19 March 2021
The new PRC Copyright Law will come into effect on June 2021.
China has a three-track enforcement system for copyrights – criminal, civil and administrative. This gives options to IP owners. Because there are so many copyrights covering books, music, film, digital content, applied art and other forms of work, copyright cases usually outnumber those of trademark, unfair competition and patent infringement. Therefore, China’s copyright administrative enforcement authority plays a very important role in cracking down on copyright infringers as the administrative route is cheaper and faster to take. This allows many cases to be resolved without having to be brought to the IP courts, which are already burdened with a heavy caseload.
In this article, we will look at recent developments in China’s copyright administrative enforcement system to show the wide range of options available for IP owners.
The copyright administrative enforcement authority
Copyright enforcement is led by the National Copyright Administration of China (NCAC) and its various levels of copyright administrative authorities (CAA). Its role is to protect the exclusive rights of copyright holders as well as the public interest. The only exception to this enforcement system is that the Shenzhen Administration for Market Regulation (AMR) is in charge of administrative copyright enforcement in Shenzhen, as it is a special economic zone.
CAAs are empowered to conduct on-site inspections of premises where illegal acts by an infringer occur, interrogate relevant and responsible persons, seize alleged infringing reproductions, equipment for installing/storing infringing reproductions, materials, tools and equipment used for the purpose of committing illegal acts, and to check, seal-up and make copies of files, accounts and other related written materials. These are very extensive powers far beyond what can be achieved in a civil case.
EXAMPLE:
In March 2019, the Nanjing City CAA raided Nanjing LeKu Internet Technology Co.Ltd for making illegal profit through its app “Korea Opera TV” which provided 88 online unauthorized films and other audio-visual works and advertisements. The CAA issued a decision to confiscate the illegal profit of RMB 20,000 (USD3,076) and imposed a fine of RMB 839,000 (USD129,076)
Compared to civil litigation which usually takes 6 to 18 months for first instance judgements, an administrative punishment decision is usually issued within 3 months. Depending on the severity of the copyright infringement, the authority can issue a decision to confiscate seized items and illegal profits, destroy infringing reproductions, tools and equipment without compensation and impose a fine of up to five times the illegal turnover. The punitive decision is published on the CAA’s official website.
EXAMPLE:
The Shenzhen AMR issued a decision on 4 November 2020 (within a month after filing the case) with a fine of RMB 10,000 (USD1,538). It was imposed based mainly on notarized purchases from Hong Kong against a factory for illegally installing TV boxes and disseminating US copyrighted films and selling them to overseas buyers. The punishment was published on the Shenzhen AMR’s official website[1].
Copyright infringement is becoming more technical, such as cases of applied artworks, anti-circumvention and rights management information cases, communication to the public digital infringement. So CAAs, especially in tier one cities like Shenzhen, Guangzhou, Shanghai and Beijing, having to decide more and more complex copyright infringement case at the administrative stage.
EXAMPLE:
A 2020 case for a Japanese copyright holder involved technology circumvention tools related to a computer game console. The Guangzhou and Shenzhen CAA had to decide on Article (6) of Article 48 of the Copyright Law regarding intentional avoidance or destruction of technical measures without the consent of the copyright holder. After careful consideration and technology verification, both authorities issued punishment decisions imposing penalties on distributors/service providers of the game console.
The pre-requisite of public interest for copyright administrative enforcement
In addition to the Copyright Law, China has also promulgated other rules to protect copyright. These include the Implementation Regulations for the PRC Copyright Law, Regulations on Protection of information Network Transmission Right, Regulations on the Protection of Computer Software, Measures for the Implementation of Copyright Administrative Punishments, and the Measures for the Administrative Protection of Internet Copyright.
In order for the CAA to implement the aforementioned laws and legislations in copyright infringement cases, it is a pre-requisite that public interest is also harmed by the infringing act, according to Article 48 of the Copyright Law. There is no clear definition as to what constitutes as “an infringement act that also harms public interest”. In practice, CAAs at different levels have different approaches to applying this Article. Some cases are rejected by the CAA over doubts about the “public harm”, of which the IP owners involved are advised to go to court.
Some years ago, the NCAC provided guidance regarding how to apply Article 48 concerning the public interest to the Zhejiang Provincial Copyright Administration. The NCAC sets out the principle that if an act not only infringes another’s copyright but also harms fair competition in the market, the act should be deemed as also harming public interest. This has given some guidance for law enforcement and it is not too difficult for copyright holders to prove this. In our experience, copyright holders should provide initial evidence of the infringing act with a purpose to make illegal profit, the infringement scale, some examples of unfair competition, as well as harm to consumers’ interest, and reasons this will cause disorder to the market. Then the CAA will accept a case.
