MPAA v. Shenzhen Xunlei Networking Technology – Asserting Copyright Claims in China
Studios of the Motion Picture Association of America Inc. (MPAA) sued Shenzhen Xunlei Networking Technologies Co., a Chinese online video-streaming and pay-per-view service in China over copyright infringement on Jan. 19.
The MPAA filed the suit in the Nanshan district court in Shenzhen, China, according to Bloomberg News and a statement the MPAA made. This lawsuit is especially surprising given the fact that Xunlei and the MPAA previously announced their agreement to jointly promote legitimate access to film and television shows online on June 3, 2014 about three weeks before the company raised $101 million in a U.S. IPO. On January 20, 2015, the MPAA said, without much detail, that it alleges “various acts” of copyright infringement and seeks damages, an injunction against the infringing activity, a public apology and litigation costs.
Which Laws Govern Their Dispute?
The Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) is an international agreement governing copyright. Both the United States and China are parties to the Bernie Convention. Under the Berne Convention, if copyright infringement occurs outside of the United States, the appropriate forum is the foreign nation where the infringement occurs. Frequently, that foreign nation would, presumably, employ United States law, at least to the extent of determining ownership of the United States copyright. However, the general rule is that the law of the forum nation may determine: (1) who owns the copyright, and (2) the rights afforded the owner of the copyright.
Where the Chinese law applies to the rights entailed in the copyright, Chinese law must grant foreign copyright owners rights that are at least equal to the rights that it grants its own nationals. This is called “national treatment” and requires only that the foreign plaintiffs be granted parity. It does not, however, mean that Chinese law applies to the substantive rights of the foreign copyright in China.
Will the MPAA Win?
It’s hard to say. Even if the MPAA can recover, they’ll likely only recover a fraction of the potential profits they lost from lost sales. Historically, copyrights have not received strong protection in the Peoples Republic of China. However, external pressures and internal economic objectives have moved China closer to copyright protection practices found in Western nations.
Even so, there are not enough cases being brought before Chinese courts and the fines and damage awards are not large enough to deter copyright infringement or compensate copyright owners under existing law. Simply put, there aren’t adequate incentives to motivate Chinese infringers to modify or alter their behaviors or practices. Further, existing laws fail to adequately compensate copyright owners for profits lost as a result of infringer activity – which probably has the practical effect of deterring copyright holders from bringing claims. To statistically illustrate the problem above: “Total fines imposed by Chinese authorities for violations of trademarks, copyrights, and patents collectively amounted to $30 million, only 0.05 percent of the estimated sales revenue losses of over $60 billion suffered by U.S., European Union, and Japanese companies in the same year.”
Why is there such a discrepancy between China’s and the United State’s awarding of damages?
China’s copyright laws do award economic damages to individuals and companies for copyright infringement. Even though those laws have been designed to comport with the Berne Convention and other major international agreements, Chinese copyright laws differ in certain areas from those found in many Western countries. For example, total recoverable damages are often capped. While capping damages can hedge the risk of excessive damage awards, it can also constrain awards to levels well below the actual economic damages the copyright owner incurs.
Even where they are not capped, damages awarded are low compared with those awarded in the U.S.. Like in the U.S., in China, damages are often computed on the basis of the infringer’s “unjust enrichment.” In other words, damages are based on the amount of money the infringer profited as a result of the infringement. But because infringers usually sell their illegal copies at a fraction of the price the copyright owner would charge, such unjust enrichment is often tiny compared to the potential profits from lost sales.
So Why Sue?
Well it’s simple, the MPAA wants to send a message. Mike Ellis, president and managing director of the Motion Picture Association for the Asia Pacific region says, “[f]or too long we have witnessed valuable creative content being taken and monetized without the permission of the copyright owner, that has to stop and stop now.”
 2 Litigation of International Disputes in U.S. Courts § 8:43
 5 L of Intl Trade § 156:1
Photo by: Joe Ross under Creative Commons License.