| Our ref. : TIB 07/09/5/2 XXVII | Tel. no. : 2918 7418Fax no. : 2869 4420 |
4 January 1999
By Fax
Clerk to the Panel on Trade and Industry
Legislative Council Secretariat
Legislative Council Building
8 Jackson Road
Central
Hong Kong
(Attn : Ms. LEUNG Siu-kum)
Dear Ms. Leung,
Copyright Royalties and Licence Fees
Thank you for your letter of 16 December. Our comments on the issues raised in your letter, seriatim, are as follows.
How licence fees are collected by the various collecting societies in hotel industry and other trades; how they determine the fee level; and who the legitimate bodies are to claim licence fees.
Copyright right is a private property right. In line with international intellectual property conventions and norms, the Copyright Ordinance stipulates, amongst other things, that the copying, broadcasting or public performance of copyright works requires the consent of the copyright owner. The copyright owner or any body legitimately representing him may demand a reward, monetary or otherwise, in return for the consent for the use of his copyright works. In a free market economy, a copyright owner is free to appoint any body to represent his rights, and to determine on his own the reward required for the use of his copyright works. In this respect, a copyright-owner's position is little different from that of an owner of physical property.
Comments on each of the concerns raised by the Federation of Hong Kong Hotel Owners.
The note at the Annex addresses the points raised by the Federation of Hong Kong Hotel Owners.
Contact details of the current fee-collecting societies in Hong Kong.
As a copyright owner is free to appoint anyone to represent his rights and negotiate on his behalf the terms for the use of his copyright works or he may elect to represent himself in such transactions, the Government does not have the details of all fee-collecting societies in Hong Kong. The two major collecting societies that collectively administer copyright in Hong Kong that we are aware of and their contact details are -
| (a)
| Composers and Authors Society of Hong Kong (CASH)
18/F Universal Trade Centre
3 Arbuthnot Road
Central
Hong Kong
Tel : 2846 3268
Fax : 2846 3261
|
| (b)
| Phonographic Performance (South East Asia) Limited
Room 3705 Hopewell Centre
183 Queen's Road East
Wan Chai
Hong Kong
Tel : 2866 6862
Fax : 2866 6869
|
Yours sincerely,
Annex
Comments on Submission
by the Federation of Hong Kong Hotel Owners
regarding the Copyright Ordinance
The following sets out the Administration's comments on the Federation's points seriatim. The points in italics are those raised by the Federation.
1. (a) The Ordinance itself in many areas is unfair to the hotel industry. There is no "guideline" for copyright fee-collecting societies on how fees are charged.
Copyright is a private property right. The legislative intent of the Copyright Ordinance is to protect the legitimate interests of rights owners as well as users of copyright works, in line with international conventions and norms on intellectual property. In a free market, a copyright owner is free to appoint anyone to represent his rights and negotiate on his behalf the terms for the use of his copyright works. A copyright owner can also elect to represent himself in such transactions. It would be inappropriate and contrary to international law for the Government to interfere with how these private rights are exercised in the normal exploitation of the work.
(b) Hotels are vulnerable to overcharging and double charging by any fee-collecting society which sets its own fee standards on an item by item basis.
As copyright is a private property right, the rights owner or anyone legitimately representing the owner has a right to demand a reward for the use of his copyright works. It is not appropriate for the Government to interfere with the exercise of essentially private economic rights. The Copyright Ordinance already provides statutory mechanisms, through the Copyright Tribunal, for arbitrating royalty disputes with collective copyright administration bodies. The Ordinance also provides for a statutory indemnity in favour of licensees to cover any liability incurred by them for acts done within the apparent scope of their licence. It should be noted that a copyright article may consist of different types of copyright works (e.g. the copyright of the performance of a symphony belongs to the performing orchestra, while the record company may own the copyright of the recording) and the use of the article may require royalty payments to different collecting societies representing different rights owners.
(c) Fee collecting societies are not transparent. Trades and industries do not know how they come up with the tariff calculations nor how the royalties are distributed.
