PLC Paper No. CB(1)26/97-98
(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 Friday, 25 April 1997, at 10:30 am in the Chamber of the Legislative Council Building

Members present :

    Hon Mrs Selina CHOW, OBE, JP (Chairman)
    Hon Ronald ARCULLI, OBE, JP
    Hon Mrs Miriam LAU Kin-yee, OBE, JP
    Hon Fred LI Wah-ming
    Hon Henry TANG Ying-yen, JP
    Dr Hon Philip WONG Yu-hong
    Hon Howard YOUNG, JP
    Hon CHAN Kam-lam
    Dr Hon LAW Cheung-kwok
    Hon Margaret NG
    Hon SIN Chung-kai

Members absent :

    Hon Ambrose LAU Hon-chuen, JP (Deputy Chairman)
    Dr Hon HUANG Chen-ya, MBE
Public officers attending :
    Mr Augustine CHENG
    Deputy Secretary for Trade and Industry
    Mr Stephen SELBY
    Director of Intellectual Property
    Mr Calvin H LEUNG
    Head, Intellectual Property Investigation Bureau
    Customs and Excise Department
    Mr Peter CHEUNG
    Deputy Director of Intellectual Property
    Mr Patrick NIP
    Principal Assistant Secretary for Trade and Industry
    Mr Johann WONG
    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

I Confirmation of minutes of meeting and matters arising

(LegCo Paper No. CB(1)1376/96-97)

1. The minutes of the meeting held on 26 March 1997 were confirmed.

2. The Chairman reported the following -

  1. To avoid a clash of meetings, the meeting scheduled for 5 May 1997 at 10:30 am would be deferred to 12:30 pm.

  2. Deltamac Limited had requested to meet with the Bills Committee.

  3. The Bills Committee had received further submissions from KPS and the International Federation of the Phonographic Industry (Hong Kong Group) (IFPI), a joint submission from ATV, Cable TV, TVB and STAR TV, and submissions from Video Software Dealers Association and the Hong Kong Theatres Association Ltd. (LegCo Paper Nos. CB(1)1358 and 1360/96-97).

(Post-meeting note: The Secretariat had made arrangements for Deltamac Limited to meet with the Bills Committee on 30 April 1997.)

II Meeting with the Administration

(LegCo Paper No. CB(1)1379/96-97)

Clause 33

3. The Deputy Secretary for Trade and Industry (DS/T&I) briefed members on the Administration’s proposal to modify and expand the scope of clause 33. Members noted that some organisations like the Software Publishers Association had suggested that the Government should close retail outlets selling pirated copyright products (such as through the making of closure orders by the court on premises found to be involved in repeated piracy activities), or hold the occupiers and lessees of premises criminally liable for permitting their premises to be used for copyright infringement activities. While the Administration was open-minded on these suggestions, it recognised that these were severe measures that had to be considered very carefully. It therefore suggested that the need for such measures be reviewed following implementation of the proposed legislative measures in the Bill for a period of time. Meanwhile, in order to further enhance the effectiveness of anti-piracy efforts, the Administration proposed to make persons civilly liable for knowingly permitting their premises to be used for copyright infringement activities for trade or business purpose. DS/T&I invited members to comment on the proposal and advised that subject to their agreement, the Administration would propose a Committee stage amendment to clause 33 to achieve this effect.

4. While agreeing that the proposal would greatly strengthen enforcement at the retail level and help target actions at infamous shops, members were concerned that innocent people might be victimized. In gist, their major concerns were as follows -

  1. Unlike obscene activities, copyright infringement activities were difficult to detect. Great care had to be exercised in assessing whether a landlord did knowingly permit his premises to be used for copyright infringement activities. It would be unfair to hold the landlord liable for his tenant’s conduct which might be beyond his knowledge. Moreover, the proposal might be of little use as an infringer could register under various names.

  2. To avoid trouble, landlords might simply refuse to let their premises to retailers of copyright goods. As a result, copyright goods retailers might have difficulties in finding rented premises to conduct businesses.

  3. The landlord’s interests might be unfairly affected. For example, he might have to take legal actions or compensate the tenant for terminating a tenancy agreement should he suspect that copyright infringement activities were carrying on in his premises. The value of premises known to have been used for such activities would go down.

5. To address members’ concerns, the Administration explained that in working out the operational details, the Administration would ensure that the landlord would be properly notified after his tenant had been found guilty of selling pirated copyright products. This would have alerted the landlord to the possibility of his premises being used for infringement activities by the same tenant. The landlord could protect himself by incorporating into the tenancy agreement a prohibition clause against the sale of pirated goods or conduct of infringement activities. A landlord might also take other course of actions. For example, in the absence of a tenancy agreement, he might issue a written advice to the tenant requesting him to stop the sale of pirated products, failing which the premises would be resumed.

6. Some members opined that the Government should not transfer its responsibility to fight piracy to the general public. They urged the Administration to explore the viability of other measures such as cancellation of a business registration upon second conviction of a copyright infringement offence. In response, DS/T&I and the Director of Intellectual Property (D of IP) emphasised that the Administration had already strengthened border measures and introduced various additional legislative measures to enhance enforcement capability. The proposal was targeted at piracy at the retail level. The suggestion of cancelling an infringer’s business registration might not work as he might not have a business registration. Even if he had, he could easily resume business under another name after the cancellation.

