The disputed secondary remuneration

2013/1/31By Zhang Weijun, Head of Tongji Intellectual Property and Competition Law Research Center,[Copyright]

On July 6th 2012, the second draft revision of the Copyright Law (second draft revision) was announced by the National Copyright Administration of the People’s Republic of China (NCAC) which stipulates authors’ right of secondary remuneration for their audiovisual works. However, the new provision proposes serious repercussions for the film and TV industries. Relevant parties such as screenwriters, directors and producers as well as scholars have entirely different views and interpretations on the changes. Therefore, we need to consider, what is the secondary remuneration right? Does it exist for a reason? Are there any problems in the provisions of the second draft revision?
 
The origin of secondary remuneration
Article 15 of the current Copyright Law provides that producers enjoy the copyright of audiovisual works, while the screenwriters, directors, cameramen, lyricists, composers and other associated authors are entitled to remuneration pursuant to the contract signed with the producer. However, there is no specific provision to define the “remuneration.” Is it only confined to the licensing fees paid to associated authors by producers for the reproduction of the original works? Is it the remuneration paid to screenwriters, directors, cameramen, lyricists, composers and other associated authors for the “secondary uses” of audiovisual works? Is it both of these remunerations?
Article 16.2 and 16.3 of the first draft revision provides that, “with the consent of authors, their play scripts and musical works can be reproduced into audiovisual works by producers. The authors should receive remuneration unless otherwise stipulated in the contract between the relevant parties.” According to the explanation of the first draft revision delivered by NCAC, “screenwriters, lyricists, composers and other The Disputed Secondary Remuneration associated authors can qualify for remuneration for the secondary uses of audiovisual works.” This explanation seems to indicate that on the basis of the current Copyright Law which endows authors with the right of remuneration through contracts with producers. The first draft revision has additionally granted screenwriters, lyricists, composers and other associated authors the right of remuneration for the secondary uses of their works, which is the so called “secondary remuneration.”
Article 17 of the second draft revision has amended the aforesaid provision so that, “the original authors, screenwriters, directors, lyricists, composers and other associated authors have the right of obtaining equitable remuneration.” The most obvious amendment is that it has included the original authors and directors in the subject scope of the secondary remuneration right, and deleted the provision of “unless otherwise stipulated in the contract,” i.e. the right of secondary remuneration has changed from an agreement in contract to a provision provided by law.
It can be seen from the first and second draft revisions that the concept “the right of secondary remuneration” has not been applied directly. However, the explanation of the second draft revision (the explanation) released by NCAC states that the current law has not provided “the right of secondary remuneration,” i.e. the right of obtaining remuneration for the secondary uses of audiovisual works of the relevant parties. This amendment clearly stipulates that five types of authors, the original authors, screenwriters, directors, lyricists and composers, enjoy the right of secondary remuneration for secondary uses of audiovisual works. Accordingly, “the right of secondary remuneration” came into existence.
According to the second draft revision, authors may receive payment in two ways; firstly from the production of the works and secondly from secondary uses of the works. However, the second type of remuneration is already covered in the “remuneration contract” under the current law, which means that producers currently pay remuneration to authors. Do legislators intend to grant “legal” remuneration right, i.e. “the right of secondary remuneration,” to authors in addition to the current provision? The second draft revision does not provide clear answers, but the explanation indicates that, “the current laws of China have no provisions on ‘the right of secondary remuneration.’” The NCAC seems to consider it new content which does not exist within current law. Is it justifiable for legislators to grant new rights to authors of audiovisual works?
 
Analyzing the rationality of “the right of secondary remuneration”
Article 15 of the current Copyright Law explicitly grants copyright of cinematographic works to producers meanwhile prohibits the authors from being copyright holders, even through contracts agreed to by both parties. The first draft revision added the provision of “unless otherwise specified in the contract,” while the second draft revision has deleted it and adheres to the current law. On the whole, the provisions for the copyright of audiovisual works of the current Copyright Law and the second draft revision are similar to those in Germany. However there is no “secondary remuneration” for authors except the rental of film and video products in Germany.
Of course, the fact that there is no provision on “the right of secondary remuneration” in foreign countries does not mean that we cannot have such a provision in China, so long as it is fair and just. The author of this article believes that the need for “the right of secondary remuneration” in the second draft revision lacks evidence and justification for the following reasons.
As long as the screenwriters and other associated authors agree to the production of their works as audiovisual works within the licensing contract or directors and other associated authors agree to be involved in the production of cinematographic works, their copyright has been legally transferred to the producers. Both the authors of the original works including the original authors, screenwriters, lyricists, composers and the authors of the cinematographic works like directors can get remuneration based on licensing contracts or other contracts relevant to the cinematographic work production. The remuneration includes licensing fees or service payments as well as remuneration for secondary uses of the cinematographic works which can be deemed as transfer fees in the legal transfer processes or in the presumption of transfer processes of the right of audiovisual works. There is no need for additional legal provision to intervene in the right of remuneration between the authors and the producers where contractual agreements already exist and provide the required protection.
The second draft revision has explicitly granted the property right of copyright to the producers. All the property rights which had been granted to the authors provided in the Copyright Law are now transferred to producers who also have the right to secondary uses of the audiovisual works. Authors, who are deprived of the property right, are now granted remuneration rights instead. If the users pay the remuneration, they have to pay both producers and authors for the single use of cinematographic works. This makes the “copyright legal transformation” meaningless and the users’ obligation of dual payment irrational.
In fact, the “secondary uses” of audiovisual works in the provision of secondary remuneration right is not plausible itself. The “secondary uses” includes the means of reproduction, distribution, rent, screening, transmission and adaptation. The above means are the “first uses” rather than the “secondary uses” of the audiovisual works. Authors should get remuneration for the above uses. However, the authors’ rights have been legally transferred to producers, therefore users need only pay producers who then pay remunerations to authors.
 
