September 2009

GREETING

Dear Readers,

There has been much talk over the past decade regarding China’s commitment to IP protection. The central government has invested billions in cracking down on piracy and copyright infringement. This latest development further demonstrates the government’s commitment to IP protection, and if implemented in a thoughtful way, will represent a sea of change in the way music ownership is viewed in China.

Edward Lehman
Managing Director

FEATURE

Long used to download music with impunity, netizens in the PRC this week were faced with new restrictions that were put in place by the central government regulating the downloading of foreign music content. Such regulations welcomed by foreign artists and labels who have been for over a decade now watching with dismay as one of the most lucrative markets in the world provides next to no return; over 99% of music downloaded in China during 2008 was done so illegally, representing lost revenue for companies and a disincentive for new artists to focus on the Chinese market.

The new rules, unveiled by the Ministry of Culture stipulates that the lyrics of a foreign song must be translated into Chinese and submitted to the ministry for approval. The lyrics must also be accompanied by evidence that the applicant has the legitimate right to distribute the song in China. There are some worries that the new regulations are too stringent and could lead to unnecessary delays as millions of songs are translated and submitted for approval. Neil Turkovitz, Vice President of the Recording Industry Association of America, urged the Chinese government to implement the new rules in an effective manner which will result in the least amount of disrupt to the business.

While foreign copyright holders will be the eventual winners from the new regulations it will be China’s search engines that will suffer initially. Baidu, China’s most popular search engine, contains an MP3 search function where multiple links are provided to sources where music can be downloaded; with no reference to copyright ownership. Such search function generates significant traffic and advertising revenue for the site.

It remains to be seen how effective the new laws will be though. In the broader scheme of China’s commitment to strengthening intellectual property it can only be viewed as a positive development .

Lehman, Lee & Xu
10-2 Liangmaqiao Diplomatic Compound
No.22 Dongfang East Road Chaoyang District
Beijing 100600 China
www.lehmanlaw.com