Please see comments under point 1(b) above. In addition, the distribution of royalty payments or licence fees amongst composers or authors who are members of the collecting societies is strictly a private commercial agreement between the respective parties. It is not an international practice to register licencing bodies. Nonetheless, under the voluntary registration system for licensing bodies to be set up under the Copyright Ordinance, an applicant licensing body will need to make available to the public information relating to scales of copyright royalty charges. This would enhance the transparency in the operation of the licensing bodies.
(d) The industry recommends that a token amount for each hotel is to be paid to those fee-collecting societies which would share the fees by themselves.
Please see comments under points 1(a) and (b) above.
2. (a) There is no clear "definition" on "public" and "private" performance. As the law presently stands, a public performance can be defined as music played in a hotel guest room, which, according to international hotel industry's norms and practices, is regarded as a "private" area.
There is ample case law on what constitutes "public" and "private" performances. In the context of hotels, the status of a performance would be construed by the courts in accordance with the relevant case law and the facts and circumstances of each case. While it is up to the hotel industry and the collecting societies to agree whether "performance" in hotel guest rooms should itself attract royalty charges, the Government has been given to understand that the collecting societies normally use the number of rooms in a hotel as a "multiplier" in the calculations for royalty payments.
(b) Copyright Ordinance should be restricted to performance of a public nature only where admission fee is charged.
Hong Kong is bound by international obligations to provide adequate protection to copyright, and any exceptions must be limited such that they would not otherwise prejudice a normal exploitation of a copyright work by its lawful owners (see point 1(a) above). Exceptions to the Copyright Ordinance are currently provided to enable fair and equitable uses of copyright works in cases like academic research, private study, domestic use, or news reporting or criticisms.
3. Royalty should be charged only from the "source" i.e. at the time of buying and selling.
The ownership of copyright in a copyright work is quite independent of the ownership of the material upon which the copyright work is recorded, whether it is a piece of paper, a film or a sound recording. It is a well-established trade practice that copyright royalties for public performance of recorded music are not included in the retail price of the physical copy of the music.
4. The industry recommends restore Clause 78 of the Draft Copyright Bill which provides residents and inmates of the hotel to be excluded from the definition of "having paid for admission".
Clause 78 of the consultation draft of the Copyright Bill provided certain exceptions to the copyright law. These exceptions were provided for charitable organisations but not for places like hotels as such. In line with Hong Kong's international obligations under various intellectual property conventions and agreements, the Bills Committee on the Copyright Bill of the previous Legislative Council agreed that the legitimate rights of the copyright owners should not be prejudiced with unnecessary exceptions (see point 1(a) above). Section 81(3) of the Copyright Ordinance accordingly is limited to apply to charitable organisations only.
5. (a) There is no way of knowing how legitimate the claims is to collecting fees and royalties by the fee-collecting societies as authors/composers cannot be traced or have died many hundred years ago.
In a free market, a copyright owner is free to appoint any body to represent his rights and negotiate on his behalf the terms for the use of his copyright works. However, as in all private commercial transactions, each contracting party is liable to its own claims or counter-claims. Copyright protection for the original works of authors or composers lasts for their lifetime plus 50 years. However, copyright also subsists in the recordings of music for 50 years from the making or release of such recordings. International norms require that the legitimate rights of the recording company and performing artists should be protected. Public performance of such recorded music therefore needs the consent of the respective rights owners.
(b) Fee-collecting societies claim represent authors/composers. The hotel industry is not in possession of any authentic documents to confirm who these copyright holders actually are. Whether there is any official registration mechanism for authors/composers certifying they are authentic copyright owners.
International obligations preclude us from requiring the registration of the ownership and subsistence of copyright for copyright protection under our laws. In many transactions proof of ownership is not normally required either. The principle with ownership of copyright is no different.
6. Composition of the Copyright Tribunal is mainly composed of lawyers and members directly or indirectly related to copyright fee-collecting societies. There is no representatives from other trades and industries including the hotel industry which are affected by the Ordinance.
