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People's Republic of China
Zhi Zhong Zi NO.12 (1999) ¡¡ Appellant
(Defendant in the High People's Court): Appellee
(Plaintiff in the High People's Court): Appellee
(Plaintiff in the High People's Court):
Beihai
Zhong Ding Stock Co., Ltd. (¡°Zhong Ding Company¡±), with an office at
Zhong Long apartment, Beihai Road, Beihai.
Legal Representative:
Chunlai Li, Chairman of the Board of Zhong Ding Company. Appellee
(Plaintiff in the High People's Court): Attorney:
Xiangdong Zhang, (ibid).
Appellee (Plaintiff in the High People's Court):
Center¡±), with an office at 38-3, Minzu Road, Nangning. Legal Representative: Yongshang Wei, Manager of the Service Center. Attorney:
Xiangdong Zhang, (ibid). Appellee
(Plaintiff in the High People's Court): Guanxi
Old People Tourist Company (¡°Tourist Company¡±), with an office at 2-3,
South Yuanhu Road, Nanning. Legal Representative:
Rangjun Liu, Manager of the Tourist Company. Attorney: Xiangdong Zhang, (ibid).
Appellee (Plaintiff in the High People's Court):
Guilin
Overseas Tourist Company (¡°Overseas Company¡±), with an office at 8,
Zhishan Road, Guilin Legal
Representative:
Cilin Yao, Manager of Overseas Company. Attorney:
Xiangdong Zhang, (ibid). Appellee
(Plaintiff in the High People's Court): Guilin
Chang Hong Trade Company (¡°Chang Hong Company¡±), with an office at 3,
Kaifeng Road, Guilin. Legal
Representative:
Yulun Qiu, Manager of Chang Hong Company. Attorney:
Xiangdong Zhang, (ibid.) Appellee
(Plaintiff in the High People's Court): The
People¡¯s Government of Binyang County, with an office at the government
yard, Binyang County. Legal
Representative:
Haizhen Ning, the head of the county. Attorney:
Xiangdong Zhang, (ibid.) Defendant
in the High People's Court:
Nanning
Taian Property Development Co., Ltd. (Taian Property Company), with an
office at 38-2, National Road, Nanning. Legal
Representative:
Xiangyong Ma, Chairman of the Board of Taian Property Company. Attorney:
Ning Ma, staff, Nanning Taian Property Development Co., Ltd. This
is an action in copyright license contract dispute involving Dunde Chen,
Beihai Zhong Ding Stock Co., Ltd. (referred to as ¡°Zhong Ding
Company¡±), Guilin Energy Resources Development (Group) Company (referred
to as ¡°Guilin Energy¡±), Guangxi Farm-Industry Products Purchasing
& Sale Service Center (referred to as ¡°Service Center¡±), Guangxi
Old People Tourist Company (referred to as ¡°Tourist Company¡±), Guilin
Overseas Tourist Company (referred to as ¡°Overseas Company ¡°), Guilin
Chang Hong Trade Company (referred to as ¡°Chang Hong Company¡±), the
People¡¯s Government of Binyang County (referred to ¡°Binyang
Government¡±), Hong Kong Pei Run International Co., Ltd. (referred to as
¡°Pei Run International¡±), and Nanning Taian Property Development Co.,
Ltd. (referred to as ¡°Taian Property Company¡±).
The action was brought before the High People's Court (referred to
as ¡°the initial court¡±) of Guangxi Zhuang Autonomous Region.
The initial court made the Civil Judgment No.13 Civil Case (1996)
Gui Chu Zi on December 31, 1998. Pei
Run International appealed the decision of the initial court.
In accordance with the law, this court established a panel to hear
the appeal, now concluded. The
initial court identified following facts.
On June 22, 1995, Dunde Chen in the name of the producer of a film
¡°Tie Xue Kunlun Guan¡± (referred to as the ¡°film¡±), and Xuequan
Yang in the name of the representative of shareholders of the film forming
as Party A, entered an Assignment Contract with Party B, the Pei Run
International. The
Assignment Contract provided that Party A would assign the distribution
right of the film, the by-products of the film and all of the related
rights to Party B. The
transfer fee was RMB 13 million. Party
B was obligated to remit the distribution revenue of RMB 13 million to the
accounts designated by Xuequan Yang within one year upon the effective of
the contract. Party B was
required to mortgage the 2nd, 3rd and 4th
floors of Taian Mansion to Party A before its sufficient remittance of the
transfer fee in the due time. The
mortgage was totally up to 3,792.52 square meters and valued as RMB
14,521,104. Party B was
entitled to a limited distribution right at home and abroad based on the
contract. The domestic
distribution right was effective subject to the clear direction of the
Film Bureau, Ministry of Broadcast, Film and Television Administration of
the PRC. The period of the
entitled distribution right was two years.
