TYGlobe

I. Preface

With the rapid development of the online micro-drama industry, various platforms have abundant reserves of produced online micro-dramas with increasingly diversified themes, and the "going global" of online micro-dramas has gradually become a new trend. While the output of online micro-dramas multiplies, problems including plot homogenization, low content quality and deviation from mainstream values have emerged, making the gradual tightening of regulatory policies an inevitable outcome. With the successive issuance of regulatory policies, various entities in the online micro-drama industry will face different legal risks. The author has sorted out and interpreted the regulatory policies applicable to online micro-dramas in the previous article. This paper will first briefly describe the overview of the business model and industrial chain of the online micro-drama industry, identify the industrial chain entities involved in different segments of the online micro-drama industry, so as to analyze the potential legal risks of each entity and put forward corresponding compliance recommendations.

Part II Overview of the Business Model and Industrial Chain of Micro-Short Dramas

In recent years, online micro-short dramas have risen rapidly as a new form, with their market scale expanding continuously, the number of launched works surging, and their quality and performance in content, technology, operation and other aspects improving constantly. Novel IP copyright holders and original script copyright holders authorize film and television production companies, MCN institutions and other entities to undertake the production, and advertisers enter into commercial cooperation with the aforesaid parties. After the filming is completed, the finished works are launched on mini programs or long and short video platforms. Distributors re-disseminate and promote the micro-short dramas through various channels, and revenue sharing is finally conducted based on such indicators as clicks, views and payment status. The operation mode of micro-short dramas has gradually matured. The industrial chain of micro-short dramas can be subdivided into three links: upstream, midstream and downstream, each of which has its specific participants and functions.

- Upstream Link: i.e. pre-stage content production. Copyright holders and production contractors are the main participants in this link, which mainly involves work contents including copyright purchase, IP incubation, script writing, team formation and shooting of finished films. This link is both the starting point of the entire industrial chain and the core of content creation.

### Midstream Segment: refers to mid-stage content distribution, in which platform operators and distributors play a critical role. In this segment, the online micro-drama content produced in the upstream is disseminated to a wider range of audiences through such means as platform hosting and online micro-drama distribution. This segment acts as a bridge connecting upstream content production and downstream ecological support.

- Downstream links: Mainly refer to publicity, distribution and advertising placement activities, involving relevant parties including disseminators, agents, advertising placement platforms, etc. By means of traffic delivery and other approaches, such links provide more exposure opportunities for micro-short dramas to help expand their influence, which is of vital importance to enhancing the monetization capacity of micro-short dramas and reaching a wider audience group.

III. Potential Legal Risks Confronting Copyright Owners

For the purpose of this article, the term "copyright holder" specifically refers to the copyright owners of works such as online novels, animation and comics, games, and original scripts, who enjoy the copyright of the corresponding works in accordance with the law. The first step involved at the front end of content production is intellectual property (IP) acquisition. Usually, the production contractor of micro-short dramas signs an agreement with the copyright holder to obtain the copyright authorization of the work. On this basis, screenwriters, directors, producers and other relevant personnel can carry out secondary creation and adapt the work into screenplays or scripts. As the licensor of the works, the copyright holder shall pay attention to the following legal risks:

(I) The copyright owner shall ensure that it has the legal basis for its rights, so as to avoid disputes over copyright infringement.

Generally, the production contractor shall obtain authorization to exercise part or all of the copyright of the work, especially such fundamental rights as the right of reproduction, right of adaptation, right of cinematography and right of distribution. Only after obtaining the corresponding authorization can the production of micro-short dramas proceed to the next stage. As the licensor of the copyright of the work, the copyright holder shall be obliged to ensure that it has the corresponding legal basis for the rights, otherwise it will be exposed to the legal risk of giving rise to copyright infringement disputes. Copyright disputes occur frequently in the film and television industry, such as the infringement dispute between Chiung Yao's *Plum Blossom Branding* and Yu Zheng's *Palace 3: The Lost Daughter*, and the copyright ownership and infringement dispute concerning *Candle in the Tomb: The Ancient City of Jingjue*. Such disputes usually involve rights including but not limited to the right of authorship, right of adaptation and right of protection of the integrity of works, while individual disputes also involve plagiarism of works. Copyright dispute cases in the film and television industry also have certain warning and reference significance for the micro-short drama industry.

(II) Copyright owners shall carefully review contract contents to avoid contract disputes and liability for breach of contract.

The copyright holder and the commissioned producer generally stipulate such basic clauses as the content of authorization, form of authorization, rights and obligations of both parties, and liability for breach of contract by signing an agreement. The copyright holder shall carefully review the contract content and seek professional legal advice when necessary.

(III) The copyright holder shall ensure that its contents comply with laws, regulations and regulatory policies, and avoid legal risks arising from illegal or non-compliant contents.