The Copyright Tribunal is a statutory body established under the Copyright Ordinance. It is a quasi-judicial body appointed by the Chief Executive and is empowered to adjudicate disputes on collective administration of copyright. The Chairman and Vice Chairman of the Tribunal are highly-qualified persons eligible for appointment as district court judges. The seven members of the Tribunal have been appointed from a wide spectrum of the society to ensure the interests of various sectors are represented. They include representatives from the accounting profession, academics, composers, the retailing sector and also a member of the Consumer Council. The Tribunal and its predecessor, the Performing Rights Tribunal, has provided an alternative and more economical means to seek redress on such disputes than the courts. Seeking redress through the courts is still open to the parties to such disputes.
7. The hotel industry recommends, as a first step, to review the Copyright Ordinance and then introduce appropriate amendments.
The Copyright Ordinance was enacted by the previous Legislative Council in June 1997, i.e. less than two years ago. Nonetheless, the Government welcomes suggestions to improve the existing copyright protection regime.
(Miss CHEUNG Siu-hing)
for Secretary for Trade and Industry
c.c. DIP (Attn. : Mr. Stephen Selby)
Annex
Comments on Submission
by the Federation of Hong Kong Hotel Owners
regarding the Copyright Ordinance
The following sets out the Administration's comments on the Federation's points seriatim. The points in italics are those raised by the Federation.
1. (a) The Ordinance itself in many areas is unfair to the hotel industry. There is no "guideline" for copyright fee-collecting societies on how fees are charged.
Copyright is a private property right. The legislative intent of the Copyright Ordinance is to protect the legitimate interests of rights owners as well as users of copyright works, in line with international conventions and norms on intellectual property. In a free market, a copyright owner is free to appoint anyone to represent his rights and negotiate on his behalf the terms for the use of his copyright works. A copyright owner can also elect to represent himself in such transactions. It would be inappropriate and contrary to international law for the Government to interfere with how these private rights are exercised in the normal exploitation of the work.
(b) Hotels are vulnerable to overcharging and double charging by any fee-collecting society which sets its own fee standards on an item by item basis.
As copyright is a private property right, the rights owner or anyone legitimately representing the owner has a right to demand a reward for the use of his copyright works. It is not appropriate for the Government to interfere with the exercise of essentially private economic rights. The Copyright Ordinance already provides statutory mechanisms, through the Copyright Tribunal, for arbitrating royalty disputes with collective copyright administration bodies. The Ordinance also provides for a statutory indemnity in favour of licensees to cover any liability incurred by them for acts done within the apparent scope of their licence. It should be noted that a copyright article may consist of different types of copyright works (e.g. the copyright of the performance of a symphony belongs to the performing orchestra, while the record company may own the copyright of the recording) and the use of the article may require royalty payments to different collecting societies representing different rights owners.
(c) Fee collecting societies are not transparent. Trades and industries do not know how they come up with the tariff calculations nor how the royalties are distributed.
Please see comments under point 1(b) above. In addition, the distribution of royalty payments or licence fees amongst composers or authors who are members of the collecting societies is strictly a private commercial agreement between the respective parties. It is not an international practice to register licencing bodies. Nonetheless, under the voluntary registration system for licensing bodies to be set up under the Copyright Ordinance, an applicant licensing body will need to make available to the public information relating to scales of copyright royalty charges. This would enhance the transparency in the operation of the licensing bodies.
(d) The industry recommends that a token amount for each hotel is to be paid to those fee-collecting societies which would share the fees by themselves.
Please see comments under points 1(a) and (b) above.
2. (a) There is no clear "definition" on "public" and "private" performance. As the law presently stands, a public performance can be defined as music played in a hotel guest room, which, according to international hotel industry's norms and practices, is regarded as a "private" area.
