News

On October 25, 2021, Sichuan Ziqi Culture Communication Co., Ltd. (hereinafter referred to as "Ziqi Culture") formally sued Hangzhou Weinian Brand Management Co., Ltd. (hereinafter referred to as "Weinian") and Liu Tongming, the legal representative of Weinian. It marks that Li Ziqi incident has officially entered the litigation stage.

At present, neither party has disclosed the details of the case. At this stage, all analyses on the case itself are somewhat subjective. But from this Li Ziqi’s lawsuit against Weinian, we can also see some of the legal issues in the Internet industry today, especially the contradiction between Internet celebrities and their brokerage companies. How to reduce these legal risks and create a healthy “Internet celebrity” This is the real value of this case in the "economic" legal environment.

The Development History of Li Ziqi Brand

Throughout the development history of Li Ziqi brand, it has roughly gone through three stages, namely, personal development stage, contract stage, and cooperation stage.

01 Personal Development Stage

As a video creator, Li Ziqi, like an ordinary UP owner, used his own power to complete a series of work such as video planning, creation, shooting, post-editing, and publishing. At this stage, Li Ziqi registered an account in his own name. The account is owned by him. The copyright of the video he shoots belongs to him. If the video generates income, he also owns it. Of course, Li Ziqi also needs to bear the full cost of video creation. If the content of the video infringes on the legal rights of others, Li Ziqi also needs to personally bear the relevant legal responsibilities. Therefore, the legal relationship involved in Li Ziqi brand is clearest at this time.

However, at this stage, although the video quality created by Li Ziqi is relatively high, the exposure is not ideal. For UP owners at this stage, in order to gain higher exposure, in addition to the video quality itself, they also need high-quality publicity channels. This involves the division of labor between video creation and publicity operations. MCN is dedicated to video creators provide financial support to help them promote content, increase users and match advertising companies, and Weinian is one of these companies.
02 Contract Stage

In 2016, Weinian and Li Ziqi formally established a cooperative relationship. From a legal perspective, the cooperative relationship between an Internet celebrity and MCN is a contractual relationship, that is, an online celebrity and MCN signed a related brokerage contract. In the contract, the rights and obligations of both parties, video creation revenue distribution, advertising revenue sharing, and copyright The core content such as ownership and account management should be agreed in detail. The UP master is responsible for the creation of video content, and the MCN company is responsible for packaging and promotion of the video and the UP master. The two work together to increase exposure and ultimately achieve a win-win situation.

But at this stage, due to the joining of MCN, the legal relationship has become complicated, and many potential legal risks have also arisen from this.

First, many MCN companies do not have professional operating qualifications, nor are they equipped with sufficient staff. They have made many promises to the UP owner before signing the agreement, but they are essentially incapable of fulfilling the relevant commitments in the contract, and they have not only failed to help the UP owner. Gaining more exposure also makes UP owners lose the autonomy of video creation.

Second, most UP owners are in a weak position when signing MCN companies, so there are a lot of "overlord clauses" in the contract. For example, during the contract period, all creative activities of the UP master must be approved by the company, the tasks assigned by the company for the UP master cannot be rejected, and the business activities arranged by the company for the UP master must follow the company's arrangements, and the UP master creates the video. All the copyrights of the company belong to the company and so on. Once the UP owner signs such an agreement, he/she has to be bound by these unfair terms. A little carelessness may constitute a breach of contract, and the company may demand high compensation or even be sued to the court, leading to the destruction of years of accumulation.

Third, the ownership of the account is at risk. Whether it is video creation or webcasting, it must be achieved through a fixed account. All video and live broadcast revenues on the platform must first be counted under the account name. The fans also follow the influencer himself by following the account. In this case, the platform accounts that have accumulated a large number of fans (such as Douyin, Weibo, Taobao) have taken instead of becoming core assets focused by both internet celebrities and MCN agencies. Since most UP owners are in a weak position while signing the contract, the MCN company usually requires the UP owner’s account ownership in the contract to belong to the company and it should be operated and managed by the company. What's more, it will be agreed that the account will not be granted returning after the contract expires. In cause, the UP master will be emptied "" by the MCN company. In recent years, the number of disputes arising from account ownership rights has increased. The courts mainly depend on whether the parties have made a clear agreement in the contract when hearing related cases. At the same time, it will also take into account whether the account has obvious personal attachment. However, there are many legal difficulties in practice. For example, usually, the account must be registered and bound by the UP master with his ID card. If the ownership of the account is subsequently transferred to the MCN company, how to make a real-name system under the same account change is a problem that needs to be solved urgently by major platforms.

