The CAVCA Staggering Forward in Dispute

By Kevin Nie, China IP,[Copyright]

Ever since the foundation of the CAVCA, over several years, it has only done one thing, but with great difficulty. That is charging and collecting copyright royalties from “karaoke” operators in a complicated and changing environment. 

The full name of the CAVCA is “China Audio-Video Copyright Association,” and its preparation for establishment began in 2001. It was officially approved by the National Copyright Bureau in 2005, and it completed the legal person registration in the Ministry of Civil Affairs of China on June 24, 2008. It then became the sole legal entity of the audio-video copyright collective management entity on the mainland.

The CAVCA has always been staggering forward with disputes since its preparation for establishment to its formal foundation, and then to its all round launch of large-scale rights-maintaining campaign.

The dispute of karaoke charges

Since the 1990’s, it has been one of the major choices for entertainment to go to for places like KTVs, and the karaoke industry has become one of the largest entertainment industries with the fastest developing speed and largest market potential in recent years. Meanwhile, the acute conflicts of interests between the audio-video industry and the karaoke industry have become increasingly severe.

Since the revision of Copyright Law in 2001, the number of lawsuits related to karaoke charges has begun to rise. In particular, since 2003, the copyright conflict regarding karaoke has been constantly intensifying. Among these incidents, what is most typical is that in April, 2004, more than 50 record companies under the IFPI (International Federation of the Phonographic Industry), such as the Globe and  Warner, began a simultaneous and nationwide campaign against the KTV industries, which revoked intensive repercussions. The government, consumers and news media expressed much concern.

Karaoke industry is engaged in activities which are mainly dependent on music and music video works, and it is their legal duty to pay copyright royalties to the rights holders. But it is hard to pay remuneration to the copyright individually because copyright owners and karaoke operators are scattered everywhere. What makes it harder is the large quantity of music works and MV works used in karaoke clubs. Therefore, the best way to pay remuneration to obligees is through collective management organizations.
Copyright Collective Management Regulations, which was promulgated and implemented as of March 1, 2005, provides that “the rights that are difficult for the obligees to perform effectively, such as the rights of performance, broadcasting, rental, information network propagation, copy and other rights, can be collectively managed by copyright collective management organizations.” It is a legal right for the obligees to protect their rights as well as participate in the foundation of organizations such as the CAVCA to protect and manage collections in relation to those rights.
On December 23, 2005, the National Copyright Bureau approved the foundation of China Audio-Video Copyright Association, collectively managing the obligees’ copyright or other legally protected rights relating to those copyrights in accordance with laws.

Since the first day the CAVCA was founded, it started to carry out the approval and protection work in fields using audio-video works like karaoke copy, issue, network usage and rental, etc. “From its formal approval, karaoke charges have been our prime mission,” said Wang Huapeng, who was not only the Vice President of China Audio Video Association (CAVA) but was also the officer responsible for the preparing team of the CAVCA when interviewed by China’s Economic Weekly.

In July, 2006, the National Copyright Bureau officially approved the CAVA and the preparation team of the CAVCA, both representing the obligees of music video works, and Music Copyright Society of China (MCSC), an organization of music works obliges to collect copyright royalties in karaoke clubs.

After a comprehensive survey and analysis and thorough communications with karaoke operators, the CAVA and its preparation team, the organization submitted to the National Copyright Bureau the Standard on Copyright Royalties in Karaoke Operations, which suggested that the karaoke operators should pay copyright royalties yearly in units of chambers, that is, 12 Yuan per day for one chamber (including royalties for both the music and MV works). The National Copyright Bureau noticed the public of the Standard for one month beginning Aug, 21, 2006 to solicit suggestions from every circle, and held a conference for soliciting the opinions from those concerned such as obligees, the karaoke clubs and the entertainment associations. 

Speculations and concerns sprang up even before they started charging for works. Before the official announcement of the Standard, the industry commonly held a wait and see attitude.

On November 9, 2006, the National Copyright Bureau made a formal announcement on its official website, approving the Standard submitted by the CAVA and the preparation team of the CAVCA mentioned above. At the same time, pilot projects were carried out in larger cities such as Beijing, Shanghai and Guangzhou, etc.
The announcement of the Standard triggered a stir in the society, and was subjected to questions and opposition from many sides. The most commonly discussed disputes are as follows: Are the standards on copyright royalties reasonable? Who is qualified to collect the royalties? Who has the right to supervise to collection of royalties? The Shanghai Municipal Association of Culture & Entertainment Industry (SMAEI) firmly opposed the idea based primarily on the principle that, “the price is too high.” KTV clubs in Beijing said the price was “unacceptable,” while the Guangzhou Municipal Association of Culture & Entertainment Industry (GMAEI) issued a public notice to boycott it, refusing to pay the royalties.

“Sock puppet” of the CAVCA

Every party concerned raised questions whether the CAVCA, which was under the preparatory stage at that moment, was qualified to collect the royalties. Because when the Standard was released, the CAVCA was still in the preparatory stage, which was severely criticized by representatives from the entertainment circle. Huang Shiqiu, President of the GMAEI said, “It is impossible for us to hand the money over to the CAVCA without legal identity.”

