Provisional Legislative Council

PLC Paper No. CB(2)1399
(These minutes have been
seen by the Administration)

Ref : CB2/BC/8/97

Bills Committee on
Prevention of Copyright Piracy Bill

Third meeting on Monday, 23 February 1998 at 8:30 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
Mrs Selina CHOW, JP
Hon Henry WU
Hon Ronald ARCULLI, JP
Hon CHAN Yuen-han
Hon CHAN Kam-lam
Hon Howard YOUNG, JP

Members Absent :

Prof Hon NG Ching-fai
Hon Eric LI Ka-cheung, JP
Hon NGAI Shiu-kit, JP
Dr Hon Philip WONG Yu-hong
Hon Kennedy WONG Ying-ho
Hon YEUNG Yiu-chung
Dr Hon LAW Cheung-kwok
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

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. Matters arising from the last meeting

(PLC Paper Nos. CB(2)1076(01) and CB(2)1076(02))

1. The Chairman informed members that as agreed at the last meeting, he had held a press briefing on 20 February 1998 to brief the press about the source coding system proposed in the Bill and to appeal to parties who had views on the SID codes of the International Federation of the Phonographic Industry (IFPI) to give their views to the Bills Committee. As some organizations which had reservation about adopting the IFPI’s codes had requested to remain anonymous in their joint submission to the Administration, the Clerk had tried to contact these organizations through the Administration but response from them was still awaited.

2. Members noted that the Secretariat had prepared a summary of issues raised by the deputations and members at the last meeting. The summary was tabled at the meeting and subsequently issued to members vide PLC Paper No. CB(2) 1076(01). At the invitation of the Chairman, Principal Assistant Secretary for Trade and Industry (PAS(TI)) briefed members on the Administration’s response to concerns raised in the submissions to the Bills Committee (English version) (which was tabled at the meeting and subsequently issued vide PLC Paper No. CB(2) 1076(02)). The gist of the discussion is summarized in paragraphs 3 - 14.

A database on popular copyright titles and licensing rights

3. On the proposal to set up a comprehensive registry of copyright, members noted that the Administration recognized the benefits of an up-to-date database on popular copyright titles and licensing rights and was working with the copyright industry on the way forward. In response to the Chairman, PAS(TI) said that the Administration did not have any timetable on the matter. At a meeting held with representatives of the industry a few weeks ago, they were requested to advise on the information which they could make available for inclusion in the database. However, some of them had indicated that they might have difficulty in providing comprehensive information. PAS(TI) further said that the Administration would gather all available information and consider whether it was feasible to establish an up-to-date database. In this regard, Dr Charles YEUNG reiterated the importance of setting up a comprehensive registry of copyright to assist the industry in copyright verification.

Imported optical discs

4. Members noted that the Administration did not agree to impose the mandatory source coding requirement on imported optical discs on the grounds that -

  1. the proposal was beyond the original legislative intent of the Bill;

  2. licensing storage premises for imported optical discs might be too restrictive and burdensome for optical disc manufacturers; and

  3. importation of infringing copies of copyright works into Hong Kong was already an offence under the Copyright Ordinance.

5. Mrs Selina CHOW had a different view, saying that controls on imported optical discs would facilitate policing of copyright piracy at retail level in Hong Kong. In response, PAS(TI) explained that requiring all optical discs sold in Hong Kong to bear a manufacturer’s code would not necessarily assist Customs officers’ enforcement efforts at retail level; instead, it might limit the availability of overseas non-mainstream products in Hong Kong and restrict consumer choice. Assistant Commissioner of Customs and Excise (AC(CE)) supplemented that Customs officers would normally base on the content of an optical disc, instead of the manufacturer’s code, to determine whether the optical disc was copyright infringing or not. The manufacturer’s code would only assist Customs officers to trace the source of optical discs and to identify copyright infringing activities at production level.

