged by copyright owners because it deprives the rights of non-member copyright owners to “opt-out", i.e. to make their own decision on claiming compensation and refusing the administration by COCA. They do not accept such standard licensing-fee decided by the COCA in its previous agreement with users.

It appears that the Extension of Competence of Copyright Collective Management Associations, as a whole, is maintained throughout all three drafts. However, the second and third drafts provided three exceptions to the principle of Copyright Collective Management (“CCM”): (1) if the non member author can prove that the users of the work is aware and has understood the “opt-out” i.e. reservation made by the right owner but still keep using it, (2) if the non member author has notified the use to stop using, but the user refused to stop and (3) if, in spite of a court decision ordering to cease using the work of the non member author, the user still continues using it.

Such exceptions were regarded as new changes to restrict the application of this provision and maintain the legitimate interests of right owners.