John McLellan spoke at the Midem conference at the “Legal Up-date” seminar hosted by the International Association of Entertainment Lawyers

 

Script for the Speech at Midem (2016)

According to the Concise Oxford Dictionary “to filibuster” is to obstruct in a legislative assembly by prolonged speaking.

The Hong Kong government is by now all too familiar with this term and tactic, employed with great “success” by opposition members on a number of government legislative initiatives, one of the most recent being the passage of a new Copyright (Amendment) Bill. This Bill provoked great concern amongst a significant portion of Hong Kong’s population and spurred a measure of demonstration that would not generally be associated with the passage of copyright law. So, what was all the fuss about?

(1) Expanding Exclusive rights

The Bill included a broader right that allowed copyright owners to control dealings in their works across any electronic platforms defined broadly in order to cover any existing or future modes of electronic transmissions, i.e. “to communicate the work to the public”.

(2) Safe Harbour Provisions for OSPs

There were also “safe harbour provisions” (which the government had sought to introduce in the 2011 Amendment Bill which also failed) for OSPs – with the usual take down notice mechanisms that are a feature of similar legislations elsewhere in the world.

(3) Additional Fair dealing exceptions

The angst seemed to be focused on the attempt to expand upon the fair dealing exception.
Hong Kong has relatively limited fair dealing exceptions: (a) research and private studies; (b) criticism, review and news reporting; (c) education; and (d) public administration. Three additional fair dealing exceptions were proposed in the 2014 Bill:

• Use for the purpose of parody, satire, caricature and pastiche (although these terms were not defined in the 2014 Bill);
• Use for the purpose of commenting on current events. (This would seem to have expanded upon the current definition for fair dealings for the purposes of news reporting and would offer protection to Internet users who have been using copyright works when commenting on current political or social events); and
• Use of a quotation to the extent which is no more than necessary for the specific intended purpose. (This was aimed at allowing the Internet users to quote copyright works for the purposes of facilitating discussions, providing information or expressing opinions as used on blogs and social medial websites.)

While these additional fair dealing exceptions afford better protection to the users than the current regime, it was argued vociferously by some interest groups that the scope was not wide enough to cover all common derivative works.

In an attempt to stall the debate (and the passage of the Bill), the pan-democrat lawmakers put forward approximately 1,300 amendments and requested a quorum bell – which triggers a headcount – 24 times. This forced the government to withdraw the bill which cannot be re-tabled until the 2017 legislative session.

So what was the fuss really about? Well, at its root seems to be a fear that, after the incorporation of the new measures, citizens may be prosecuted for political reasons. Hong Kong people frequently use ironic pictures to express their opinions on public affairs, or even messages satirizing the Chief Executive and the HKSAR Government. There have been a series of incidents involving officials since the handover in 1997 that have served to seriously undermine the confidence of some members of the public in the Hong Kong Government.

Meanwhile, over the border in the Motherland, the Central Government has made a number of policy announcements of significance for the entertainment industry and specifically the music industry.

 

Regulator’s 2015 policy for music industry development

The State Administration of Press, Publication, Radio, Film and Television (more commonly known by its previous acronym “SARFT”) published in November 2015 “Several Opinions on Vigorously Promoting the Development of China’s Music Industry”.

(a) The Opinions propose a 5-year plan to boost the value of the music industry to RMB 300 billion by the end of 2020.

(b) In order to reach this target, the Opinions propose a number of measures, including:-

1. Cultivating large-scale music group companies: To cultivate two to three large music enterprises through means of acquisition, merger, reorganisation or otherwise. Such enterprises will own a number of famous music brands and enjoy certain policy advantages. Both their respective turnover and asset value will exceed RMB 5 billion.
2. Establishing a large-scale professional music platform: To establish a national-wide music statistics platform and an IP transaction and monitoring platform, so as to facilitate the production, promotion, distribution and sale of high-quality music.
3. Encouraging international cooperation: To support PRC music corporations in introducing high-quality music talents, music programmes and advance business practices from all over the world. Ideally, such international cooperation should see more ‘Chinese cultural elements’ being included into in the relevant music products. Interestingly, the Opinions also specifically mentioned “to support PRC music corporations in participating in high-end exhibitions such as MIDEM”.

In terms of achieving these ends, the industry would seem to have made a good start.

