Legislative Council

LC Paper No. CB(1) 1221/98-99
(These minutes have been seen
by the Administration)

Ref: CB1/PL/TI/1

Panel on Trade and Industry
Minutes of meeting held on Monday, 1 March 1999, at 2:30 pm in the Chamber of the Legislative Council Building

Members present :

Hon CHAN Kam-lam (Chairman)
Dr Hon LUI Ming-wah, JP (Deputy Chairman)
Hon Kenneth TING Woo-shou, JP
Hon James TIEN Pei-chun, JP
Hon David CHU Yu-lin
Hon Cyd HO Sau-lan
Hon NG Leung-sing
Prof Hon NG Ching-fai
Hon Mrs Selina CHOW LIANG Shuk-yee, JP
Hon MA Fung-kwok
Hon CHEUNG Man-kwong
Hon HUI Cheung-ching
Hon CHAN Kwok-keung
Hon Mrs Sophie LEUNG LAU Yau-fun, JP
Hon SIN Chung-kai
Dr Hon Philip WONG Yu-hong

Members attending :

Hon Fred LI Wah-ming
Hon James TO Kun-sun
Hon Timothy FOK Tsun-ting, JP

Public officers attending:

Mr CHAU Tak-hay,

Secretary for Trade and Industry

Miss CHEUNG Siu-hing,

Deputy Secretary for Trade and Industry

Mr Stephen SELBY,

Director of Intellectual Property, Intellectual Property Department

Mr Vincent POON,

Assistant Commissioner (Control and Intellectual Property), Customs and Excise Department

Mr Philip CHAN,

Principal Assistant Secretary for Security

Mr M DOWIE,

Assistant Commissioner of Police (Support), Hong Kong Police Force

Clerk in attendance :

Ms LEUNG Siu-kum,

Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU,

Senior Assistant Secretary (1)3

I Confirmation of minutes of previous meeting
(LC Paper No. CB(1) 916/98-99)

The minutes of the meeting held on 4 January 1999 were confirmed.

II Information paper issued since last meeting

2. Members noted that no information paper had been issued since last meeting.

III Date of next meeting and items for discussion

3. The next meeting originally scheduled for 12 April 1999 had been re-scheduled to Tuesday, 13 April 1999, at 10:45 am to discuss the following:

• Competition Policy Advisory Group: Progress report; and

• Report on the consultancy study on strategy to promote the use of information technology in Hong Kong.

(Post-meeting note: An additional item on "Special Finance Scheme for small and medium enterprises" was subsequently included in the agenda for the meeting.)

IV.Combating copyright piracy: Possible additional legal tools

4. At the invitation of the Chairman, the Secretary for Trade and Industry (STI) briefed members on the consultation paper on "Combating Intellectual Property Rights Infringement in the Hong Kong Special Administrative Region: Possible Additional Legal Tools". He emphasized that the options set out in the consultation paper were put forward without a preconceived Government view. The Administration welcomed any comments which members and the public might have on these options. Subject to the views gathered, the Administration would consider introducing concrete legislative proposals to the Legislative Council for consideration.

Option 1:	Including piracy and counterfeiting offences under the Organized and Serious Crimes Ordinance
Option 2:	Amending the Copyright Ordinance and the Trade Descriptions Ordinance to provide for the confiscation of criminal proceeds from intellectual property infringement offences

5. Having regard to the enormous profits generated from copyright piracy and trademark counterfeiting activities, some members expressed concern that organized or serious crime might be involved in these activities. They therefore agreed that the special investigation and enforcement powers available under the Organized and Serious Crimes Ordinance (OSCO) should be used to deal with piracy and counterfeiting offences. Mrs Selina CHOW asked when the required legislation could come into force. The Deputy Secretary for Trade and Industry (DSTI) advised that this would hinge on how the legislation was drafted. It would be quicker and technically much easier to amend Schedule 1 or 2 of OSCO to include criminal copyright and trade mark infringements. However, it would take a longer period of time to copy the complex OSCO provisions in relation to detecting and confiscating criminal proceeds into intellectual property law as depicted in Option 2.

6. As to whether the Police would be directly involved in enforcement against copyright and trade mark infringements after these had been included under OSCO, STI replied that a decision on this had yet to be made. He nevertheless emphasized that the Police had been liaising with the Customs and Excise Department (C&ED) in combating piracy and counterfeiting activities. The Police would report to C&ED cases of suspected piracy offences and join forces with C&ED in large scale enforcement exercises if required. The Assistant Commissioner of Police (Support) supplemented that it was a standing practice that intelligence in respect of copyright and trade mark infringements should be passed onto C&ED through the Criminal Intelligence Bureau of the Police. In 1998, the Police had referred 384 cases to C&ED which had resulted in the arrest of 424 suspects. In addition to intelligence gathering, the Police also co-operated with C&ED in intelligence-based investigations, operations and training. He assured members that the Police would continue to support C&ED in combating piracy, subject to the availability of resources. Mr SIN Chung-kai considered that the number of cases referred by the Police was extremely low, given the existing rampant sale of pirated optical discs. He urged the Police to take enforcement actions against copyright piracy activities as vigorous as those against dangerous drugs crimes.

