Initiatives in Online Copyright Enforcement

ONLINE USE OF WORKS

Another frequently contested issue is related to Clause 5 of Article 10 of the Copyright Law. This provides that, subject to certain statutory exceptions, a copyright owner has the exclusive right to use his or her works by way of "reproduction, performance, broadcasting, exhibition, distribution, producing motion pictures, television and other audio-visual works, or adaptation, translation, annotation and compilation." Defendants in several online copyright infringement cases have argued that lawmakers did not contemplate when they enacted Clause 5 that displaying or distributing the works on the internet would constitute the use of the works. Prior to the issuance of the Interpretations, most courts held that Clause 5 picks up other unspecified forms of use with the phrase et cetera. The second paragraph of Article 2 of the Interpretations explicitly confirms these judgements that the transmission of works to the public by means of internet falls within the classification of the forms of use set forth in Clause 5 of Article 10 of the Copyright Law.

As a related matter, Article 9 (2) of the Interpretations indicates that any intentional unauthorized use of any works involving disseminating such works to the public on the internet may trigger copyright infringement claims under Article 45 of the Copyright Law.⁴This provision was of great concern to internet operators, particularly, ICPs, which aggregate, edit and process tens of thousands of new information on a daily basis. The Supreme People's Court seems to be well aware of such concerns in the Interpretations. Article 3 of the Interpretations exonerates website operators from any infringement claims with respect to their republishing or excerpting of any works provided:

(a) such works have been previously published in a newspaper or periodical or on the internet;

(b) the copyright owner of such works have been paid for the republishing and excerption;

(c) the sources of the works have been properly identified; and

(d) the copyright owner made no declaration that such works may not be republished or excerpted.

Although such provisions substantially limit website operators' potential risks of copyright infringement, website operators still need to find a way to deal with the financial burdens involved in having to pay the copyright owners for the use of works. Furthermore, if the copyright owners cannot be timely located or the copyright owners do not expect to receive the payment, it is unclear whether failure to pay the copyright owners would still constitute infringement.

Liability of ISP and ICP for Third Party Infringement

Articles 4 through 8 of the Interpretations provide judicial guidance as to how to determine the liabilities of ISPs and ICPs in connection with online copyright infringement conducted by third parties.

Participation in Others' Infringements

First, Article 4 of the Interpretations provides that any internet operators, including both ISPs and ICPs, that participate in, incite, or assist third parties with copyright infringement by means of the internet networks will be held jointly liable for copyright infringement with such third party pursuant to Article 130 of the PRC Civil Law General Principals⁵ . However, the Interpretations fail to establish criteria for how to determine what acts constitute an internet operator's participation or assistance in another's copyright infringement activities. This omission will likely become one of the most debated issues in or outside of courtrooms in connection with copyright infringement allegations against internet operators in reliance on this Article 4.

Failure to Stop Others' Infringements

Article 5 of the Interpretations indicates that any ICP which is well aware of, or has been warned by the relevant copyright owner with solid evidence of, any copyright infringement committed by an internet user, must take necessary action to stop the infringement. If such ICP fails to take any action to stop such alleged infringement, it will be held jointly liable for such copyright infringement pursuant to Article 130 of the Copyright Law. It should be noted that how to establish the awareness of an ICP with respect to an alleged online copyright infringement is a factual issue to be determined by individual judges on a case-by-case basis. However, reading this Article 5 of the Interpretations alone may lead ICPs puzzled as to how to make a judgment as to what constitutes the solid evidence presented by copyright owners in connection with his or her alleged online copyright infringement. As we discussed below, to certain extent, Article 7 of the Interpretations ease such concerns of ICPs.

Failure to Fulfil Disclosure Requirements

Article 6 of the Interpretation further provides that an ICP must furnish to a requesting copyright owner the user registration information of the internet user who has been alleged to infringe the copyright of such copyright owner. If the ICP fails to do so without good cause, such ICP will be held jointly liable for the copyright infringement pursuant to Article 106 of the PRC, Civil Law General Principals. Previously, ICPs were required under Chinese law to bear the disclosure obligations to certain government authorities for law enforcement purposes. But with the effectiveness of the Interpretations, ICPs are now also required to bear the disclosure obligations of ICPs toward the copyright owners.

The mere compliance with either Article 5 or Article 6 alone may not be sufficient to eliminate an ICP's liability for online copyright infringements. ICPs should comply with both Article 5 and Article 6 in order to establish a sufficient defense against any potential online copyright infringement claims.

Conditions Precedent to Disclosure

In connection to the disclosure requirement for ICPs under Article 6, Article 7 of the Interpretations allows ICPs to deny any disclosure request of the copyright owner if such copyright owner fails to provide certain evidential support for his or her copyright infringement allegations. Such evidential support must include proof of his or her own identity, proof of his or her copyright ownership and proof of the alleged infringement. Although Article 7 of the Interpretations deals with the basic proof requirements in connection with the disclosure obligations of ICPs under Article 6, the relatively more specific provisions may help ICPs to determine what constitutes the solid evidence required under Article 5 and decide whether or not it should comply with the copyright owner's request to stop the alleged copyright infringement pursuant to Article 5.