A decorative textiles copyright infringement case handled by the Guangdong Provincial Copyright Administration (GDPCA) is also regularly referred to by CAAs, particularly in Guangdong Province, as guidance for officials toconsider whether public interest has been harmed. They look at several factors including:
1. Harm to the IP holder, which also includes harm to fair competition in the market and causes a risk to other competitors.
2. The difference in quality of copyright infringements potentially suffered by consumers.
3. Pirated products, which lead to tax evasion and harming the state.
Proving copyright infringement and using the copyright recordal system
Copyright automatically arises in a completed work embodied in a tangible medium of expression. In practice, the copyright enforcement authority requests a copyright holder to provide a copyright recordal certificate to initially prove copyright ownership before they will review its merits and file a copyright infringement case. A copyright recordal certificate is issued by the NCAC (without substantial review of an application) upon voluntary application by the copyright holder. This serves as prima facie evidence of copyright subsistence and ownership. Unless the infringer can provide evidence otherwise (which requires the submission of evidence such as original manuscripts and drafts, contracts, etc.), the copyright recordal is accepted by the enforcement authority as evidence of copyright ownership.
Along with covering technical copyright issues, a copyright recordal certificate also covers efficiency issues. This is because it is in Chinese and it has an official status. Not only is it a time saver for the CAAs, but it can be relied on when enforcing copyright through cease-and-desist letters or complaints to third-party e-commerce or social media platforms.
Copyright recordal is a speedy process – a recordal takes only three to four months and because no examination is required, it is also inexpensive. A fast-track process varying from 1 working day to 35 working days can be requested to expedite the progress by paying additional fees. IP owners worry that such recordals are a barrier to enforcement, but proving subsistence and ownership in the Chinese language is often a more time-consuming process.
According to the 2019 white paper Intellectual Property Protection Status issued by the China National Intellectual Property Administration (CNIPA), there were over 4 million applications for copyright recordals in 2019, covering 2.7 million works and 1.5 million computer software programs.
Administrative cases used in civil litigation
One important use of administrative cases is to secure evidence for civil litigation. In some cases, the cessation of infringement will be sufficient. In others, however, IP owners will need to seek damages. In such cases it is often useful to file an administrative action first so that all the evidence can be obtained. In our experience, it is far more effective to obtain evidence through this method than through private investigations. The goal of the copyright holder then will be to secure an award of damages.
EXAMPLE:
In December 2020, Rouse filed a complaint against a jewelry wholesaler in the Shuibei area (famous for jewelry wholesales) in the Luohu District AMR of Shenzhen. The AMR raided the store and seized over 20 luxury rings, bracelets and necklaces made of gold and platinum that were replicas of copyrighted luxury jewelries without the brands. The illegal value of the seized goods reached the criminal threshold and the AMR transferred the case to the local police for criminal investigation in February 2021. The copyright holder has begun settlement negotiations seeking damages of RMB 1 million (USD153,846). The prospects of winning a civil litigation case based on evidence from the raid is high if a settlement is not reached.
Jianwang Campaign ( or “ SwordNet Campaign”)
China conducts campaigns to enforce IP protection. Since 2005, the NCAC, together with the Ministry of Industry and Information Technology (MIIT), the Ministry of Public Security (MPS) and the Cyberspace Administration of China (CAC) have run an annual “Jianwang Campaign” aiming to tackle online copyright infringement in music, movies, literature, games, e-commerce, software and applications – all types of online copyright infringement.
According to government statistics, the NCAC, MITT and MPS has dealt with 5578 cases related to Internet infringement and piracy, including the legal shutdown of 3079 pirate sites and confiscating 2230 servers and related devices and imposing fines of up to RMB20.52 million. According to the China Intellectual Property Protection Status, the Jianwang Campaign has led to 1.1 million piracy links removed, 10.75 million piracy replications were confiscated, 1,405 piracy websites were shut down, 450 internet copyright infringement and piracy cases were handled, 160 copyright infringement cases worth of RMB524 million were (US$80.6 million) transferred to the criminal authorities or investigated.
Such campaigns have missed results. Some accuse the government of publishing great statistics only since copyright infringement problem remains widespread. However this misses 2 important points. First copyright is widely understood to be an issue of public good too. Creativity is protected only where the government steps in and takes action. In a country like China where infringement is not uncommon, government campaigns provide a good solution. The second point is this; these campaigns are a bedrock on which the CAAs develop extensive experience, which IP owners can rely on to secure great case results for themselves.