If there were any distribution revenue generated from the third and
fourth year, it would be shared according to the agreed terms by the
parties. The distribution
time at home and broad of the film would be calculated from the premiere
day. No parties were allowed to modify or revoke or terminate the
contract without due cause. Should
any party breach the contract, the other party was empowered to claim
compensation and seek legal protection.
The contract also provided on the matters of supplying film
material, promotional material and modifying film captions, etc.
The parties obtained contract notarization as agreed after the
signature. After
the establishment of the contract, Pei Run International authorized Dunde
Chen to go abroad to handle distribution matters.
The plaintiff urged Party B to pay transfer fee in June 1996, while
Xiangyong Ma, who was the Chairman of the Board of the defendant, wrote
back to Dunde Chen and Xuequan Yang on June 6.
Xiangyong Ma claimed that it had been nearly a year since the
entering of the contract, it was an impractical desirability for the
parties to perform the Assignment Contract.
He suggested the parties not be bound by the contract.
Dunde Chen and the like replied in written on June 16 demanding the
parties perform the contract strictly.
Then, because Pei Run International did not pay, the plaintiff
raised a lawsuit to the High People¡¯s Court of Guangxi Zhuang Autonomous
Region. The
initial court also identified following facts.
Guangxi Film Production Studio (referred to as ¡°Guangxi Film
Studio¡±) entered with Dunde Chen an Agreement
on Independent Production of the Feature Film ¡°Tie Xue Kunlun Guan¡±
(referred to as the ¡°Agreement on Independent Production¡±)
on February 27, 1993. Under
the agreement, Dunde Chen acting as the producer of the film shall
organize a preparatory team, which shall be responsible to recruit
sponsors to finance the film production in money and equipment, to select
actors and to amend the scenario, etc.
Dunde Chen shall pay RMB 300,000 as the management fees to Guangxi
Film Studio. Guangxi Film
Studio shall grant two-year distribution right of the film to Dunde Chen
upon the completion of the production subject to the distribution approval
of the Film Bureau. Dunde
Chen shall be solely responsible for the distribution copies as well as
distribution profits and losses. If
there was distribution revenue remained between the third and the fourth
years, the parties shall share the profit equally.
Guangxi Film Studio shall recall the distribution right after four
years. Dunde Chen shall
invest the by-products of the film while Guangxi Film Studio shall be
assigned 40% of the profit generated. On
March 5, 1994, Dunde Chen entered the Agreement
on Raising Funds as Shares to Produce the Feature Film ¡°Tie Xue Kunlun
Guan¡± (refer to as ¡°Agreement on Raising Funds¡±) in the name of
production unit with plaintiffs, Zhong Ding Company, Guilin Energy,
Service Center, Tourist Company, Overseas Company, Chang Hong Company, the
People¡¯s Government of Binyang County and Guangxi Liuzhou Communication
School. Under the agreement,
the film shall be jointly invested by the above eight legal entities with
a total amount of RBM 10 million. After
the signature of the agreement, except Liuzhou Communication School, seven
of the above mentioned entities had invested RMB 10.3 million to the
production. After the film
was completed, it got showing license on December 1, 1994 permitting
distribution at home and abroad. On
February 27, 1995, the Film Bureau of Ministry of Broadcast, Film and
Television Administration changed the distribution scope and limited it to
only overseas distribution. No
premiere has been held.
The initial court entered following findings.
Dunde Cheng was the independent producer of the film who organized
the preparatory team. The
film was invested jointly by the above said seven entities with the amount
of RMB 10.3 million. Dunde
Chen was entitled to four-year distribution right of the film based on the
Agreement on Independent Production with Guangxi Film Studio.
During the course of the agreement, Dunde Chen and Xueyi Yang, the
latter of whom was the representative of shareholders of the film signed a
Assignment Contract with Pei Run International in order to recoup their
investments earlier. Both
parties had the rights or power to enter into this Assignment Contract.
Pei Run International had forecasted the risk of such assignment
and Article 2.4 of the Assignment Contract provided a clause of
conditional payment of interest. The
plaintiff was not fraudulent. Also,
the content of the contract did not violate laws and regulations of the
PRC. Therefore, it was a
legal and valid contract, except Article 3.4 that was in connection with
the effective condition of distribution at home.
