Regulating Online Film and Music Piracy in China Research Paper

Introduction and History

Film and music piracy have become more advanced and handy than in the past, with the piracy users having the convenience and ease to access the illegal films and music they are looking for. Some years ago, one could see many shops selling pirated CDs, VCDs and DVDs in Shenzhen of China and currently, three biggest video-sharing sites are prevalent in China and even overseas. They are Tudou.com, Youku.com and 56.com. In these sites, the internet users can simply watch the film online without downloading it and they do not have to pay a dollar, for pirated CDs, VCDs or DVDs even if they can afford to. For music, people can just go to Baidu.com, the notorious illegal music search engine in China, and download whatever songs they want.

To understand the present situation of the current practice of film and music piracy in China, there is a need to look at the past and trace its historical development. Generally speaking, the rise of the pirated CDs, VCDs and DVDs in China can be attributed to its restrictive policy on importation of foreign films which led to expensive, limited and outdated supply of foreign films. As to how the controlled importation on foreign films became a practice in China is basically connected to its historical and cultural background.

Historically, China was so much influenced by Confucius idea which advocated “shared intellectual past”. In 1910, Qing dynasty had formulated laws regarding intellectual property; however, due to the downfall of the Kingdom, the law was never implemented. The short-lived National Government seemed not able to do much on the implementation either. In 1949, People’s Republic of China was established and implementing intellectual property law was ill-times too since the Communist Government viewed that “own property is tantamount to sin.”

This cultural ideology affected the country until the Deng Xiaoping era, when the open-door policy compelled People’s Republic of China to enact more intellectual property laws in order to set up commercial ties with foreign countries and develop China’s own national economy. The necessity to have protection for intellectual property was therefore a necessary consequence of opening up the economy and sustaining it accordingly.

In 1979, bilateral trade agreements with United States were signed due to the US pressure which will be discussed in details below. On the whole, since 1990s, China started putting effort in protecting intellectual property rights. In the same year, the People’s Republic of China incorporated international standards and enacted its Copyright law, but was found to still incompatible with Berne Convention.

It was not until September 30, 1992 that China’s Berne-compatible regulations came into effect and in October 2002, China joined both the Berne Convention and the Universal Copyright Convention. In February 2000, National Anti-Piracy and Pornography Working Committee (NAPWC) was set up to enforce the intellectual property right. Up to this point, it is evident that PRC has done much on intellectual property protection and with China coming up to the international standard like United States and United Kingdom.

However, China was complained of by the United States for its lack of enforcement of its intellectual property laws and the country was nominated by the US as the ‘Special 301’ ‘Priority Foreign Country” in 1991, 1994 and 1996. This US nomination means that China was one of the countries which had greatest adverse impacts on United States’ products due to the infringement of intellectual property rights in those years.

The conclusion suggested by the United States was for China to have yet its effective enforcement measures. In order to combat the new trend of internet music and film piracy, China would have to create the impression that it has made significant progress, via enactment of regulations and judicial decisions. China must have lowered also the threshold of criminal liability, in changing its global image of having weak or lack of it on intellectual property rights.

In 2006, the Regulation on Protection of the Rights to Network Dissemination of Information (The Regulation) became effective in China to protect copyright of owners, performers and producers of audio-visual records in the latter’s rights to network dissemination of information. The said regulation aims to encourage owners, performers and producers to create and disseminate works which contribute to the construction of socialist spiritual and material civilization in China.

In addition, the Administrative Provisions on Internet Audio-Visual Program Service (The Provisions) which was adopted by the State Administration of Radio, Film and Television (SARFT) and the Ministry of Information of the People’s Republic of China and made effective on 31^st January 2008. It required all interested internet audio-visual service providers to obtain the Internet Audio-Visual Program License as way of state regulation.

The combined bilateral agreements, regulations and provisions however appeared to have not helped much the current situation of film and music piracy mainly because of the inadequacy of enforcement. As to how true this argument will be explained and analysed in detail later.

New legislations and judicial decisions regarding intellectual property rights in China

The Regulation as mentioned earlier was implemented on 1^st July 2006 and required every one to secure permission and pay the necessary penalties before the same person could disseminate the copyrighted works or performances of another person online. Under the same regulation, network service providers are mandated to remove or disconnect links to infringing works upon receipt of complaint or proof infringement from intellectual property owners. They are likewise required to provide to the authorities with information on website operators that are engaged in distributing pirated materials. Violation of The Regulation carries an imposable penalty of a fine that could reach RMB100, 000 and a possible confiscation of computer equipment.