7. Mr Howard YOUNG was concerned that hotel operators, who let their premises on an event-by-event basis, might have difficulties in ensuring that the performance staged in their premises did not infringe copyrights. Another member opined that as many facilities of the two Municipal Councils (the two MCs) were for public use, they should be consulted on the proposal. In response, DS/T&I and the Deputy Director of Intellectual Property said that it was a standing practice of hotel operators to apply to relevant copyright licensing bodies to obtain permission for using copyright works in a certain way within the hotel premises.

8. Mr SIN Chung-kai stated that the Democratic Party considered the principle of the proposal agreeable but emphasised that care should be taken to ensure that only those landlords who really knowingly permitted their premises to be used for copyright infringement activities would be held responsible. The Democratic Party would consider the proposal further upon receiving the implementation details.

9. Dr LAW Cheung-kwok said that the Hong Kong Association for Democracy & People’s livelihood supported the principle of the proposal. In his view, the proposal should be tried out and on the basis of operational experience, amendments could be made later.

10. Some members, however, considered it necessary to know the implementation details before stating their positions. The Administration agreed to provide a paper to explain the operation of the proposal including, among other things, the criteria for testing the threshold of "knowingly", the extent of liability of landlords, and any measures to protect their interests.Admin.

Parallel imports

11. For the purpose of discussing the way forward, D of IP summarised the arguments for and against decriminalisation of parallel imports put forward by various parties and drew members’ attention to the following -

  1. The Bill was drafted with a view to addressing defects in the existing law and to mapping out a clearer way forward. Any policy to be recommended by members must be clear so that nobody should be in any doubt of their positions. This was the bottom line that a responsible administration and legislature should try to achieve.

  2. Any sanctions against parallel imports should apply equally to all categories of copyright works. In the modern environment where there was unending technological development and a greater merging of one category of work into the body of another, it would defeat the benefits of the Bill to divide the categories of works on a technological basis. Nonetheless, the Administration recognised that certain types of copyright works, e.g., films, worked through a particular system different from other types of works.

  3. Special protection should not be given to local interests in compliance with international obligations. Hong Kong might be taken to dispute resolution under the World Trade Organisation should there be different treatments for local and overseas interests.

12. D of IP then put forward for members’ consideration the following possible options for regulation of parallel importation -

  1. To maintain the original proposal in the Bill, i.e. removing criminal sanctions but elevating the legal position of the exclusive licensee to enable him to take independent actions against parallel importers.

  2. To adopt HMV’s proposal to give the exclusive licensee the first opportunity to supply the licensed goods. Should the exclusive licensee fail to meet market demands within a reasonable period of time, it would be open to other persons to obtain these works from anywhere in the world. The main issue to address was the length of a reasonable period. This proposal might create uncertainties as the legal status of the copyright work would change and it was difficult to ascertain the status at a certain point of time. A possible solution might be to allow the defendant or the respondent to a civil action to raise a defence for importing by reason of the failure of the exclusive licensee to supply the work within a specified period of time. The advantage of this solution was that the legal status of the respondent rather than of the work would be a deciding factor.

  3. To specify a period, for example one year from first publication of a work during which civil or criminal sanctions were available; thereafter, only civil remedies would remain. The Administration proposed one year on the ground that the critical period of economic exploitation of a copyright work, in particular films and musical products, was usually one year. Since it was reasonable to expect anybody dealing in copyright works to take particular care to ascertain whether a certain work was covered by this specified period, criminal sanctions were justifiable. However, if this option was adopted, the exclusive licensee would lose the right to take independent actions against parallel importers as originally proposed in the Bill. During the specified period, he could lodge a complaint with the enforcement authorities about parallel importation. Thereafter, he had to join the copyright owner in civil actions against parallel importation.

13. On option (a), some members queried whether it was justified to elevate the status of the exclusive licensee to that of the original right owner as the former’s right should be limited to distribution of the product within a specified period of time and territory. They had reservations about option (b) which would in effect reduce the exclusive licensee’s right to a right of first refusal.

14. In response, DD of IP explained that although the exclusive licensee did not have a proprietary interest in the work and his rights were contractual in nature, he enjoyed practically the same rights as those of the copyright owner. Since the existing law was unclear on the licensee’s statutory cause of action against parallel importers, the Bill sought to clarify this legal position. DS of IP agreed that HMV’s proposal would severely restrict the exercise of the right of the exclusive licensee to a limited period of time.Admin

15. At members’ request, the Administration agreed to provide a paper to elaborate on the different options proposed on regulation of parallel importation, including the rights of copyright owners vis-à-vis exclusive licensee.

Checklist of major concerns raised by consultees

(LegCo Paper No. CB(1)1379/96-97)

16. DS/T&I briefed members on the checklist of major concerns raised by consultees.

Copyright ownership and subsistence (clauses 14-15)

17. DS/T&I advised that the Administration had taken into account the interests of all relevant parties and the need to comply with international obligations in drawing up clauses 14 and 15. The Administration maintained that the Copyright Tribunal should consider the merits of each case independently if there was no agreement between the employer and the employee as regards copyright ownership. Clause 15 was clear on copyright ownership of commissioned works.