03 Cooperation Stage

In 2017, Weinian and Li Ziqi co-founded Sichuan Ziqi Culture Communication Co., Ltd., Weinian holds 51% of the shares, and Li Ziqi himself holds 49%. Since then, the cooperation between the two parties has moved from the traditional contract stage to the cooperation stage. From the perspective of the company's shareholding structure, Weinian holds 51% of the shares of Sichuan Ziqi Culture Communication Co., Ltd., is the major shareholder of Ziqi Culture and has greater control rights. According to my country's "Company Law", the replacement of executive directors and legal representatives is a general voting matter that can be passed only by more than half of the voting rights. Theoretically speaking, if Ziqi Culture’s articles of association do not provide special provisions, Hangzhou Weinian, which holds 51% of the shares, can decide Li Ziqi’s stay or out and has the power to control most of the company’s affairs.

However, the focus of this case is not the equity structure. Since the establishment of the cooperative relationship between the two parties, in addition to the direct income generated by Li Ziqi's video, a large part of the income has come from Li Ziqi's personal IP, that is, brand marketing. For example, in August 2020, Li Ziqi announced to invest and build a factory in Liuzhou to continue to promote the research and development of snail noodles flavor, quality traceability, quality control of raw materials, and poverty alleviation for farmers. According to statistics, the monthly sales volume of Li Ziqi brand snail noodles exceeds 1 million, and the annual sales scale of Li Ziqi brand in 2020 is close to 2 billion. Therefore, compared to video creation, intangible assets such as trademarks, copyrights, and patents related to Li Ziqi may have more realizable value, and the ownership of these related intellectual property rights will surely become the focus of contention between Li Ziqi and Weinian. Therefore, no matter what the cause of this lawsuit is, the ultimate goal of both parties should be to strive for Li Ziqi's brand value as much as possible.

The Cooperation between Internet Celebrities and MCN

 How to Avoid Legal Rsks

The contradiction between Li Ziqi and Weinian is just one example of disputes between internet celebrities and MCN. How can internet celebrities avoid legal risks and avoid unnecessary disputes with the company in the process of cooperating with MCN?

01 Reasonably Plan Your Career Path

      There are generally two types of internet celebrities, one is full-time internet celebrities and the other is part-time internet celebrities. For these two groups, there should be a distinction between whether to sign MCN companies and when to sign with MCN companies.

For part-time internet celebrities, being an internet celebrity is not its main source of income. Its live broadcast or video style has not yet been finalized. It should not be a part-time celebrity at this stage to greatly increase the number of fans and exposure in a short period of time to make profits. Therefore, there is no need to rush to sign a contract with MCN to transfer their rights prematurely.

For full-time Internet celebrities, increasing the number of fans and exposure as soon as possible is its primary goal, so it needs the support of a professional operation team, but this does not mean that it must immediately establish a cooperative relationship with MCN. Full-time Internet celebrities also need to think about their future style and route in advance. Since different MCN companies are good at different fields, if the future development path does not match the field and style that MCN is good at, it will also reduce the promotion effect and even interfere with their career path.

02 Pre-investigate Corporate Background

Before signing a contract with MCN, a detailed background check is very important. The preliminary investigation includes whether the company has the relevant brokerage qualifications, who the shareholders have, and how the shareholders' capital contributions are, and so on. After confirming that the company is formal, legal and operating normally, it is necessary to conduct further research on the company's past practice experience to see what successful cases the company has in this field, and how well the company matches itself. Finally, it is necessary to learn more about the company's past lawsuits and see if it has had disputes with its anchors or bloggers, what are the reasons for the disputes, whether there are relevant judgments, and the results of the referees. If there are many disputes between a company and the anchor, you need to be vigilant to prevent yourself from encountering similar disputes after signing the contract. In addition, bloggers should also maintain close communication with company staff, and when necessary, obtain certificates and other related qualifications from staff. Once staff evasive or evade, they should maintain corresponding vigilance to avoid being deceived.