Because the government has not approved the domestic distribution
right of the film, this Article has been ineffective. As the deadline of the overseas distribution right of Dunde
Chen was expired on February 27, 1999, it is unnecessary for Pei Run
International to perform the Assignment Contract any more.
The Assignment Contract should be cancelled. Pei Run International obtained the overseas distribution
right without holding any premiere. No
distribution activity was actually conducted.
Therefore, Pei Run International shall bear fault liability.
As for the domestic distribution right, the parities were well
aware of its disapproval status. The plaintiff shall bear main liability for the damages
therefrom caused, while Pei Run International shall take secondary
liability. The mortgage
guaranty of the real property provided by Taian Property Company did not
fulfil mortgage registration procedure, thus the mortgage was invalid. Pursuant
to Article 85, Article 94 of the General Principle of the Civil Law of the
PRC, Article 10, Article 15 of the Copyright Law of the PRC, and Article
16 of the Film Administration Regulations promulgated by the State
Council, the initial court determined that: 1.
Cancel the Assignment Contract entered between Dunde Chen, Xunquan
Yang, the latter of whom represented the shareholders of the film, and Pei
Run International. 2.
Pei Run International shall compensate the plaintiff for economic losses
RMB 6.5 million and the interest (The interest shall be calculated from
June 22 of 1996, and shall be the lending rate of the same kind in the
corresponding period published by the People¡¯s Bank of China.).
The payment shall be made within one month of the execution of the
judgment. 3.
Pei Run International
shall return all the promotional materials of the film delivered by the
plaintiff. The
court acceptance fee was RMB 85,723, property preservation fee was RMB
70,520, totally amounting to RMB 156,243.
The plaintiff shall bear RMB 78,121.50.
Pei Run International shall bear RMB 78,121.50.
Pei Run International appealed the decision to the Supreme
People¡¯s Court of China asserting that the High People¡¯s Court of
Guangxi Zhuang Autonomous Region was wrong both in fact finding and
application of law, and should be amended.
The appellant alleged: 1.
The Assignment Contract entered by Dunde Chen and the appellant was
invalid. It was short of
legal basis for the initial court to affirm Dunde Chen as the
¡°independent film producer¡±. A
natural person was incapable of being a legal ¡°film producer¡±.
Neither Dunde Chen was the copyright owner of the film, nor did he
have any legal power of agency. So,
Dunde Chen did not have the right to enter the Assignment Contract.
Other contract parties were not qualified to make film transaction.
It was not a valid provision in the Assignment Contract to agree
Dunde Chen to sell the ¡°entire investment shares¡± of the film, as he
was not the actual investor. The actual investors did not have any legal relationship with
Guangxi Film Studio who was the copyright owner of the film.
Therefore, the plaintiff did not hold any investment share.
It was inconsistent with the facts for the initial court to refuse
to determine the appellees fraudulent. 2.
It was wrong for the initial court to find that the appellant
should bear fault liability because it did not hold premiere when it was
granted the overseas distribution right, and did not actually distributed
the film. Dunde Chen did not
obtain imports & exports right. Thus
he was disqualified for entering any foreign related contract.
He could not guarantee the film to be shown and distributed legally
and effectively. So Dunde
Chen shall bear the non-distribution liability of the film. 3.
No revenue had been generated from film showing.
The appellant was not liable to any payment even though referring
to Article 2 of the Assignment Contract. 4.
As the Assignment Contract was entered before the Film
Administration Regulations taking into effect, it was wrong for the
initial court to apply the Regulations to judge the case. 5.
When Chinese film was distributed overseas, the revenue generated
would be no more than 10% of its domestic distribution revenue.
It was short of factual and legal basis for the initial court to
order appellant to compensate for RMB 6.5 million and the interest. The
appellant requested to vacate the initial judgment and amend it in
accordance with the law.
The appellee, Dunde Chen, submitted responsive pleading and stated
in its response that: It was basically correct for the initial court to
make facts conclusion and apply laws, except that it determined the
appellees had faults in the losses resulting from the disapproval of
overseas distribution right, and ordered the appellant to compensate RMB
6.5 million for the economic losses. The appellees requested the appellate court to reject the
appellant¡¯s claim and to amend the compensation to 13 million plus
interest. The reasons of the
appellees were: 1.
Dunde Chen was the producer of the film, or could be called as the
¡°independent producer of the film¡±. 2.
