The right to secondary remuneration should come from contract negotiation rather than statutory provision of China Copyright Law

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(Author: Tao Xinliang, Dean of the Intellectual Law School of the Shanghai University)

In the process of the third amendment of China’s Copyright Law, there is strong conviction favoring the right of secondary remuneration from audiovisual works, that is, it should be specifically included in the statutory provision of the third amendment that, whenever a copyright owner of an audiovisual work (such as a producer) authorizes another to use the audiovisual work, the authors (such as the original author, screenwriter, director, or lyricist and composer who has specifically created musical works for audiovisual work) may have the right to receive reasonable remuneration from that secondary use. In other words, irrespective of any prior contract provision on “secondary remuneration,” those above-mentioned authors may directly have a “second bite,” by virtue of the proposed revision of the Copyright Law, to be “re-remunerated” from the gains made of “secondary use.” The author of this article cannot agree with such a conviction, and hope to see that instead of forcing its way into statutory provision, secondary remuneration can be enjoyed by authors through the self governance of contract.

I. The evolution of the right and interest of the authors to audiovisual works under China’s Copyright Law

China’s Copyright Law came into effect as of June 1st, 1991, having the first amendment in 2001 for China’s accession to WTO, and the second in 2010 for the WTO’s dispute solution mechanism. The National Copyright Administration of the People’s Republic of China (NCAC) initiated the third amendment in 2011 and has gone through three drafts. The following is a summary of the statutory provisions of the remuneration rights to audiovisual work.

1. The 1991 Copyright Law
Article 15 Provision of the 1991 Revision reads in relevant part: “The director, screenwriter, lyricist, composer, cameraman and other authors of a cinematographic, television or video-graphic work shall be entitled to the right of authorship the work, while the other rights included in the copyright shall be enjoyed by the producer of the work.
The authors of screenplay, musical works and other works that are included in a cinematographic, television or video-graphic work and can be exploited separately shall be entitled to exercise their copyright independently.”

2. The 2001 Copyright Law
Article 15 of the 2001 Copyright Law reads in relevant part: “The copyright of a cinematographic work or a work created in a way similar to cinematography shall be enjoyed by the producer, while any of the playwright, director, cameraman, screenwriter, composer and other authors of the work shall be entitled to the right of authorship and shall be entitled to receiving remuneration a contract with the producer.
The authors of the screenplay, musical works and other works that are included in a cinematographic work or a work created in a way similar to cinematography and can be exploited separately shall be entitled to exercise their copyright independently.”

3. The 2010 Copyright Law
The interim revision of 2010 does not touch upon audiovisual works, and the textual provision remains unchanged.

4. The first draft revision of the third amendment of the Copyright Law (first draft revision)
Article 16 of the first revision reads: Unless contracted in writing to the contrary, the copyright of audiovisual work shall be enjoyed by the producer, while any of the screenwriter, director, cameraman, lyricist, composer and other authors of the work shall be entitled to the right of authorship. In using works of screenplay or music for making audiovisual works, the producer shall obtain permission from, and pay remuneration to, their respective authors. A screenwriter, lyricist, composer or other authors of the like, whose works are used or licensed by the producer for others to use, shall be entitled to reasonable remuneration, unless otherwise agreed upon in contract.
Where the scripts and musical works, etc. contained in an audiovisual work can be exploited separately, their respective authors shall be entitled to exercise their copyright independently, provided that the exercise of such copyright does not impede the normal use of the audiovisual work.

5. The second draft revision of the third amendment of the Copyright Law (second draft revision)
Article 17 of the second revision reads: “The producer shall obtain permission from and pay remuneration to the copyright owner for his producing audiovisual work by exploitation of the script, musical works and other works. The copyright of the audiovisual work shall be enjoyed by the producer, while its screenwriter, director, cameraman, lyricist, composer and other authors shall be entitled to the right of authorship and reasonable remuneration from others’ use of such audiovisual work.

The authors of the script, musical works and other works which are contained in an audiovisual work and which can be exploited separately shall be entitled to exercise their copyright independently, provided that the exercise of such copyright does not impede the normal use of the audiovisual work.”