Disclosure vs. Confidentiality Issues

Compliance with the disclosure requirement under Article 6 may help ICPs to build a defense against potential online copyright infringement claims. However, the requirements of the Interpretations are unlike other statutory disclosure obligations of ICPs in which the government's requirements in most case prevail over the confidentiality obligations to internet users. ICPs may need to be cautious in balancing their responsibility to protect the confidentiality of their internet users and the interests of the copyright owners. The potential exists that disclosure by ICPs in response to a copyright owners' claims without prior due diligence may give rise to claims by internet users for breach of their confidentiality agreements with the ICPs. As a matter of practice, ICPs should review their user agreements to ensure that the required disclosure made in compliance with the Interpretations has been properly carved out from its confidentiality covenants to the users.

Jurisdictional Disputes Resolved

Courts have disputed how to determine jurisdiction in hearing copyright infringement cases given the difficulties of determining the place where the infringement occurred in the virtual world. The PRC Civil Procedure Law (中华人民共和国民事诉讼法)provides that a court may have effective jurisdiction in a case when an infringement has been committed or the result of the infringement occurs within the jurisdiction of a court. In the world of the internet, the alleged online copyright infringement offender may live in a place different from the location of the ISP or the ICP involved. Article 1 of the Interpretations confirms that the place where the alleged infringement occurs includes the place "where such equipment as the server and computer terminal involved in the alleged infringement is located." Therefore, the court with jurisdiction over the place where the servers involved in the alleged online copyright infringement are located has the proper jurisdiction to hear the case. Pursuant to Article 35 of the PRC, Civil Procedure Law indicates that if there are two or more courts of competent jurisdiction over a particular copyright infringement case, the court with which the action was first filed has the preemptive jurisdiction to hear the case.

The Interpretations clarify the issues concerning courts' jurisdictions over the online copyright infringement matters. Presumably, similar jurisdiction disputes involving trademark infringements or other intellectual property rights infringements committed on the internet could be resolved in the same manner. However, whether the Supreme People's Court will issue a separate set of judicial interpretations to deal with online infringements of other kinds of intellectual property rights remains to be seen.

Calculation of Monetary Remedies

Neither the Copyright Law, the Implementation Rules nor the PRC Civil Law General Principals address how to calculate the amount of monetary remedy to be awarded for copyright infringement. In Court practice, these issues and other similar issues normally fall within the discretion of judges based on facts.

In order to standardize the Court practices, Article 10 of the Interpretations sets forth specific guidelines for courts to calculate the monetary remedy for the injured copyright owners. The calculation of the amount to be awarded can be based on either:

(i) the amount of any direct financial losses and any anticipated profits of the injured party; or

(ii) the gains derived by the liable party from the infringement.

In the event that the amount of the financial losses of the injured party cannot be determined, the Interpretations afford the court the discretion to award the monetary remedy to the injured party within a normal range between Rmb500 to Rmb300,000 depending on the circumstances of the infringement, but in no event more than Rmb500,000. It must be noted that the Rmb500,000 cap only applies to the circumstances where the amount of the financial losses of the injured party cannot be factually determined. In other words, if it can be established by solid evidence that the financial losses of the injured party exceed Rmb500,000, the injured party may be entitled to a monetary remedy in excess of Rmb500,000 pursuant to the Interpretations.

Conclusions

Because it remains unclear when the People's Congress will enact the proposed amendments to the Copyright Law, the Interpretations issued by the Supreme People's Court will take on great significance for the time being for copyright owners as well as internet operators within China. By issuing the Interpretations, the Supreme People's Court has effectively asserted its power to extend the applicable scope of certain critical sections of the Copyright Law to protect the copyrights in the digital form of the works and other works not specifically covered under the Copyright Law. The Supreme People's Court also clarified the bounds of potential liability of internet operators, ICPs in particular, in connection with online copyright infringements. Internet operators in China should establish or adjust their internal copyright policies in order to minimize the risks of potential copyright infringement claims based on the provisions of the Interpretations.

The Interpretations reflect the prevailing positions of the Chinese legal community on online copyright infringement and related issues. It is expected that the future amendments to the Copyright Law are likely to be in line with the provisions contained in the Interpretations.

ENDNOTES:

1. On December 14 2000, a Beijing court, in reliance on the Copyright Law, held an Internet Service Provider liable for copyright infringement for its unauthorized distribution of the works of six famous Chinese novelists. See http://www.chinadaily.com.cn/cndydb/2000/03/d9-3net.329.html.
2. See www.chinadaily.com.cn/cndydb/2000/12/d2-1copy.c27.html; also see http://china.scmp.com/technology/ZZZHYANUPGC.html.
3. See Article 2 of the Interpretations.
4. Article 45 of the Copyright Law sets forth the different forms of Copyright infringement.
5. CCH, China Laws for Foreign Business, Business Regulations, Volume 4, 19-150. Article 130 of the PRC, Civil Law General principals deals with joint liabilities of two or more persons.