6. Mrs Selina CHOW maintained that there were merits in requiring imported optical discs to be marked with manufacturer’s codes. In this connection, PAS(TI) informed members that to the knowledge of the Administration, only Mainland China and Taiwan had imposed restrictions on imported and locally-made optical discs. Acting Deputy Director of Intellectual Property (Ag DD(IP)) explained that regions which had adopted continental law system would usually resort to administrative measures to impose these restrictions. Mainland China, for example, had required manufacturers to adopt manufacturer’s codes on optical discs by way of a notice. Hong Kong was the first common law region which proposed to impose the source coding requirement on locally manufactured optical discs by legislation. He added that at present there was no international covenant which required optical discs to be marked with a manufacturer’s code. Ag DD(IP) cautioned about the policy implications involved if the ambit of the Bill was to be extended to imported optical discs. PAS(TI) stressed that the Administration was concerned that overseas countries might consider imposition of the requirement on imported optical discs as an unnecessary barrier. Mrs Selina CHOW said that she appreciated the Administration’s concerns but would need to give further thought to the matter.

Non-renewal or revocation of licences

7. Ag DD(IP) explained that the standard of proof for civil cases of copyright infringement was fairly low. Unwilful act resulting in copyright infringement would constitute civil liabilities without exemption. In the light of the concerns expressed, the Administration agreed to delete clause 11(1)(c) to the effect that records of civil liabilities would not be a factor for consideration in revocation or non-renewal of a licence.

8. On a deputation’s proposal that the Commissioner of Customs and Excise (the Commissioner) should consider revocation or non-renewal of a licence only in case of subsequent convictions under the proposed Ordinance or the Copyright Ordinance, and only after all the circumstances in which the offences committed had been sufficiently considered by a court of law before making that decision, PAS(TI) explained that the Commissioner was not obliged to revoke or refuse to renew a licence upon first conviction but was required to take into consideration all the circumstances, including whether even a first conviction was of a serious nature before making the decision. Any person who was aggrieved by the Commissioner’s decision might appeal to the Administrative Appeal Board.

9. To address the industry’s concern, Mrs Selina CHOW asked whether the Administration would consider empowering the Commissioner to suspend a licence, in addition to revoke or to refuse renewal of a licence. Ag DD(IP) responded that it was considered not necessary to do so because the Commissioner would take into account all relevant circumstances in making a decision to revoke or to refuse renewal of a licence. The suspension provision would make the licensing procedures unduly complicated. Deputy Principal Government Counsel (DPGC) added that normally only very complicated licensing scheme where the industry was subject to more stringent regulation would have a suspension provision. The proposed licensing scheme was a simple one and the application procedure for a licence was fairly quick and straight-forward. To give the Commissioner additional power for suspension of licences would not improve the efficiency of the system. He stressed that the power to revoke a licence would only be exercised as a last resort.

10. Mrs Selina CHOW maintained that by inserting another layer of penalty into the Bill, i.e. suspension of a licence, would reassure the industry that the Commissioner would need to have more justifications in revocation of a licence. PAS(TI) undertook to consult the industry on the merit of the proposal, given that the Administration had agreed to amend the Bill to the effect that the consideration to revoke or to refuse to renew a licence should only be based on records of criminal convictions of copyright infringement. Adm

Manufacturer’s code

11. Members noted that the Administration had agreed to the proposal that the Commissioner should be empowered to assign instead of approve manufacturer’s codes. PAS(TI) informed members that the Administration had reached an agreement with IFPI on the arrangement to adopt their SID system. While IFPI would supply a set of codes for the Commissioner to assign, the Administration would retain the flexibility to adopt other coding schemes at any one time. The Administration would propose amendments to various clauses of the Bill which would be submitted for members’ consideration shortly. Adm

Fees for the application, renewal or transfer of a licence

12. On Mrs Selina CHOW’s enquiry about the basis for setting the licence fees, PAS(TI) referred to Annex B to the Provisional Legislative Council Brief (File Ref. : TIB 09/46/21) and explained the cost computation to members. She stressed that a cost recovery principle had been adopted i.e. the fees proposed would cover the administrative costs of processing applications.

