a further meeting had been scheduled for Thursday, 15 May 1997, at 2:30 pm to continue with a clause-by-clause examination of the Bill; and
the Bills Committee had received submissions from the International Federation of Phonographic Industry (Hong Kong Group), the Computer and Communications Industry Association, IBM and HMV (LegCo Paper Nos. CB(1)1544 and 1561/96-97).

I Matters arising

(The Administrations information paper entitled "Legislative Council Bills Committee - Copyright Bill" tabled at the meeting and circulated to members vide LegCo Paper No. CB(1)1549/96-97)

2. The Deputy Secretary for Trade and Industry (DS/T&I) briefed members on the Administrations paper entitled "Legislative Council Bills Committee - Copyright Bill" tabled at the meeting. As a follow-up to the deliberations at the meeting on 8 May 1997, the paper set out the latest policy considerations regarding the Administrations proposed Committee stage amendments (CSAs) to the Bill in the following areas -

parallel importation;
decompilation of computer programs;
copyright in labels of non-copyright products; and
liability of landlords of premises used for infringing acts.

Decompilation of computer programs

3. Members noted the Administrations proposal to delete clause 60, which provided that lawful users might decompile computer programs, and to expand clause 37, i.e., the "fair dealing" provision, to balance the interests of users and proprietors. Clause 37(3) would be substituted with a new subclause to provide limited exception for adapting or copying a computer program for research or private study. To clarify in general terms whether an act was permitted, the Administration would add a subclause 2A to clause 36 to ensure that the primary consideration in determining whether an act was permitted was whether it conflicted with a normal exploitation of the work and unreasonably prejudiced the legitimate interests of the copyright owner. The language of the new subclause 2A followed closely that of Article 9.2 of the Berne Convention (1971).

4. Dr Philip WONG stated that he would not object to decompilation for the purpose of research. However, he was against permitting a person to capitalise on the brainwork of another person and turn it into a commercial product without giving due respect to the owner. He was concerned about the use of the expression "creating another independent program ........... not substantially similar to the program under study" in the new clause 37(3). It was a subjective judgement as to whether a work was substantially similar to the original work. In his opinion, a work created as a result of decompilation should not work independently.

5. In response, the Administration made the following points -

There were difficulties in determining whether decompilation was purely academic and the information obtained would never be applied in a commercial situation. A lawful user should be allowed to decompile to make a commercial product provided that this was not substantially similar to the original work and would not damage the economic rights of the owner. In assessing whether such a work was substantially similar to the original work, the court would deal with it in the same way as it handled copyright infringement cases.
The expression "independent program" was a technical term which connoted that independent efforts had been made to create the program. It did not imply that the program should not work independently. Differing from patents which provided monopolies for the patent holder in return for publication of the ideas, copyright was not intended to protect ideas in a program, but expression of the ideas in the form of the code. Copyright owners of programs should welcome decompilation to gain access to information to create compatible products.
New clause 36(2A) would provide sufficient protection against infringement by stipulating the general principles in determining whether or not an act was permitted under copyright. Every country had to comply with these general principles in granting copyright exceptions.

6. In reply to a members question, the Deputy Director of Intellectual Property (DD of IP) explained that "compatible with" meant "interoperable", i.e., a program with one objective could work successfully with another with another objective, or a program could operate with a different operating system.

7. A member opined that instead of expanding the scope of clause 37, it might be more appropriate to retain clause 60 and stick to the original intention of permitting decompilation only to achieve interoperability. To avoid misunderstanding, words such as "connecting" and "interface" should be used in lieu of "creating". Dr Philip WONG said that he was not against decompilation to develop another program provided that the program only supplemented and not replaced the original work. Members agreed to consider the issue later.

Copyright in labels of non-copyright products

8. In reply to the Chairmans questions, DD of IP reported that the Administration was studying overseas experience with a view to finding an appropriate way to address retailers concern over prohibition of parallel importation of non-copyright goods with copyright labels. Since there was no international norm in this area, subject to the Bills Committees decision, the Administration might leave the matter to case law or legislate to create a copyright exception for such goods. DS/T&I supplemented that in recognition of the need for certainty, the Administration would prefer the legislative approach and was working on draft CSAs which would be submitted for the Bills Committees consideration as soon as practicable.

Admin.

Liability of landlords of premises used for infringing acts

9. DS/T&I reported that the Administration was of the view that the proposal to expand clause 33 to make landlords civilly liable for knowingly permitting the use of their premises for any kind of infringing act should be considered in the light of the effectiveness of provisions already proposed in the Bill. The Administration considered it more appropriate to consult the public and the various bodies representing property owners on the practicability and implications of the proposal after enactment of the Bill.

10. Referring to clause 33(2), members expressed concern that hotel operators who hired their premises on an event-by-event basis might be unfairly held liable as they would have difficulties in ensuring that the performances to be staged in their premises would not infringe copyrights. In response, DD of IP explained that clause 33 only dealt with secondary infringement of copyright where the plaintiff had to prove that the defendant had actual knowledge or reason to believe that his premises would be used for infringing performance when he gave the permission. The innocent should not be caught under the provision as presently drafted.

