PLC Paper No. CB(1)17/97-98
(These minutes have been
seen by the Administration)
and cleared with the Chairman)
Ref: CB1/BC/14/96

Bills Committee on Copyright Bill

Minutes of meeting held on Wednesday, 9 April 1997, at 10:30 am in the Chamber of the Legislative Council Building

Members present :

    Hon Mrs Selina CHOW, OBE, JP (Chairman)
    Hon Fred LI Wah-ming
    Hon CHAN Kam-lam
    Dr Hon LAW Cheung-kwok
    Hon SIN Chung-kai

Members absent :

    Hon Ambrose LAU Hon-chuen, JP (Deputy Chairman)
    Hon Ronald ARCULLI, OBE, JP
    Hon Mrs Miriam LAU Kin-yee, OBE, JP
    Dr Hon HUANG Chen-ya, MBE
    Hon Henry TANG Ying-yen, JP
    Dr Hon Philip WONG Yu-hong
    Hon Howard YOUNG, JP
    Hon Margaret NG

Public officers attending :

    Mr Augustine CHENG
    Deputy Secretary for Trade and Industry
    Mr Stephen SELBY
    Director of Intellectual Property
    Mr Peter CHEUNG
    Deputy Director of Intellectual Property
    Mr Patrick NIP
    Principal Assistant Secretary for Trade and Industry
    Mr Vincent Y K POON
    Assistant Commissioner of Customs and Excise
    Mrs Spring FUNG
    Deputy Principal Crown Counsel
    Mr Johann WONG
    Assistant Secretary for Trade and Industry
    Ms Elizabeth TSE
    Principal Assistant Secretary for Trade and Industry

Clerk in attendance:

    Miss Odelia LEUNG
    Chief Assistant Secretary (1)1

Staff in attendance :

    Ms Kitty CHENG
    Assistant Legal Adviser 2
    Ms Sarah YUEN
    Senior Assistant Secretary (1)1

1. The Chairman reported the following -

  1. The Vocational Training Council and New T & T Hong Kong Limited had written to advise that they had no comments on the Bill; and

  2. The Hong Kong Institute of Trade Mark Practitioners (HKITMP) had requested to meet with the Bills Committee.

(Post-meeting note: The Secretariat had made arrangements for HKITMP to attend the Bills Committee meeting on 16 April 1997.)

I Meeting with the Administration

Comparison of the copyright laws of Hong Kong and the People’s Republic of China (PRC)

(LegCo Paper Nos. CB(1)1188/96-97(02) and 1248/96-97(03)

1. The Deputy Principal Crown Counsel (DPCC) briefed members on the paper comparing the copyright laws of Hong Kong and PRC. Members noted that despite the differences in the legal systems, both laws aimed at complying with international standards but through different routes to achieve the same purpose. For example, differing in classifications and wordings, the two laws were similar in targets of copyright protection, copyright ownership, rights of owner, duration of protection, exceptions and legal responsibilities.

2. In response to members’ questions, DPCC supplemented the following information -

  1. The definition of "infringing products" in PRC law would determine whether the import, export and sale of parallel imported copyright products were prohibited and penalised. Under the Bill, infringing products covered parallel imports but only civil remedies would be available for infringement.

  2. The rights of a copyright owner under the two legal systems were basically similar although these were more clearly and specifically defined under the Bill.

3. The Chairman drew members’ attention to paragraph 4 of China’s proposals to the World Intellectual Property Organisation (WIPO) (LegCo Paper No. CB(1)1248/96-97(03)), which stated that the National Copyright Administration of PRC (NCAC) could not agree with the proposal to grant importation right to copyright owners. This was different from the Bill which recognised the importation right of copyright owners. She queried the rationale for the difference.

4. In response, the Deputy Secretary for Trade and Industry (DS/T&I) and the Director of Intellectual Property (D of IP) explained that all member countries of the Berne Convention or the World Trade Organisation (WTO) had to comply with international standards and obligations. However, in areas where no consensus had been reached, e.g., parallel importation, member countries could have different treatments. The Administration was in full knowledge of China’s different stance on copyright owner’s importation right. As Hong Kong could have its own legal system, it was not obliged to take China’s stance on the issue. In fact, in recognition of a different situation in Hong Kong, China agreed that Hong Kong could treat parallel importation in a different way provided that the Bill complied with international standards.

