Submission to the Provisional Legislature, Bills Committee on Prevention of Copyright Piracy Bill

By

International Federation of the Phonographic Industry (IFPI)

  1. I. Introduction
    2.

    The following paper is submitted in response to the invitation by the Chairman of the Bills Committee on Prevention of Copyright Piracy Bill, which was gazetted on 16 January 1998, to submit our views on the Bill. This paper is submitted on behalf of over 55 local and 1,300 international members of IFPI, which include major producers and distributors of audio-visual products.

    The record industry constitutes a major part of the entertainment business in Hong Kong. The core and partial core industries in the sound recording business employ a total of over ten thousand people. According to SRH figures of 1996, direct revenues generated by the record and entertainment industries summed up to over HK$4.9 billion per annual. Hong Kong is also one of the top epicentres of pop music culture in Asia. With its own repertoire, creativity and production, our record industry has significant influence in the region and a large market in every overseas Chinese community. Its contribution in the cultural sphere is not be overlooked.

  2. Piracy and the Record Industry

    3. However, vitality of the industry is devastatingly hurt by rampant piracy in Hong Kong. According to our estimation, the production capacity of optical disc in Hong Kong stands at an astonishing 335 million per year, a jump from 60 million only a year ago. This alarming trend has already caught the attention of the international community, and is undermining Hong Kong's reputation as a well-regulated business center.

    IFPI appreciates the SAR Government's initiation to provide further legislative tool to combat the spreading of piracy in Hong Kong, and we support the Bill and the policy to adopt a registration that will give the administration more power in monitoring the optical disc manufacturing industry. We believe the present scheme stipulated in the Bill is a positive step forward in anti-piracy enforcement and the Bill has provided enough safeguards to the industry and optical disc manufacturers against unnecessary interference on their legitimate businesses.

  3. Manufacturer's Code

    4. IFPI takes the view that the Bill is in the right direction for what it intends to achieve, namely the regulating of optical disc manufacturers without interfering the markets of genuine products. However, we are disappointed that the Government has not taken into account the impacts of the new law, if promulgated, on the international anti-piracy enforcement. First and foremost, the current bill contemplates that the system of manufacturer's code, which essentially is a set of unique identifiers that allow the Customs to trace the sources of products, will be effected by the Commissioner of the Customs & Excise granting such specific code in response to the request of optical disc manufacturers. This carries with it too much potential for confusion and overlap, and lack of predictability for the purposes of law enforcement.

    For example, if a manufacturer submits its application with an existing code that is already being used by another plant, the Commissioner may still approve it because he may not be aware of its existence. Furthermore, unlike any international coding schemes that are widely recognized and administrated by reputable organizations, the code proposed by the Bill is only being enforced in Hong Kong. A pirate can confuse enforcement officers in another country by manufacturing illicit products marked with a code approved by the Commissioner. One of the possible consequences is that the Hong Kong Customs will be facing the responsibility to investigate cases that involved overseas pirates producing infringing copies marked with codes approved by the Commissioner.

    Rather than constructing the administration of unique identifiers in this manner, the Commissioner should be granted the authority to assign codes. This will ensure uniformity in terms of both placement and form of all such identifiers, creating greater transparency for both the public and law enforcement. The Commissioner should be directed to work with copyright owners, trade organizations, manufacturers and other related bodies to adopt a coding scheme. The Commissioner should be directed to adopt a system talking into account the relationship of any proposed national coding systems to systems currently being used or under consideration in the international marketplace.

    One of the most recognized international coding schemes SID Code, which is currently administrated by IFPI, is a prime example of what the Government should consider to adopt. A simple introduction of SID Code and its operation has been attached with this submission in Annex I.

    SID Code was developed jointly by IFPI and Philips in the early 1990s at a time when the record industry was the only industry using optical discs as carriers of their products (i.e. sound recordings). The primarily objective of SID Code, as a security-enhancing programme, is to identify the source of optical discs. Since other major industries such as computer software and film are also using optical discs as carriers of their products, SID Code has grown into an internationally recognized coding scheme that is being implemented by around 72% of all known optical discs manufacturers around the world. The following table shows the percentage of optical disc plants that have adopted SID Code in different regions.

