Ⅰ. Background and problems

Article 8 of China’s Copyright Law stipulates that copyright owners or owners of the rights related to the copyright may authorize collective administration organizations to exercise their copyright or rights related to the copyright, and that upon authorization, a collective copyright administration organization may exercise the copyright or the rights related to the copyright in its own name for the copyright owner or the owner of the copyrights related to the copyright and participates as a party in legal or arbitration proceedings concerning the copyright or the copyrights related to the copyright. Article 20 of China’s Regulations on Copyright Collective Management stipulates that any right owner, after having concluded a contract for collective management of copyright with a copyright collective management organization, shall not exercise by himself or authorize another person to exercise the rights in the contract to be exercised by that organization during the term agreed with in the contract. From the two provisions we can conclude that copyright collective management contract is trust contract and exclusive, under this copyright collective management pattern, any self-use will become illegal. Then is the management pattern desirable to copyright owners and suitable to China? The short article will take a typical case in China as an example and try studying the problem briefly by comparison.

Ⅱ. Typical case in China

In 2010, there happened a very controversial case in Beijing, that’s Musical Copyright Society of China (MCSC) v. Beijing October Culture Media Co.,ltd. (2013 HaiMinChuZi 1195). In the process of trial, the court confirmed four basic facts. (a) In 2010, Beijing October Culture Media Co.,ltd. held a famous Chinese singer Zhengjun’s live concert in Beijing, Zhengjun sang 12 songs trusted to MCSC to manage in this concert. (b) Singer Zhengjun was both the lyrist and composer of the 12 songs. (c) On March 1st 1995, Zhengjun concluded a contract for collective management of the copyright of existing and future musical works created by him with MCSC, but the contract did not exclude Zhengjun from exercising copyrights of his own musical works trusted MCSC to manage. (d) The China's Regulations on Copyright Collective Management was promulgated on December 28th 2004 by the State Council and took effective on March 1st 2005.

Based on the above facts, MCSC filed a lawsuit in Beijing Haidian District Court and complained Beijing October Culture Media Co., ltd of infringing its right to perform these songs.

In the process of Trial, MCSC held that the contract between it and Zhengjun was trust contract and exclusive, Zhengjun hadn’t right to exercise the 12 songs trusted to it to manage, therefore the organizer also hadn’t right to exercise the 12 songs. The Beijing Haidian District People's Court didn’t support MCSC’s position. The court decided that the defendant did not infringe the MCSC’s right to perform the 12 songs, its decision was mainly based on the following main reasons: (a) The establishment of MCSC is to manage copyrights which are difficult for copyright owner to exercise effectively, but not to exclude copyright owner from exercising his own copyrights without permission of and paying royalties to MCSC. (b) Article 20 of China Regulations on Copyright Collective Management did not apply to the contract concluded on March 1st 1995 between Zhengjun and MCSC. The Regulations on Copyright Collective Management took effect on March 1st 2005, it does not specify whether it has retroactive effect and whether it is applicable to contract concluded before it took effect in 2005. (c) The contract concluded on March 1st 1995 did not exclude Zhengjun from exercising or authorizing others to exercise his own works trusted to MCSC to manage.

Beijing Haidian District People’s Court held that the contract should override the effect of the Regulations and Zhengjun had the right to exercise copyrights of his own musical works trusted to MCSC to manage. The court further concluded that although there was no clear written license between Zhengjun and the organizer, the Zhengjun’s performance implied license to the organizer, now that Zhengjun had the right to exercise these musical works, the organizer should also have the same right without MCSC’s authorization.

The court’s decision is perfectly defensible. However, the contract between MCSC and Zhengjun was concluded before China Regulations on copyright Collective Management took effective. If the contract between MCSC and Zhengjun was concluded after the Regulations took effect, should the court made the same decision? In the following parts, let’s firstly review practices in Japan and Taiwan of China, then answer the question.

Ⅲ. Practices in Japan and Taiwan of China

How to deal with the relationship between the copyright holder and CMO in other countries and areas? Here take Japan and Taiwan of China as examples to illustrate the problem.

