Hong Kong: Hong Kong Copyright Ordinance Due For An Update

Last Updated: 22 February 2005
Article by Gabriela Kennedy and John Tai

The Copyright Ordinance in Hong Kong is under review again. In December 2004, the Hong Kong Government issued a consultation document seeking the views of the public in relation to, among other aspects, amendments to the end-user criminal liability and copyright exemption provisions in the Copyright Ordinance ("the Consultation Paper"). The consultation period ended on the 15th February 2005.

Advances in technology have made it increasingly easy to make copies of copyright works and to distribute such copies. Copyright owners have been lobbying for stronger and more effective protection of their rights under the Copyright Ordinance.

The Consultation Paper proposes changes that include a broadening and strengthening of the rights of copyright owners. Since such changes would have wide social implications, the Consultation Paper proposes a simultaneous broadening of the copyright exemptions under the Copyright Ordinance as a possible counter balance to the strengthening of the copyright owners' rights.

These and a number of other issues raised in the Consultation Paper exemplify the diverging interests of copyright owners and of copyright users. The public feedback will assist the Hong Kong Government in formulating proposals to make appropriate amendments to the Copyright Ordinance with the aim of striking a balance between the interests of copyright owners and those of users of copyright works.

End-user criminal liability revisited

One of the major areas under review is the scope of end-user criminal liability provisions. End-user criminal liability provisions were first introduced in the Copyright Ordinance in 2001 and initially covered all types of copyright works. The Intellectual Property (Miscellaneous Amendments) Ordinance 2000 provided that end-users who knowingly possess an infringing copy of a work for the purpose of or in the course of, or in connection with any trade or business, committed an offence.

The effect of the end user criminal liability provisions was quickly narrowed down to four categories of works, namely, computer programmes, movies, television dramas and musical recordings after the public and business communities raised practical concerns that they could inadvertently be caught by the newly introduced criminal provisions.

There were also concerns that it would be impractical or impossible for the public to obtain permission from all relevant copyright owners whenever they wished to make a copy of a work. As a result, the end-user criminal sanctions were suspended in relation to works that did not fall within the four categories of works for a period up to July 2006.

This situation resulted in an imbalance in the protection of different types of copyright works. The Consultation Paper contemplates varying degrees under which the scope of end-user criminal liability may be expanded so that all copyright works could be afforded the same level of protection.

In order to protect the public interest, the scope of criminal liability could be extended to cover those works whose owners could easily be identified and located by the public who would obtain their consent to copy or distribute such works.

Alternatively, the scope of end-user criminal liability might be expanded to cover works that are published in books, magazines or periodicals but would exclude promotional leaflets, pamphlets and posters. However, this would hardly alleviate the concern relating to the difficulty of locating copyright owners.

One suggestion favoured by a few industry groups is to have a centralised database where copyright works can be registered, coupled with a mechanism for the collection of copyright royalties. Criminal end-user liability would exist for works that have been registered in the centralised database, while civil remedies only would be available for works that have not been registered.

The counter-argument to the introduction of the centralised database is that the cost of maintaining such a database would be quite high.

Copyright exemptions

The Consultation Paper puts forward the possible overhaul of the permitted acts under the Copyright Ordinance. These are statutory defences to acts which otherwise would be regarded as infringements of copyright. An exhaustive list of permitted acts is offered in the Copyright Ordinance. These include use of copyright works for the purposes of research, private study, criticism, review or reporting current events.

One of the options put forward in the Consultation Paper is the introduction of a quantitative test for fair dealing in relation to research or private study purposes, which follows the model adopted in Australia and Singapore.

The argument in favour of the quantitative test is that it would bring certainty in deciding the scope of permitted acts (i.e what can or cannot be considered to amount to fair dealing). The quantitative test may not necessarily offer the ideal solution. If a user is allowed to copy 10% of a book, would the test be fair if that 10% were the most important part of the book or if the book consisted of 10 chapters of equal length each written by a different author? In such situations the application of the test would result in a substantial part of a work or the entire work of one author being copied.

In order for a quantitative test to work, detailed rules would need to be devised to cater for all types of situations and for different categories of copyright works.

