Copyright Protection in China – It’s Real, and It’s Spectacular

China copyright law

Okay, maybe not spectacular. But definitely real.

An article in yesterday’s Wall Street Journal, How a Plague on the Movie and Music Industries Became Their Chief Protector in China: Chinese search giant Baidu’s transition to creator and buyer of content has changed its priorities, sums up the change that is happening with China IP protection and enforcement:

Chinese search giant Baidu Inc. BIDU 3.47% was once a scourge of Hollywood and the U.S. music industry, which accused it of being a pipeline for pirated content.

Today when Baidu is involved in a copyright infringement case, chances are it is the one casting the blame.

Baidu’s about-face in the copyright fight reflects its emergence as a creator and buyer of content, a transition that continued recently when the company struck a deal to license original shows from Netflix Inc. NFLX 0.85% Other Chinese media companies are undergoing similar transformations, upending how entertainment is protected in the world’s second-largest economy, legal analysts say.

This article quotes Mathew Alderson, our lead China media and entertainment lawyer on how intellectual property protection in China is moving from something that was formerly done to make foreign companies and governments happy to something China now sees as economically important.

“One of the old rationales for copyright protection…is that it provides an incentive to invest. We are seeing that in play here in China,” said Mathew Alderson, a partner and entertainment lawyer at Harris Bricken in Beijing. “Copyright is no longer something imposed on China by the U.S. It is now a tool in Chinese hands.”

The Wall Street Journal notes that in the last ten years China’s courts have seen a 15-fold increase in copyright-related lawsuits:

One way to measure the change is by the escalating flood of lawsuits aimed at protecting intellectual property.

Nearly 87,000 copyright-related cases were filed in China last year, according to data compiled by China’s Supreme People’s Court, a 15-fold increase from 2006. These cases include claims of illegal distribution, or unauthorized reproduction, of written content, videogames, movies and TV shows.

And here’s the point that stems from this massive increase in copyright lawsuits in China: the companies that are bringing these lawsuits are not doing so for their health. They are spending time and money on these lawsuits because they believe that the economic rewards from doing so will be greater than their costs. They have rationally decided that China’s enforcement of its copyright laws warrants this conclusion.

All this is leading to big changes in how Hollywood and Western TV studios are handling their content these days, with most of them choosing to license their content to Chinese companies (like Baidu and Tencent), rather than work at getting that content into China on their own:

For Hollywood studios, striking deals with Chinese partners is much easier than trying to defend their copyrighted content on their own, said Eric Priest, a University of Oregon School of Law professor who researches copyrights and the Chinese entertainment industry.

“If you’re a content producer with an office in Hollywood, you aren’t going to be familiar with where Chinese netizens are getting unlicensed content,” Mr. Priest said. “You won’t be familiar with the shadowy set-top manufacturers who are installing apps that people buy that allow direct access to unlicensed content. You’re going to be much better off with a partner in China that can do that.”

 

Also just last week, a Beijing court awarded Tencent more than US $1 million in damages in a copyright infringement case. The defendant in the case was Baofeng Technology, a high-profile streaming site and manufacturer of VR hardware. Baofeng has been found liable for copyright infringement numerous times previously (including for unauthorized distribution of films, television, and the most recent World Cup), but that’s surely in part because it’s so visible. After its 2015 IPO on the Shenzhen exchange, Baofeng soared to a valuation of more than US$8 billion, and although its current valuation is closer to US$1 billion, it is a real company, with real assets.

In the case decided last week, Baofeng was found to have streamed the first 6 episodes of season 3 of The Voice of China without permission from Tencent, which had licensed exclusive streaming rights. The Voice of China (or whatever name it’s going by these days) is one of the most popular programs in China and it generates significant revenue for all of the companies involved with it. Tencent wanted to protect its investment.

Tencent’s victory in the litigation regarding The Voice of China is of a piece with other recent lawsuits regarding enforcement of motion picture copyrights in China, including Disney’s victory over a film that ripped off the anthropomorphic vehicles from Cars, decisions holding private cinema operators liable for exhibiting content without permission, and the recent controversy and lawsuit regarding Wolf Warriors 2. Copyright owners in China no longer have to just grin and bear it.

I hate to say we told you so on this, but we told you so on this Way back in early 2013, in China Intellectual Property Law. A Radio Interview For World Intellectual Property Rights Day, Dan Harris of my firm predicted that this day would come and explained why:

China is a lot better compared to ten years ago. I think very little of that has to do with the WTO. I think that China is better because China is getting wealthier, and because Chinese companies are starting to care more about IP. I am of the view that countries start doing well with IP when its own powerful companies really start caring about it. And I’ve seen this progression happen in Japan, I’ve seen this progression happen in Korea, I’ve read about how this progression happened in the United States. The reality is nobody is going to be able to force China to improve its IP from the outside, but big companies within China like Haier, like Huawei, like Lenovo — companies that care about their own IP — are going to be able to force China to improve. That’s what’s happening. And as more big companies come to the fore in China, China’s IP is going to continue to improve. And there’s not much that can be done to rush it. In fact, if anything China’s IP is improving nicely. Meaning, it’s improving at least as fast as Korea’s did, at least as fast as Japan’s did, and probably as fast as the US’s did, but the US was a long time ago.

In other words, China — like pretty much most countries, is a lot more likely to do what it perceives to be in its own self interest than to do something just because other countries are telling it that it should/must.

Granted, the legal principles in these cases are straightforward and from what I’ve seen, the facts patterns leave little room for interpretation. When the defendants explain why they weren’t infringing the copyright, they tend to sound like Vanilla Ice explaining why “Ice Ice Baby” wasn’t a blatant copy of “Under Pressure.” (I can’t wait to see who will be the Chinese Robin Thicke and state that they couldn’t possibly be liable for copyright infringement because they were drunk on baijiu throughout production.)

The point is not that Chinese courts are establishing new rights, but that they are enforcing the rights that already exist for copyright owners – and doing so in a meaningful way. Both Chinese and foreign copyright owners are turning to Chinese courts to enforce their rights, and are prevailing. At least with the easy cases.

In future posts, I will discuss what you can and should do to protect and enforce your copyrights in China.

Matthew Dresden

Matthew focuses on international and China law, with a focus on technology and entertainment law and Chinese transactional and IP work. He represents a wide range of companies, from start-ups to NYSE-traded companies. His work has included matters for film studios, cable channels, film and television production companies, video game developers, magazines, restaurants, wineries, international design firms, product manufacturers, outsourcing companies, and computer hardware and software companies.