The copyright owner of the film was Guangxi Film Studio. As the
independent producer of the film, Dunde Chen obtained authorization from
the Guangxi Film Studio, and entered the Assignment Contract with the
appellant within authorization scope.
Guangxi Film Studio affirmed the Contract afterwards.
Therefore, Dunde Chen was qualified for entering the Assignment
Contract. The Contract was
the real intention expressed by the parties.
Dunde Chen was not fraudulent. Guangxi Film Studio had the right to
distribute the film overseas by itself.
The notary office notarized the Assignment Contract, and the
parties had performed the Contract actually.
So, the Contract was legal and effective. 3.
According to Article 2.2 of the Assignment Contract, the appellant
was obliged to pay RMB 13 million. This
Court ascertains that the facts determined in the initial trial were
basically correct, a determination not objected by the parties. This Court also ascertains that: Under
Article 28 of the Agreement on Raising Funds, the four-year distribution
right of the film at which period were self-managed shall belong to the
production unit, i.e., belong to the entire investors.
Besides the agreed sharing provision provided under the Agreement
on Independent Production, the showing revenue shall be shared on the
basis of investment proportion. The
parties shall share the profits and losses together.
The Article also provided that the showing avenue should be shared
among investors firstly in investment proportion.
The producer shall only participate in the sharing when the
production cost was recouped. Under
Article 5.3 of the Agreement on Raising Funds, upon the requirement of
Party B, Party A was obliged to send personnel carrying the film (or video
tape) to other countries and areas to negotiate distribution matters.
The expenses shall be borne by Party B.
Dunde Chen declared that he had delivered the copy of the film and
promotional materials to the appellant following the provision of this
Agreement. Section 4 of the initial judgment also ordered the appellant to
return the copy and promotional materials to the appellee.
The appellant did not object to it. This Court affirms this fact.
This Court believes that the main issues in this case are the
validity of the Assignment Contract and the liability of breaching the
Assignment Contract. 1.
The validity of the Assignment Contract In
the context of copyright law, the ¡°producer¡± of a film means the
copyright owner. In this case the producer of the film is Guangxi Film
Studio. The concept of
¡°independent producer¡± in the Agreement on Independent Production
between Guangxi Film Studio and Dunde Chen is not the same concept of
¡°producer of film¡± in copyright law, but a common saying in the reform
progress when investment manner of film production has evolved into an
integrated diversity. It
means the investment of the film and the specific organizer of film
production. There is no legal
means of the common saying. Therefore,
it lacked legal basis for the initial trial to determine that Dunde Chen
was the independent producer of the film. As
the copyright owner of the film, it is valid for the Guangxi Film Studio
to assign the distribution right and other related rights that were kinds
of property rights without breaking laws and regulations.
On January 28, 1995, the Film Bureau of the former Ministry of
Broadcast, Film and Television Administration promulgated the Temporary
Regulation on Film Transaction (referred to as the ¡°Temporary
Regulation¡±). Although the
Temporary Regulation prescribed the qualification requirement for dealing
with film transaction, the condition attached in the provision of domestic
distribution in the Assignment Contract was ineffective due to the
unsatisfactory of the condition. The
Guangxi Film Studio conducted the overseas distribution by itself and had
sought approval firstly. Moreover,
the Temporary Regulation was a kind of administrative provision. It is
inappropriate to be applied as the basis to determine the validity of the
Assignment Contract. Therefore,
this Court rejects the appellant¡¯s claim for invalidating the Assignment
Contract. As
the investors¡¯ representative, Dunde Chen entered the Agreement on
Independent Production with Guangxi Film Studio and was entitled to the
distribution right for a period of time based on the agreement.
Dunde Chen was rightful to enter the Assignment Contract with the
appellant and establish civil legal relations on the matters of
distributing the film as well as sharing the showing revenue.
The appellant claimed that Dunde Chen lacked qualification to enter
the Assignment Contract according to the Temporary Regulation is dismissed
by this Court for the same reason mentioned above.
The seven entities including Zhong Ding Company were the actual
investors of the film. Under
the Agreement on Raising Funds between Dunde Chen and the seven investors,
the parties jointly enjoyed the four-year distribution right and related
rights of the film. Dunde
Chen and the said seven investors forming as one party entered the
Assignment Contract with the appellant and sold their rights in the film
to the appellant. The parties
were all qualified to enter such contract.