5. Responding to members’ questions on any difference in treatment between local and foreign copyright owners in China, the Assistant Legal Advisor (ALA) explained that under the Berne Convention, all member countries were required to treat local and foreign copyright owners the same.

Protection and enforcement of intellectual property rights in Hong Kong

(LegCo Paper No. CB(1)1221/96-97)

6. DS/T&I briefed members on the Administration’s paper on the protection and enforcement of intellectual property rights in Hong Kong. Members noted that the Hong Kong Government was firmly committed to combating copyright piracy, and had been making efforts to tackle the problem on various fronts. The quantity of seizures in 1996 was 180% of that in 1995, making a net increase of 22% in value. In 1996, a total of 144 persons received immediate custodial sentences for offences relating to copyright piracy as compared with 18 in 1995. The Bill introduced additional legal tools to enhance the ability of the Customs and Excise Department (CED) to enforce against copyright piracy and to facilitate co-operation with copyright owners and enforcement authorities of other countries/territories. These included the following -

  1. To further double the maximum penalty on first conviction for possession of pirated copyright products for trade or business purpose (to $50,000 per infringing copy and 4 years’ imprisonment) and plates for making pirated copyright products (to a fine of $500,000 and 8 years’ imprisonment) (clause 116);

  2. To introduce an export offence to penalise exporters of pirated copyright products or articles used to make infringing copies of copyright works from Hong Kong to other places (clauses 115(1)(c) and 115(4)(c));

  3. To introduce an additional presumption based on affidavit to facilitate proof of copyright subsistence and ownership, and to make clear that object codes of computer software would be acceptable for accompanying the affidavit (clauses 118(2) and 118(1)(e));

  4. To enable the Commissioner of Customs and Excise to release seized samples and disclose information to copyright owners to help them establish infringement and pursue civil remedies (clauses 123-124, 136-137);

  5. To enable CED to disclose relevant information to enforcement authorities in other jurisdictions for better multi-lateral co-operation (clause 125); and

  6. To introduce provisions to enable CED to exercise power of forfeiture over suspected pirated copyright products (clause 127).

7. To facilitate the copyright owners and their exclusive licensees to take civil actions, the Administration also proposed to -

  1. retain the court’s power to award "additional damages" in an action for infringement of copyright having regard to all the circumstances as the justice of the case might require (clause 105(2)); and

  2. re-affirm that affidavit evidence would be admissible in civil proceedings (clause 118(1)).

8. In addition, subject to members’ agreement, the Administration was prepared to propose a Committee stage amendment to modify and expand the scope of clause 33 of the Bill to make persons civilly liable for knowingly permitting their premises to be used for copyright infringement activities for trade or business purpose.

Enforcement actions

9. In reply to members’ questions relating to seizure of infringing articles, DS/T&I and the Assistant Commissioner of Customs and Excise (AC of C&E) supplemented the following details -

  1. The value of seizure was estimated on the basis of the production costs of the pirated goods.

  2. According to the findings of the survey of software piracy in the world jointly conducted by the Business Software Alliance and the Software Publishers Association, Hong Kong’s trade losses in 1995 were estimated at US$ 123 million.

10. Members opined that the amount of products seized at border points was insignificant as compared with the figure of trade losses. In response, DS/T&I and AC of C&E said that trade losses were estimated on the basis of the estimated market value of products including profits. This calculation method was different from that applied to assessing the value of seized products. It was difficult for the Administration to assess the selling prices of products which could vary greatly. The value of seized products at border points was small because new customs border measures and offence provisions to tackle cross-border piracy activities were only introduced in December 1996 after the enactment of the Intellectual Property (World Trade Organisation Amendments) Ordinance (IPO) (Ordinance No. 11 of 1996). Enforcement actions were taken on various fronts, not just at the border. In fact, it was considered more effective to tackle the problem at source, namely at the production level, and to step up cross-border intelligence exchange and co-operation. At members’ request, the Administration would provide a breakdown on quantity and value of seized pirated copyright products at various border control points and in retail outlets in 1996.Admin

11. Members emphasised that border control was indispensable in combating piracy as many pirated goods were smuggled in. They urged CED to strengthen border measures and upgrade equipment against piracy. In response, AC of C&E emphasised that CED was already dedicated to the task. In this regard, it had established close contacts with China to strengthen cross-border actions and intelligence exchange. China had set up a body specially devoted to enforcement against piracy two years ago and six parallel operations had been mounted by the Hong Kong Customs together with the relevant Chinese authorities at the land border. At members’ request, the Administration would provide more details on enforcement actions taken in 1996, including the six parallel operations and the amount and value of seized pirated products. Members noted that the Administration had also planned to upgrade border equipment. For example, a large garage-like x-ray machine for inspection of trucks would be installed .