If Article 17.3 of the second draft revision is interpreted as bestowing authors with upgraded rights, then the provision of property right of copyright in the current law should be amended, otherwise it will be illogical. In other words, when producers have the entire property right of copyright, authors cannot enjoy the right of secondary remuneration for the secondary uses of audiovisual works. Their interests can only be guaranteed by producers during the right transfer. Payment methods can vary (e.g. box office independent account systems), but “right of secondary remuneration” does not exist.
The second draft revision deliberately divides authors’ right of remuneration into two parts: one is the remuneration of the production of audiovisual works; another is remuneration of the secondary uses of the audiovisual works. The division here is subtle but lies in the fact that the right which could be agreed upon through contract negotiations is now a legal provision of law. However, the deliberate legal intervention may have the opposite effect. The compulsory right of remuneration is favorable to authors if the audiovisual works can drive profits, but are authors obliged to take risks if the opposite situation occurs? There seems no justification for authors to only enjoy profits but take no risks.
Therefore, if “the right of secondary remuneration” provision in the draft is meant to strengthen the protection of original authors, screenwriters, directors, lyrists and composers, are there any more appropriate approaches to achieve this goal? If there is no such approach, then how can we improve the provisions in the draft?
 
Suggestions for the copyright law revision on the right of remuneration
Based on the current provision, authors can only negotiate higher prices for their works during the licensing process. However, their bargaining chip is unreliable. On the one hand, the producers’ reproduction of the works can extend influence and enhance the authors’ reputation, many authors hope their works can be brought to light by competent producers; on the other hand, producers possess huge sums of money which is indispensable for the production of the audiovisual works, therefore they have a dominant position in the bargaining. Allowing relevant parties to negotiate their own remuneration contracts without considering the unequal status of the relevant parties is inadequate because the vulnerable parties’ interests cannot be guaranteed.
If the second draft revision intends to strengthen the protection for authors, then we can learn from legislations of other countries, and granting authors the additional “right of secondary remuneration” is not a required approach to achieve the goal. Provisions in the laws of Germany and Italy are good examples. On the one hand, they show great respect to relevant parties, add bargaining chips for authors and allow authors and producers to make counter agreements on audiovisual works. On the other hand, with the prerequisite of keeping producers’ right of acquiring copyright through legal transfer, authors and producers are allowed to balance their interests by contracts, and when the lack of equality is severely abused, laws can give proper adjustments to a certain extent. For example, when the box office of cinematographic works exceeds the amount set in the contract, the exceeded amount should be shared by authors and producers if there is no counter agreement.
To sum up, on the basis of the second draft revision, the author of the article proposes the amendment suggestions for authors’ remuneration right, Article 15 of the current law (Article 17 of the second draft revision) should be amended as follow:
Producers shall enjoy the copyright of audiovisual works, while the original authors, screenwriters, directors, cameramen, lyricists, composers and other associated authors have the right of authorship if there is no counter agreement.
With the consent of authors, their play scripts and musical works can be reproduced into audiovisual works by producers. The authors shall get remuneration. The original authors, screenwriters, directors, lyricists, composers and other associated authors can get remuneration at a certain ratio from producers’ screen licensing fees paid by users; otherwise they can get extra remuneration when the screen licensing fees reach a certain threshold set in the contract signed by authors and producers if there is no counter agreement. The payment amount and payment method can be negotiated by the parties involved or in accordance with regulations of the relevant administrative departments if they can’t reach an agreement.
Authors can use play scripts and musical works, etc. of an audiovisual work separately without violating the work’s normal use.
 
(Translated by Emily Tan)

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