EXAMPLE:
In January 2019, Shanxi Provincial and Changzhi Municipal police and the CAA formed a special team to investigate into the website of Shengcheng Jiayuan (圣城家园网) for the unauthorized online dissemination of films, music, games and software. During the joint enforcement, it was found that the operator Mr Zhu and other infringers had made profits from illegally providing its members (more than 2 million registered members) 16,700 films, 16,300 music works,4,700 games, and 9,900 software, involving a total of over 1.3 billion clicks. In December 2019, Huguan County People’s Court in Changzhi City issued a criminal judgement against Mr. Zhu and the other infringers for copyright infringement, imposing a sentence of up to 3 years and 6 months and fines of up to RMB 810,000 (USD124,615) for each individual. It only took the authorities 15 days to make the decision, from filing the case to arresting the first suspect, and less than a year to the trial.
Customs Copyright Protection
Another administrative authority that can handle copyright infringement and piracy cases is the China customs. Copyright holders can file applications for copyright recordals in the national customs database and provide training in different ports to get on-site inspecting officials familiar with copyrighted works to enhance the chance of intercepting reproduced or pirated goods. According to China Intellectual Property Protection Status, the China Customs seized 303 shipments of 83,700 copyright infringing products in 2019.
EXAMPLE:
In April 2020, Foshan customs (under Guangzhou Customs) intercepted 1825 backpacks with SWISSGEAR labels infringing Swiss Wenger’s copyright. It is the biggest seizure of copyright infringement in the past 3 years for Guangzhou customs[2].
In Feburary 2020, Xiamen customs seized 24,000 light sticks infringing the copyright of Xiamen Changhui Enterprise Ltd (厦门长辉实业有限公司). The copyright holder did not record its copyrights beforehand with customs, but the copyright holder reported the target shipment to Xiamen customs, submitted its copyright certificates and paid the bond. Xiamen customs reviewed the copyright and made comparison with the target light sticks and accepted the case.[3]
Shenzhen as the most advanced CAA
With its unique test and pilot systems for IP enforcement, Shenzhen is a frequent trail blazer in IP cases. A key concern in China is deterrents. Administrative enforcement suffers from the accusation that fines are too low, just a cost of doing business for IP infringers. A key worry for IP owners using administrative remedies instead of civil ones is whether the penalty will be higher than the gains from IP violations.
EXAMPLE:
In March 2014, Tencent, which was the exclusive licensee of 13 copyrighted audio-visual works, made a complaint to Shenzhen AMR against Qvod (a developer and provider of software for broadcasting audio-visual works) for disseminating the 13 works on the internet without authorization. Before Tencent filed the complaint, it had sent 3 cease-and-desist letters to request Qvod stop the infringement. Tencent also provided a civil judgment from the Shenzhen Nanshan District Court to prove that similar infringing behavior made by Qvod was confirmed by the court to be copyright infringement and ordered to stop the infringing activity and to pay damages.
Based on evidence against Qvod on repeated copyright infringement and public harm, the AMR issued a fine of RMB 260 million (US$ 40 million), which was three times of Qvod’s illegal business turnover of RMB 86.71 million. Qvoq appealed to the Guangdong provincial Copyright Bureau by filing for first instance administrative litigation at the Shenzhen Futian District People’s Court, for second instance administrative litigation at the Shenzhen City Intermediate People’s court, and for final administrative litigation to the Guangdong Provincial Higher Court. In 2019, the Higher Court made a final binding judgement rejecting all of Qvod’s claims and upheld the decision. As a result of the decision, Qvod went into bankruptcy.
Conclusion
China handles a vast number of copyright administrative cases. They are inexpensive, speedy and are effective for most situations. Many cases are directly initiated by the authorities under government campaigns, and the CAAs are becoming more experienced in tackling new subject matters. Administrative remedies are a great first step for copyright holders seeking criminal and civil penalties in cases of copyright infringement.
Sophia Hou, Principal, Rouse
shou@lushenglawyers.com
[1] https://amr.sz.gov.cn/outer/doublePublic/detail.html?id=
a7eea817a9314bc8a548d2e23541ca9b&type=XZCF&
name=zhxnxwwk2dl53nhpx7dlzpfv47l5hu6qz7pltk6lx3e6nt6ty7llpogw7dl7psfiwc4a
[2] http://szb.nanhaitoday.com/epaper/zjsb/html/2020-04/10/content_5804.htm