    Country/Region

    Percentage of known optical discs plants that have adopted SID Code

    Asia

    81%

    North America

    72%

    China

    100%

    Latin America

    100%

    Hong Kong

    90%

    World

    76%

    At present SID Code is administrated jointly by IFPI and Philips. A CD plant can send its application to both to obtain its codes. There is no cost and condition involved in the approval, except the applicant must not have previous convictions of any copyright infringements. Once the use of code has been approved (which normally takes around three weeks), timing of its introduction and form of corporation in equipment and tools will have to be decided by each manufacturer, though certain guidelines concerning location on the disc, tamper resistance, wear and tear, and visibility will be provided. A plant is also obliged to inform IFPI or Philips when the mould attached with a code is sold to a third party or when the plant has ceased to operate.

    SID Code is an effective security enhancing programme and a well-established part of any anti-piracy programmes and the optical disc manufacturing industry. We have stressed in our comments and meetings with officials from Trade and Industry Bureau that IFPI's involvement in SID Code is strictly administrative and non-commercial. We do not gain financially from the programme. Our operational and anti-piracy funding is financed entirely by members. Our offices in over 70 countries share the responsibility of supervising the usage of SID Code all over the world. It is in the interest of IFPI and our members to investigate any complaints and cases regarding the counterfeiting of SID Code since most of those cases also involved pirate activities.

    We have in the past allotted a whole set of codes to a government, which in turn were being assigned to optical disc plants in that country by the administration. The recent example is China. A set of 52 codes was allotted to the Chinese government in 1995 with no charges and an undertaking that another set would be allotted upon request. The right to assign and manage those given codes rests with government authorities in China.

    We believe such arrangement can also be adopted in other areas, and government officials should be directed to take into account of any schemes similar to SID Code while adopting its own scheme. IFPI is very willing to work closely with the Government to reach a similar agreement we have with the Chinese government, and with reasonable modifications to fit the needs of the Hong Kong market. We have officially agreed with the Trade and Industry Bureau to do the followings if the government should decide to accept our recommendation (the letter attached in Annex II):

    --to allot a set of SID Codes to the government with no charge and an undertaking that further sets of codes will be allotted on the same conditions upon request;

    --to give the appropriate government authorities the management rights to assign those allotted codes to local manufacturers and cancel codes on their discretion;

    --to assist in investigating cases relating to any misuses and counterfeiting of SID Codes on local and international levels upon request; and

    --to assist in any technical issues regarding the implementation of SID Codes upon request.

  • Conclusion

    • Provided that the Hong Kong coding system takes into account coding schemes such as SID Code presently used in the international marketplace, Hong Kong will be able to adopt a legal framework that more completely accomplishes the anti-piracy objectives underlying the legislation. Hong Kong does not exist in a vacuum. As piracy has developed into an organized and international crime, a government cannot develop an anti-piracy tool that does not take into consideration of existing schemes that are effective in combating piracy and widely adopted by enforcement bodies, copyright owners and the optical disc manufacturing industry. It is in particularly undesirable for any governments to pass laws that do not recognize existing orders and practices of the marketplace.

    With the interests of the local and international copyright owners and optical disc markets in mind, we strongly recommend the Government to amend the Bill according to the following three points:

      --to amend Section 15 and Section 16 so that the Commissioner will be granted the authority to assign manufacturer's codes;

      --the Government should be directed to work with the industry and other relevant bodies to adopt a standard coding scheme; and

      --the coding scheme adopted should take into account the relationship of systems that are currently being used in the international marketplace.