In 2008, the Provisions was came into effect requiring relevant service providers to secure the needed license to engage in online audio-visual broadcasting with the specific requirement that they should be majority state-owned/-controlled and should satisfy a number of other conditions. One of these conditions includes the need to carry out a comprehensive censorship system that must be funded by approved sources. Given this new legislation, it appears unlikely to have private online audio/video sharing websites that could operate as service providers.

Judicial victory in fighting online piracy by the Regulation was first shown by the Yahoo! China case. Yahoo! China was sued and payment of compensation of RMB212, 600 was ordered by the Chinese court in April 2007. Article 23 of the Regulation provides that if the service provider “knows, or ought to know that the items linked by its website are infringing, it remains jointly liable for the infringement. In addition, three Motion Picture Association of America (MPAA) companies won a major lawsuit against two local companies for piracy in the same year.

In May 2008, more vigorous enforcement was demonstrated when the SARFT has ordered eight online video-sharing websites in China to shut down and issued warnings to twenty websites over “improper online content” including copyrighted movies, violent videos and pornography.

Criminal liability is also imposed by the China government by its Criminal Law. Two important articles of said Criminal Law punish copyright crimes. Article 217 of the Criminal Law punishes the crime of copyright infringement when there is reproduction or release of copyrighted works without the permission of copyright owners if the purpose is to reap profits that will involve “illegal revenue in relatively large quantities, or under other serious circumstances.” Article 218 of the Criminal Law, on the other hand, penalizes the crime of knowingly selling reproductions as defined in Article 217 of the same law.

Present rules may be viewed quite vague and subject to judicial interpretation. In a 2001 judicial interpretation, the Supreme People’s Court (SPC) made the infringement crime “virtually unattainable” and when it imposed a minimized fine on the infringer. In December 2004, a new judicial interpretation was made lowering the threshold of the criminal liability in infringing copyright and made it easier to punish the infringers, which adequately met the demands of World Trade Organisation and of the offended countries.

Interpretation concerning issues relevant provisions of penal laws on copyright infringement law by Supreme People’s Court and the Supreme People’s Procuratorate is worth noting. Under Article 5 of said interpretation, any person may commit any of the acts of infringing upon copyright as described in Article 217 of the Criminal Law, with the amount of illegal proceeds to be no less than RMB30,000 shall be construed to have generated illegal proceeds in relatively large amount or shall be deemed to have caused “other serious consequences” under given circumstances.

Said violation would subject a violator to a penalty of fixed-term imprisonment of not more than three years or be detained criminally for the copyright infringement, and or she be made to pay to pecuniary fine. The given circumstances to quality to have caused “other serious consequences” include

1. having from a proceed of not less than RMB50,000 from illegal business operation;
2. reproducing and distributing not less copyrighted words with the total of no less than 1,000 copies;
3. other circumstances of serious consequences.

Analysis of current situation

Piracy still prevalent in China despite successful prosecutions

For online movie piracy, there are three major websites in China which can be quoted as examples, namely, Youku.com, 56.com and Tudou.com. One can examine these sites by searching for films. For example, take a British drama movie as an example, which was released in 2008, The Other Boleyn Girl. The movie can easily be found in these three sites and can be watched free of charge (up to 8 December 2008). It is probably tempting to watch film in those sites without going out and paying a dollar if one does not care about the visual and sound quality of the movie.

Even though successful lawsuit occurred like the case of Shanghai No. 1 where the Secondary People’s Court has sentenced Toudu.com, to pay in compensation in the amount of RMB50,000 to NuCom Online (Beijing) for copyright violation, yet Tudou.com has not stopping in working or providing for online pirate film sharing. This would imply that the successful lawsuit will not necessarily deter the illegal online video sharing.

And, shortly after the promulgation of The Provisions, the authority appeared to have consented to violations for a great number of existing players on online video when it declared that new rules are applicable only to new entrants. This could mean that private video-sharing websites can still continue their business as long as they do not contain illegal content. In June and July of this year, Youku and Tudou had, in fact, received the license from the SARFT respectively where pirated films can still be watched in their websites now. This may be the reason why Sky Canaves of The Wall Street Journal criticized the rules of licensing as vague.

The vagueness on rule of licensing gets more complicated if private video-sharing website continue to operate despite an earlier regulation that providers should be limited to government owned or controlled entities. This could be taken as a failure of regulation or a failure of enforcement or simply lack of political will on the mere vagueness or lack of consistency in the rules.

For online music piracy, Baidu.com is a very notorious website for providing searching services for pirated music. There are still many smaller sites doing the same job. To see whether The Regulation is helpful in dealing with Baidu.com, one could take a movie soundtrack as an example, “Way Back into Love” by Hugh Grant. After entering the name in the search box and clicking “search”, there are more than 10-page search results for this song (up to 8 December 2008).

