TIPO determines royalty rates for public performance

The Taiwan Intellectual Property Office (TIPO) recently completed a review of several copyright public performance royalty rates set by copyright collective management organisations (CMOs). The royalty rates reviewed and determined by TIPO will remain effective for three years. CMOs and users cannot alter the rates or apply for another review of the royalty rates determined during this three-year period.

According to the Copyright Collective Management Organisation Act, which was amended on 10th February 2010, copyright CMOs can be organised and established by copyright holders for the purpose of managing economic rights on behalf of multiple economic rights holders. Such CMOs adopt uniform royalty rates and methods for the distribution of royalties as the basis for the collection and distribution of royalties, and enter into licence agreements with users in their own name. Before the amendment in February 2010, the copyright royalty rates set by CMOs had to be reviewed by TIPO in advance; however, the current act requests CMOs only to announce the royalty rates publicly and report them to TIPO for recordal. The act allows a copyright user that objects to a royalty rate set by a CMO to apply for a review by TIPO.

In Taiwan, six CMOs are established and approved by the competent authorities: 

• Three CMOs (MCAT, MÜST and TMCS) that manage public performance rights related to musical works.
• Two CMOs (ARCO and RPAT) that manage sound recordings.
• One CMO (ARCO) that manages audiovisual works.
• One CMO that manages oral and literary works.

The CMOs have been setting and announcing different royalty rates for copyright licences since June 2010. Users have objected to almost all of the rates set and announced by CMOs, and many applications for reviews have been submitted to TIPO since August 2010.

Although the act requests TIPO to complete the review of a royalty rate within four months of the date on which the documents are fully submitted, in practice the review process has been delayed due to fierce debates between users and CMOs, and documents have been submitted to TIPO continuously by the parties. Despite other pending cases, by early 2012 TIPO had completed the review of several types of copyright public performance royalty rates set by MÜST and MCAT respectively, including:

• Public performance in concerts and theatres.
• Public broadcast by private broadcasting service providers.
• Public performance and public broadcast by hotels.
• Public broadcast by cable and satellite broadcasting channels.
• Public broadcast by satellite television channels.
• Public performance and public broadcast by hospitals and medical institutes.

The royalty rates reviewed and determined have been published by TIPO (the Chinese version is available at www.tipo.gov.tw/ch/AllInOne_Show.aspx?path=4148&guid=26dd4556-0b11-48fa-91f6-24fc8b81e359&lang=zh-tw).
 
In general, the royalty rates determined by TIPO after review are lower than those proposed by the CMOs. If a CMO increases an existing royalty rate, TIPO tends to maintain the royalty rate at its previous level unless there is clear evidence showing that both users and the CMOs wish to alter the rate. In addition, TIPO will not accept a CMO’s reasons for increasing a royalty rate if the calculation basis of the royalty rate is irrelevant to the use of copyrighted works. For example, TIPO rejected MÜST’s proposal to calculate the royalty for satellite television channels to broadcast copyrighted musical works publicly based on the channel's annual business income because the total amount of the business income may include income that is irrelevant to the use of musical works. Thus, TIPO adjusted the royalty rate for satellite musical channels to broadcast musical works managed by MÜST publicly from MÜST’s proposal – 2.25% of the musical channel’s annual business income – to a much lower rate – 0.55% of the musical channel’s annual advertisement income plus its income from sub-licensing to others.

Other hotly debated issues, such as royalty rates for use of copyrighted musical works online and royalty rates for singles, remain pending with TIPO. 

In practice, in the copyright licensing market, large users tend to negotiate with CMOs separately and independently for a more favourable royalty rate, and a CMO will accept a reasonable rate that is lower than its standard schedule if the licence agreement reduces the CMO’s costs and expenses in dealing with the unlawful use of copyrighted works. Of course, after TIPO has reviewed and determined certain royalty rates for copyright licensing, the rates determined officially by TIPO will be used as a standard reference. Since both users and CMOs may acknowledge that the market for licences covering online services and innovative services is developing and has no established fee structure, seeking an amicable licence agreement seems to be the best way for the parties to find a win-win, or at least commercially acceptable, solution at present.