    JOINT SUBMISSION TO THE BILL COMMITTEE OF HONG KONG PROVISIONAL LEGISLATURE REGRADING MANUFACTURER'S CODE AND THE PREVENTION OF COPYRIGHT PIRACY BILL

    JOINTLY SUBMITTED BY

    Business Software Alliance,

    Hong Kong, Kowloon & New Territories Motion Picture Industry Association,

    Hong Kong Optical Disc Manufacturers Association,

    International Federation of the Phonographic Industry

    and

    Motion Picture Association

    1. Introduction
      2.

      The groups listed above represent companies and organizations covering a wide range of companies in the music, movie, computer software and optical disc manufacturing industries. They will be collectively referred to as the industry thereafter. This submission is made by the industry on behalf of their members, which included local and overseas companies that will be, both directly and indirectly, affected by the Prevention of Copyright Piracy Bill (the "Bill"), which the Government has presented to the Provisional Legislature.

    2. Background

      3. The industry appreciates the Government's efforts in combating the rampant piracy problem in Hong Kong, which is moving down the path of becoming a major base for the manufacturing of illicit copyright products. According to a figure estimated by International Federation of the Phonographic Industry, the optical disc production capacity of Hong Kong has increased from 60 million to 335 million per annum within the last twelve months. This alarmingly rapid growth has already caught the attention of international community. The increase of pirated products in the market has hurt both at retail level and the market for exports of legitimate products devastatingly.

      The industry fully supports and believes it is appropriate for the Government to adopt a scheme that will give the administration more power to regulate the optical disc manufacturing industry. Past experiences of the Hong Kong Customs have shown that by just raiding on wholesalers and retailers of pirated products, albeit an important means to cut off supply of illicit products to consumers, is not enough to tackle our problem.

    3. Manufacturer's Code

      4. However, the industry believes that there is one important point in all comments of the draft Bill submitted independently by all groups listed above has not been considered favourably by the Government, and is subsequently ignored in the Bill. The Bill confers the power of approving manufacturer's code (Sections 15 and 16) to be marked on all optical discs produced by manufacturers to the Commissioners of Customs & Excise (the "Commissioner"). The industry has stressed that, from the anti-piracy enforcement perspective, this scheme runs the risk of creating confusions in the local and international market by giving the Commissioner the sole power to approve codes without referring to other internationally recognized coding codes and standards.

      For example, if a manufacturer submits its application with an existing code that is already used by another plant elsewhere in the world, the Commissioner may still approve it because either he may not be aware of its existence or he may not be in the legal position to reject the application. It will then give the manufacturer the opportunity to use an existing code, which has already been assigned to a plant elsewhere in the world, to engage in the production of pirated products and create confusion in identification of the source of such products.

      We have proposed in our comments that rather than constructing the administration of codes in manners prescribed by the Bill, the Commissioner should be granted the authority to assign codes. This will ensure uniformity in terms of both placement and form all such identifying codes, creating greater transparency for both the public and law enforcement. The Commissioner and other Government officials should be directed to work with the industry, which includes copyright owners, trade organizations, manufacturers and other relevant parties to adopt a coding system in manners that will take into account of systems that are currently being used in the international marketplace. Meanwhile, manufacturers should be permitted to continue to use existing codes that have been assigned to them by reputable and widely recognized international organizations.

    4. Conclusion

      5. The industry takes the view that the Bill is in the right direction for what it intends to achieve, namely regulating optical disc manufacturers without interfering the legitimate production of optical discs. However, we fear that the Bill, if promulgated, will not achieve its objectives and it may even further complicate the present marketplace and international anti-piracy enforcement. Therefore, the industry wants to convey our request that the Government should seriously consider amending the Bill according to the three points listed below:

      --the Government should consider to amend Sections 15 and 16 so that the Commissioner will be granted the authority to assign manufacturer's codes;

      --the Government should work with the industry and other relevant bodies to adopt a standard coding scheme, which will also permit manufacturers to continue using existing codes that have been assigned to them by widely recognized international organizations; and

      --the coding scheme adopted should take into account the relationship of systems that are currently being used in the international marketplace.

    END