1. Practices in Japan

According to JASRAC’s interpretation if satisfying operational standards of self-use and dealing with some formalities, the copyright owner can exploit copyright of his own works trusted to CMO to manage without permission of and paying royalties to it.Section 1 of Article 11 (1) of “Japan Trust Contract Agreement Clauses 2010 (enacted by JASRAC according to Act on Management Business of Copyright and Neighboring Rights)” stipulates that if all the following conditions are satisfied, the truster can exercise the copyrights of his own works trusted to JASRAC to manage. (a) to exercise for promoting the managed works; (b) to exercise the managed works only in Japan; (c) to notify JASRAC the scope and quantities of exercising the managed works in written form in advance; (d) to submit informed consent in written form of all right holders involved in the managed works; (e) the publisher or organizer is the truster, including his relatives or his private firm that could be regarded as the same person of the truster; (f) to receive no consideration from making the managed works available to the public. However, any of the followings is not regarded as receiving consideration. Firstly, if it is distribution of copies of the managed works, the equivalent consideration of the actual production expenses. Secondly, when to hold concert, the equivalent consideration of the actual venue expenses; and (g) if to exploit other copyright owner’s works in the meantime, it is necessary to obtain license.

Two conclusions can be drawn from practices in Japan. The first is, except from the above-mentioned circumstances, any other self-uses of the trusted works for business will constitute infringement on the copyright of works trusted to JASRAC to manage in Japan. The second is, except that truster and truster’s (copyright owner) relatives or his private firm that can be regarded as the same person of the truster can become organizers or publishers and exercise the trusted works in order to promote the exercise of trusted works with no consideration, any other persons can’t become organizer or publisher and exercise copyright of trusted works without authorization of and paying royalties to JASRAC.

2. Practices in Taiwan of China

Before 2010, Article 13 of Taiwan Regulations on Copyright Intermediary Organization strictly prohibited copyright owner from exercising by himself or authorizing others to exercise his copyrights of the trusted after he joined the CMO. However, the Article was abolished in 2010 because of all kinds of violent criticisms from all levels.

In practice, the contract concluded between the CMO and copyright owner is still exclusive collective management contract, therefore, the copyright owner has not the right to exercise copyrights of his own works trusted CMO to manage unless he get a license from CMO after he has joined the organization.

Why happened such changes and existed such practices in Taiwan? There existed the following two reasons. One was that most opinions thought that it would excessively strengthen the exclusiveness of management contract if Article 13 of Taiwan Regulations on Copyright Intermediary Organization was maintained. Another was that most opinions held if copyright owner had the right to exercise by himself or authorize others to exercise copyrights of trusted works, users might conspire with copyright owner to avoid license from and paying royalties to CMO.

There happened a well-publicized case in Taiwan in 2009. Singer Xie Hexuan was complained of infringing the copyright of MUST for uploading his own songs on his own blog. Xie protested that why he had not the right to upload his own songs. Although this case came to private settlement eventually and did not enter into litigation proceeding and there was not much enlightenment for solving the same cases, it was still widely tracked by all sectors of Taiwan society. Many Taiwanese scholars thought that to differentiate copyright owner’s exercise and organizer’s exercise was very important. In light of their ideas, under some conditions, the fact that copyright owner can exercise copyrights of his trusted works doesn’t inevitably lead to such result that the organizer has right to exercise the same trusted works, the key is whether the organizer gets copyright owner’s license.

However, this case is different from the case which happened in Beijing. In this case, Xie Hexuan was only composer, the copyrights of his music had been assigned to a company, the company joined MUST, therefore MUST had the right to charge XieHexuan infringing its copyright.

Compared with practices in Japan and Taiwan of China, practices in Japan is too rigorous to copyright owners’ selfuse, practices in Taiwan of China is relatively flexible, the copyright owners can choose whether to conclude exclusive management contract with CMO.

Ⅳ. Legality of Article 20 of China’s Regulations on Copyright Collective Management

Legality of Article 20 of China’s Regulations on Copyright Collective Management is a very complicated problem which is connected with the function of Article 20. Then, what results will Article 20 of China’s Regulations on Copyright Collective Management cause?

Firstly, according to Article 20 of Regulations on Copyright Collective Management, after March 1st 2005, the copyright owner obviously has no choice but to conclude contract for exclusive collective management with CMO, CMO’s management will cover all kinds of uses of copyright owner’s works.

Secondly, there exist no possibilities of individual management, which will be a great harm to copyright owner. Under the control of Article 20, copyright owner has no possibilities to exercise the copyrights by himself or authorize others to exercise the copyrights that shall be exercised by the CMO within the period stipulated in the contract, copyright owner will lose many gold market opportunities.

