Legislative Council Panel on Trade and Industry

Combating Copyright Piracy


This note provides a summary of the Government's efforts to combat copyright piracy.

Multi-Pronged Approach

2. The Government is fully committed to tackling the problem of copyright infringement on all fronts. For maximum results, we have adopted a multi-pronged approach which comprises four important elements : a comprehensive legal framework; vigorous and sustainable enforcement action; education and publicity efforts; and close liaison with the copyright industry and cross-border enforcement authorities.

3. Hong Kong's legislative framework for copyright protection is recognized to be among the best in the world. It covers the production, distribution and retail levels of copyright piracy -

  1. we have complied with the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights since December 1996;

  2. the new Copyright Ordinance with enhanced enforcement powers for Customs and increased penalties for copyright offences was enacted in June 1997;

  3. a licensing requirement for the import and export of optical disc manufacturing equipment was introduced in December 1997; and

  4. in March 1998, the Prevention of Copyright Piracy Ordinance was enacted. It provides for the licensing of optical disc manufacturers and the use of a source identification code on locally-manufactured optical discs.

4. Vigorous enforcement action has been undertaken to combat copyright piracy -

  1. at the retail level, raids of black spots as well as the more peripheral sites are being carried out frequently;

  2. at the production level, lines involved in producing pirated optical discs are being seized in record numbers; and

  3. at the distribution level, warehouses storing pirated optical discs are being raided and smuggling into and from Hong Kong of pirated materials is being intercepted.

5. In the first seven months of 1998, we have seized -

  1. 30.5 million copies of suspected pirated optical discs worth $830 million, as compared with 4.5 million copies worth $143.7 million in the whole year of 1997; and

  2. 53 production lines worth $370 million, as compared with 5 production lines worth $34 million in 1997.

6. Several initiatives are being pursued on the education and publicity front -

  1. the school visit programme, which has already covered 97 schools and more than 26,000 students since its launch in September 1997, will continue. Our plan is to cover 100 schools in the new school year;

  2. we are now preparing two "announcements of public interest" (APIs) for television and radio broadcast in the fourth quarter of 1998 to enhance public awareness of the importance of respecting intellectual property rights;

  3. a poster campaign to increase public awareness will be launched in the fourth quarter of 1998; and

  4. a teaching kit aimed at upper primary and lower secondary school students on intellectual property rights is near completion.

7. We also recognize the importance of maintaining close cooperation with the copyright industry and other enforcement authorities. We have -

  1. maintained a regular dialogue with the copyright industry and sought their comments on issues of mutual interest, e.g., legislation, enforcement and education;

  2. successfully operated, since December 1997, a reward scheme funded by the copyright industry. A total of $300,000 has been paid from the reward scheme to informers providing leads to the seizure of three optical disc production lines;

  3. maintained close contact and sharing information with the Mainland, especially Guangdong, authorities in combating cross-border piracy offences; and

  4. kept up a dialogue with various overseas intellectual property or copyright organizations to share views and keep tabs on the latest international developments.

8. The multi-pronged approach is beginning to yield results. Blatant sale of pirated optical discs at retail black spots has now subsided. The courts have started hearing the first cases brought under the new Copyright Ordinance. The deterrent effect of court sentences should begin to be felt when more verdicts are handed down. With the commencement of the sanctions provisions of the Prevention of Copyright Piracy Ordinance at the end of August 1998, the production of pirated optical discs should be put in check, and the effect will eventually filter down to the retail level. Intelligence reports are that some illegal production lines are already withdrawing from Hong Kong.

Further Initiatives

9. We believe that we should allow the relatively new legislative regime some time to take hold for its full effect to be assessed. Nonetheless, we recognize that we cannot be complacent. We have therefore considered, on a preliminary basis, certain additional legislative proposals. Our initial assessment of these proposals is outlined below.

10. We have established that it is technically feasible to adopt provisions on detecting and confiscating criminal proceeds for piracy offences. In determining whether to take the proposal forward, the following considerations are relevant -

  1. the additional deterrent effect : the existing forfeiture provisions in the Copyright Ordinance already provide for confiscation of usually very expensive manufacturing equipment and other articles found in connection with piracy offences. The maximum penalties of $50,000 for each infringing article and imprisonment for four years are potentially crippling; and

  2. the resource implications : investigations for tracing the proceeds are highly resource intensive.

11. We have considered the possibility of introducing closure orders for premises repeatedly used for piracy activities along the lines of the provisions of the Crimes Ordinance for vice establishments. Again we have established the technical feasibility of the proposal. The following considerations are relevant in determining whether to take the case forward -

  1. the modus operandi of pirates : unlike vice operators, copyright pirates usually operate in ad hoc installations and are highly mobile;

  2. fairness to landlords and owners : to safeguard private property rights and to allow landlords and owners to take remedial action, elaborate procedures and a long lead time of about 15 to 27 months is required before closure orders may be obtained if the vice establishment model is followed; and

  3. speed : to be effective in piracy cases, however, the closure orders should ideally be imposed almost immediately and prior to conviction.

12. We have also considered whether some form of end-user liability should be introduced. The idea is that end-users and consumers of pirated materials should bear some legal liability if they have knowingly purchased or consumed the pirated goods. We have studied the practices in a number of foreign jurisdictions, e.g., France, India, Australia, Canada and the United States. It appears that only France and India have a very limited form of end-user liability. In addition, at the enforcement level, the liability provisions seem to be enforced at the point of importation for counterfeit goods (for France) and in commercial settings (for India) only.

13. The main difficulty in imposing end-user liability is the need to prove mens rea legally. In practice, however, there is anecdotal evidence that many consumers of pirated materials are well aware that they are buying pirated goods because of the circumstances in which the transactions take place. We will therefore need to consider if a practical way could be found to impose some form of end-user liability should circumstances warrant.

Way Forward

14. The Government is prepared to take the two proposals on confiscating criminal proceeds and closure orders forward if their likely effectiveness is established and if there is sufficient public support for them. End-user liability, however, is a much more controversial subject which requires extremely careful consideration with regard to both legal principles and other factors such as public reaction. The Government will consult the copyright industry and listen to the views of other interested parties on the practicality and desirability of all these three proposals before it reaches a firm decision on whether any of them should be taken forward.

Advice Sought

15. Members of the Panel are invited to comment on the three options floated in paragraphs 10 to 13.

Trade and Industry Bureau
August 1998