6. The third draft revision of the third amendment of the Copyright Law (third draft revision)
Article 17 of the third revision reads: “The producer shall obtain permission from the copyright owner for his producing audiovisual work by exploitation of the script, musical works and other works created by another person. The copyright owners of such existing work shall, unless otherwise agreed by the parties, retain the exclusive rights to the audiovisual work in accordance with Paragraph 2 of Article 14. The authors of movies, TV shows and other audiovisual works shall include the directors, screenwriters, and music composers whose works are specifically created for the audiovisual work. The proprietorship of a cinematographic work or TV shows shall be contracted between the producer and the authors; where there is no decision or the decision is not clear, the producer shall enjoy the proprietorship, provided that the authors be entitled the right of authorship. The benefit-sharing of movies, TV shows and other audiovisual works shall be decided as between the producer and the author; the author shall have the right to receive reasonable remuneration from others’ use of the audio-visual work where there is no such agreement or the agreement is uncertain.
The authors of the script, the musical works and the other works which are included in an audiovisual work and which can be exploited separately shall be entitled to exercise their copyright independently, provided that the exercise of such copyright does not impede the normal use of the audiovisual work.

Tracing the history of China’s Copyright Law revisions, it could be seen from the previous versions that according to the 1991Copyright Law, what the author enjoyed is only the right of authorship to audiovisual work, which was named as cinematographic work, only provides for the addition to authorship of audiovisual works (called “Film, television and video works, TV shows and sound recordings”), and there was no specific regulation on the property right to the work. Under the 2001 and 2010 Copyright Law, something new were added to the scope of audiovisual work, which were named as “cinematographic works and works created by a process analogous to cinematography,” while its screenwriter, director, cameraman, lyricist, composer and other authors shall enjoy the right of authorship therein and shall be entitled to receive remuneration in accordance with the terms of the contracts concluded between them and the producer. A contract is the precondition for the authors to receive remuneration according to their authorships. However, there has been no introduction of the right to secondary remuneration before the second draft of the Copyright Law. It was added in the second draft that the screenwriter, director, cameraman, lyricist, composer and other authors of the preexisting work shall enjoy the right of authorship therein and shall be entitled to receive reasonable remuneration from others’ use of such audiovisual work, and in the third draft that the benefit-sharing of movies, TV shows and other audiovisual works shall be agreed upon by the producer and the author, whereas the author shall have the right to receive reasonable compensation from others’ use of the audiovisual work where there is no such agreement or the agreement is uncertain.

II. The right to secondary remuneration should come from self-governance rather than statutory mandate

The right to secondary remuneration is not strictly a legal terms and thus has never been found in any statutory provisions or revisions of drafts of the Copyright Law. However, it can be seen form the second and third drafts that the right to second remuneration is in fact a right enjoyed by author, screenwriter, director, lyricist, composer and other authors of the preexisting audiovisual work to receive remuneration after being paid by the producer as the author of audiovisual work according to the contract. It means that the authors shall have the right to be paid after the first remuneration as long as the copyright owner of the audiovisual work authorizes others to use, regardless of the existence of a contract on such secondary remuneration. Therefore, these authors have the right to have a “second bite” on the economic gains form others’ use of the work. Under such conditions, such remuneration shall depend on the stipulation of the Copyright Law and the contract is meaningless to such remuneration. These authors shall have statutory rights and interests to receive reasonable remuneration from others’ use of the audiovisual work each time and there is no limitation on the number of times for such remuneration. This is the true meaning of the right to secondary remuneration.

In the opinion of this author, the proposed legislation on the right to secondary remuneration is inappropriate for the following reasons:

Firstly, all the original author, screenwriter, director, cameraman, lyricist, composer and other authors are not the author of audiovisual work in the overall sense or the co-author of the audiovisual work as a whole according to the provisions and the optimization of the third revision of the Copyright Law.

Secondly, all the authors of the preexisting work and the authors of the preexisting music and song should receive remuneration from the authorization to use the work completed by them before. Generally, this should be solved by the copyright licensing contract between them and the producer for a package settlement of preexisting work. And there should also be a package settlement of copyright licensing contract for every lyricist and composer who makes proper creation for the screenwriter, producer, and new music work for audiovisual work.

The author of a preexisting work is the copyright owner of the preexisting work and as such, the relationship of rights and obligations between him and the producer, the copyright owner of the audiovisual work, is in fact a relationship under which he authorizes the producer the right of adaptation which is included in the copyright of the preexisting work, and such relationship should be governed by the copyright licensing contract for the protection of the author’s right to remuneration. And there should also be a proper contract for every lyricist and composer, who makes proper creation for the screenwriter, with the producer, who acts as the copyright owner of the audiovisual work, to guarantee their rights to remuneration. The doctrine of freedom of contract and priority of agreement should be uphold, from which the parities shall, after bargaining, conclude a contract for the settlement of the author’s right to remuneration. The author can get the remuneration from the conclusion and performance of such contract. Of course, the parties shall have the right to agree to choose a method from the package remuneration, royalty remuneration, royalty remuneration plus entry fee, one-off payment of remuneration, and phased or multi-payment of remuneration. They should be free to decide which of the above-mentioned method to follow or not according to the previous principle. Both parties should have their rights and obligations provided after an evaluation of risk and expected gains. It is especially necessary for the parties to audiovisual work, which have greatly benefited from the scientific and technological development.

