China Publishes Draft Rules on Protection of Information Network Dissemination Rights

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1 China Publishes Draft Rules on Protection of Information Network Dissemination Rights

2 1 China Publishes Draft Rules on Protection of Information Network Dissemination Rights On 22 April, 2012, the Supreme People's Court in China published the "Draft Provisions on Several Issues concerning the Application of Law in Hearing Civil Dispute Cases Involving Infringement of the Right to Network Dissemination of Information" (Draft Rules). 1 The legal framework regarding protection of information network dissemination rights mainly include The Copyright Law, the "State Council Regulations on the Protection of Right of Dissemination via Information Networks" (State Council Regulations) and the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of Law in the Trial of Cases Involving Copyright Disputes over Computer Networks" (2006 Interpretation), which took effect on 1 July When enacted, the 2006 Interpretation will be replaced by the Draft Rules. Relevant in this context are also the "Trial Guiding Opinions of the Beijing High People's Court on Certain Issues related to the Trial of Cases involving Copyright Disputes in the Internet Environment" (Trial Opinions), which came into effect on Aug 1, However, the Trial Opinions are not national legislation but provide guidance for Beijing courts in relation to judging copyright infringements in the online environment. INTRODUCTION From an overall perspective, the Draft Rules are much more detailed than the current 2006 Interpretation and incorporate several rules from State Council Regulations on liability of network service providers (NSPs). Much like the draft Copyright Law, which is currently under amendment, the Draft Rules also seek to balance the interests of rights holders, NSPs and the public. The key theme is consideration of the fast development of technology and the internet environment. The Draft Rules are also a response to emerging copyright infringement law suits involving downloadable music and literary works in the online environment. and rights holders. The main points are explained here below. New definitions 1. "INFORMATION NETWORKS" The Draft Rules provide a definition of "information networks" that did not previously exist in the 2006 Interpretation. Article 2 states that: "For the purposes of these Provisions, information networks refer to the Internet, broadcasting networks and mobile communication networks with computers, TV sets, telephones or other electronic devices as receiving terminals." 2. UNAUTHORIZED UPLOADS "PROVISION" OF WORKS A key addition is the definition of what constitutes "provision" of works, performances or audio and video recordings. Where an NSP is regarded to have provided the works, it will be liable for infringement. This addition basically clarifies which acts are deemed to constitute infringing acts in the internet network environment. Article 3 provides that NSPs can be held accountable for copyright infringement if they provide access to works via the web without being permitted by copyright holders. "Providing a work" is defined as "uploaded [the works] to the network server or otherwise made available on any information network accessible by the public, so that the public is able to download, browse or otherwise obtain the same". Listed in the table below are acts that are regarded as "acts of provision". We also include circumstances under which the NSP will not be liable despite having provided the works. In terms of detail, the Draft Rules set out a number of new definitions that will have an impact on both NSPs 1

3 1 China Publishes Draft Rules on Protection of Information Network Dissemination Rights Acts of Provision Leniency as regards liability Note Art. 3 Where a piece of works, recording is uploaded to the network server or otherwise made available on any information network accessible by the public, so that the public are able to download, browse or otherwise obtain the same Art. 4 Where a plaintiff is able to provide evidence showing that a NSP appears to have provided works, recordings Where the NSP is able to prove that it has only provided automatic access, automatic transmission, information storage space, search, link, peer-to-peer technology or other services in respect of the alleged infringing works, recording. Only automatic access Art. 5 Where an NSP, for the purpose of providing search services, generates webpage snapshots, thumbnails or the like of a piece of works, performance or audio and video recording and makes the same available to the public Where the act neither affects the normal use of the works, recording, nor unreasonably damages the legitimate rights and interests of the right owner in the works, performance or audio and video recording, and where the NSP claims that its act constitutes a reasonable use No effect on the normal use; AND No un-reasonable damages; AND Reasonable use Art. 6 Where an NSP claims that it has only provided network services such as information storage space, search, link, peer-to-peer technology, but there s evidence proving that it has committed an act of provision jointly with the provider of the infringing works Joint liability

