I. Introduction: The Worldwide Battle Over Masters
The recent high-profile conflict between G.E.M. (Deng Ziqi) and her former management company has caused significant waves in the Asian entertainment scene. Central to this dispute is a situation familiar to industry watchers globally: an artist attempting to re-record their own songs to escape the control of a record label, only to be accused of copyright infringement. This situation closely resembles Taylor Swift widely publicized efforts to regain control of her musical catalog by re-recording her early albums.
Although the details of G.E.M. case are specific and currently under legal review, the legal issues involved are universal but carry unique complexities under Chinese Copyright Law. For international music companies, independent artists, and labels aiming to enter or grow in the Chinese market, grasping these subtleties is not just theoretical—it is crucial for safeguarding their assets. This article seeks to break down the Chinese copyright environment, going beyond the headlines to examine the practical aspects of copyright ownership, the extent of statutory licenses for sound recordings, and the vital role of careful contract drafting.
II. The Bundle of Rights: Breaking Down Ownership in China
In common law systems, we often treat copyright as a single concept or differentiate between publishing and master rights. However, under the Copyright Law of the People’s Republic of China (PRC), copyright is explicitly viewed as a bundle of rights—a set of distinct, exclusive legal rights. These rights include, but are not limited to, reproduction, distribution, broadcasting, public performance, and the right to disseminate works over information networks (commonly called the Internet Dissemination Right).
For foreign rights holders, this division presents a significant initial challenge. In a typical artist-label relationship, determining ownership is not just based on industry norms but requires careful contractual interpretation.
The Importance of Contractual Allocation
Chinese law upholds contractual freedom in the transfer and licensing of copyright. Typically, a music company (the label) may acquire or license reproduction and distribution rights for a sound recording, and possibly the information network dissemination right for digital streaming. Meanwhile, the songwriter (lyricist and composer) retains the underlying copyright in the musical composition (the musical works) and often licenses specific rights (such as mechanical or performance rights) separately to collective management organizations or the label.
Disputes arise when these boundaries become unclear. For example, if a contract grants the label exclusive rights to publish and distribute, does this include the right to authorize streaming? Recently, Chinese courts have tended to interpret the Information Network Dissemination Right (Article 10 of the Copyright Law) strictly. This right governs the interactive transmission of works, allowing the public to access them at their chosen time and place (e.g., platforms like Spotify, Apple Music, Tencent Music).
The Problem of Overlapping Rights
Imagine an artist who signed a contract years ago and now wants to re-record a song. If the original contract assigned the reproduction right for the specific sound recording to the label, the artist is generally free to create a new recording (a cover or re-record) of the same composition, provided they have secured the rights to the musical work. However, if the contract includes restrictive clauses or non-compete terms related to the musical work itself, or if the artist assigned the composition copyright to the company, then re-recording could infringe on the company rights in the composition.
This issue was central in the Taylor Swift case: she owned the composition (publishing) but not the master recordings. In China, if an artist has assigned both the composition and the original recording to the label, re-recording without permission directly infringes the label exclusive rights. Therefore, the re-recording strategy only works if the artist retains ownership of the composition or has a clear license to use it. Foreign artists must carefully review their Chinese contracts to determine exactly which rights in the bundle they have transferred.
III. The Digital Divide: Streaming vs. Broadcasting
For international music companies, understanding the difference between Broadcasting and Information Network Dissemination in China is crucial but often misunderstood.
The Interactive Standard
According to Chinese law, the Right of Dissemination over Information Networks (Article 10, item 12) is defined by its interactive nature. This right applies when users choose when and where to access the content, which is the main source of revenue for modern music, including all on-demand streaming platforms.
The Non-Interactive Scope
In contrast, the Right of Broadcasting (Article 10, item 11) covers non-interactive, scheduled transmissions such as traditional radio and television broadcasts. Although both involve communication to the public, the key legal difference is the absence of interactivity in broadcasting. Why is this important? A license for Broadcasting does not automatically include Streaming. Foreign labels entering distribution agreements in China must ensure their contracts explicitly grant the Right of Dissemination over Information Networks. Using vague terms like public communication or broadcasting rights (common in older contract templates) can result in a distributor having permission to air a song on the radio but not to stream it on platforms like NetEase Cloud Music or QQ Music.
IV. Cross-Border Contracts: The Risks of Legal Terminology
When foreign rights holders work with Chinese companies, contracts are often written in English or translated, which can cause significant risks due to differences in legal terms.
The Hong Kong Example and Its Implications for Mainland China
Take contracts governed by Hong Kong law, a frequent gateway for deals involving China. Under Hong Kong Copyright Ordinance (Section 27), there is a right described as playing or showing the work in public, often called public performance or public playing. Importantly, this right pertains to live performances or physical locations like venues, bars, or stores. It differs from Section 28A, which covers making available or remote transmissions. If a contract with a Chinese party uses Hong Kong public playing term without clarification, the Chinese side might interpret it narrowly as only covering live performances, overlooking digital distribution rights.