What’s more ridiculous, even if CMO does nothing for copyright owner, it can still deduct 10-15% of licensing royalties as management cost. However, if copyright owner can directly conclude contract with and collect licensing royalties from users, he will obtain all royalties. That’s to say, the copyright owner will lose 10-15% of licensing royalties without any justifiable reasons under CMO’s exclusive management. Of particular note is, if CMO doesn’t fulfill conscientiously its management duties, the copyright owner’s interests will be damaged more greatly.

To take MCSC as an example, from 1992 to the end of 2011, its total revenue of 2011 reached about 88.89 million RMB, a new record and an increase of 30.69% over the previous year.However, by the end of 2011, the total distributable amount still reached 73,4725 million RMB (Annual Report 2011 of MCSC), annual report 2012 of MCSC still does not come out so far, not to mention annual report 2013.

The above fact shows that the collective management of MCSC is still not transparent, open and efficient, MCSC does not distribute royalties to copyright owners timely and impartially, many copyright owners have never received any royalties so far. That’s why many right holders don’t want to join MCSC and strongly criticize MCSC.

Thirdly, Article 20 is likely to cause harm to users.Under CMO’s management, users can’t directly obtain copyright owner’s license to exercise copyright of related works and exploit related works with no need to worry about copyright dispute, which is possibly detrimental to promote exploitation of copyright owner’s works.

Fourthly, Article 20 is a strong disincentive for copyright holders to join CMO.According to Article 20, copyright owners who are unwilling to conclude contract for exclusive collective management of copyright can’t become a member of CMO, this will deprive copyright owners of equal right of becoming a member of CMO.

Because Article 20 of China’s Regulations on Copyright Collective Management has brought about the above four adverse consequences, many scholars think that its legality is problematic. Based on this idea, the famous copyright law scholar and former official of Taiwan Intellectual Property Officer, Mr. Zhang Zhongxin, thought even if the management contract between the singer Zhengjun and MCSC was exclusive, Haidian District People's Court should also decide organizer had right to use the said song, his reason was as follows: “Instead of letting organizer pay royalties to MCSC and MCSC distributes no royalties to copyright owners, might as well let organizer directly pay royalties to copyright owners.”

Mr zhang’s idea was apparently the result of strongly criticizing Article 20 and MCSC. Although Mr Zhang’s idea was a pragmatic approach to protect copyright owners’ interests, it was against the concept of the rule of law,it seems very difficult to be supported.

Ⅴ. Conclusion: market not authority should be decisive

In some countries and areas, practices of exclusive collective management of copyright may be more desirable than that of non-exclusive collective management, just like some scholars said, it can avoid excessive competition which harms the copyright owner’s interests. However, it depends on effective, full, timely and open collective management. However, at least at present there is still lack of such collective management in China, exclusive collective management of copyright is both not desirable to copyright owners and not suitable to China.

This paper holds that any laws and regulations should not force copyright owner to conclude exclusive contract with CMO, unless copyright owners are willing to do so. Those copyright owners who are willing to accept exclusive collective management are often lack of ability to exercise effectively their copyrights, exclusive collective management of CMO is more beneficial for them. But for those who are unwilling to accept exclusive collective management of CMO, they have ability to exercise effectively their copyright in some special circumstances, laws and regulations should not force them to accept exclusive collective management in any circumstances. In this sense, practices in Japan has to be deemed too exacting to copyright owners, it is very difficult to be transplanted into China.

Perhaps some opposers think now that the contract between copyright owner and CMO is trust contract, the copyright owner does not have the right to exercise copyright any more in light of the principle of trust contract. The idea is untenable. Technologically, copyright is intangible property, even if trusted to CMO to manage, right holders can still exercise his right, which is unlike trust of tangible property.

In the long run, based on Corcern for competition and maturity of the market for CMOs, transparency and impartiality of CMO’s practices (distribution and governance), statute making copyright collective management exclusive mandatory is still too early for China, in order to balance all parties’ interests, the best choice is to abolish Article 20 of Regulations on Copyright Collective Management.

In a word, when market can decide distribution of resources, any authorities (legislation, administration and jurisdiction) should not interfere in market, it is the market but not authority should be decisive in the process of distribution of copyright resources.