11. Members pointed out that the expression "liable for the infringement unless when he gave permission he believed on reasonable grounds that the performance would not infringe copyright" in clause 33(1) might mean that the hotel operator would have to take the initiatives to make enquiries on the legality of the performance before he would have reasonable grounds to believe that the performance would not infringe copyright. They opined that this shift of burden from the plaintiff (who previously had to prove actual knowledge) onto the defendant (who might now have to establish that he had "reason to believe" that the performance would not infringe copyright) was both unfair and impracticable, and would place an onerous burden on the hotel operators.

12. At the Chairmans invitation, the Assistant Legal Advisor (ALA) advised that the expression " believed on reasonable grounds" was meant to be a defence provision. In her view, it would be difficult for a hotel operator to prove that he had reason to believe that the performance would not infringe copyright. As shown in common law cases, provision of negative evidence was not easy.

13. In response, DD of IP stressed that hotel operators could protect themselves by adhering to the standing practice of applying from relevant collective copyright administration societies for an annual public performance licence. Licences issued by large collecting societies in Hong Kong covered over 90% of copyright works. In addition, hotel operators could protect themselves by including in the lease agreement an indemnity provision for damages resulting from use of the premises for infringing acts. Members agreed that the Bills Committee would consider this issue later.

II Clause-by-clause examination of the Bill

(LegCo Paper Nos. CB(1)1379/96-97 and 1545/96-97(01))

14. Members continued with a clause-by-clause examination of the Bill.

Clauses 62 and 63 - Typefaces

15. Members noted these clauses.

Clauses 64 and 65 - Works in electronic form

Clause 65

16. Members noted the Administrations proposed CSA to clause 65 to clarify that only "transient and incidental copy which is technically required for the viewing or listening" of the work might be permitted as a non-infringing copy.

Clauses 66 to 74 - Miscellaneous: literary, dramatic, musical and artistic works

17. Members noted these clauses.

Clauses 75 and 76 - Miscellaneous: Films and sound recordings

Clause 76

18. Members noted the proposed CSAs to the clause. They also noted that the Administration considered it necessary to define more clearly organisations which would be granted copyright exceptions. The Administration decided to withdraw its proposal to delete "or are otherwise concerned with the advancement of religion, education or social welfare" in subclause (2)(a) which was included on the list of proposed CSAs tabled at the meeting on 8 May 1997 (LegCo Paper No. CB(1)1545/96-97(01)).

Clauses 77 to 84 - Miscellaneous: Broadcasts and cable programmes

Clause 77

19. The Chairman drew the Administrations attention to the joint submission of TVB, ATV, Cable TV and STAR TV (LegCo Paper No. CB(1)1360/96-97(01)) and opined that as broadcasters had paid royalties for broadcasting or including in a cable programme service the copyright work within the licence period, it was only natural that the statutory period of ephemeral rights, i.e. copyright exception to allow incidental recording or copying of copyright works for the purpose of broadcast or inclusion in a cable programme service, should run concurrent with the licence period. She echoed the view expressed in the joint submission that the proposal to require broadcasters to destroy the back-up copy within three months was impractical and unreasonable. In response, DD of IP made the following points -

The statutory period of ephemeral rights was only 28 days under the existing law. The Bill proposed to extend this copyright exception to three months to bring it into line with the Broadcasting Authoritys requirement that a broadcaster or a cable programme service provider should keep copies of their programmes for three months for inspection.
The Administration noted the possible logistical problems of the broadcasting organisations and the cable programme service providers but maintained that a permission to make back-up or library copies of licensed copyright works should be negotiated with the copyright owner and should not be provided as a copyright exception. To protect the legitimate interests of copyright owners, any copyright exceptions had to be granted with care. Any unauthorised copying of a copyright work was an infringement to the reproduction right of the copyright owner of the work in question. Clause 77 as drafted was consistent with international copyright principles.

20. The Chairman maintained that through payment of royalties, broadcasters were in effect authorised by the copyright owner to make back-up copies for the purpose of broadcast. She requested the Administration to reconsider the broadcasters views.

Admin.

Clause 81

21. Members noted that in line with clause 76(2)(a), the Administration withdrew its proposed CSA to delete "or are otherwise concerned with the advancement of religion, education or social welfare" in subclause (3)(b). The same also applied to the proposed amendments to clauses 250(2) and 253(3)(b).

Clause 82

22. Members noted that to ensure minimal inconvenience and disruption to the viewing habits of satellite master antenna television (SMATV) subscribers without compromising the rights of broadcasters to distribute their signals, the Administration would introduce a CSA to the clause to stipulate a revocable implied licence for SMATV operators to re-transmit non-encrypted broadcasts. However, in recognition of the incompatibility between the proposed CSA and the terms of the existing licensing regime for SMATV in Hong Kong, the provision empowering the right owner to revoke the implied licence by giving a six-month notice would not commence until after a comprehensive review on the broadcasting policy by the Broadcasting, Culture and Sport Branch.