Another option put forward in the Consultation Paper is of a non-exhaustive fair-dealing approach similar to the "fair-use" doctrine under the US copyright law. Such an approach would represent a u-turn compared to the current system of an exhaustive list of permitted acts. If such a system were adopted whether a certain use of a copyright work would be regarded as fair-dealing would be decided on a case by case basis taking into account four factors namely:

a) the purpose and character of the use, including whether such use is of a commercial nature or is for non-profit educational purposes;

b) the nature of the copyright work

c) the amount and substantiality of the portion used in relation to the copyright work as a whole; or

d) the effect of the use upon the potential market for a value of the copyright work.

There are many problems associated with the whole-sale importation of an alien concept such as the concept of fair use, into Hong Kong legislation. They include the fact that the actual concept of "fair use" is not defined; US jurisprudence would not be of any use to Hong Kong Courts; a non-exhaustive approach cannot easily be reconciled with the 3-step test under the TRIPs Agreement which requires exceptions to i) be confined to special cases; ii) not conflict with a normal exploitation of the work; and iii) not unreasonably prejudice the legitimate interests of the copyright owner.

The third option put forward in the Consultation Paper is the expansion of the list of permitted acts. Amongst the suggestions for new exemptions are: allowing the uploading of insubstantial parts of works to a school intranet for access within the school; allowing the showing and playing of broadcasts or cable programmes in hotel rooms and on public transport; as well as lifting certain restrictions regarding special formats of printed works for the visually impaired and the making of sub-titled TV broadcasts or cable programmes for people with a physical or mental disability.

While some of these new exemptions may not be controversial, the showing and playing of broadcasts or cable programmes is likely to be opposed by concerned industry groups.

End-user liability associated with parallel imported goods

The Copyright Ordinance contains a number of provisions imposing civil and criminal liability for the parallel importation of copyright works. The enactment of these provisions in 1997 caused heated debates amongst a number of groups including the government, members of the Copyright Bills Committee, copyright owners, consumer groups, industry groups and retailers.

Criminal liability for parallel imports in Hong Kong is confined to works that have been published for less than 18 months. To safeguard the position of retailers detailed defences were also introduced in 1997.

In July 2003 civil and criminal liabilities with respect to parallel imported copies of computer programs and other copyright works which are embodied in articles that contain computer programs, were removed. The rationale behind this amendment was to increase competition and the availability of products in the market and thus alleviate the problem of business end user software piracy.

The scope of liberalisation under the 2003 amendment excludes articles which contain computer programs and copyright works, the principal use of which is to be viewed or played as a movie, television drama, musical sound or visual recording, or as an e-book.

A further proposal was made in 2003 to remove civil and criminal liability for parallel imported copies of all copyright works, or for possessing such copies, for use in the course of a person's business. The 2003 proposal envisaged that dealing in parallel imported copies of works would continue to attract civil and criminal liability.

In the event, the 2003 proposal was abandoned and the issue of parallel imports has been re-opened in the Consultation Paper which now seeks views on i) whether criminal and civil liabilities in relation to parallel imported copyright works should be relaxed; ii) whether the 18-month period restriction in which criminal sanctions apply should be shortened and if so, for how long, and iii) finally the extent to which the liability should be relaxed.

As in the past, the liberalisation of parallel imports is likely to be resisted by the sound recording industry and the movie industry who stand to lose if cheaper, parallel imported copies of works become readily available.

Defence for employees against end-user criminal liability

Another area under review in the Consultation Paper is whether a specific defence should be made available to employees who are found in possession of infringing software provided by their employers for use in the course of their employment.

This proposal was made in apparent response to public concerns that employees might be criminally liable if they use infringing software provided by their employers. Practical experience has however shown that it is the employer rather than the employee who is prosecuted for infringement.

One argument against the introduction of such a defence is that a specific employee defence would only make it harder for copyright owners to take enforcement action and would provide infringers with a new defence.

The introduction of a specific defence for employees is likely to be resisted by the software industry which lobbied hard for the introduction of end-user liability in the first place.