Regardless of the success of the Yahoo! China case, Baidu.com still keeps doing its business of offering comprehensive search results of illegal MP3, MP4, MIDI, WMA or RA online. The prevalence of intellectual property piracy contradicts the claim that the intellectual property laws of China have come up at par the international standard.

It would appear that what is claimed as coming up with international standard is not what is happening in reality or that said standards exist only in books. This would make it interesting to discuss enforcement.

Is there adequate enforcement?

Aside from the legislative effort seen in terms of passed laws, Anti-Piracy campaigns and Task Forces were launched, too. Moreover, the judicial decisions of the court got promulgated against violation of intellectual property rights. These signs of trusting the law to take its own course in addressing piracy as evidenced by the increasing litigation and regulation. As proof, the National Intellectual Property Working Group has announced the legislative and enforcement reforms to protect the intellectual property in China in March 2006.

It is ridiculous to say that China has done very little in dealing with the online piracy and intellectual property protection issue because people are going to jail for violations and infringed items are being seized. In 2005, 1,799 criminal cases relating intellectual property infringement were accepted by the Public Security Bureau and approximately 2,700 people were sent to the jail due to the infringement of intellectual property law. In 2006, 1,076 intellectual property cases were prosecuted and 39 million infringed items were seized. However, even such a huge effort was made, how come China was still considered by United States by its “Special 301” Report of 2006?

It may be asserted the adequacy of enforcement is already very doubtful as seen in the big disparity of what was provided by regulations and how the courts interpret the same and even as what is actually happening in reality because of ease of access to pirated material from privately-owned websites. Perhaps the number of prosecutions was too small in relation to reported violations or that only a small portion of infringing items was seized in relation to total. It appears that the penalties have not yet submerged into the consciousness of the consuming public and that the laws could still be considered lax or that these laws and regulations have no teeth at all.

In addition, it is still argued that the more effective enforcement measures are yet to be enacted by the Chinese Government. For example, the “vague” rule for licensing of the video-sharing websites as mentioned above definitely encourages Youku.com, Tudou.com and other similar sites to make those pirated movies accessible. Moreover, failed lawsuit against online piracy is also fatal. In Baidu.com v Gold Label (EMI), Go East (Universal), Cinepoly (Universal), EMI, Warner, Universal, and Sony BMG case, the Court held that the service provided by Baidu.com did not amount to infringement as those music files are downloaded from a third party sites even it is Baidu.com which was helpful enough to get these links systematically and comprehensively. Baidu.com has been criticized by the Office of the United States Trade Representative’s Special 301 report as the largest among China-based search engines for MP3 which links where song files could be downloaded, yet the court has clear the company.

Even if the Regulation is implemented, the interpretation of the Regulation in providing third-party links for pirated music is posing as an obstacle to get rid of online music piracy. Similarly, the vagueness of the granting of license to video-sharing websites possibly leads to the reduction on numbers of video-sharing sites but still, allows pirated films to be watched online. This may put in question the very purpose of regulation as the aim was just to reduce the website but not to order a stop to piracy.

Although it may be argued that the government can check and monitor those video-sharing sites easier by having selected websites to allow pirated films to be watched, one could see the lack of clear direction on whether the government of China is really serious in dealing with the prevalence of the online film piracy. There may have been people going to jail and infringed properties being seized, the laxity of implementation in many cases do not amount to really prohibiting or putting a stop to film and music piracy.

How to improve?

It is argued that there should be more foreign pressure for formulating more regulations and better enforcement. Obviously, with the US pressures mentioned above, China has made more and more effort to make it compatible with the international standards in protecting intellectual property. Whether China can enter World Trade Organisation will be under the strong influence of the US. This mutual need may force China to deal with the intellectual property rights more robustly.

It can be inferred however that for the pressure to control piracy to come from the US, there are still many loopholes to plug if the citizens or consuming public will not appreciate the purpose of having anti-piracy laws. Laws alone may not do it. The historical and cultural context must also be considered. The long years of belief that the every property is owned by the state in China under the communist regime cannot be erased overnight with a property intellectual and intangible as that to be private property.

More lawsuits from MPAA and Music companies can raise the awareness of the China public. Carl Erik Heiberg gives two purposes of lawsuits. First, the successful lawsuits can actually punish the infringers. Second, they may make the Chinese people more alert to the seriousness of copyright.

However, educating people should take place first. Students should be taught the concept of intellectual property right. Government should also utilise media to promote this concept. China can take lesson from Hong Kong when the latter’s Intellectual Property Department implemented several promotion materials to increase the awareness on the importance of copyright and published booklets.

