Following its move to collect copyright royalties for background music in 2002, the recording industry is taking another big step toward protecting intellectual property rights: safeguarding copyright of the music videos used at karaoke venues.

Karaoke outlets in China pay royalties to the Music Copyright Society of China, the copyright management collective for musicians.

However, this year the recording industry has begun claiming that the music videos used in karaoke venues should also be subject to fees.

At least 49 recording companies sent legal notices to about 12,000 karaoke venues across the country in March this year. The notices demanded the outlets stop using copyrighted music videos and pay damages.

Some outlets compromised, but most didn't. A few cases have made it into court.

Many karaoke operators believe they have already paid, because the Music Copyright Society collects money from them annually to pay copyright holders. Moreover, they say, the notices did not provide a viable standard for calculating compensation.

According to Qian Jian, the legal adviser to a karaoke venue in Beijing, the notice said compensation would be calculated based on the size of the outlet and the number of rooms available.

Judgments already handed down in a few similar lawsuits required the karaoke operators to pay 100,000 yuan (US$12,000) for each music video.

Karaoke operators fear that if this calculation is used to determine compensation, they will suffer huge losses. Most of them have thousands of songs in stock and many of the music videos played are transferred directly from video recordings.

Even more importantly, the recording industry has not indicated what it intends to do about music video royalties in the future. Many karaoke operators believe that if they compromise now, they may have to pay far more in the years ahead.

"Karaoke venues also pay business taxes, about 23 to 25 percent of the revenue. If each recording company asks for 10,000 yuan for each music video, the venues are left with only one choice: shutting down," Huang Shiqiu, head of Guangzhou's entertainment business association, told the Nanfang Daily.

A few months after receiving their notices, 30 karaoke venues in Shanghai countersued the recording industry, claiming that their reputations had been damaged and that business had declined after the delivery of the notices as a result.

The case has been accepted by the Shanghai Second Intermediate People's Court, but has not yet been tried.

The plaintiffs are asking for 1.0 million yuan (US$122,000) in compensation.

According to Wang Ju, secretary-general of China Audio & Video Association, the recording companies have come out on top in similar IPR lawsuits in nearly all cities except Shanghai.

The courts tend to regard music videos as cinematographic works under the protection of the Copyright Law and thus rule in favor of the recording companies.

But according to a report in the China Youth Daily, an anonymous official with the National Copyright Administration pointed out that there is still a lack of legislative authority for collection of copyright royalties for music videos from entire karaoke industry.

An amendment to the Copyright Law that went into effect in 2001 says that music broadcast in public is subject to royalties or permission for free use from copyright holders. It contains no mention of music videos.

Before that amendment, ambient music could be played freely anywhere without paying for use or requesting permission. Since 2001, Beijing businesses have been paying for their background music.

At present, the society manages copyrights of more than 60,000 songs and has at least 1,700 members.

(China Daily October 11, 2004)