The CAVCA is a collective organization for the purpose of managing the audio-video copyrights, which was launched by the CAVA and approved by the National Copyright Bureau. It took two years’ time from the approval to formally establish the completion of the registration with the Ministry of Civil Affairs of China. During this period of time, the obligees’ willingness to protect their legal rights became more intense. According to the No.1 Announcement of the National Copyright Bureau (2006), prior to the completion of the society registration of the CAVCA, the duty that the charges collection of the karaoke copyright royalties had to pay was temporarily exercised on its behalf by the CAVA. The man responsible for the establishing the CAVCA preparation team and its working staff appeared publicly on behalf of the CAVCA.

The popular term on Internet of a “sock puppet” may well illustrate the phenomenon. The CAVA was considered the “sock puppet” of the CAVCA before its official establishment.

After deciding to collect the karaoke copyright royalties, the CAVCA was well prepared for a variety of challenges, and the boycott from industry associations was the first big problem they faced.

On December 23, the CAVA held an internal meeting in Beijing, and decided to begin to collect royalties as of January 1, 2007.

In order to make the collection of obligees’ rights operate effectively, the CAVA held China’s audio-video copyright protection working meeting in Beijing, and set up the Copyright Protection Center of the CAVA on November 29, 2006. It was a temporary institution on behalf of the CAVA to protect the rights of its members, which marked the actual operational stage for legalizing the operation of the karaoke industry.

Disputes continued, and so did the win-lose game for the related parties. The karaoke copyright charge became temporarily a seesaw battle.

After several months, the dispute over karaoke copyright charges revived again after a cooling down period. The CAVA published a notice in the Guangzhou Daily on March 26, 2007, which stated that the Guangzhou-based agency of the CAVA would initiate the collection of charges of karaoke music works and music video works copyright.

In February, 2007, the Yunnan-based station of the CAVA was officially founded. It began to grant authorizations and collect karaoke copyright royalties in Yunnan. On February 13, the Association signed agreements on the payment of karaoke copyrights with the first group of 12 KTV clubs in Kunming, Yunnan province.

Soon the CAVA collected the first karaoke copyright royalties, which were from Yunnan province.

On April 8, 2007, 30 KTV owners in Kunming acquired copyright licenses from the CAVA, and became the first group of domestic KTV enterprises authorized and licensed. The CAVA held a special news conference in Kunming, and officially issued the licenses to the KTV owners who had paid the royalties.

After the successful “ice-breaking” in Yunnan, the work started in succession to reach out to the provinces of Xinjiang, Shaanxi, Shandong, Beijing, Guangdong, Jiangsu, Fujian, Liaoning, Chongqing, Hunan, Anhui, Jiangxi, Shanxi and Sichuan, and spread throughout the whole country quickly. By the end of 2007, the karaoke copyrights royalties had been carried out in 15 provinces, autonomous regions and municipalities across the country. 

The organization realized that protecting copyrights through their collective management programs had not been appreciated by most people. The public had reacted sharply and questions began to arise when the CAVA released the notice that it began to collect the karaoke copyright royalties in 2007. The Association made various announcements about its efforts, especially in the publicity month of the IPRs during which more than 100 articles and news related to IPR protections were published. The conference for the announcement of the karaoke royalties was organized by 100 people in the Great Hall of the People. In May, 2007, the News Probe in CCTV specially made a program titled The Karaoke Industry Finds it Difficult to Say OK, and gave a summary report on the copyright royalties.

The CAVCA after being given the proper title

On May 28, 2008, the CAVCA was officially founded in Beijing. It was granted authority to collect the royalties which had been managed by the CAVCA before. One year since its establishment the CAVCA began a large-scale right-protecting campaign, and caused public concern as it began suing several KTV operators.

In July, 2008, because of the infringement of using 3 MV works owned by the member under the management of the CAVCA, the Holedy Amusement Park in the Chancheng district of Foshan city was fined 30,000 Yuan, and was ordered to stop the infringements immediately and delete the music which was infringing on copyrights.
The CAVCA filed lawsuits at seven courts in Beijing on October 17, 2008, against 100 Beijing based karaoke bar operators such as “The Same Song, In the Mood for Love, The 5th Club” and “17 Miles”, who were refusing to pay royalties for songs and MV videos they used. It was the first time the CAVCA had engaged in such large scale lawsuits to protect the rights of its rights holders since its foundation.
From December 18 to December 19, the first court decision was made on the CAVCA suing the KTV copyrights infringements, and the CAVCA won the lawsuit. 9 KTV clubs such as “The Same Song” and “In The Mood For Love” were sentenced to stop the infringing act and to compensate for the damage, the highest amount of compensation reached 100,000 Yuan.

Meanwhile, the CAVCA continued carrying out the work of collecting and paying the copyright royalties of the karaoke. Since 2008, the era of “free-lunch” was over as for the karaoke industry in the provinces or municipalities such as Chongqing, Shanghai, Tianjin, Guizhou and Hubei.