13. Noting that the cost computation was made on the assumption of 100 licence applications, Mrs Selina CHOW said that the fees proposed might not be justified if the number of applications was lower than expected. PAS(TI) explained that the expected number of licence applications was based on Customs intelligence on known optical disc manufacturers which were about 50 and an estimation of those unknown manufacturers in the industry. She assured members that the Administration would review the licence application fees if deemed appropriate. In this regard, the Chairman said that the workload for processing applications might only be heavy during the first few months as the licence would be valid for 3 years. He therefore suggested the Administration to consider temporary re-deployment of staff to absorb the workload in order to cut down the staff cost.

14. PAS(TI) explained that the procedures and the amount of work involved in vetting applications for renewal or transfer of licences would be similar to that for an application for a new licence. However, Mr Howard YOUNG and Mrs Selina CHOW were of the view that as separate inspection teams would conduct inspections at the licensed premises from time to time, the amount of processing work for renewal or transfer of licences should not be as great as a new application. Fees for renewal or transfer of a licence should be lower than that for an application for a new licence. At the Chairman’s request, PAS(TI) undertook to re-consider views expressed and revert to members at the next meeting. Adm

Forfeiture of equipment

15. The Chairman referred to Mrs Selina CHOW’s suggestion at the last meeting that it should be made specific in clause 27(b) of the Bill that "equipment" used in connection with any offence under the proposed Ordinance should be seized and forfeited. Ag DD(IP) confirmed that any equipment or machinery seized by authorized officers were liable to forfeiture. Ag DD(IP) further explained that clause 20 (Seized optical discs, etc., liable to forfeiture) should be read in conjunction with clause 18(2) which stipulated that an authorized officer may seize, remove or detain "any machinery, equipment or other things which appears to him to be or to contain or to be likely to be or to contain, evidence of an offence under this Ordinance.".

II.Clause-by-clause examination of the Bill

16. After having discussed the broad principles of the Bill, members proceeded to clause-by-clause examination of the Bill. The gist of the discussion on clauses 1 - 29 is summarized in paragraphs 17 - 27.

Clause 3 Licence required to manufacture optical discs

17. In response to Mr Howard YOUNG, PAS(TI) said that the purpose of subclause (2)(b) was to exempt certain persons such as academic researcher from the licensing requirement. She supplemented that the exemptions would have to be prescribed by the Secretary for Trade and Industry by way of regulations made under clause 37.

Clause 5 Application for and grant of licence

18. Referring to clause 5(2), Mrs Selina CHOW asked whether the conditions to be imposed by the Commissioner in granting a licence should be specified in the Bill, and in the event that the response was negative, whether the Administration would give an undertaking that these conditions would be reasonable when the Bill resumed its Second Reading debate. AC(CE) responded that although the conditions to be imposed by the Commissioner would be general in nature, it would not be appropriate to specify them in the Bill. He reiterated that the Customs and Excise Department had no experience in regulating optical disc manufacturing plants and the Commissioner should be given more flexibility in imposing licence conditions. Mrs CHOW was concerned that the Commissioner might be given too much discretion. At the Chairman’s suggestion, PAS(TI) undertook to consider Mrs CHOW’s proposal and respond at the next meeting. Adm

Clause 11 Refusal to grant or renew licence

19. The Chairman referred to the Chinese text of subclause (1)(b) and asked whether the word should be inserted before . PAS(TI) said that the Administration would review the drafting of the provision. Adm

Clause 14 Appeals to Administrative Appeals Board

20. In response to Mrs Selina CHOW’s enquiry about the composition of the Administrative Appeals Board, Ag DD(IP) explained that two of the Board members, as a minimum requirement in law, should be District Court judges, and they were not required to have any expertise in intellectual property. The role of the Board was to determine whether any decision made by the Commissioner on licence applications was legally in order and in accordance with the principles of justice.

