PLC Paper No. CB(1)111
(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 Monday, 28 April 1997, at 4:30 pm
in the Chamber of the Legislative Council Building

Members present :

    Hon Mrs Selina CHOW, OBE, JP (Chairman)
    Hon Howard YOUNG, JP
    Hon CHAN Kam-lam
    Hon Margaret NG
    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 Fred LI Wah-ming
    Hon Henry TANG Ying-yen, JP
    Dr Hon Philip WONG Yu-hong
    Dr Hon LAW Cheung-kwok

Public officers attending :

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

Attendance by invitation :

Hong Kong, Kowloon & New Territories Motion Picture Industry Association

Mr MA Fung-kwok
Vice Chairman
Mr Peter LAM
Mr TSUNG Wan-chi, Woody
Chief Executive
Mr W M LEE, Maurice
Partner, Robertson Double & Lee
Mr Richard FAWCETT
Foreign Lawyer, Robertson Double & Lee
Ms S Y LIU, Sonia
Trainee Solicitor, Robertson Double & Lee

Hong Kong Film Directors’ Guild

Mr Gordon CHAN
Vice President

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

The Chairman reported the following -

  1. the International Federation of the Phonographic Industry (Hong Kong Group) had made a submission entitled "Exclusive Licensees of Copyright Have Proprietary Rights" at LegCo Paper No. CB(1)1395/96-97(01); and

  2. supporters of Interoperable Systems in Australia had made a submission at LegCo Paper No. CB(1)1395/96-97(02).

I Meeting with deputations

2. The Chairman welcomed the deputations and invited them to express their views.

Meeting with the Hong Kong, Kowloon and New Territories Motion Picture Industry Association (MPIA)

(LegCo Paper No. CB(1)1288/96-97(03) and a further submission tabled at the meeting and circulated to members vide LegCo Paper No. CB(1)1435/96-97)

3. Mr Maurice LEE briefed members on MPIA’s earlier submission (LegCo Paper No. CB(1)1288/96-97(03)). He explained that MPIA recommended deleting clause 35(4) to retain criminal sanctions against parallel imports for the following reasons -

  1. The unique nature of the film industry justified continuation of criminal sanctions, which had a strong deterrent effect. Prohibition of parallel imports was more cost-effective than provision for remedies as the latter would invariably involve legal proceedings.

  2. Decriminalisation of parallel importation might not benefit consumers. First, products were not necessarily cheaper in jurisdictions in which parallel importation was deregulated. Second, without censorship for parallel imported films and videos, young people might be exposed to inappropriate materials. As regards choice, many distributors dealt with niche films to ensure availability of a wide range of titles to Hong Kong consumers.

  3. The Law Reform Commission Subcommittee on Copyright (the LRC Subcommittee) had divided views on decriminalisation of parallel imports. Decriminalisation was not in line with the world trend. The use of Singapore as an example to highlight the benefits of parallel importation was irrelevant because Singapore only had a small local film industry. Its exports of copyright works were not a major factor in its economic prosperity and it did not face the risk of great damage to its economy from flow-back of lower price goods from neighbouring markets.

4. In reply to members’ questions, representatives of MPIA said that they disagreed with the view that retention of criminal sanctions against parallel importation would elevate the status of the exclusive licensee to that of the copyright owner. The primary objective of copyright law was to protect authors of copyright works and people who invested financially to obtain rights in the works regardless of whether these rights were owned, assigned or licensed. 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. In the film trade in particular, a licensee had the rights to enforce copyright as if he were an assignee of those rights. He also had the responsibility to protect the copyright work in co-operation with the copyright owner. As opposed to general commodities, importation rights of copyright works were conferred with copyright owners and exclusive licensees alike by virtue of national copyright laws in many countries. It would go against the international trend to relax control over parallel importation.

5. Representatives of MPIA further opined that non-availability of products and difficulties in identifying exclusive licensees were not the issues. MPIA represented over 95% of right owners and regularly provided retailers with information on exclusive agreements for both local and foreign works. MPIA was ready to provide such information and refer enquirers to the concerned exclusive licensees on request. Adequate information was readily available to answer reasonable enquiries from prospective importers. As for the availability of products, the existing distribution system had already provided sufficient guarantee for supply of a full range of products. Since exclusive licensees had paid copyright owners for exclusive distribution rights, it would be against their interests not to make available the products. Moreover, a retailer might negotiate for the exclusive right of a title.