Proof of infringing copies of computer programs in end-user piracy cases

Another issue which affects the computer industry relates to the proof of infringing copies of computer programs when infringements come before the courts. The view expressed by the computer industry is that copyright owners have experienced difficulties in enforcing their rights as it is hard to prove whether a computer program installed in a computer is an infringing copy in the absence of any legal requirement for businesses to retain records to show that they are legitimate copies.

The Consultation Paper suggested a number of possible options. A relatively quick and cheap approach would be to require businesses to keep records of all licensed computer programs. It will then be up to the Court to decide in end-user piracy proceedings whether such records are sufficient to show that the computer program is not an infringing copy.

Other options put forward include shifting the burden of proof on defendants. The effect of this would be that a computer program without a licence would be presumed to be infringing unless the defendant could prove the contrary.

A third option suggested is to defer the introduction of provisions in legislation to address this issue until more enforcement experience becomes available. This option comes with the suggestion that the software industry should adopt technological measures into computer programs and require registration to facilitate the proof of infringing copies. This suggestion has been rejected by the software industry as unworkable. The industry is likely to lobby for the first option.

Circumvention of technological measures for copyright protection

The Consultation Paper also examines the introduction of criminal sanctions for acts of circumvention of copyright protection measures, expanding such protection to cover access control measures and introducing civil and criminal liability for acts of circumvention.

The video gaming industry's view is that stronger measures are needed to curb the rampant piracy problems associated with acts of circumvention of copyright protection devices and measures in Hong Kong.

Video gaming consoles whose copy protection measures have been circumvented with the aid of mod chips are readily available at many computer centres around Hong Kong. Although the Copyright Ordinance provides civil remedies against such acts, enforcement actions have proved to be difficult, slow and costly.

It is argued that criminal sanctions would have a stronger deterrent effect on infringers and would enable copyright owners to take swifter and more cost efficient enforcement actions against mod-chippers.

Rental rights & WIPO Internet treaties

Finally, the Consultation Paper seeks views on whether rental rights for copyright owners of films including musical visual recordings should be provided under the Copyright Ordinance and whether the legislation in Hong Kong should be harmonised with the WIPO Copyright Treaty and WIPO Performances and Phonograms Treaty ("the WIPO Internet Treaties") and thus bring Hong Kong in line with international developments.

It is not clear why rental rights for films were not introduced in 1997 at the time of the passing of the Copyright Ordinance, as Hong Kong could hardly have been said then to fall under the exception provided by Article 11 of the TRIPs Agreement. Article 11 allows Members not to introduce a rental right unless there is evidence of widespread copying of works which is materially impairing the exclusive right of reproduction conferred on authors and their successors in title.

It will be up to the movie industry to persuade the government that Hong Kong does not fall within this exception.

As far as the adoption of the WIPO Internet Treaties is concerned, although Hong Kong has no international legal obligation to implement them, some provisions from the WIPO Internet Treaties were incorporated in the Copyright Ordinance in 1997. The Consultation Paper proposes the adoption of further provisions from the WIPO Internet Treaties. Although it is argued that this would bring Hong Kong in line with international developments, this can hardly be so as the WIPO Internet Treaties were passed in 1996 and since then many countries have adopted more sophisticated and detailed legislation to deal with digital rights and the protection of copyright works on the Internet.

Conclusion

The Consultation paper proposes an ambitious agenda of changes to the Copyright Ordinance which will no doubt give rise to many debates between copyright owners and users of copyright works.

The high profile arrest by the Hong Kong Customs & Excise Department of a Hong Kong man in January 2005 for illegally downloading and uploading films to the Internet using BitTorrent technology and the lack of any formal charges against the infringer weeks later, highlights inadequacies in the Copyright Ordinance in dealing with file-sharing and new technologies which enable such activities. The time has perhaps come for Hong Kong to put digital rights on its agenda and deal with them in a less piece-meal and more systematic fashion.

© Gabriela Kennedy and John Tai

For further information in relation to this article, please contact either author at gabriela.kennedy@lovells.com or john.tai@lovells.com

The authors are partner and solicitor respectively practising in the Intellectual Property group of Lovells in Hong Kong.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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