7. Given that C&ED had insufficient manpower to tackle the problem of intellectual property right infringement, Mrs CHOW cautioned that a bottleneck would occur if the Police only referred cases to C&ED without direct involvement in enforcement exercises. While acknowledging Mrs CHOW's concern, STI advised that the problem of manpower constraint in C&ED could not be resolved merely by involving the Police in enforcement actions. He said that unless there was a change in the existing legal procedures, C&ED would still be ultimately held responsible for the verification of seized infringing products which was a time consuming and labour intensive process. To address the problem, consideration was being given to simplify the process with a view to releasing more C&ED staff to undertake frontline operations.

Option 3:

Introduction of mandatory or standard sentences for copyright and trade mark offences

8. Mr SIN remarked that it would be technically difficult to implement the option since a mandatory or minimum sentence was a highly exceptional measure.

Option 4:	Closure orders against premises used repeatedly for piracy or counterfeiting activities
Option 5:	Immediate closure orders for premises used for piracy or counterfeiting activities

9. The Chairman and Mr LUI Ming-wah did not agree with these options. They considered it unfair for the Administration to impose closure orders on landlords and owners of premises who might not have a good knowledge of the activities of their tenants. Mr SIN also expressed concern that the interest of landlords and owners concerned would be unduly prejudiced if they could not terminate the tenancies in question within the grace period provided by the Administration.

Option 6:

Banning unauthorized video recording in cinemas

10. In reply to Mr Fred LI's question, the Assistant Commissioner (Control and Intellectual Property) advised that it was estimated that about 60-70% of the pirated optical discs available in the market were made from unauthorized recordings in cinemas. To combat piracy at source, members agreed that bootlegging must be stopped. As to how banning of unauthorized copying could be enforced in cinemas, DSTI replied that since it was not feasible for the Administration to deploy an enforcement officer to every cinema across the territory, initial check for bootlegging would have to be done by cinema operators with support from either the Police or C&ED. Nevertheless, the Administration had yet to decide which one of these two departments should be the responsible enforcement agent in this respect. Mr MA Fung-kwok opined that it might not be useful to ban bootlegging in cinemas as unscrupulous merchants could always import infringing prototypes from overseas countries for mass production in Hong Kong. The situation was further aggravated after the decriminalization of parallel importation as pirated optical discs were imported under the disguise of parallel import. STI replied that the present provisions regarding parallel importation of copyright articles had been made to strike a balance between consumer rights and interest of copyright owners. He said that it was a criminal offence under the existing intellectual property law for parallel importation of copyright articles, including optical discs within 18 months of the first release of the articles.

11. On a related issue, STI said that the Government was concerned that some right owners might have engaged in producing optical discs which looked like pirated versions for sale at the same time as or even before the theatrical release of the films. The Government was considering whether the owners concerned were liable to commercial fraud in view of the impact on the interest of cinema operators. Messrs James TO and MA Fung-kwok did not agree with the proposed criminalization of right owners because they were also victims of copyright piracy. They pointed out that as right owners were not properly protected against intellectual property right infringement, they had no choice but to resort to such an extreme means to protect their own interest. To tackle the problem, Mr MA considered it necessary for the Administration to require manufacturers to put an identification coding on all optical discs to facilitate checking by the Administration as well as the public to ensure authenticity. Mr CHEUNG Man-kwong however pointed out that pirates could easily forge the identification code.

Option 7: Banning video equipment in cinemas

12. Mrs CHOW noted that at present, cinema operators could prohibit clientele to bring their own food in the cinemas. She considered that the same prohibition measure should apply to video equipment.

Option 8: Imposing consumer liability

13. Members were generally opposed to the option of imposing consumer liability as consumers might find it difficult to distinguish the infringing from the genuine articles. STI nevertheless considered that consumers should be able to differentiate the authenticity of an optical disc or an apparel by its price, packaging and the outlet through which it was sold. They should not buy such a product if they were in doubt. After all, optical discs and designer clothing were not daily necessities. Mr LI however pointed out that unlike pirated audio-visual products which could be easily identified by their packaging, consumers might not be able to verify the authenticity of goods such as toys with patented design. Expressing similar concern, Mr CHEUNG considered that if a product was well-known only in other places but not in Hong Kong, consumers would be vulnerable to commit an offence due to the lack of knowledge of whether such a product was a fake. Mr SIN urged the Administration to consider copyright piracy and trademark counterfeiting separately. STI took note of members' views. He also acknowledged Mr HUI Cheung-ching's concern about the need to stop people from bringing pirated goods from the Mainland.

Conclusion

14. Messrs CHEUNG Man-kwong and SIN Chung-kai remarked that in considering possible additional legal tools for combating copyright piracy, priority should be given to those which would facilitate enforcement at manufacturing, distributing and retail levels. Expressing similar views, Mrs CHOW said that non-controversial options such as including copyright piracy under organized and serious crimes, confiscation of proceeds from piracy dealings should be implemented as soon as possible. Options such as closure orders and consumer liability would require detailed examination. STI took note of members' concerns and advised that he personally agreed that consumer liability would not be a priority option because it was difficult to enforce. As regards the consultation period of four months, STI advised that this was required to enable the Administration to gauge the views of relevant parties, including the Provisional District Boards, on the feasibility of these options. He nevertheless undertook to consider shortening the duration by one to two months. On education, STI assured members that efforts would be made to enhance public awareness of the importance of respecting intellectual property rights.

Admin

V Any other business

15. There being no other business, the meeting ended at 4:00 pm.

Legislative Council Secretariat
29 April 1999