Clause 85 - Adaptations

23. Members noted this clause.

DIVISION IV - MORAL RIGHTS

Clauses 86 to 88 - Right to be identified as author or director

24. Members noted these clauses.

Clauses 89 to 92 - Right to object to derogatory treatment of work

25. Members noted these clauses.

Clause 93 - False attribution of work

26. Members noted this clause. Clauses 94 to 97 - Supplementary

27. Members noted these clauses. DIVISION V - DEALINGS WITH RIGHTS IN COPYRIGHT WORKS Clauses 98 to 101 - Copyright

Clause 100

28. In reply to a members question, DS/T&I and DD of IP explained that copyright works could be exploited vertically and horizontally. The exploitation of copyright works could be separated into different geographical areas by way of licences. The "exclusiveness" of a licence depended on its terms. Clauses 102 and 103 - Moral right

29. Members noted these clauses. DIVISION VI - REMEDIES FOR INFRINGEMENT Clauses 104 to 108 - Rights and remedies of copyright owner

Clause 105

30. Members noted the proposed CSAs to the clause and the Administrations explanation that the amendment to subclause (2)(c) would have the effect that the courts should take into account the "completeness, accuracy and reliability of the defendants business accounts and records" in assessing damages to be awarded.

31. Members noted the paper prepared by ALA entitled "Damages in Infringement Action - Copyright Act 1956 and Copyright Bill" tabled at the meeting on 8 May 1997 and circulated to members vide LegCo Paper No. CB(1)1545/96-97(03). Clauses 109 and 110 - Rights and remedies of exclusive licensee

Clause 110

32. DS/T&I advised that a new subclause 110(1A) would be added to the Bill to clarify that the exclusive licensee might not, without the leave of the court, proceed with civil action against parallel importers unless the copyright owner joining as a plaintiff. In reply to members questions, DD of IP provided the following information -

Subclause 110(1) set out the general basic principle that the exclusive licensee should proceed with actions against parallel importers with the copyright owner joining as a plaintiff or adding as a defendant. Subclause 110(1A) specifically required the licensee to join the owner as a plaintiff before proceeding with civil actions against parallel importers. This requirement was imposed to balance the reinstatement of criminal sanctions against parallel importation.
Subclause 110(1A) excluded the reference to the owner adding as a defendant because this only dealt with civil actions regarding an "act". In the event that a parallel importer challenged the legal status of the exclusive licensee, subclause 110(1), which stated that the owner should be added as a defendant, would apply.
Upon death or liquidation of the owner or the right-holding company, the assignee, successor or liquidator would be required to join as a plaintiff in place of the owner in cases against parallel importers.
Under the new subclause 110(1A), unless with the leave of the court, the exclusive licensee might not proceed with civil actions against parallel importers without the copyright owner joining as a plaintiff. The court would take all relevant factors into account in considering applications for such leave.

33. Members emphasised that leave should only be granted under exceptional circumstances which should be specified in the Bill to ensure certainty, ALA suggested that the Administration consider including in the subsidiary legislation guidelines to which the court should follow in granting leave.

Admin.

34. In response, DD of IP clarified that the court was given the discretion to grant leave under very exceptional circumstances. At members request, he agreed to specify these in the Bill.

Clause 111 - Remedies for infringement of moral rights

35. Members noted this clause.

Clauses 112 to 114 - Presumptions

Clause 113

36. Members noted the Administrations proposed CSA.

Clauses 115 to 117 - Offences

Clause 115

37. Members noted the proposed CSAs.

Clause 116

38. In reply to a members question, DD of IP advised that the penalties for second conviction of an offence for making or dealing with infringing copies was increased to a fine at level 5 and imprisonment for four years two years ago. The Bill proposed to impose such penalties on first conviction to strengthen the deterrent effect.

Clauses 118 to 130 - Supplementary

Clause 118

39. Members noted the proposed CSAs. In reply to the Chairmans question, DD of IP clarified that the proposed CSA to subclause (12)(c) was intended to cover civil cases.

Clause 119

40. DS/T&I advised that the Administration proposed a CSA to subclause (1)(a)(iii) to add ", or anything which appears to him to be or to contain, or to be likely to be or to contain, evidence of an offence under this Part" after "infringing copies of any such work". Members expressed reservations about the phrase "to be likely to be or to contain" as this might involve subjective judgement. In their opinion, the expression "appears to him to be or to contain" should be sufficient to facilitate enforcement.

41. In response, the Administration made the following points -

There were cases where the contents rather than the article itself were infringing, for example, in the case of sale of infringing articles on the Internet. As a precaution against perceived enforcement difficulties in taking actions against infringing activities conducted in a computer environment, the expression "to be likely to be or to contain" was necessary to facilitate evidence collection.
Unlike other illegal acts, it was not always possible to judge whether an article was infringing by appearance, for example, infringing CD ROM. The power to stop and search any vehicle in the presence of circumstantial evidence only was thus necessary to strengthen enforcement actions.

42. Members agreed to start scrutinising clause 122 at the next meeting of the Bills Committee scheduled for 14 May 1997 at 8:30 am.

43. The meeting ended at 6:30 pm.

Provisional Legislative Council Secretariat
16 July 1997

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