ABSTRACT: This paper discusses the phenomenon of pirated Chinese publications, relevant aspects of American copyright law and the implications for libraries building Chinese collections.

I. Introduction

One day I decided to walk all the stacks, and quickly noticed the computer books section – several walls stocked to the brim with textbooks – all pirated, that is, printed without permission of the copyright holder.

I then walked through the business section where a large number of best sellers in the US had been translated and put into print in China, again without permission of the copyright holder. Then I traveled over to the CD section, where I could choose from the genuine Deutsche Grammophon CDs imported from Germany at 300 RMB (about US$40) and up, or, the illegal copies made in China, at 1/10 that price. Then over to the VCD section (as DVDs are known in China), where…well you get the picture.

It is not just the traditional street sellers who are the distribution channel for counterfeit book materials. Mainstream bookstores in China carry huge inventories of unlicensed works of copyrighted material for sale to the domestic market. Pirating is a mainstream in China. And it is everywhere.

II. Pirated Chinese Editions and Copyright Infringement in the U.S.

What is intellectual property, anyway? There are many definitions. Let us describe it generally, the easy way. Very briefly, it refers to just about anything you can think up and express, and which you might be able to make some money from. In this country, and in most others, government protects assets created by the intellect in a variety of forms, for example, in patents for inventions and designs and the like; in trademarks, like brand names and logos; and in copyrights, of stories, songs, films, etc., even of pantomimes. In other words, the person who comes up with these imaginative inventions of the mind has certain rights in them and others can not make use of them, generally speaking, without permission, usually procurable by the payment of money. This discussion will focus on copyrights, leaving aside patents and trademarks.

How do people protect themselves against the theft of intangible assets, such as these? You can put valuables, like coins and jewelry, in a safe deposit box in the bank. But to make commercial use of them, by selling them, for example, they must be displayed, and you would go to great lengths to ensure that physical valuables are not easily stolen by someone who sees what you have got. Intellectual property laws and the mechanisms to enforce them are the means by which intangible assets are protected. While there are similarities between Chinese and American intellectual property law, there are differences; but enforcement of the law is so very different in effect that where one may be well protected in the U.S., one may be virtually unprotected in China.

Who hurts and who gains when copyright is infringed? The copyright holder is not paid for his work; the seller of an unauthorized work profits while failing to uphold the law. The purchaser usually receives a poor quality substitute, but saves money, and may run the risk of infringing upon the rights of the copyright holder as well. Infringement, in the larger scheme of things, is an attack upon the system of laws and enforcement established to maintain market order and to encourage invention and creation.

Despite a Copyright Act in existence since 1790, America has seen significant book pirating in its history. 19th century American publishers pirated thousands of popular English works without obtaining permission from copyright holders across the Atlantic. One often sees on the cover or title page of works of the time the label “Authorized Edition,” which the reading public may have considered a signal as to the quality and integrity of the text. These days, book pirating in the U.S. is negligible. In modern China, despite the existence of intellectual property laws, albeit in their infancy, and a regime that professes to their enforcement, there is, similar to 19th century America, little check on the infringement of intellectual property rights.

It is cheaper not to pay the rights holder and then force him to sue. The rights holder who sues finds that his chances of success are much more doubtful in China than in the U.S. The infringer in China is more likely to get away with it. Besides, someone else will do it if you do not, creating a cheaper product that will take market share away from you. What is important in understanding this phenomenon is that mainland Chinese, who have only recently been introduced to the idea of personal rights in any form, have not yet gotten their minds around their fundamental nature, which is that rights, which are abstractions, can have finite value in and of themselves. Intellectual property is a complex bundle of intangible rights with real value. This is a difficult concept to grasp.

When I first sold computer hardware into China in the early 1990s, Chinese buyers would not think of paying extra for service (maintenance) on the machines. After a few years, they began to realize the value of service, and began paying for it with greater willingness. It took a combination of the customer’s inability to reproduce the service, as well as their recognition of its value to them, for them to willingly pay for it. Gradually, some intangible services are now recognized by mainland Chinese as having such value that people are willing to pay for it. A similar change may come in the area of intellectual property in China.