Clause 15 Optical discs must be marked with approved manufacturer’s code

21. Referring to the bilingual texts of subclause (3), Mr Howard YOUNG enquired whether the terms "visual examination" and had identical meaning. DPGC responded that the term "visual examination" did not necessarily have a broader meaning. He explained that the term would not preclude a person from examining an object with the aid of other tools such as a magnifying glass or glasses. The Assistant Legal Adviser 2 (ALA2) also confirmed that it was not unusual in law drafting for to be adopted as the Chinese rendition for "visual examination".

Clause 18 Power of authorized officers to enter and search, etc.

22. Referring to the Chinese text of subclause (2)(b), ALA2 suggested the Administration to consider inserting the word after where it appeared the second time. Adm

23. In response to the Chairman’s enquiry, PAS(TI) confirmed that the language of subclause (3) was consistent with similar provisions of the Copyright Ordinance as well as other statutes in Hong Kong. DPGC pointed out that the Garrison Law provided a general exemption for military air craft or military vehicles from powers of search if a certificate by the Garrison Commander could be produced. Qualifications normally would not be added to the exemption provisions unless for international conventions. Ag DD(IP) added that military air craft or military vehicles of other countries in Hong Kong were subject to the same general exemption as they had diplomatic immunity. In response to Mr Howard YOUNG, Ag DD(IP) confirmed that a warrant would be required under normal circumstances for an authorized officer to enter and search any place including military premises.

24. Mrs Selina CHOW asked whether manufacturers would be able to claim compensation for damages resulting from the enforcement actions taken by authorized officers. Ag DD(IP) pointed out that under clause 33, the Commissioner, his authorized officers and persons assisting authorized officers were not liable for any loss or damage suffered by any person as a result of any action taken by them in good faith in the exercise of powers under the Bill. This was consistent with other enforcement-related legislation. However, a person aggrieved by wrongful acts of authorized officers exercising their powers under the Bill could claim damages from the Government by virtue of clause 33(4). At Mrs CHOW’s request, ALA2 undertook to report at the next meeting whether any similar legislation contained a compensation provision. ALA2

25. Referring to subclause (4)(a), Mr Henry WU asked whether the reference to "outer and inner door" was too narrow and thus unnecessarily restricted Customs officers in executing their powers under the provision. DPGC said that this was a common provision in Customs-related legislation. ALA2 confirmed that the same reference had been used in section 122 of the Copyright Ordinance. At the Chairman’s suggestion, PAS(TI) agreed to review the wording of the provision. Adm

26. ALA2 asked whether the removal, seizure and detention of machinery, equipment or any other thing under subclause (5) was subject to any time limit. Ag DD(IP) advised that the Bill had not specified any time limit in this respect. However, DPGC pointed out that according to clause 20(2), the procedure stipulated in sections 131 and 133 of the Copyright Ordinance was applicable. Mrs Selina CHOW expressed concern as to whether the exercising of powers of the authorized officers had been subject to adequate checks and balances. At Mrs CHOW’s request, ALA2 undertook to study the matter and revert to members at the next meeting. ALA2

Clause 26 Liability of persons other than principal offender

27. Dr Charles YEUNG expressed concern about the scope of subclause (1) which sought to cover persons such as manager, secretary or any other officer of a body corporate. Ag DD(IP) pointed out that the provision was similar to section 125 of the Copyright Ordinance concerning liability of persons other than the principal offender. The purpose was to prevent an offender from avoiding liability by way of committing an offence through the act of a company.

III. Date of next meeting

28. The next meeting had originally been scheduled for Wednesday, 25 February 1998 from 8:30 am to 12:45 pm. In view of the satisfactory progress in scrutinizing the Bill, members agreed that the meeting would commence at 10:45 am, instead of 8:30 am. The meeting would continue with clause-by-clause examination of the Bill and consider draft Committee Stage amendments to be proposed by the Administration. Clerk

29. The meeting ended at 10:35 am.

Provisional Legislative Council Secretariat
16 March 1998