When advertising their goods or services in China, foreign-invested companies—just as they would in their home market—often use popular music or trending videos to boost their chances of catching consumers’ attention. However, even just a short extract from a commercial piece of work by a professional artist will involve intellectual property (IP). This case study by the China IP SME Helpdesk provides some information on the main steps involved if a copyright licence is needed for a marketing campaign in China.

Background

A Belgian small to medium-sized enterprise (SME) producing chocolate decided to increase its investments in China to improve sales. The company had already been present in the China market for almost a decade, with satisfactory sales figures and a well-prepared IP protection strategy. The company had registered its trademark when it entered the China market and had also obtained a few design patents covering some of the more distinctive shapes of its most distinguished products.

A year ago, the company opened its very first local office in Shanghai and hired some local employees to boost its presence in the China market. The SME had just launched a brand new product and with the advice of the local team started a marketing campaign focussing heavily on advertising on social media platforms such as WeChat and Douyin (TikTok). The marketing campaign was tailor-made for the China market, featuring videos about how chocolate is made in Belgium, but using extracts of one of the latest Chinese pop songs.

Problems encountered

At company headquarters, the marketing team had a rather good understanding of how intellectual property rights (IPR) work. When approving the Shanghai marketing campaign, they were pleased to learn that the copyright for the video material belonged to the company since the video was shot in their factory by their own employees. However, the marketing team was concerned over the use of music in the video, as it could be considered a violation of third-party copyright.

The marketing team was not familiar with the procedure for obtaining copyright licences in China, since this was their first social media advertising campaign there. While solving this issue, the headquarters had to place the marketing campaign on hold. Meanwhile, the marketing team contacted the China IP SME Helpdesk to learn more about copyright licences in China, and were informed that copyright licences in China are managed by collective management institutions such as the Music Copyright Society of China (MCSC). The MCSC is the only statutory collective management organisation for music works in Mainland China. Their main function is issuing copyright licences to users and collecting the corresponding fees. The MCSC also allocates royalties to its members.

Actions taken

Before broadcasting the advertisement, the SME contacted the MCSC to apply for a licence to use the pop song in the online advertisement. Obtaining a copyright licence in China is a relatively straightforward process and, in this case, it was all done by the company’s Shanghai-based employees. The first step of the process included creating an account on the e-licence section of the MCSC’s website. Second, the SME needed to submit the application file for the approval of the MCSC. Finally, once the application was approved, the SME paid the requested fees (which are paid annually) within 10 days of the application being accepted.

The application can technically be handled remotely. However, to create an account on the MCSC website, a Chinese phone number is required. Also, the support of a Chinese advertisement agency is needed. The whole application process is only available in the Chinese language. Timewise, the MCSC requires three working days from the receipt of the application to examine it. The MCSC will then contact the holder of the music rights for a price quotation. This step may take time and involve negotiations. Once the price is agreed upon by both parties, it takes about one week for the MCSC to approve and finalise the licence.

By obtaining the copyright licence, the SME was able to avoid infringing the third party’ s copyright and could confidently launch its marketing campaign.

Lessons learnt

• Before launching an advertising campaign in China, carry out due diligence of the IPR involved to make sure you are not infringing any third-party rights. Video material and music are both separately covered by copyright. Even if you only use parts of someone else’ s work, it would still be considered copyright infringement. If you are not the copyright holder, you should always obtain a licence to use the material in your advertisement. Be careful not to show a third party’ s trademarks, as direct comparative advertisement is not allowed in China.
• Obtaining a copyright licence in China is relatively straightforward as the copyright collective management institutions facilitate the work. As mentioned earlier, the MCSC is the Chinese copyright collective management institution for musical works. For written works, you should consult with the China Written Works Copyright Society (CWWCS). For audio-visual works, you should consult with the China Audio-video Copyright Association (CAVCA).
• Do not launch your advertisement in the China market if you are not sure of the copyright ownership. Copyright infringement can lead to payment of damages and the removal of your advertisement from online platforms. Note that China is a rather litigious country and the chances of being sued for third-party copyright infringement are high.
• You need to pay an annual fee for a copyright licence; however, the costs vary depending on different factors such as the type of work, use of the work (advertisement, background music for an event, broadcasting), dissemination platform and time, among others. Consult with the relevant copyright collective management institution first when planning your advertisement campaign, since the licence costs (and ultimately your campaign costs) can vary widely depending on the resources used.

The China IP SME Helpdesk supports SMEs from European Union (EU) Member States and from countries participating in the Single Market Programme¹ to protect and enforce IP rights in or relating to China, Hong Kong, Macao and Taiwan, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on IP and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IP queries via email (question@china-iprhelpdesk.eu) and gain access to a panel of experts, in order to receive free and confidential first-line advice within three working days. The China IP SME Helpdesk is an EU initiative. 

To learn more about the China IP SME Helpdesk and any aspect of IP in China, please visit our online portal:  https://intellectual-property-helpdesk.ec.europa.eu/regional-helpdesks/china-ip-sme-helpdesk_en