Sale of Pirated DVDs by Foreigners in China – Criminal Act or Copyright Infringement

The following case attracted substantial publicity both in China and elsewhere for several reasons. Firstly, it was the first case of a judgment being published by an Intermediate People’s Court in China involving the illegal sale of pirated DVDs in China in which foreigners were punished. Secondly, the case raised some concerns in the PRC and elsewhere about what constitutes the crime of selling infringing reproductions as well as the difference between the crime of selling infringing reproductions and the crime of copyright infringement in China.

From 3 November 2003 to 1 July 2004, Randolph Hobson Guthrie III ("Guthrie"), an American, who did not hold an Audio-Video Products Business Permit in China and knew that the DVDs he sold were infringing copies, accepted orders and sold the infringing DVDs to overseas buyers by connecting his computer to the website www.threedollardvd.com at his residence in Shanghai. Cody Abram Thrush ("Cody"), another American, Wu Dong, a PRC citizen and Wu Shibiao, a PRC citizen assisted Guthrie with delivering goods, client connections, transportation and computer supervision. The total sales to overseas buyers amounted to over 130,000 discs with sales income of over US$399,000 (RMB3,300,000) and revenue of over RMB970,000.

The Shanghai No.2 Intermediate People’s Court held that Guthrie, Cody, Wu Dong and Wu Shibiao sold the infringing DVDs with the knowledge that they were reproduced and distributed without the copyright owner’s permission and had made "huge illegal gains" out of such sales. Accordingly, they were guilty of the crime of selling infringing reproductions under Article 218 of the Criminal law of the PRC ("Criminal Law"). Guthrie, being the main offender, was sentenced to prison for 2 years and 6 months, a fine of RMB500,000 and deportation. Cody, acting as an accomplice, was sentenced to prison for 1 year, a fine of RMB10,000 and deportation. Wu Dong, acting as an accomplice, was sentenced to prison for 1 year and 3 months and a fine of RMB10,000. Wu Shibiao, acting as an accomplice and having voluntarily given himself up to the police was only fined RMB30,000.

Article 218 of the Criminal Law provides that it is a crime to sell infringing reproductions if any person knowingly sells works reproduced by infringing the copyright of the owners as mentioned in Article 217 of the Criminal Law for the purpose of making profits and the amount of illegal gain is "huge". Any person who commits this crime will be sentenced to prison for not more than 3 years, be fined or both.

Article 217 of the Criminal Law states that copyright infringement in any of the following ways is a crime if the copyright infringement is for the purpose of making profits :-

1. reproduction and distribution of written work, musical work, motion pictures, television programmes or other video graphic work, computer software or other work without the copyright owner’s permission;
2. publication of a book of which the exclusive right of publication is enjoyed by another person;
3. reproduction and distribution of an audio or video recording produced by another person without the producer’s permission; or
4. production and sale of a work of art bearing the forged signature of another person.

Any person who commits the crime of copyright infringement making "huge illegal gains" or if there are other special serious circumstances, will be sentenced to prison for not less than 3 years and not more than 7 years and a fine.

"Huge illegal gains" stated in Article 218 of the Criminal Law means any illegal gain of RMB100,000 or more, and is defined in Article 6 of the "Interpretation by the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues of Law Application in Handling Criminal Cases Involving Intellectual Property Rights".

The difference between the crime of selling infringing reproductions and the crime of copyright infringement lies in the type of act. With the crime of selling infringing reproductions, the act refers to the sale of infringing reproductions, whereas with the crime of copyright infringement, the act refers to the reproduction and distribution of copyrighted work. In this case, Guthrie, Cody, Wu Dong and Wu Shibiao did not reproduce the DVDs themselves. They purchased the pirated DVDs from other suppliers and sold the DVDs to overseas buyers at a higher price. Hence they were held liable for the crime of selling infringing reproductions under Article 218 of the Criminal Law.

Non-Chinese citizens must also be aware that the Criminal Law is applicable to all persons, including non-Chinese citizens who commit crimes in the PRC. It is also stated that when either the act or the consequence of a crime takes place in the PRC, a crime is deemed to have been committed in the PRC (Article 6, Criminal Law).

Since China became a member of the World Trade Organisation ("WTO"), it has been required to provide protection of IP rights in accordance with the WTO agreements. In order to enhance its trade relationships with other countries, China also wants to be seen as being tough on enforcement of IP rights. Foreign investors should be aware of the PRC Government’s determination to protect IP rights in China.

Our Intellectual Property and Litigation Practice regularly advises clients on PRC intellectual property rights, registrations and enforcement issues. If you want a copy of the summary of the above case or have any questions in relation to other China related or intellectual property matters, please contact us.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.