12. Some members put forward proposals to facilitate detection of infringing copies at border points such as requiring the consignor to produce licensing documents to verify that the copyright goods were legally manufactured and imported. These documents could be issued by relevant trade associations in the place of production.

13. In response, the Administration provided the following comments -

  1. The fight against piracy had already been strengthened by new customs border measures under the IPO. These measures greatly facilitated initiation of civil proceedings against copyright infringers by enabling copyright owners and exclusive licensees to apply to the court for a detention order to detain suspected imports of pirated copyright products. Applications for detention orders could be lodged on a case-by-case basis and the maximum detention period was twenty days. So far these customs border measure provisions had not been invoked.

  2. At present only strategic commodities had to be licensed. Extension of a licensing system to all copyright products had to be carefully considered as this might affect legitimate trade flow. As a matter of fact, CED had been checking copyright imports at border points. Such imports were normally accompanied by proof of production authorisation from the copyright owner.

  3. As most pirated products were smuggled in, it would be more effective to strengthen intelligence gathering to facilitate spot checks than to introduce a licensing system.

14. Members were concerned that with decriminalisation of parallel imports, pirated products might flow into Hong Kong under the disguise of parallel imports. To address their concerns, the Administration assured members that border measures for copyright products including parallel imports would not be relaxed. If members so wished, the Administration might consider extending the new customs border measures mentioned in paragraph 11 to detain suspected parallel imports. However, CED had to rely on copyright owners and exclusive licensees to provide information to take enforcement against importation of parallel goods. The Administration further advised that parallel imports infringed the contractual rights of the copyright owner or the exclusive licensee. Criminal actions could not be taken without their full co-operation in providing information and giving evidence in court.

Additional legal tools proposed

15. Members in general supported the introduction of additional legal tools in the Bill to fight piracy. They, however, opined that a substantial increase in the maximum penalties against copyright piracy activities was necessary and it was inadequate to merely double the maximum penalty on first conviction. In response, the Administration provided the following explanations -Admin

  1. The IPO, amended in 1995, increased the maximum penalty for infringing intellectual property rights by 25 times and differentiated between penalties on first and subsequent convictions. The Bill proposed to do away with the two levels of penalties as it had been considered inadvisable to disclose the conviction history of a defendant in court. As a matter of fact, the proposed maximum penalty was the heaviest in South East Asia; it should have sufficient deterrent effect. At members’ request, the Administration would provide information on the range of penalties passed down by the court on conviction for infringement of copyright offences in the past few years.

  2. Apart from penalties, there were other sanctions available under the Bill, for example, forfeiture of seized goods. CED could forfeit suspected pirated copyright products seized under clause 127(2) if no claims for the goods were received within 30 days after seizure. This would be an effective anti-piracy measure, in particular where the copyright owner refused to co-operate in bringing evidence to court, or where he could not be located.

Civil proceedings

16. In reply to members’ questions on the right of the copyright owner and the exclusive licensee to claim damages through civil proceedings, DS/T&I and the Deputy Director of Intellectual Property explained that the existing remedies of damages included basic damages, additional damages and conversion damages. The Bill proposed to delete conversion damages because it was considered that additional damages alone should enable the copyright owner or the licensee to claim reasonable compensation for excessive losses having regard to the flagrancy of the infringement and any benefit shown to have accrued to the defendant by reason of the infringement. In consideration of the efforts and investment made by the infringer in an infringement act, the Administration proposed that the scope of damages should be restricted to make it in line with the law of the UK. Apart from damages, other remedies were available, e.g., injunction, delivery, etc.

17. ALA referred members to clauses 105(2)(a) and (b) concerning factors which the court might consider in awarding additional damages. In response to members’ request, ALA agreed to prepare a comparison of additional and conversion damages for members’ reference.ALA

18. The Chairman reminded members that the next meeting of the Bills Committee would be held on Wednesday, 16 April 1997, at 8:30 am.

19. The meeting ended at 12:45 pm.

Provisional Legislative Council Secretariat
9 July 1997

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