6. Representatives of MPIA elaborated on the effects of civil remedies and criminal remedies as follows -

  1. Civil proceedings incurred substantial time and expense. Given that a judgement might be unenforceable (for example, because the defendant had been liquidated or was a shell company), copyright owners and exclusive licensees always hesitated to pursue civil remedies. If criminal remedies were available, right holders would be spared of much time and costs in civil actions.

  2. In order to maintain good relationships, people in the trade were always reluctant to initiate civil actions to settle parallel importation. In some cases, the importer ceased an infringing act upon receiving a notice of infringement from the right holder. However, on many occasions retailers simply disregarded the notice of infringement issued by MPIA on behalf of its members. With criminal remedies, retailers would take more initiatives to ascertain the status of a copyright work before importation.

  3. Without the deterrent effect of criminal sanctions, it would be very difficult to prevent an overseas exclusive licensee from parallel importing products into Hong Kong albeit the specification of territorial rights in the sale of the products and the lack of exportation rights in the contract. Copyright owners would have great difficulties in tracing the source and in proving that overseas licensees knowingly exported products to Hong Kong.

  4. Customs and Excise Department (CED) allocated limited resources to deal with parallel importation. It would be less inclined to combat parallel importation should it be decriminalised.

7. Representatives of MPIA welcomed the following aspects of the Bill -

  1. Affidavit evidence would be accepted as proof of copyright subsistence and ownership. MPIA considered it necessary to further strengthen the provision by deleting the requirement for the deponent to appear in court and specifying the admission of affidavit evidence in the form of confirmation of assignment in both civil and criminal proceedings. MPIA suggested that Hong Kong establish a system of copyright registration with reference to the US experience.

  2. A product would be considered an infringing copy if its making and importation violated an exclusive licence agreement regardless of whether it was parallel imported by an overseas exclusive licensee or the copyright owner. MPIA considered this reasonable because the investments and risk borne by an exclusive licensee in obtaining exclusive distribution rights were recognized.

  3. MPIA supported clarification of the position of exclusive licensees in taking civil actions against parallel importers in breach of exclusive licence agreements.

Meeting with the Hong Kong Film Directors’ Guild

8. Mr Gordon CHAN echoed MPIA’s views and supplemented the following points -

  1. The thriving of the film industry depended on strong copyright laws and enforcement. Parallel imports, albeit not pirated goods, disrupted the release schedule and undermined the marketing strategy and sales opportunities of exclusive licensees. Deregulation of parallel imports discouraged exclusive licensees from taking up exclusive rights, resulting in limited supply of works to consumers.

  2. Most developed countries with high standards of copyright protection and exports of intellectual property products prohibited parallel importation. As a major exporter of films, Hong Kong should retain criminal sanctions against parallel imports.

II Meeting with the Administration

9. In response to comments that CED allocated limited resources to deal with parallel importation, the Assistant Commissioner of Customs and Excise clarified that the Administration was committed to combating parallel importation. Since parallel importation infringed the contractual right of the copyright owner or the exclusive licensee, actions could only be taken upon notification by them. The effectiveness of the Administration’s enforcement actions depended on co-operation of right holders in giving evidence and testifying in court. At members’ request, the Administration would advise the number of cases where investigations into suspected infringements of copyrights could not proceed because of reluctance on the part of copyright owners or exclusive licensees to provide information.

10. On the question of divided views of the LRC Subcommittee on parallel importation, the Administration explained that albeit the lack of a consensus in the Subcommittee, LRC as a whole agreed on decriminalisation of parallel importation. Internationally there was no consensus on the issue. The Agreement on Trade-Related Aspects of Intellectual Property Rights, which set the minimum international standards on intellectual property protection, had not specified the handling of parallel imports and this was left to the local law of each member of the World Trade Organisation.

11. The Administration responded to other comments of the film industry as follows -

  1. As the exclusive licensee’s right should be limited to distribution of the product within a specified period of time and territory, it might not be justified to elevate his status to that of the right owner.

  2. Although the provision for the deponent of the affidavit to be cross-examined in court might frustrate the prosecution’s case, such procedural safeguard was necessary to ensure a fair trial. This was particularly so in criminal cases as the burden of proof should be heavier. Moreover, the court would grant such a request 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.

  3. The US copyright system was unique in that most other countries did not have a registration system. At present, Hong Kong accepted US registration documents as proofs of US copyrights.

  4. Although the cost incurred by copyright owners in criminal proceedings might be lower, the overall costs of criminal and civil cases were largely the same. The only difference was that in criminal proceedings, the cost would be borne by the Administration.

12. The meeting ended at 6:30 pm.

Provisional Legislative Council Secretariat
4 August 1997

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