Choice of Law
Parties can select which jurisdiction law governs their copyright contracts. However, if no choice is made, the law of the place with the closest connection usually applies—often the location of the obligated party. For foreign licensors, this typically means Chinese law governs rights exploited within mainland China. Therefore, foreign legal advisors must tailor rights grants to local law. Do not assume that granting public performance rights includes streaming rights—it does not. Contracts should use precise terms from PRC Copyright Law such as Information Network Dissemination Right (信息网络传播权), Reproduction Right (复制权), and Distribution Right (发行权).
V. The Puzzle of Statutory Licensing for Sound Recordings
One of the most technically challenging parts of China current copyright system—and a significant risk for rights holders unfamiliar with it—is the Statutory License for Sound Recordings outlined in Article 42, Paragraph 2 of the Copyright Law.
The Legal Provision and Its Uncertainty
This rule essentially says that a producer who lawfully creates a sound recording can make a recording of someone else musical work without needing the copyright owner’s permission, as long as they pay the required statutory fee—unless the copyright owner has explicitly stated that such use is prohibited.
Originally, this was intended to prevent monopolies and encourage music distribution during the era of physical media like CDs and cassettes. If a song became popular, other labels could legally release cover versions without negotiating individual licenses, provided they paid the standard fee. However, the wording leaves a large grey area. It specifically mentions the right to make (produce) the recording. But what about what happens after the recording is made? Does the statutory license cover distributing those copies? Does it apply to streaming or online dissemination?
The Conservative Interpretation vs. Modern Practice
A strict, literal reading limits the statutory license to just the act of recording. Any further actions—such as reproducing, distributing, or streaming—would require separate permission from the copyright owner. Under this interpretation, the statutory license is almost useless for commercial releases: you can record the song, but you cannot sell or stream it without a separate agreement. This creates a deadlock that undermines the law goal of promoting music dissemination.
Advocating a Forward-Looking Interpretation
From the perspective of industry practitioners seeking growth, the statutory license should be understood to include the necessary subsequent uses of the recording. The law intent was to maximize the value and reach of musical works. In today digital world, exploitation no longer means just manufacturing physical copies; it means uploading to servers and streaming online. If the statutory license is confined to physical CD production—a format that is rapidly declining—the law becomes outdated. A practical interpretation would hold that the license inherently includes the right to distribute recordings over digital networks, provided fair payment is made. This is especially important for cover artists and digital platforms operating under collective licensing systems.
For foreign rights holders, this creates a risk: Chinese platforms or cover artists might claim statutory license rights by showing they paid collective management organizations (like MCSC). Rights holders need to carefully monitor such uses.
VI. The Declaration of Non-Use: A Protective Measure That Needs Clarification
Article 42 also allows copyright owners to opt out by declaring that such use is not permitted.
Lack of Clear Procedures
This is where the biggest vulnerability lies. The law does not specify how, when, or where this declaration must be made. Should it be printed on the original album cover? Filed with the Copyright Protection Center? Or is a statement on the artist website enough? This uncertainty creates a trap for those unaware. If a foreign publisher does not make a clear, public declaration forbidding statutory licensing, Chinese entities may proceed with cover versions, claiming ignorance of any prohibition.
Recommendations for Strict Interpretation
To protect foreign rights holders, a strict approach to the declaration is necessary.
- Timing: The declaration should ideally be made before anyone invests in producing a cover version. A declaration made after significant investment by a third party would be unfair and undermine reliance interests.
- Clarity: The declaration must be explicit. A vague All Rights Reserved may not be enough. It should clearly state: This musical work may not be used under the statutory license for sound recordings.
Applying Estoppel and Acquiescence
Courts should consider estoppel and acquiescence principles. If a copyright owner has tolerated statutory licenses for years without objection and then suddenly tries to block a competitor, the court might find the owner has implicitly waived the right to prohibit use. However, relying on court discretion is risky. The safer approach is proactive management. Foreign agencies should ensure all works registered or published in China carry a clear, prominent declaration.
VII. Practical Guidance for Overseas Music Stakeholders
China music market is evolving, but legal tools exist for those who understand them.
- Review Your Contracts: Don’t rely on standard global agreements. Make sure Chinese licenses explicitly specify rights under Article 10 of the PRC Copyright Law. If you want to grant streaming rights, specify Right of Dissemination over Information Networks, not just digital rights.
- Secure Composition Rights: For artists wanting to re-record (the Taylor Swift strategy), owning the composition is essential. If the original contract assigned composition rights to the label, re-recording without permission infringes copyright. You must negotiate a reversion or license first.
- Make Proactive Declarations: Music publishers should include a no statutory license clause in metadata sent to Chinese digital service providers and collective management organizations. Although the legal effect is unclear, this creates evidence of your intent in case of disputes.
- Monitor and Enforce: Since the scope of the statutory license is disputed, don’t assume unauthorized covers on Chinese platforms are lawful. Challenge them. Enforcement helps clarify the law and protect rights holders.
VIII. Conclusion
The G.E.M. case reflects an industry in transition, where old contracts meet new distribution methods. While re-recording empowers artists, China legal framework remains rigid and contract-based.
The statutory license system, meant to ease access, currently causes uncertainty due to vague scope and procedural gaps. As China’s music market grows rapidly, foreign rights holders must approach it carefully and precisely. By understanding the fragmented rights system and adopting strong drafting and registration practices, creators and companies can protect their works effectively.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. The opinions expressed are those of the author based on practical experience and current legal interpretations.