Executive Summary:

• China is increasingly a key developing market for British music;
  
• As recognised in the Government's response to the Trade and Industry Select Committee report (see note 1) into 'Trade and Investment Opportunities with China and Taiwan' - "the protection of intellectual property rights is a major concern for small and large companies trading and investing in China". We believe that there still remains much work to be done in terms of enforcement to protect the intellectual property of British companies;
  
• In principle, the issue of intellectual property protection in China is taken very seriously at central government level and we welcome the efforts by their Government to make significant steps towards improving their intellectual property framework in recent years;
  
• The problem is not the absence of legislation but rather the fact that practical enforcement measures are inadequate and patchy. Any legislation which complies with WTO standards is rendered valueless if not enforced in practice;
  
• We welcome the efforts of UKTI, working with CBBC, to provide advice to companies on how they can protect their IPR in China through printed material, seminars and individual company advice;
  
• We recognise the prudent approach of the China Task Force established by the Government and urge the various initiatives already undertaken to be developed and expanded upon even further;
  
• Recent amendments to Chinese copyright law removed a wide ranging exception that permitted broadcasters to use musical works without either authorisation or remuneration; the practical impact of this change is still limited and should be reviewed on a regular basis;
  
• The UK music industry has been working with officials from UK Trade and Investment and will shortly be announcing details of a partnership which will greatly support the commercial exploitation of this key strategic market for the future;
  
• We hope that this will address the rules prohibiting foreign company investment in China (market access problems) which have inhibited the development of appropriate business networks and significantly reduced the potential for market entry.

Recommendations:

• It is important that the UK Government continues to provide constructive assistance and co-operation to their Chinese counterparts. This may take many forms, from strategic advice to knowledge and information sharing;
  
• The UK Government should continue to apply supportive pressure on the Chinese Government to deliver adequate enforcement measures. The needs to be an on-going dialogue between all stakeholder interested in copyright protection so that the UK and China better develop their valuable trading relationship;
  
• The Government should consider reporting the programme and progress of the China Task Force to both Parliament and the public in order to improve the awareness of policy approach undertaken. Informing industry about the reforms undertaken may also help present a more positive perception of opportunities in the developing Chinese market;
  
• We urge officials in the Department of Trade and Industry (and the Patent Office), and the Foreign and Commonwealth Office to continue their collaborative efforts in this area. The experiences and expertise from enforcement officers in the UK should be exchanged where possible to inform the Chinese authorities of 'best practice' approaches to enforcement;
  
• The Governments Creative Industries Cross Departmental Intellectual Property Forum seems an appropriate arena for future discussion relating to international cross border enforcement issues;
  
• It would be useful for the Government to consider closer linkage between the IP Forum and the DCMS Creative Export Groups (and Music Export Group) in order to recognise and maximise the value of UK intellectual property and our creative industries in international markets;
  
• In general, industry also has an important role to play and we propose that the DTI Europe and World Trade division meets with other Creative Industries representatives on a regular basis to examine mechanisms which help secure 'best practice' solutions wherever possible;
  
• We urge the Government to continue to use all opportunities to raise intellectual property protection matter during Ministerial inward and outward visits and the UK-China Joint Commission and its working groups;
  
• The Government can gain a better understanding of appropriate approaches to prevent piracy through its bi-lateral relations with other countries;
  
• The UK Government should continue to work through the WTO apparatus and multi-lateral fora, such as the recent EU China Summit which took place in December to encourage further 'sectoral dialogue' on issues, including intellectual property;
  
• The ongoing trade missions for the creative sector are welcomed and to be encouraged further.

Background to our interests in China

1. The UK music industry contributes £4.6 billion per year to the UK GDP, with exports valued at over £1.3 billion a year (see note 2). Copyright royalties make up the vast proportion of composers' and publishers' income. They receive royalties for the broadcast and performance of their music overseas through the international network of collecting societies or sub-publishing networks. Revenue from international territories directly depends on copyright law in those countries and its enforcement in practice.