But in the short term, one can not expect rapid and radical change in intellectual property rights consciousness. Mainland Chinese seem to recognize that they may have certain legal rights, but apparently they have not yet extended that idea to the general public. In more traditional Chinese parlance, we might even say there remains a serious lack of social ethics (公德心).

In other words, “I have rights,” but there is little recognition that “you as well have rights.” A further complication finds the modern extension of an historically traditional disrespect Chinese generally feel towards the concept of rule of law, in great contrast to their more respectful attitude towards (or perhaps fear of) the rule of man. In such an environment, one can expect relatively lethargic and stuttering progress towards the development of a consciousness in China that equates the unauthorized use of intellectual property with theft; that the theft itself is unlawful and unethical; and is, as well, an attack upon the developing structure of legal rights. With greater exposure to the ideas of intellectual property and the rights involved, China may see progress over the next few generations. It took the United States a long time before a system of intellectual property rights became well established, not only in law, but in the American consciousness. However, even now, as we all know, digital technologies and the ease of cheap copying have once again posed a challenge in the American mindset.

A note: we must remember that not only are foreign rights holders damaged by Chinese pirating, but domestic Chinese rights holders as well. Internally, there is very great infringement, with Chinese counterfeiting product, upon the rights to which are owned by other Chinese. From the National Copyright Administration of China website (http://ncac.gov.cn), we can quickly find examples as follows:

未经授权出版他人书信等作品集案

投诉人: 钱钟书、杨绛

被投述人: 辽宁某出版社

案情简介: 1997 年5 月，钱钟书、杨绛向国家版权局投诉辽宁某出版社未经其授权，擅自将他们的私人信函、诗文、墨迹、照片等，连同其他失实的报道，编成《记钱钟书先生》一书出版发行，严重侵犯了其著作权，要求予以查处。

经查，被投诉人未经著作权人许可，擅自出版上述作品，侵犯了著作 权人的发表权、作品完整性权和复制发行权等多项著作权。 处理结果: 国家版权局作出如下处罚决定：

1．停止发行该书。

2．封存并销毁该书的库存。

3．对出版社罚款1 万元。没收出版社付给作者的稿费和折抵费的该书。

III. American Copyright Law – A Few Basic Concepts

What does U.S. copyright law protect? Fundamentally, it protects original works fixed in any tangible medium of expression from which they can be perceived, reproduced, or otherwise communicated.

Two important points:

1. The expression of ideas is protected, not the ideas themselves, nor are mere facts, designs or processes protected by copyright. For example, a list of the highest mountains in North America can not be copyrighted, but an adventure book on mountain climbing that incorporates the list as well as other material, perhaps descriptive, perhaps visual, but essentially creative, can be copyrighted.

   But what is the dividing line between an idea and its expression? It is, as Judge Learned Hand wrote, “of necessity vague.” In fact, this most famous and brilliant of judges in American history adjudicated several copyright cases which appear to contradict each other in just this area of inquiry. Each case is decided on its own merits by a decision maker who weighs the facts, while looking to case law for guidance in understanding the interpretation of regulations.

2. In the U.S., as in China, copyright protection is automatic upon the creation of the work. Once written down, it is copyrighted. Formal registration with either nation’s copyright administration is not required for protection. However, in the U.S., formal registration is required if one holding a copyright originating in the US wishes to sue another party for copyright infringement – not necessarily true for foreign copyright holders, however. So, formal registration is very much recommended, but not required.

Back to the law. The U.S. Copyright Act tells us that the owner of a copyright has certain exclusive rights, subject to exceptions, to do and to authorize any of the following:

1. to reproduce the copyrighted work;

2. to prepare derivative works based upon it;

3. to distribute copies to the public by sale or other transfer of ownership, or by rental, lease, or lending; (note: This is where libraries come in.)

