Provisional Legislative Council

PLC Paper No. CB(2)1402
(These minutes have been
seen by the Administration)

Ref : CB2/BC/8/97

Bills Committee on
Prevention of Copyright Piracy Bill

Fourth meeting on Wednesday, 25 February 1998 at 10:45 am in Conference Room A of the Legislative Council Building

Members Present :

Hon MA Fung-kwok (Chairman)
Dr Hon Charles YEUNG Chun-kam (Deputy Chairman)
Hon WONG Siu-yee
Hon Eric LI Ka-cheung, JP
Mrs Selina CHOW, JP
Hon Henry WU Hon
Hon CHAN Kam-lam
Hon Howard YOUNG, JP
Hon YEUNG Yiu-chung
Dr Hon LAW Cheung-kwok

Members Absent :

Prof Hon NG Ching-fai
Hon NGAI Shiu-kit, JP
Hon Ronald ARCULLI, JP
Hon CHAN Yuen-han
Hon Philip WONG Yu-hong
Hon Kennedy WONG Ying-ho
Hon TAM Yiu-chung, JP

Public Officers Attending :

Miss Elizabeth TSE
Principal Assistant Secretary for Trade and Industry

Deputy Director of Intellectual Property (Acting)

Mr Vincent POON
Assistant Commissioner of Customs and Excise

Mr Jeffrey GUNTER
Deputy Principal Government Counsel

Mr Johann WONG
Assistant Secretary for Trade and Industry

Attendance by Invitation :

Mr LAM Kwok-wah
Wah Lee Advanced Technology Company Limited

Mr Danel HO
Maytronic Industrial Company Limited

Mr Thomas LEE
Polymate Consultants Limited

Clerk in Attendance :

Mrs Percy MA
Chief Assistant Secretary (2)3

Staff in Attendance :

Miss Anita HO
Assistant Legal Adviser 2

Miss Flora TAI
Senior Assistant Secretary (2)3

I. Meeting with deputations

Wah Lee Advanced Technology Company Limited

Maytronic Industrial Company Limited

(PLC Paper No. CB(2)1084(01)

1. At the invitation of the Chairman, Mr Danel HO briefed members on the joint submission from Wah Lee Advanced Technology Company Limited and Maytronic Industrial Company Limited which had been issued vide PLC Paper No. CB(2)1084(01).

Polymate Consultants Limited

(PLC Paper No. CB(2) 1086(01))

2. At the invitation of the Chairman, Mr Thomas LEE briefed members on the joint submission prepared by Polymate Consultants Limited which had been issued vide PLC Paper No. CB(2) 1086(01).

Mandatory requirement of manufacturer’s codes

3. Mr Thomas LEE was of the view that the proposed licensing system would enable Customs officers to combat copyright piracy by identifying and inspecting the factories for the manufacture of optical discs. However, the requirement of source identification codes might not achieve the purpose of combating copyright piracy and would expose legitimate manufacturers to unnecessary risks. For example, in the case of forgery of a manufacturer code approved for use by a particular licensee, the licensee concerned would face the problem of having to prove that the pirated optical discs marked with the code were not their products. In this connection, the Chairman suggested that for better protection, manufacturers could consider adding their own codes, on top of the manufacturer’s codes to be assigned by the Commissioner of Customs and Excise (Commissioner). Mrs Selina CHOW added that a source identification requirement could facilitate, albeit to a limited extent, the tracking process.

4. With reference to the proposal that the Commissioner should be empowered to assign, instead of approve, manufacturer’s codes in accordance with a uniform set of codes to be provided by the International Federation of Phonographic Industry (IFPI), Mr LAM Kwok-wah and Mr Danel HO expressed concern that manufacturers adopting the IPFI codes might be subject to certain conditions and charges imposed by IFPI.

5. In response, Principal Assistant Secretary for Trade and Industry (PAS(TI)) explained that the Administration had reached an understanding with IFPI which would allocate a set of SID codes to the Commissioner with no charge and no obligations on the part of the Administration or the prospective licensees. The Commissioner would take into account the IFPI’s codes currently used by some manufacturers in assigning the manufacturer’s codes. To enhance the transparency of the coding system, the Commissioner would be required to determine the standards for the marking of the manufacturer’s codes on optical discs, and to publish these in the Gazette. The manufacturer’s code assigned by the Commissioner would also be incorporated as one of the conditions to be endorsed on a licence. In this regard, members noted that the Administration would propose amendments to clauses 2, 3, 6, 8, 15, 16, 22, 31 and 34 of the Bill (as set out in Appendix I to PLC Paper No. CB(2)1095(01)). To dispel any misunderstanding, members urged the Administration to explain to the industry details of the understanding reached with the IFPI.