2. One of our member organisations, the Performing Right Society (PRS), signed a reciprocal representation contract with the MCSC (Music Copyright Society of China) in 1995, by which PRS represents Chinese repertoire here in the UK and MCSC represents the repertoire of PRS' members in China. This contract is an investment in the long term, which will provide for a flow of income when the market in China develops and when rights become recognised and valued.

3. With its population of more than 1.3 billion, China is a key market for British music when the legal framework allows a valuable market to develop. Adequate and effective protection of intellectual property rights is not only in the interest of international right holders such as the ones represented by British Music Rights; it is also of China's direct interest in its endeavour to attract foreign investment.

4. Our main concerns relate to (i) the continuing high level of piracy; (ii) the limited impact of recent amendments to Chinese copyright law; and (iii) Market access restrictions for foreign companies.

Piracy in China

5. Piracy remains at an unacceptable high level in China - there is a piracy rate for sound recordings of 90% representing a loss to the music industry of US$ 286.0 million in 2003 (see note 3). Inadequate legal protection combined with ineffective tools for enforcement of intellectual property rights were partly addressed during the negotiations for China's entry into the WTO, and it is vital that as a full WTO member, China improves its actual record on law enforcement in order to comply with its obligations under TRIPS. This requires:

• Availability of deterrent criminal sanctions and appropriate civil damages (which also need to be imposed in practice)
  
• Comprehensive police powers (e.g. to conduct raids and searches on premises)
  
• Intensification of education and training of members of the judiciary and the police (in particular customs officials to counter exports)
  
• Effective co-operation between the government departments (e.g. Ministry of Justice and Ministry of Culture) and enforcement bodies
  
• Meticulous implementation of the provisions of the WIPO Treaties on digital rights management in order to ensure adequate protection of creative content in the digital context.
  
• Clear mandate for foreign professional organisations representing rights holders to be able to enforce the rights of their members in their own name. It is very burdensome for such organisations to join their members into any legal action and for each member to have to adduce title before they can commence proceedings.
  
• Devotion of sufficient resources to assist the fight against piracy.
  
• The availability of public information on a major scale in order to improve education and awareness levels in terms of the value of intellectual property.

6. Although we acknowledge that there have been some efforts to improve the high levels of piracy and counterfeit goods by the Chinese Government following its accession to the WTO, this still falls well short of internationally accepted standards.

Practical impact of amendments to Chinese copyright legislation

7. The Chinese Government adopted amendments to its Copyright Law of 1990 on 27th October 2001 to bring its copyright regime into compliance with the TRIPS Agreement, and we understand it is also considering further amendments to facilitate ratification of the 1996 WIPO "Internet" treaties.

8. There was one change to the law with particular significance to writers and publishers. Broadcasting is huge business in China, with 38 provincial television broadcasters, 752 local stations and more than 2,100 cable operators throughout the country. However, until the amendments in October 2001, a wide exception permitted broadcasters to use musical works without either authorisation or remuneration. The exception also made it impossible for MCSC to collect royalties from bars or restaurants for public reception of broadcasts. We hope that these changes in the law make a real economic difference to copyright owners, though their application in practice must be reviewed on a regular basis.

9. In 2003, PRS received only £8,196 in payments from MCSC. Whilst this is an improvement from literally nothing in previous years, this still falls very short of what should have been paid to UK music creators and publishers.

Market access

10. As regards music publishers, market access restrictions have presented an impediment to receipt of payable income. Typically publishers promote musical works in their catalogues internationally through appointment of sub-publishers or through the establishment of subsidiary companies in different territories. The rules prohibiting foreign company investment in China have inhibited the development of appropriate business networks and consequently reduced the potential for market entry. The UK music industry has been working with officials from UK Trade and Investment and will shortly be announcing details of a new partnership which will greatly support the commercial exploitation of this key strategic market for the future. If the Committee would like further details of this initiative we can provide more information.

Notes

1. Fourteenth Report of Session 2002-03: Trade and Investment Opportunities with China and Taiwan. The Government response was issued on the 16 December 2003.

2. Music Education Council report - Counting the Notes (November 2002)

3. Source: IIPA 2004 Special 301 report (www.iipa.com)