The provision on selling the investment shares to the appellant was
valid as well. Whether Dunde
Chen was the copyright owner or the distribution agent of the film did not
affect his qualification to enter the Assignment Contract. Whether the
seven entities have any legal relation with Guangxi Film Studio was not a
precondition for them as investors to contract with Dunde Chen and to
enjoy the related property rights of the film under the Assignment
Contract. Therefore, the
reasons for the appellant to claim the Assignment Contract invalid are
refused.
The appellant failed to provide evidence for Dunde Chen¡¯s
fraudulent performance. The
domestic distribution assignment was conditional under the Assignment
Contract. The Court finds it
is difficult to prove the appellant¡¯s claim that Dunde Chen was
fraudulent. Therefore, the
appellant¡¯s claim for the invalidity of the Assignment Contract is not
supported. It is correct for
the initial court to determine the Assignment Contract is valid. 2.
The liability of breaching the Assignment Contract The
Assignment Contract provided that the appellees was obliged to assist the
appellant dealing with distribution matters only when Party B had such
requirement and paid the expenses related.
The export of film falls in the scope of special license
administration in the country. It
has no direct relation with the administration of imports and exports
trade of goods. There is also
no internal and inevitable relationship between whether Dunde Chen
maintaining imports and exports right and whether the film being showed
and distributed overseas. Therefore,
it is correct for the initial trial to determine the appellant had fault
for not actually distributed the film after it got the overseas
distribution right. The
appellant¡¯s claim for Dunde Chen¡¯s liability is rejected. In
fact, the Assignment Contract is a non-gratuitous assignment for
distribution right and other related rights.
The Contract provided clearly that the transfer fee was RMB 13
million. The appellant
claimed that having distribution revenue was the precondition for its
payment obligation. Neither
did the claim meet the provision of the Assignment Contract, nor did it
comply with the rights and obligations in general non-gratuitous
assignment contract. This
appeal reason is rejected. According
to the conditional provision for domestic distribution in the Assignment
Contract, the distribution right assignment was divided into two parts,
which included the assignment of domestic distribution right and the
assignment of overseas distribution right.
The domestic distribution appointment was ineffective due to the
disapproval of government. The
overseas distribution appointment was effective upon the establishment of
the Assignment Contract. Dunde
Chen had delivered the copy of the film and promotional materials to the
appellant, which meant that the overseas distribution assignment had been
performed. Based on the provision of the assignment deadline in the
Assignment Contract, and the showing license issued by the Film Bureau,
the former Ministry of Broadcast, Film and Television Administration on
February 27, 1995, Dunde Chen was entitled to overseas distribution right
until February 27, 1999. It
is correct for the initial court to determine that Pei Run International
was unnecessary to perform the Assignment Contract and the Contract should
be cancelled. As the
distribution right of the film has returned to Guangxi Film Studio at
present, the object of the Assignment Contract has been no longer existed.
The Assignment Contract has been expired naturally.
The appellant declared that the overseas distribution revenue of
films in our country was no more than 10% of its domestic distribution
revenue. However, it did not
provide evidence. Moreover,
Dunde Chen and other appellees had no any other profit and had suffered
great losses during the term of the Assignment Contract, because their
rights had been assigned to the appellant.
Therefore, it was reasonable for the initial court to order the
appellant to compensate RMB 6.5 million.
The appellant¡¯s reason not to accept the initial compensation
lacked sufficient factual basis, and is rejected by this Court. The
State Council promulgated the Film Administration Regulations on June 19,
1996. The Assignment Contract
was entered on June 22, 1995. It
is wrong for the initial court to apply the articles in the Film
Administration Regulations in this case, and shall be corrected.
In summary, the appellant¡¯s reasons are untenable, except the one
claiming the initial court applied laws inappropriately.
This Court dismisses the appeal claim.
The appellees required amending the compensation in the initial
judgment to RMB 13 million and interest in their response. Because the appellees did not appeal for the initial
judgment, this Court will not hear it.
The initial court was basically clear in conclusion the facts.
Although there was some inappropriate application of laws, it did
not affect the material judgment for the case.
Pursuant to Item 1.1 of Article 153 of the Civil Procedure Law of
the PRC, this Court judges as follows: 1.
The initial judgment is affirmed. The appeal is rejected. 2.
The court acceptance fee is RMB 85,723, which shall be borne by the
Hong Kong Pei Run International Company Limited. This
judgment is final. Chief
judge: Zhipei Jiang Judge: Tianping Dong Judge:
Hui Zhang
Clark of the court: Yanfang Wang
January 2, 2001 ¡¡ |
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