Partnerships with domestic music and film industries as suggested by academics could be another way. In 2005, a concert was launched in China for promoting anti-piracy in audio-visual products as a way of providing an opportunity to educate the Chinese about the concept of copyright and piracy.

If restriction on the importation of film is one of the reasons for the online film and music piracy, the government should then improve market access of foreign films so that less people would need to use the illegal way for entertainment.

Alternative Compensation System (ACS) is also an option as a legal way for downloading free music. With a legal means to download music, the Chinese people would know that there are legal and pirated works online but they should only download the legal ones. Under the ACS, the copyright owner should register their works with the relevant department where fingerprint will be attached to the work which counts how many times their work have been downloaded. The file can be shared or posted online free of charge. However, sales tax will be charged on products which are required to do the uploading, downloading and sharing, such as, computer equipments, MP3 players, writable CD/DVD and burners. If this method is implemented, legal music and films can be legally downloaded free of charge, and people do not need to visit the illegal sites and use the illegal means to obtain the same thing. In similar manner, Google Music provides music search which is only accessible by Chinese internet users while the search results will be provided by another site which is ad-supported. The most important thing under this arrangement is that the music is that website is legally provided by the copyright owner. Even though the selection is still limited compared with Baidu.com, it is the first step for the Chinese public to access legal music.

Conclusion

As technology becomes more and more sophisticated, different kinds of piracy online will be coming into sight. However, with new legislations and wider judicial interpretation of relevant criminal laws, the intellectual property right issue is dealt with in a more high-profile manner which includes improving the awareness of the Chinese public regarding protection of intellectual property. However, more effective measures to curb the development of the hi-tech pirated sources will be definitely required.

Moreover, people should be made aware that stealing a CD from a shop is a theft and downloading a song from the non-copyright owner too is a misdemeanour. This could be done by educating people. Given the deep-rooted concept of shared property, a long-term education and promotion of intellectual property right is needed. Without the knowledge of the existence or importance of the intellectual property right, Chinese public can hardly have motivation to change its almost entrenched idea.

The perception gap between what is being reported to media and the actual extent film and music piracy at China must be eliminated. Media should help the Chinese people that many judicial success of is Supreme Court is bringing to justice property owners and violators. The media people should help disseminate enacted laws and regulation to curve violations and their successful implementation by telling the real score given the high extent of violation as seen by the Unites States is still very high. If the gap or distortions is not reconciled, an incorrect understanding of the problem may affect trade laws and foreign relations between the US and China and would cause enforcement resources to be misallocated. If the US fails to appreciate what have been done by the Chinese government to address intellectual property piracy, it is possible the China may lose the incentive to continue it enforcement efforts.

Although it is believed that the percentage of pirate sales to total domestic sales in China is still high, there are strong indications that pirate sales are falling and licensed sales are increasing. It can be deduced however that even if piracy rates will fall, the level of piracy in China is expected to remain in high in terms of volume because of the great number of people in China.

China is not US or Canada. The speed at which intellectual property protection may be enforced may take longer in China compared with more developed countries like the US or Canada. Although the Chinese government recognizes the need to protect intellectual property in its land, it may take some time before the expected improvement of piracy rates could actually be substantially be reduced.

There is reason to use the theory of moral development where the third level will not just come in an instant but may have to pass the other two levels depending on the moral education of the Chinese consumers of IP-protected products. The third level is described by Hill as the post-conventional level where people are most concerned with the ramification of their actions towards society in general. Before the third level comes, the moral development would have to pass the first level or the so-called pre-conventional level and second level or the conventional level. Under the first level, the focus is to avoid punishment and then achieve some level of self-gratification. Under the second level, there is now the peer pressure exerting its influence on individual where individuals would have to be influenced on possible disapproval by others.

Based on evidence and materials discussed in this paper, this researcher believes that the Chinese customers may still belong to the first level since peer pressure for possible dishonour may not have penetrated even to the consciousness of the people considering their background that property was previously owned by state and hence they could not be violating in one sense. Given the recent decision in the case of Yahoo China that may have been facilitating violation of intellectual property law, it may be easy to understand the present stage of moral development for Chinese consumers of intellectual property protected products. Yahoo China may also be argued to have its US roots and to think that it is all the fault of China with the US only blaming the latter would seem to be unfair.

It may also be deduced that violators may just be coming from the younger population of China of which research has confirmed that these younger people are greater in number than the more adult persons in downloading. It could be further deduced that low risk of detection and punishment as perceived by younger members of the population because of ease by which piracy could be committed in the light of participation of Yahoo China in the illegal downloading may have been causing the high piracy violations.

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