4. to perform the copyrighted work publicly;

5. to display the copyrighted work publicly; and

6. in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

These are exclusive rights – in other words, they belong to the copyright owner alone, subject, of course, to certain exceptions.

Briefly, let us go through these exclusive rights one by one. For the purposes of our discussion, some are more important than others. Therefore, not all of them will be discussed in detail.

International Treaties

But first, let us ask an important question. Can a Chinese copyright holder expect to be protected from infringement occurring in the U.S.? Yes, and, basically for the same reason that American copyright holders expect protection from infringement occurring in China to American copyrights. International treaties, such as the Berne Convention, when agreed to by its signatory nations, require its signatories to protect the copyrights of other signatories just as they protect the copyrights of their own people. The U.S. and China are signatories to (in other words, have agreed to uphold) the Berne Convention, as well as other relevant treaties. The U.S. must extend copyright protection to Chinese copyright holders.

Distribution

Remember that the owner of a copyright has the exclusive right to distribute copies to the public by sale or other transfer of ownership, or by rental, lease, or lending. Libraries lend. What if a library lends a pirated book it has purchased and placed on the stacks?

The closest case on this subject is Hotaling v. Church of Jesus Christ of Latter-Day Saints, decided in 1997 by the U.S. Court of Appeals, Fourth Circuit. Hotaling published research materials in microfiche form. The Mormon Church purchased one genuine copy and added it to its main library collection in Salt Lake City. The Church then made copies without Hotaling’s permission and sent them to several branches. Hotaling learned of the copying and demanded the Church stop doing so. The court held that a library “distributes a published work, within the meaning of the Copyright Act, 17 U.S.C. Sections 101et seq., when it places an unauthorized copy of the work in its collection, includes the copy in its catalog or index system, and makes the copy available to the public.” Since the owner of the copyright, in this case Hotaling, has exclusive rights to distribution of his work, the library did something it should not have done. From the opinion: “Distributing unlawful copies of a copyrighted work does violate the copyright owner’s distribution right and, as a result, constitutes copyright infringement.” The copy in Hotaling is of a microfiche, but the holding of the case would appear to apply to books, audio CDs and DVDs as well.

People may ask if there is any kind of exception for libraries. After all, our work is done for the benefit of the public. Well, the relevant exception is in Section 108(c): the Copyright Act permits libraries to make a replacement copy of a published copyrighted work for preservation and security, that is,

“solely for the purpose of replacement of a copy or phonorecord that is damaged, deteriorating, lost, or stolen, or if the existing format in which the work is stored has become obsolete, if –

1. the library or archives has, after a reasonable effort, determined that an unused replacement cannot be obtained at a fair price; and
2. any such copy or phonorecord that is reproduced in digital format is not made available to the public in that format outside the premises of the library or archives in lawful possession of such copy.”

This is a very narrow exception.

Some may ask about the “fair use” exception, as delineated in Section 107 of the Act which allows “reproduction for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.” For example, the use of word for word quotations from copyrighted material used in a scholarly article. I point this exception out, which is widely known in the academic world, so that we can dismiss it. Fair use is not applicable to the situations we are describing. Yes, there are certain uses of copyrighted material that do not amount to infringement – negligible and narrow exceptions – but there is no blanket exception for libraries.

Performance

Many libraries show movies, nowadays generally in the form of DVDs shown on a screen, to the public. For example, a library already has a pirated DVD in its collection – regardless of the method by which the DVD came to be there – it wishes to show at the library. May it show the movie to the public?

Remember that the copyright holder has exclusive rights to perform or to authorize a public performance of a motion picture and other audiovisual works. Public performance under the Copyright Act means either of two things:

1. that the place where the work is performed or displayed is open to the public or any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered; or
2. a transmission or other communication of a performance of the work to the public, by means of any device or process, for example, on TV screens or on wide movie screens. This means that a showing of a pirated DVD at the library is very likely an infringement. (There is a narrow fair use exception for classroom showings of curriculum-related audiovisual works.)