 

Digital music scene in China: Background and latest development

a. Kugou and Tencent’s QQ Music are China’s largest music streaming services both claiming more than 800m registered users. Other major market players include NetEase Cloud Music, Baidu Music, and the Alibaba Group-owned brands Xiami Music and Tiantian Dongting. Apple Music is in the country, but its impact is negligible and far outweighed by companies native to the country.

b. Tencent has made great strides in licensing content from U.S. rights holders, signing up exclusive deals with Warner Music and Sony Music to exclusive distribution deals. It also owns the most popular instant messaging app WeChat, by which users can share songs on Tencent’s QQ Music. Its QQ music service claims over 100 million daily active users.

c. Meanwhile, Baidu, the operator of China’s largest online search engine, has plans to merge with domestic music company Taihe Entertainment Group. The deal will combine Baidu Music and Taihe’s traditional music publishing and artist development activities into a new digital music enterprise. This partnership will see Taihe’s intellectual property and A&R capabilities, covering more than 700,000 recordings, joining with Baidu’s streaming and distribution resources. Baidu has about 150 million active monthly users.

d. In April 2016, Alibaba Music upgraded its music streaming business with the debut of an online platform where fans can connect with stars, merchants and others in the entertainment industry. Music fans can use their smartphones to follow their favorite stars, participate in fan activities, purchase related merchandise and watch live shows of cyber celebrities and popular singers. The division has exclusive rights agreements with numerous Chinese and Western music labels such as Universal Music Group, BMG and S.M. Entertainment and Rock Records.

e. It was reported in May 2016 that Tencent-affiliated China Music Corp. (CMC), the company behind online music services Kugou and Kuwo, was planning a U.S. listing, possibly before the end of the year. The company has hired Goldman Sachs Group and Morgan Stanley for the IPO which could range between $300-600 million USD.

 

Governance on Copyright Protection and Anti-Piracy

a. On the anti-piracy front in November 2015 the General Office of the State Council published its “Opinions on Strengthening the Governance of Infringement and Counterfeiting on the Internet”.

b. The Opinions introduce a 3-year target for the suppression of IP infringement activities on the internet. Law enforcement agencies will focus on counterfeit products and internet piracy. However, they will also extend their monitoring coverage to include new transmission methods such as third-party apps, cloud storage, Weibo and WeChat.

New “Online Music Copyright Association” established in January 2015

a. Furthermore, in January 2015, around 30 music companies and platforms in China (e.g. MCSC, Tencent) launched the Online Music Copyright Association in an attempt to battle piracy. The association published two documents: the ‘Anti-Piracy Declaration’ and the ‘Self-discipline Convention’.

b. The ‘Anti-Piracy Declaration’ pledges that all members of the association will pursue legal actions against copyright infringers and make sure they bear their legal responsibilities.

c. The ‘Self-discipline Convention’ proposes that all members should establish their respective self-check systems, such that IP-infringing materials can be detected, tackled, unlisted and deleted from the relevant platforms.

As a general observation having cited these policy initiatives, 2015 was a major year for copyright enforcement in the online music space, with 687 cases tried at various Chinese courts in total, becoming the largest category of such online IP disputes.

 

Apple loses trademark fight over ‘iPhone’
When is an iPhone not and iPhone; When it is a bag made in China

a. In May 2016, the Beijing Municipal High People’s Court ruled in favour of Xintong Tiandi Technology which had registered the “iPhone” trademark for leather goods. The major reason behind the Court’s decision was that Xintong Tiandi’s use of the IPHONE trade mark does not harm Apple’s interests, as no one in China would in fact be confused and think that the leather goods were associated with Apple. Further, it held that Apple failed to prove that the brand ‘iPhone’ was famous in China.

b. Apple has said it plans to request a retrial with the Supreme People’s Court, the highest court in mainland China.

 

Facebook won a trademark case in the Beijing High Court against a company that registered the brand name “face book”

a. Contrast Apple’s experience with that of Facebook. In May 2016, the Beijing High Court ruled that Zhongshan Pearl River Dinks Factory (“ZPR”), should not have been allowed to register the ‘face book’ trademark in association with its food and drinks products. The Beijing court said that ZPR’s application to so register ‘face book’ was a blatant act of copying and harmed fair market competition. The application was in ‘violation of public order and moral principles’ and that ‘face book’ was ‘intentionally copied from another high-profile trademark.’ The trademark authority’s approval was revoked.

b. Interestingly, in contrast to the popularity of iPhone (which has sold millions of handsets since launching in 2009), Facebook is effectively banned in China.