1. Copyright Audit

(1) In essence, the Chinese Internet copyright distribution market is composed of:

• the production companies
• copyright distribution agents and their multi-level sub-agents
• the content delivery platforms
• copyright agents and playing platforms.

Due to the structure of many levels of copyright agents, it is sometimes difficult to sort out the source of copyright authorization.

(2) To maximize their own self-interests, a few copyright agents may sometimes adopt illegal means (modifying licensing agreement regarding its time, access, scope, etc.), resulting in inconsistency between the authorization of producing companies and the delivery platforms which consequently lead to litigations.

(3) China's rapid development of Internet technology and emerging commercial applications brought about multiple types of Internet playing platforms, such as website, mobile devices, IPTV. As a result, the process in obtaining the copyright for a particular playing platform has become a more involved .

2. Cases on some of Bright Star’s auditing services

Upon completing the due diligence process on a certain copyright ownership, Bright Star summarizes the finding and submits an advisory report to the appropriate parties.

On September 8, 2010, SIPRES was asked to audit the authenticity of the copyright authorizations on two copyright agents that they have obtained from Warner, Universal, Fox and Disney (here referred as Agent A and Agent B and with the relevant copyright authorization documents attached). After contacting the Motion Picture Association of America (Beijing Office) for verification, SIPRES was advised that the relevant authorization need to be verified with Warner. During September 9-11, 2010, Warner gave the verification on the authorization by email.

Below is the copyright verification message sent between SIPRES and Warner.

3. Dispute Mediation

With its own team of professional mediators, SIPRES has been providing dispute resolution services regarding copyright infringement related issues such as copyright, trademark, patent right, and unfair competition.

From December 2007 to November 2010, SIPRES had mediated more than 1,000 copyright infringement disputes, with 700 of them settled successfully.

Below is the document regarding the authorization of Warner to Agent B as mentioned in the copyright verification message (see above figure).

Below is Warner’s reply to SIPRES for the copyright status.

Below is the auditing result memorandum from SIPRES.

3. Copyright audit results

Take the year 2006 for example, fifteen Internet Content Providers commissioned SIPRES to conduct a copyright auditing on: movies, TV programs, animations and music that they had been providing. For that year, the copyright ownership for a total of 2,919 movies, 2,087 television plays, 1,324 animations and 161,291 songs were audited. Out of that, 805 films, 468 television plays, 691 animations and 132,141 songs passed the audit.

A list of Clients requested for copyright audit services (listed below are the company LOGOs; see Folder 1)

4. Difficulties in conducting Copyright Auditing

(1) Only a small part of the producers could provide formal written letters.

(2) Very few producers provide authorized sampled contracts, thereby, preventing us to verify its authenticity.