How do pirated editions get into a library collection, anyway? What happens when a library purchases and imports pirated copies from overseas – usually without knowledge of their being pirated items because, quite often in China, exactly who holds the copyright is unclear. Chapter 6, Section 602 of the Copyright Act deals with this.

602 (a) Importation into the United States, without the authority of the owner of copyright under this title, of copies or phonorecords of a work that have been acquired outside the United States is an infringement of the exclusive right to distribute copies or phonorecords under section 106.

The importation from China of unauthorized copies of books, audio CDs and DVDs is itself an infringement, but there are two exceptions which concern us.

1. importation of copies or phonorecords (i.e., books and audio CDs) under the authority or for the use of the Government of the United States or of any State or political subdivision of a State if they are used for archival (lending is not mentioned) purposes only

Are you a state university library? Importing for archival purposes only? Or to lend? Another exception:

2. an organization operated for scholarly, educational, or religious purposes and not for private gain may import no more than one copy of an audiovisual work (i.e., DVD) solely for its archival purposes, and no more than five copies or phonorecords of any other work (i.e., books and music CDs) for its library lending or archival purposes, unless the importation of such copies or phonorecords is part of an activity consisting of systematic reproduction or distribution

Note that DVDs, as opposed to books and audio CDs, are here given different treatment.

Basically, to avail itself of either Section 602 exception, the library needs to ask several questions, among them – is the library importing its Chinese book materials directly from overseas? What item is it – book, audio CD or DVD? Has the copyright owner given his permission? And for what purpose use in the library (archival or lending)? And what constitutes “systematic distribution?” (The law is not especially clear. Does it include inter-library loan, for example?). The answers to these questions will guide you to conclude whether your importation infringes. That may be slim comfort to you, especially when you consider the situation among publishers in China, which will be discussed in a moment.

In sum, if a work has been copied without the authority of the copyright holder, even though that person may be in China, an American library can only in narrow circumstances purchase it and import it from China without infringing that copyright. In addition, an American library can in only narrow circumstances place an unauthorized copy in its collection and make it available for lending to patrons. The library generally can not show a pirated DVD to a gathering of people. It appears that library use of pirated book materials from China is very much limited to a set of narrow exceptions. These materials are not generally going to become available for usage in the library in the normal course of library lending and audiovisual program planning.

IV. The Practical Effect of American Copyright Law

Now, we move away from the American law to the practicalities of dealing with China on a business basis. I would like to recognize Frank Cheng, Managing Director of Beijing Zhongtie Chuangshi Cultural Development Company (北京中铁创世国际文化发展有限公司总经理), who was unable to participate in this discussion because of visa difficulties, but who shared his notes with us.

The Chinese publishing industry has changed greatly since the 1980s when I would buy Chinese publications by mail from International Bookstore in Beijing (国际书店). I well remember the slim brochures advertising books and periodicals from many publishers at extraordinarily cheap prices. Much of it was propaganda printed on hair-thin paper, but, if he was careful, it was inexpensive for an eager student to build a personal library of Chinese books back then. They arrived in huge, dramatically soiled hempen Chinese postal sacks with rope and metal collars. It was very exciting to be on the receiving end of such a parcel.

The publishing playing field has changed a good deal since then. Publishing houses still may publish only with a license, awarded by the government. There are about 550 authorized publishing houses in China, but it is not just these quasi-state organizations which are involved in publishing. Many of the functions of publishing are now taken on by so-called “cultural companies” (文化公司). Publishing houses outsource certain functions to these smaller companies, which are not authorized by the state to do the actual “publishing.” While this brings new talent and drive to an otherwise stagnant publishing industry weighed down by the burden of retirees and partially employed workers, it can create problems for the library buyer.

Remember that the copyright holder, even if he resides in China, has certain exclusive rights in the U.S. regarding reproduction and distribution of his work. So, is the item you are purchasing (importing) from China – and when you put it in your collection and make it available to the public, distributing -- published with the authorization of the copyright holder or not? (We just assume that with books in the West, don’t we?) Given our discussion of copyright law, it is important. No library wishes to be held liable for copyright infringement.