Parallel importation (clauses 35, 104,109)

18. The Principal Assistant Secretary for Trade and Industry (PAS/T&I) pointed out that the list of consultees favouring criminal sanctions against parallel imports should include IFPI. Pending further information from the Administration, members agreed to defer discussion on this issue.

Rights of copyright owner (clauses 26 and 33)

19. Pending information from the Administration, members agreed to discuss the liability of landlords (clause 33) later.

Acts permitted in relation to copyright works (clauses 37,44,48-49,60 and 82)

20. As regards reprographic copying by educational establishments (clause 44), DS/T&I advised that the Administration preferred to rely on case law than to defining "reasonable extent". In the Administration’s view, the proposed arrangement would have greater flexibility.

21. DS/T&I and DD of IP explained that the Administration disagreed with the Hong Kong University of Science & Technology’s comments that library exceptions (clauses 48 to 49) were overly restrictive because the legitimate interests of the rights owners should not be prejudiced and the proposed exceptions were in line with international practices.

Decompilation of computer programs

22. Members agreed to defer discussion on decompilation of computer programs (clause 60) until the Bills Committee met with the American Committee for Interoperable Systems. Miss Margaret NG suggested that clause 60 should be considered in conjunction with clause 37, which dealt with fair dealing so that if the former was deleted, the scope of the latter could be widened to permit decompilation by reason of fair dealing. At members’ request, the Administration agreed to provide information on US laws regarding fair dealing.Admin.

Re-transmission of broadcasts

23. DS/T&I pointed out that in consideration of the impact on SMATV operators of the removal of copyright exception for re-transmission of non-encrypted programme signals (clause 82), the Administration intended to introduce the concept of implied consent into the Bill. A broadcaster might object to free re-transmission of his programme signals by giving SMATV operators a six-month notice to revoke that consent. Clause 82 should only take effect after the Broadcasting, Culture and Sports Branch had completed a review on broadcasting policy in 1998. In the Administration’s view, such arrangements should ensure minimal inconvenience caused to the general public. The Chairman reminded the Administration to consider the views of ATV, Cable TV, TVB and Star TV in their joint submission (LegCo Paper No. CB(1)1360/96-97).

Remedies for infringement (clauses 105,115,118(5) and 118)

24. DD of IP explained that additional damages, similar to aggravated damages in the UK and exemplary damages in Commonwealth countries, would compensate the copyright owner for excessive losses. With the reaffirmation of the court’s power to award such damages, it was in order to abolish conversion damages which was in line with the trend in most common law countries.

25. D of IP advised that to plug the loophole, the Administration proposed to introduce criminal sanctions for infringing activities under the Internet environment (clause 115). To address members’ concern over the effects on service providers, the Administration agreed to consult the Hong Kong Internet Service Providers Association regarding service providers’ extent of liability. It assured members that in criminal cases, the onus of proof rested with the prosecution.Admin.

26. As regards affidavit evidence (clause 118(5)), DS/T&I advised that whilst the Administration noted the Hong Kong Institute of Trade Mark Practitioners’ view that requirement of the deponent of the affidavit to be cross-examined in court might frustrate the prosecution’s case, it, however, remained of the view that such procedural safeguard was necessary to ensure a fair trial. Under clause 118(5), the party requesting the deponent’s presence would have to bear the costs incurred. Under clause 118(8)(b), the court would grant such requests only when it was of the opinion that the subsistence or ownership of the copyright was genuinely in issue. The risk of abuse was therefore quite remote.

27. As for the Hong Kong Bar Association’s comments that the affidavit provision (clause 118 (3) and (4)) would reverse the onus of proof, PAS/T&I emphasised that the Administration considered these provisions reasonable because the affidavit procedure was very important in copyright litigation. Moreover, an affidavit was only a presumption and could be challenged.

Customs border measures (clause 131-140)

28. Members noted that the question of whether criminal actions could be taken against articles in transit and whether such goods should be included in customs border measures had also been raised during scrutiny of the Patents Bill. They agreed that to ensure consistency in all intellectual property laws, discussion should be deferred until the Bills Committee on Patents Bill had arrived at a decision on the issue.

Collective administration of copyright and the Copyright Tribunal (clauses 141-164)

29. DS/T&I and D of IP informed members that there was no international norm in this area. Since the existing system of collective administration of copyright in Hong Kong was working fairly well, it would be in users’ interest to continue with this system of voluntary registration which had struck a balance between Government intervention and enforcement of private rights.

Technological measures and general (clauses 268,270)

30. DS/T&I explained that although the proposal to abolish the statutory recording licence went against the recommendation of the Law Reform Commission (LRC), this was in line with the changes in international norms arrived at after release of the LRC report.

31. The Chairman reminded members that the next meeting of the Bills Committee would be held on 28 April 1997 at 4:30 pm.

32. The meeting ended at 12:35 pm.

Provisional Legislative Council Secretariat
10 July 1997