03 Modify Unreasonable Contract Terms in Time

The brokerage contract is the most important legal basis for cooperation between internet celebrities and MCN companies. When signing the contract, the anchor or video creator should understand the terms of the contract one by one, especially paying attention to unreasonable overlord clauses. In practice, this type of brokerage contract will have the following common problems:

1.The contract period is too long. The brokerage company usually agrees with the anchor for a period of cooperation. This is also called the contract period. During this period, the anchor transfers part of his rights to the company, and the company is responsible for supporting the anchor to promote its content. With products, after the contract expires, both parties can choose to renew or terminate the cooperative relationship. However, during the performance of the contract, unless there is a statutory reason for termination or the contract otherwise stipulates, neither party can terminate the contract arbitrarily and withdraw from this cooperative relationship. If the contract period is short and the legal risk is relatively low, the anchor thinks that the two parties are not happy during the cooperation period and can "stop the loss in time" after expiration. However, if the contract period is too long, plus other unreasonable clauses, the anchor is equivalent to signing a "deed of sale", putting himself in a weak position for a long period of time. Therefore, if the two parties have not had a stable cooperation experience before, it is not advisable to agree on a long cooperation period for the first time to avoid signing a "deed of sale."

2.The account ownership belongs to the company. An online platform account with a large number of fans has extremely high commercial value, so the account right is particularly important for the anchor. Some MCN companies will stipulate in the contract that the ownership or management rights of the account will be returned to the company, and even after the contract expires, the account will not be returned. The account is the life of the anchor. The income of major platforms is usually settled under the account name. The fans also follow the anchor behind the account by following the account. Once the company has control of the account, it will be controlled to a large extent. In addition to the style, release, and revenue of the video, the anchor becomes a profitable tool for the company.

3. Unreasonable distribution of intellectual property rights. Intellectual property clauses are important clauses in brokerage contracts. Because copyrights, trademarks, and patent energy continue to bring benefits, MCN companies usually stipulate in the contract that the company will enjoy the copyright of the works produced during the cooperation period. The anchor needs to clarify which works are commercial works linked by the company, and which works are works independently undertaken by individuals. The copyright ownership of the two works should be distinguished. In addition, the reason why MCN signed the contract with the anchor was not only the anchor's creative ability, but also the anchor's personal brand effect. The anchor shall try his best to protect intellectual property rights such as trademarks and patents to prevent the company from malicious registration and theft.

04 Pay Attention to the Preservation of Relevant Evidence in the Performance of the Contract

      Contract breach is one of the main reasons for disputes between the anchor and MCN. In order to protect their own rights, it is recommended that the anchor keep the relevant evidence related to the performance of the contract, such as the written contract signed by both parties, chat records with company staff, SMS records, the time when the work was produced, account withdrawal records, bank transfer records, etc. If a dispute arises between the two parties to the court in the future, the above-mentioned evidence will become the basis for the court's decision. If you do not pay attention to keeping it in peacetime, your own legal rights and interests will not be safeguarded.

Concluding Remarks

As a proponent of traditional Chinese culture, Li Ziqi used her shooting expertise and unique aesthetics to show the world traditional Chinese cuisine and pastoral scenery. He is worthy of learning and imitating from all video creators. As for the capital represented by Weinian, we do not use a hostile psychology of rightness and mistakes to attack maliciously. The correct way to spread Chinese culture is to maximize the potential of both parties within the framework of the law. How to provide effective protection to all parties under the legal framework of the traditional brokerage model, combined with the special circumstances of Internet celebrity brokers, requires the common wisdom of legal and industry experts. This is not only about thousands of Internet celebrities or MCN organizations

      His personal fate is the meaning of the healthy development of the entire industry.

Ge Youshan

Executive Director of JAVY Law Firm

Business Areas

Legal Risk and Compliance, Dispute Resolution and Litigation, Bankruptcy and Reorganization, Company/Foreign Direct Investment, Mergers and Acquisitions

Statement：

Solemnly declare:

This article was originally created by the lawyers of JAVY Law Firm and only represents the author's own personal views. It should not be regarded as a formal legal opinion or suggestion issued by JAVY Law Firm or its lawyers. If you need to reprint or quote any content in this article, please indicate the source.