CAVCA’s contributions were fully recognized by some departments of the government. On December 25, 2008, the General Office for Social Securities of CPC central committee, and the General Office for the Supreme Court for the PRC, the Propaganda Department for the Ministry of Public Securities of the PRC, the Political Department for the Supreme People’s Procuratorate of the PRC, the Publicity Bureau of the legal system for the Ministry Justice P.R.C, Press Association of China People’s Congress, Press Association of China’s Legal System jointly participated in the selection of the top 10 typical cases in China in 2008; the lawsuit case of the CAVCA was among these. On December 29, 2008, the CAVCA was chosen in the list of the “Top 10 Figures of Right Protections in 2008,” jointly sponsored by the major news organizations of the capital press and participated and supported by some departments of the State Council.

During the course of participating in solving the issues of copyrighted music, the CAVCA was involved and foreshadowed the subsequent storm. Over several years, VOD software suppliers illegally copied the disc albums which other party enjoyed the right when equipping them with the song-requesting system of the average karaoke bar. The copyright bureau in Yunnan province carried out abrupt enforcement activities towards a series of VOD manufacturers, which was called “Yunnan incident.”

By the end of 2008, the lawyer Dong Zhengwei from the Zhongyin Law Firm of Beijing issued a report to the General Administration of Industry and Commerce of China and the National Development and Reform Commission, requesting the right to carry out anti-monopoly enforcement on the copyright royalties regarding the karaoke fees being collected. Some media reported this incident. The NDRC transferred the report to the DRC of Beijing for inspection and enforcement. Combined with anti-monopoly laws and regulations, the DRC of Beijing ultimately made the final conclusion that, “the activities of the CAVCA related to the collection of copyrights royalties from KTV bars did not constitute a monopoly.”

Another conflict arises from CAVCA

Beginning April 20, 2009, the column Super Variety Express in CCTV channel 3 reported the fact that the CAVCA was charging karaoke clubs for royalties in a seven part series. This was followed up by Today’s Watch on CCTV channel 2 and the Morning News on news channels that made similar reports. Some of the general media took this as an information source and extended reports which followed. The conflict escalated quickly and the CAVCA was again involved in the midst of a media storm.

On the evening of May11, 2009, the CCTV Today’s Watch program broadcasted a special news program named “The Copyright Royalties and Charges for Protection,” in which they invited two experts to speak on issues centered on the collection of copyright royalties and its distribution and launched a debate which the CAVCA considered to be remarkably obvious and one sided.

This program mainly concerned the following contents: So far, the copyright royalties collected by the CAVCA had reached 80 million Yuan, but the singers had not made a penny; the karaoke royalties were in fact collected by the Tianhe company, but it didn’t declare the distribution of the royalties; charged that the CAVCA was a sort of industry monopoly and the royalties which it stated were in the interests of the industry were in fact charges for protection.

The focus of the media was not “whether royalties should be collected, ” “whether the collectors were legal,” but put forward the following four questions centering on the karaoke copyright royalties collected by the CAVCA has carried over the previous year: Why haven’t singers received their payments now that the copyright royalties the CAVCA has collected has reached 80 million Yuan? Are the 50% royalty payments which the CAVA has collected too high? Does CAVCA have a monopoly over collecting copyright royalties from the karaoke industry? Does the CAVCA act without proper supervision and auditing from the relevant departments of the State Council?

One of the reasons the CAVCA was under such severe attack was because it was drawing fees for management costs which reached up to 50% of the of the amounts collected, which is very uncommon for a rights protection organization. As members of the CAVCA, some music companies thought, as a professional association, the CAVCA was supposed to protect the interests of copyright owners of music and the MV industry. It appeared quite unreasonable that the revenue of the CAVCA was higher than that of righter owners, so the copyright management authorities held that the CAVCA’s actions were improper.

In response to the four suspicions, the person in charge of the CAVCA that there was an inadequate understanding on the relevant laws and regulations on Copyright Law and Copyright Collective Management Regulations, inadequate understanding on the huge obstacles the CAVCA had to contend with. Also, opponents understated the resources that the CAVCA had invested to collect the copyright royalties, which lead to a misjudgment and misdirection of the public’s opinions regarding these investments and which resulted in a skewed sense of the public appearance and appreciation of the fees.

Staggering forward in suspicion

In the face of such social suspicion, the CAVCA decided to keep a low profile. On the one hand, it made responses on its official website. On the other hand, it dealt with its affairs more quietly.

In recent months, many media reporters have contacted the CAVCA several times, but its staff told the reporters they had no time to do interviews. A China IP reporter once contacted the CAVCA to conduct an interview, but was denied access on the basis that they were too “busy with business.” The forum of its official website in the CAVCA was temporarily closed.

After 30 years since the opening-up and reform, the concept of copyright has already become rooted deeply in people’s mind. It has become a general trend to implement copyright collective management. Although there is much room for improvement, we still hope China’s copyright collective management can go smoothly.   

(Translated by He Shuliang)

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