The copyright system is the function of the scitech, economic and social advancement. It can be said that contemporary copyright system is no longer simply a systematic arrangement of creation standard, which have covered mutually differentiated ownership of rights and three types of works for respective distribution of interests, namely, the creation work with creation standard, technological work with unit standard, and audiovisual work with capital standard.

The traditional works usually refer to the works of folk literature and art, including written works, oral works, musical, dramatic, quyi, choreographic and acrobatic works, works of the fine arts and architecture, photographic works, etc. Their copyright ownership is distributed according to the principle of creation standard, according to which the copyright holder shall be the author regardless of its being a personal or unit creation. The technological works mainly refer to graphic works such as drawings of engineering designs, product designs, maps and sketches, model works and computer software, which fall within the category of works created in the course of employment under the Copyright Law.

The copyright to technological works is also called the industrial copyright, whose right distribution is similar to the service invention under the Patent Law. This is an embodiment of unit standard. As for the technological works, all copyrights except the right of authorship shall be hold by the unit the author works.

The principles for the distribution of copyright to traditional and technological work are based on the intellectual standard, whereas the audio-visual work is based on the capital standard. The audiovisual work referred to musical, dramatic, quyi and choreographic works in 1991 Copyright Law, and now refers to cinematographic works and works created by a process analogous to cinematography in the current 2010 Copyright Law, and meant the audiovisual work in the all three draft revisions of Copyright Law. It can be seen from this that the audiovisual work has entered the stage of capital standard from the previous creation or intellectual standard. Those who funds shall obtain the copyright, namely, the ownership of copyright shall mainly be hold by the producer who fund for the audiovisual work. The third draft revision of the Copyright Law intends to make a suggestive adjustment by provisions that “the property rights of the copyright from movies, TV shows and other audiovisual works shall be contracted by the producer and the authors, and shall be enjoyed by the producer where there is no such agreement or the agreement is unclear, whereas the authors shall enjoy the right of authorship therein,” and that “the agreement of the ownership of the copyright shall proceed the stipulation, and it shall be hold by the producer where there is no such agreement or the agreement is uncertain in this regard.” It is very difficult for the suggestion to be adopted because audiovisual works are mainly composed of costly films and television works. If adopted, the suggested article will find very difficult to be applied because of capital’s control and greed in the production of the films and TV show, and it is expected that the majority of the contracts will provide that the producer will be the owner of the copyright to the audiovisual work in practice.
Audiovisual work is featured by its capital standard which requires the input of huge fund with high investment risk. Investors need to have a clear expectation of input, output and budget. If the secondary remuneration is difficult to foresee or control, the investor may be unwilling to make a decision on the investment. Furthermore, there is a great difference and strong individuality in terms of audio-visual works, which requires a freedom to contract or priority of agreement doctrines to conclude a detailed agreement to define and reasonably distribute the risk and gains. Therefore, the parties should be free to negotiate whether to adopt or take the remuneration method into consideration. It seems unnecessary to have a detailed statutory provision in this regard. The secondary remuneration should be a method resulting from the free will of both parties instead of legislation. It should be reverted to the contractual rights and obligations, balanced and guaranteed by the parties through free negotiation other than be configured and protected by statutory rights under the Copyright Law.

Some advocators allege that the system of secondary remuneration has been established abroad for many years and thus become an international practice. However, this is not true in fact. There are few countries with secondary remuneration under their copyright laws, and there is no requirement of the introduction of such system according to international conventions related to copyright and intellectual property right.

In summary, the author thinks that China’s Copyright Law should not introduce the secondary remuneration in its third amendment according to the traditional stipulations and the optimization of the third amendment of the Copyright Law in China, and taking into account the comprehensive reasons such as the bad application of the system for audiovisual work which is featured by the capital standard. There should be a proper contract for every author, screenwriter, director, lyricist and composer, who makes proper creation for the screenwriter, with the producer, who act as the copyright owner of the audiovisual work, to guarantee their rights to remuneration. The author’s interest form secondary remuneration should be agreed upon between the author and the producer after negotiation instead of being directly mandated by the statutory law.

(Translated by Yuan Renhui)

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