6. Mr Thomas LEE remained concern that requiring manufacturers to adopt any new coding system would pose additional financial burden on them, in terms of the cost for making a new/modified mould and loss of production time. He would therefore prefer the original proposal in the Bill under which the Commissioner was empowered to approve any suitable coding system that might be submitted by an optical disc manufacturer. PAS(TI) said that although the IFPI SID system was not the only coding system used in the international market, it was widely used in the industry and thus its adoption would cause least disruption to most manufacturers. Moreover, the additional expense for engraving a code in the mould was minimal. In this regard, the Chairman remarked that a right balance had to be struck in order to ensure the integrity of the source coding system.

Validity of licence

7. Referring to the views expressed by the deputations that a licence to manufacture optical discs should be valid for five years instead of three years, Mr Howard YOUNG remarked that it was not unusual for a licence to be renewed on a yearly basis. Citing the hotel industry as an example, he pointed out that a hotel licensee had to apply for renewal of licence every year despite the huge investment involved. Mr YOUNG therefore asked whether the real concern was about the conditions for renewal of licence.

8. In response, Mr Danel HO said that manufacturers were worried that they might unwilfully commit copyright infringements as verification of copyright ownership would be difficult, especially when there was no comprehensive registry of copyright to assist them in the process. They could easily face the risk of non-renewal of licence, hence suffering great financial loss. Mr Thomas LEE added that the Commissioner had the sole discretion to refuse renewal of a licence and was not required to seek any advice from the industry. The Acting Deputy Director of Intellectual Property (Ag DD(IP)) pointed out a person could appeal against the Commissioner’s decision on non-renewal of licence to the Administrative Appeals Board, and lodge further appeal to the High Court if there was a legal point in dispute. In this regard, the Chairman remarked that the manufacturing industry could consider setting up a representative organisation to represent their interests.

9. The Chairman asked the Administration to take positive action on the industry’s proposal of establishment of a registry of copyright. He said that according to information received, pirated digital video discs bearing IFPI codes had already been found in the market.

II.Meeting with the Administration

(PLC Paper Nos CB(2)1095(01) and CB(2)1095(02))

10. At the invitation of the Chairman, PAS(TI) briefed members on the Administration’s response to concerns raised at the meeting held on 23 February 1998 and in the joint submission from Wah Lee Advanced Technology Company Limited and Maytronic Industrial Company Limited. The Administration’s response was tabled at the meeting and subsequently issued to members vide PLC Paper No. CB(2)1095(01). The gist of the discussion is summarized in the following paragraphs.

"Certificate of Origin" for importation of optical discs

11. Members noted that the Administration did not accept a deputation’s proposal of imposing the requirement of "Certificate of Origin" for importation of optical discs on the grounds that Hong Kong, as a free port, had to be cautious about imposing such a condition on trading partners and the requirement would be of only marginal usefulness in terms of preventing piracy. In response to Mr CHAN Kam-lam who expressed reservation about the proposal, PAS(TI) said that the Administration was not aware of any country or region having imposed a requirement for "Certificate of Origin" on imported optical discs.

12. Mrs Selina CHOW reiterated her concern that imported optical discs being exempted from the mandatory source coding requirement would be a loophole in the Bill. PAS(TI) said that importation of pirated optical discs was already an offence under the Copyright Ordinance. The purpose of the Bill was to prevent copyright piracy at source in Hong Kong.

Licence conditions

13. Assistant Commissioner of Customs and Excise (AC(CE)) informed members that the Commissioner would specify general conditions for the grant of a licence for the manufacture of optical discs, such as the licensee ought to maintain ledger and records of the type and quantity of optical discs produced and source of raw materials, or particulars of consignees of optical discs. In response to Mrs Selina CHOW’s query, AC(CE) explained that although Customs officers already had the power to request such information from the manufacturers, the conditions imposed an obligation on the manufacturers to maintain and furnish such information to facilitate the work of Customs officers.

14. Mrs Selina CHOW said that any conditions imposed should not affect the normal operation of businesses. Mr Howard YOUNG echoed Mrs CHOW’s view. The Chairman suggested that the Administration provide a paper spelling out the general and specific conditions which might be specified by the Commissioner for the grant of a licence, and the circumstances under which the specific conditions would be imposed. Adm

Licence suspension mechanism

15. PAS(TI) informed members that the Administration had consulted the Hong Kong Optical Disc Manufacturing Association about the proposal. The Association agreed with the Administration’s assessment that it was not necessary to empower the Commissioner to suspend a licence, in addition to the power to revoke or to refuse to renew a licence. She pointed out that the introduction of a licence suspension mechanism might create more uncertainty for the licensees. In this connection, the Chairman drew members’ attention to the letter dated 24 February 1998 from the Hong Kong Optical Manufacturers Association setting out its view on the matter. The letter was tabled at the meeting and subsequently issued vide PLC Paper No. CB(2)1095(02). Mrs Selina CHOW asked the deputations present at the meeting to give their views in writing on the proposal, if any, to the Bills Committee.

III.Date of next meeting

16. Members agreed that the next meeting would be held at 10:45 am on Friday, 27 February 1998 to continue discussion of the outstanding issues.

17. The meeting ended at 12:50 pm.

Provisional Legislative Council Secretariat

11 March 1998