The copyright holder shall abide by relevant laws and regulations, and ensure that the content of works does not violate the mandatory provisions of the law. With the gradual development and improvement of regulatory policies on micro-short dramas, the content of micro-short dramas shall also comply with the provisions of regulatory policies, and avoid content prohibited by rules and regulations, such as content that damages China's national image or splits the country (e.g. "Taiwan independence"); content that sensationalizes social hotspots, intensifies social conflicts and undermines social stability; content that distorts history and historical figures; content that glorifies villainous and negative figures, etc. If the content of a micro-short drama violates laws and regulations, the non-compliant micro-short drama itself may face penalties such as being ordered to make rectification and being mandatorily taken offline. The illegal content may also lead to consequences for the copyright holder including fines, compensation, reputation damage and legal proceedings.

(IV) Where overseas copyright transactions are involved, the copyright holder shall conduct legal research in advance to avoid operational and copyright risks arising from legal differences among different countries and regions.

In copyright licensing transactions, the copyright owner is generally required to warrant that it holds the corresponding rights and that it does not infringe upon the legitimate rights and interests of others in the target market. Where a copyright owner and its counterpart are involved in a cross-border copyright licensing transaction, given the differences in laws and regulations among different countries and regions and varying levels of intellectual property protection, if the copyright owner fails to conduct prior investigation and assessment, it may be subject to penalties or face litigation risks for violating local laws and regulations. For example, the country where the target market is located may have a relatively lenient intellectual property protection regime, which will lead to damage to the rights and interests of the copyright owner; or even if the work of the copyright owner complies with the laws and regulations of its home country, its content may violate the laws and regulations of the country where the target market is located, which will constitute a breach of relevant contract clauses, and the copyright owner shall bear corresponding liabilities for breach of contract.

IV. Compliance Recommendations

(I) Lawfully acquire and protect intellectual property rights

As the licensor, the copyright owner shall lawfully obtain the intellectual property rights in the work. In the process of licensing the copyright of the work, the licensee usually requires the copyright owner to undertake that it is the copyright owner of the licensed work and provide corresponding copyright warranties and declarations. First, the copyright owner shall warrant that it has a complete, lawful and valid right basis; Second, the copyright owner shall warrant that it has the capability and conditions to exercise the licensing rights independently; Third, the copyright owner shall warrant that the content of the work does not contain any content plagiarized from other works or content that infringes upon the rights and interests of others. After lawfully obtaining the intellectual property rights, the copyright owner shall take active measures to protect its own rights, such as copyright registration, trademark registration and so on.

(II) Conclude contracts with cooperating parties to explicitly define the scope of authorization.

In the process of licensing works, the copyright owner shall sign a written contract with the cooperating party to specify the content of authorization and the rights and obligations of both parties. In the course of concluding the contract, attention shall be paid to the following matters (as a complete contract is relatively complex and comprehensive, only several points are listed herein):

1. Authorized Content

The contract shall expressly stipulate the contents of authorization between the two parties, and such contents of authorization shall explicitly specify the specific authorized works, the specific licensed rights, the authorized territory, the term of authorization and other relevant contents.

2. Authorization Methods

Methods of authorization include exclusive authorization, non-exclusive authorization and sole authorization. Exclusive authorization refers to granting the right to use the licensed work to the cooperating party in an exclusive and proprietary manner. Non-exclusive authorization means that the cooperating party uses the licensed rights in a non-exclusive manner, that is, the copyright owner has the right to exercise relevant rights on its own or license any third party other than the cooperating party to exercise such rights. Sole authorization means that the copyright owner shall not license the rights granted to the cooperating party to any third party other than the cooperating party for exercise, but the copyright owner has the right to exercise relevant rights on its own. The two parties shall explicitly specify the method of authorization in the contract to avoid subsequent disputes.

3. Protective Measures

Copyright holders shall note whether there are protective clauses for their own intellectual property rights in the contract, such as clauses on reservation of the right of authorship, protection of the right of integrity of works, and production quality assurance, and shall stipulate corresponding liability for breach of contract. The aforesaid intellectual property protection clauses can safeguard the rights and interests of copyright holders to the greatest extent possible and mitigate their losses.

(III) Conduct regular compliance reviews, adjust business operations in a timely manner, and guard against both infringement upon the lawful rights and interests of others and being infringed upon.

As laws and regulations and the market environment are subject to constant changes, copyright owners shall conduct regular compliance reviews. Copyright owners may establish an internal review mechanism or engage a third party to regularly inspect their own intellectual property status, contracts and licensing agreements, and monitor contract performance, so as to ensure that their own rights are not infringed upon and that licensees exercise their rights in accordance with contractual stipulations. In the meantime, copyright owners shall also regularly monitor the market environment and keep abreast of competitors' dynamics, to guard against both their own infringement upon others' rights and infringement of their own rights by others.

V. Summary

Nowadays, the business models of micro-short dramas are increasingly diversified, demonstrating a robust development momentum, with a growing number of market entities participating in the micro-short drama industry. This paper discusses copyright owners, one of the major participants in the early stage of content production, identifies the potential legal risks they may face, and puts forward compliance recommendations. The author will analyze the legal risks concerning other entities and put forward corresponding recommendations in follow-up research.