Briefly, let us look at the possible remedies a successful plaintiff may have in a case against a copyright infringer.

1. actual damages the infringement caused the plaintiff. Or,
2. statutory damages (damages set by statute), which can be much higher than actual damages – between $750 and $30,000 per infringement. And
3. attorney’s fees, perhaps, depending upon the discretion of the judge. Statutory damages are the most injurious, usually far exceeding actual damages.

Criminal penalties are possible as well – but they require willful infringement for commercial gain. So it pays to make sure your materials do not infringe.

There is an exception in Section 504 eliminating statutory damages where an infringing library “believed and had reasonable grounds for believing that the use of the copyrighted work was a fair use.” But we have seen that the fair use exception is not necessarily applicable to the scenarios we have been talking about.

Copyright holders who find unauthorized materials in your stacks may decide they have found a good target for attack, since the state or local government has money and usually does not have the desire to spend a lot of it fighting, but might instead settle quickly and allow the attacker to cash out. All told, it is clear that we would wish to avoid liability for copyright infringement.

Back to China. Books issued by a publishing house with a permit to publish from the government are usually authorized copyrighted publications. The difficulty comes when publishing houses join with cultural companies to publish – it is less clear in such a situation the status of the copyright – the copyright may have been transferred permanently or temporarily, forgotten about or, in the case of outright pirates, entirely neglected.

There is no entity in China like the online Copyright Clearing House (copyright.com) where convenient access to the status of Chinese rights and permissions may be ascertained quickly from within the U.S. It is believed that there is some kind of a shake-up coming in the publishing system in China in 2006 which may affect copyrights in some way. In December, 2005, an online search for trademarks was announced in China, but whether a similar online service for copyrights might be released is purely conjecture.

V. How Might a Library Protect Itself?

1. Is the selling price greatly discounted from the cover price? Street prices of pirated editions in China often sell for 10 – 15% the cover price.

2. In the case of books, many recently published items on the rear information page will carry substantial copyright information such as
   • An ISBN number (example: 7-5036-4865-1)
   • the C in a circle © mark
   • CIP (图书在版编目数据) data (example: 中国版本图书馆CIP 数据核子(2004) 第022069 号)
   • An example of a book showing all this is 《经济法双语对照法规》, published by 法律出版社 in 2004.
   Unauthorized books generally will not carry this information, but the reverse is not always true.

3. In the case of audio CDs and DVDs, there are a number of signs to watch for that tend to show an item is a pirate.
   • Packaging that lacks the 音像制品防伪标识 and 中国进出口 公司防伪标识
   • Holographic labels required by the Chinese government to be placed on Chinese made products purportedly verifying the genuineness of the product – although these labels themselves are easily counterfeited.
   • No ISBN or ISRC number 中国标准音像制品码 on the product
   • Packaging or printing of poor quality.

4. If purchasing from a domestic American supplier of materials, inspect all product and immediately reject, notify in writing and return anything suspicious to the dealer.

5. Your attorney can help draft a clause in a purchase agreement that places the burden upon the supplier by assessing penalties for nonconforming product and indemnifying the library against infringement. In practice, this does not limit library liability, but at least the supplier holds some responsibility and may become more cautious himself about the products he carries. On the other hand, some suppliers might simply decide not to sell if so burdened. Of course, it can be attempted – and the seller reaction can be judged.

6. Indeed, a reliable supplier in China who keeps track of publications on the market and can better judge copyright status will limit buyer risk. If such a supplier can be found, it would be extremely valuable. Library staff involved in purchasing from overseas must become as knowledgeable as they can about the publishing market in China to ensure pirated editions are less likely to enter the collection, except and only as allowed by law.

I have heard of at least one case brought by Hong Kong movie distributor against a library, which I believe was settled out of court for a cash sum. However, I have been unable to track down details of this case, and would like to hear from anyone who may have any information about it. If it had been settled before litigation, that would explain why few traces of it remain in the public record.