Copyright Pledges in China Film & TV Finance

Copyright in China is a bundle of personal and property rights attaching to certain types of works. Copyright works include written works (such as screenplays) and cinematographic works (such as motion pictures). The rights in written works include a right of cinematography, being the right to adapt the written work into a cinematographic work. Producers exercise this adaptation right when they turn a screenplay into a motion picture. The rights in the resulting cinematographic work include the right of public presentation or exhibition, certain broadcast rights and the right to communicate through an information network.

Chinese law provides for the registration of a pledge over copyright works. The regulations refer to the “recordal of a copyrighted work deposit.” China’s pledge system is recognized by WIPO. The pledge is a kind of security interest in support of a loan. An advance of funds on account of development, production or distribution costs, under a contract, can qualify as a loan for the purposes of a pledge. The lender need not be a Chinese entity. It could be a foreign studio, producer, distributor, investor or bank, as long as the copyright concerned is owned by a Chinese entity.

Assembly, a 2007 Huayi Brothers release, was reportedly the first motion picture over which a pledge was registered. China Merchants Bank was the lender. There have since been many accounts of pledges over motion picture copyright and broadcast rights in television programs. Deutsche Bank and Standard Chartered Bank Hong Kong are among the lenders reported to have relied on this form of security.

Though a framework exists, the registration of pledges is not yet common in the Chinese film and TV business. There are several reasons for this. Completion bonds or completion guarantees are only in their infancy here. The existing regulations are not comprehensive and they lack clarity in key areas. There is also no reliable system for assessing the value of copyrights. The main difficulty is the registration of a pledge over future copyright or a copyright expectancy. But, as with so many things in China, difficult does not mean impossible.

-This article was first published on October 5th, 2015 by China Law Blog.