4 2 3. RED-FLAG PRINCIPLE - KNOWLEDGE THRESHOLD The knowledge threshold in the Draft Rules is applied to an NSPs knowledge of infringements committed by users of the NSPs network services. If the court considers that the NSP knew or should have known that a user was infringing others' rights (i.e. that is should have seen the "Red Flag"), the Draft Rules encourage the courts to decide that the NSP is at fault. However, where an NSP only provides automatic search result links through its search engine, based on input from the users, the Draft Rules provide that the presumption is that the NSP should NOT have known of the infringement. Based on that, we consider that the Draft Rules require item specific knowledge on the part of the NSP in order to trigger the application of the red-flag principle (the knowledge threshold). This seems to be consistent with reasoning in the recent Viacom vs. YouTube case 2. The key questions debated by the courts in the case are whether YouTube had knowledge of specific infringing material that was posted on its site; and whether YouTube was protected (in a safe harbor) from infringement claims since they removed that material upon being notified. The Draft Rules require that, when determining whether the NSP knows or should have known of the infringement, and therefore be held liable, the courts shall consider a number of things such as: a) if the infringement is obvious; b) whether direct economic benefits have come from disseminating the works; c) if technical measures have been taken to stop infringement; d) the NSPs response to notice/s of infringement; e) measures taken against repeat infringement; f) the type and popularity of the infringing works and the extent of the infringing information. The Draft Rules also list a number of activities, which, if carried out, will be counted against the NSP and creates a presumption that it knew or should have known of the infringement, specifically: Creating ranking lists, catalogues, or indexes of popular films. Recommending a work, performance with links and descriptive summaries. Providing directional links to a third party website engaging mainly in acts of infringement. 2 Providing information storage space, for example placing the full content of a film on its home page and taking the initiative to select, compile or edit the content of a popular film or creating a ranking of such works. Other circumstances where the NSP can be deemed to have known of the acts of infringement. 4. DIRECT ECONOMIC BENEFITS As mentioned above, one of the criteria used when determining if an NSP knew or should have known that it was transmitting infringing works is whether it derived "direct economic benefits". On the one hand, according to the Draft Rules, the following shall NOT be deemed as deriving direct economic benefits: a) Standard charges collected by an NSP that provides information storage space on the basis of time, traffic; and b) Advertising fees collected by an NSP for its information storage space services. On the other hand, the Draft Rules provide that, in light of the specific circumstances, benefits obtained by an NSP from the posting of advertisements for a particular works, performance or audio & video recording, or benefits that are proven to have a particular relationship with the provided works, recording may be deemed as directly obtained economic benefits. It is unclear how these criteria will be judged by the People's Courts. BALANCING TECHNOLOGY AND RIGHTS OF COPYRIGHT OWNERS 1. SAFE-HARBOR The Draft Rules combined with the PRC Draft Copyright Law provide a safe harbor for NSPs while at the same time tightening the provisions on what constitutes infringement. Article 69 in the PRC Draft Copyright Law provides that NSPs who provide storage, search or linking services are not obligated to review information to ensure that copyrights are intact. However, the Draft Rules do require NSPs to take action when there is a clear case of infringement (Art. 10 para. 2). Also see the section above regarding the Red Flag principle. The Draft Rules provide a safe harbor where the NSP voluntarily has taken relevant technical measures to prevent infringement from occurring.

5 3 2. NOTICE AND TAKEDOWN Articles 17 and 18 of the Draft Rules show the attempt to balance interests of rights owners, technology providers and the public. NSPs will be liable for infringement if they fail to take action, such as deleting or blocking a link, after receiving a notice from a rights holder. NSPs are given a reasonable time frame within which to react to a notice. The courts can then apply a "check" to determine whether the NSP indeed reacted within a reasonable time frame. The test includes reviewing the method of delivery of the notice, accuracy of the notice; level of difficulty in taking measures; nature of the service provided; type and quantity of works involved. Unless an NSP has just cause, it must take action within one day where a popular film is involved, or within five days for other works. For the first time, the Draft Rules set out a reasonable time frame within which an NSP must respond to a take-down notice. This should have a noticeable effect on both NSPs and rights holders. SUMMARY Overall the Draft Rules provide useful guidelines for the courts on how to assess an NSP's liability; this in response to public criticism that copyright is not effectively provided in the internet environment in China. The approach is also consistent with what we have seen in the Draft Copyright Law (please see our newsflash on the Draft Copyright Law). 3 The Draft Rules embody when an NSP should not be entitled to a safe harbor, definitions of direct economic benefit, knowledge thresholds and notice and takedown requirements. In conclusion, they provide for a more targeted approach incorporating definitions of activities that are more likely than others to lead to infringement liability. However, should the Draft Rules be enacted, much would remain to be clarified, such as how the courts will determine under what circumstances direct economic benefits have been derived or whether the NSP is not liable since it in fact only provided automatic access in respect of the alleged infringing works. Those involved in the Internet, and on-line copyright will have strong interest in following the developments in this area. The Supreme People's Court is soliciting opinions from the public on the Draft Rules until 1 June We will continue to update you with any developments in the drafting process. If you any questions regarding this newsflash, please contact the China Intellectual Property Team. KEY CONTACTS Beijing Deanna Wong T Rae Yan T Shanghai Feng Zhen T William Fisher T Hong Kong Henry Wheare T Gabriela Kennedy T

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