There is ample case law on what constitutes "public" and "private" performances. In the context of hotels, the status of a performance would be construed by the courts in accordance with the relevant case law and the facts and circumstances of each case. While it is up to the hotel industry and the collecting societies to agree whether "performance" in hotel guest rooms should itself attract royalty charges, the Government has been given to understand that the collecting societies normally use the number of rooms in a hotel as a "multiplier" in the calculations for royalty payments.
(b) Copyright Ordinance should be restricted to performance of a public nature only where admission fee is charged.
Hong Kong is bound by international obligations to provide adequate protection to copyright, and any exceptions must be limited such that they would not otherwise prejudice a normal exploitation of a copyright work by its lawful owners (see point 1(a) above). Exceptions to the Copyright Ordinance are currently provided to enable fair and equitable uses of copyright works in cases like academic research, private study, domestic use, or news reporting or criticisms.
3. Royalty should be charged only from the "source" i.e. at the time of buying and selling.
The ownership of copyright in a copyright work is quite independent of the ownership of the material upon which the copyright work is recorded, whether it is a piece of paper, a film or a sound recording. It is a well-established trade practice that copyright royalties for public performance of recorded music are not included in the retail price of the physical copy of the music.
4. The industry recommends restore Clause 78 of the Draft Copyright Bill which provides residents and inmates of the hotel to be excluded from the definition of "having paid for admission".
Clause 78 of the consultation draft of the Copyright Bill provided certain exceptions to the copyright law. These exceptions were provided for charitable organisations but not for places like hotels as such. In line with Hong Kong's international obligations under various intellectual property conventions and agreements, the Bills Committee on the Copyright Bill of the previous Legislative Council agreed that the legitimate rights of the copyright owners should not be prejudiced with unnecessary exceptions (see point 1(a) above). Section 81(3) of the Copyright Ordinance accordingly is limited to apply to charitable organisations only.
5. (a) There is no way of knowing how legitimate the claims is to collecting fees and royalties by the fee-collecting societies as authors/composers cannot be traced or have died many hundred years ago.
In a free market, a copyright owner is free to appoint any body to represent his rights and negotiate on his behalf the terms for the use of his copyright works. However, as in all private commercial transactions, each contracting party is liable to its own claims or counter-claims. Copyright protection for the original works of authors or composers lasts for their lifetime plus 50 years. However, copyright also subsists in the recordings of music for 50 years from the making or release of such recordings. International norms require that the legitimate rights of the recording company and performing artists should be protected. Public performance of such recorded music therefore needs the consent of the respective rights owners.
(b) Fee-collecting societies claim represent authors/composers. The hotel industry is not in possession of any authentic documents to confirm who these copyright holders actually are. Whether there is any official registration mechanism for authors/composers certifying they are authentic copyright owners.
International obligations preclude us from requiring the registration of the ownership and subsistence of copyright for copyright protection under our laws. In many transactions proof of ownership is not normally required either. The principle with ownership of copyright is no different.
6. Composition of the Copyright Tribunal is mainly composed of lawyers and members directly or indirectly related to copyright fee-collecting societies. There is no representatives from other trades and industries including the hotel industry which are affected by the Ordinance.
The Copyright Tribunal is a statutory body established under the Copyright Ordinance. It is a quasi-judicial body appointed by the Chief Executive and is empowered to adjudicate disputes on collective administration of copyright. The Chairman and Vice Chairman of the Tribunal are highly-qualified persons eligible for appointment as district court judges. The seven members of the Tribunal have been appointed from a wide spectrum of the society to ensure the interests of various sectors are represented. They include representatives from the accounting profession, academics, composers, the retailing sector and also a member of the Consumer Council. The Tribunal and its predecessor, the Performing Rights Tribunal, has provided an alternative and more economical means to seek redress on such disputes than the courts. Seeking redress through the courts is still open to the parties to such disputes.
7. The hotel industry recommends, as a first step, to review the Copyright Ordinance and then introduce appropriate amendments.
The Copyright Ordinance was enacted by the previous Legislative Council in June 1997, i.e. less than two years ago. Nonetheless, the Government welcomes suggestions to improve the existing copyright protection regime.
