By Richard  Wigley of King & Wood’s Intellectual Property Group

Online infringement of copyright works in the P.R.C. has been a major problem for rights holders since the advent of the Internet. High rates of infringement have presented real challenges to content owners hoping to monetize their content in China’s fast-growing online world. While civil, administrative and criminal actions are all available as possible means of seeking recourse and establishing deterrents, in practice, they all have distinct advantages and disadvantages. In the case of bringing criminal action against alleged copyright infringers, establishing that the alleged infringers qualify for criminal prosecution has at times proven problematic. Some additional assistance to rights owners, however, is now available.

On January 10, 2011, the Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security of the P.R.C. issued and made effective their "Opinions" on "Some Issues Concerning Application of Law in Handling Criminal Cases of Intellectual Property Rights Infringement"1 (hereinafter referred to as the "Opinions"). While the Opinions cover a wide variety of intellectual property rights issues, certain Articles of the Opinions are specifically applicable to copyright infringement and, more specifically, online copyright infringement. It is useful to examine the guidelines set forth by some of these Articles.

Firstly, Article 10 of the Opinions defines what constitutes "for the purpose of making profits" required for criminal prosecution, as follows:

"In addition to sale, any on the following circumstances may be determined as "for the purpose of making profits":

1. Charge fees directly or indirectly through such means as publishing non-free advertisements in or binding a third party"s works with other person"s works;

2. Charge fees directly or indirectly by transmitting other people’s works through the information network or providing such services as publishing non-free advertisements on the websites or web pages by making use of the infringing works uploaded by others;

3. Charge membership registration fees or other fees for transmitting others’ works through the information network in the form of a membership system; and

4. Other circumstances that make profits by taking advantage of other’s works."

While Article 10 provides needed clarification regarding what constitutes "for the purpose of making profits", it is especially noteworthy that it highlights "publishing non-free advertisements" as a basis for "making profits". As much of the online world is driven by online ad revenues, the Opinions now makes clear that infringers cannot claim that they are not "making profits" merely because they are not directly charging the user for the content at issue. As such, copyright owners now have a clearer basis for seeking criminal prosecution against websites which offer infringing content to users and where said websites are driven by online ad revenues or, alternatively “membership registration fees”.

Though it may seem obvious in the online world, the Internet has created a new means of distributing content and it is, as such, required that the laws adapt to this new reality. In regards to what constitutes "distribution" as set forth in Article 217 of the Criminal Law of the P.R.C., the Opinions provides clarity, in that it defines distribution of infringing content (including infringing copyright-protected works) to include the act of "…transmit[ting] through the Internet…" and such acts could, in certain circumstances, constitute the crime of copyright infringement.

It is often difficult to establish a monetary amount of the alleged infringement in a world such as today"s China, where revenues from sales of physical content (such as music CDs or movie/TV DVDs) are relatively minimal, and the market for paid online content is in a very nascent stage. The Opinions, however, provide other means which could in certain cases prove to be more viable options to meet the infringement thresholds required for criminal prosecution in the P.R.C. Article 13 of the Opinions provides some guidelines on the minimal thresholds for supporting criminal prosecution of acts of transmitting infringing works (including infringing copyright works) over the Internet, such as establishing an "aggregate quantity of others’ works being transmitted is more than 500 pieces" or "[w]here others’ works being transmitted has been actually clicked for more than 50,000 times”. While it may be difficult to prove that a certain music download is worth X RMB, it may be easier to prove via network statistics the number of tunes downloaded or relevant "click" rates and under the Opinions, rights holders have this greater flexibility.

Finally, it is important to note that the Opinions, as per Article 15, do not leave out those entities which act as "accomplice[s] of intellectual property crimes". Article 15 of the Opinions includes those entities as possible accomplices as those which "provide[] such services as Internet access, server co-location, network storage space, [and] communication and transmit channels…." Making clear that the threat of criminal prosecution applies not only to alleged online infringers, but also to their online "accomplices", the Opinions may provide rights holders with additional leverage in discussions with Internet infrastructure providers regarding the activities of alleged infringers and make said providers more closely monitor the possibly-infringing activities of their clients.

The deterrent effect of having clearly defined guidelines for establishing a criminal prosecution for online infringing acts cannot be underestimated. The Opinions, in this regard, address some key areas of concern and provide greater clarity. By providing the Opinions, the Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security have made life just that more difficult for online infringers and their accomplices, and, as such, copyright owners should benefit.

Note: this publication is for informational purposes only and it does not constitute a legal opinion.

1.Supreme People’s Court, Supreme People’s Procuratorate, and Ministry of Public Security, "Opinions of the Supreme People’s Court, the Supreme People’s Procuratorate, and the Ministry of Public Security on Some Issues Concerning Application of Law in Handling Criminal Cases of Intellectual Property Rights Infringement, Promulgated and Effective on January 10, 2011.