Copyright is a property right. Like other property rights, it can be pledged as a financial security. According to statistics, between 2000 and August 2010, the PRC Copyright Protection Centre had registered 934 copyright pledges, 747 of which related to computer software.
The system of registering a copyright pledge has been in place since 1996. A new set of Measures for Registration of Copyright Pledge ("Measures") was published on 25 November 2010 and will come into force on 1 January 2011. These Measures clarify and improve the current system.
Instead of registering the pledge document, the Measures now require the parties (pledgor and pledgee) to jointly apply to the State Copyright Office to record the pledge. The pledge will only become effective when it is registered in the Register of Copyright Pledge ("Register"). To apply for registration, the parties are required to submit the prescribed application form, the parties' identification documents, the contract relating to the pledge, relevant power of attorney (if applicable), written confirmation of consent from all joint owners (if there is more than one copyright owner), licence contracts (if any) entered into prior to the pledge, valuation report (if any) of the copyright work and other materials as may be required. If the documents are in a foreign language, Chinese translations have to be provided.
Any change, assignment or release of the pledge has to be recorded. If all the materials and documents are in order, the Copyright Office will complete the registration and changes within 10 days (two weeks). If any supplemental document or rectification is required, the Copyright Office will notify the parties within 10 days and if the parties fail to respond within the time set by the Copyright Office, the application will be treated as withdrawn.
Once the pledge is recorded, the Copyright Office will issue a certificate. The certificate will show the basic information of the pledgor and pledgee, the description of the copyright work pledged, the registration number and date. Such information, together with information about release, change and cancellation will also appear in the Register which can be searched by the public.
Once the copyright is pledged, the pledgor cannot assign or license use of the work without the pledgee's consent. All proceeds from assignment or licence of the pledged copyright work will be used to pay any amount owing to the pledgee or be held for the pledgee.
A copyright pledge will be released upon joint application by the parties; the satisfaction completion of the relevant pledge contract; the realisation of the charge; the pledgee's waiver; or other matters leading to the termination of the charge.
A pledge may be cancelled if the pledge is adjudicated to be terminated by a judicial, arbitral or administrative authority; the pledge contract is determined to be invalid or terminated; the documents submitted for registration purpose are forged or obtained by fraud; or the registration should not have been allowed.
The Copyright Office should not allow the registration if the pledgor is not the copyright owner; the pledge contract contravenes any prescribed terms; the copyright period has expired; the duration of the pledgee's repayment obligation exceeds the copyright period; the subsistence of copyright is in dispute; or for reason of other non-compliances.
It is expected that the implementation of the Measures will improve the current system, encourage the commercialisation of copyright and enhance the development of the copyright industry.
For inquiries related to this Legal Update, please contact: