The protection of intellectual property rights (IPR) continued to be high on the agenda of the department. Under the sustained and vigorous enforcement actions taken by the Intellectual Property Investigation Bureau (IPIB) and the Special Task Force (STF), copyright piracy and trade mark counterfeiting activities at all levels remained under control in 2004 and significant results were achieved.

Operational Achievements

2. In 2003 and 2004, the department processed 10 341 and 8 712 cases, and arrested 1 288 and 1 133 persons respectively in connection with copyright piracy activities. The total seizure of pirated optical discs (ODs) amounted to 6.22 million in 2003 and 7.31 million in 2004. Together with other seizures such as OD production equipment, the total seizure in 2003 was valued at $229 million while the seizure in 2004 was worth $273 million.

3. OD products continued to be the focus of anti-piracy actions of the department. In both 2003 and 2004, the most popular type of pirated OD in the market was video disc (including VCDs and DVDs). Altogether 2.34 and 4.72 million video discs were seized respectively in 2003 and 2004, accounting for 37.6 per cent and 64.6 per cent of the total seizure of the respective year. Among the discs seized in 2003, 1.7 million were game discs (including TV games and PC games) (27 per cent), 1.1 million were software discs (18 per cent) and 0.82 million were music discs (13 per cent). For the seizures of 2004, 0.81 million were software discs (11 per cent), 1.20 million were game discs (including TV games and PC games) (16 per cent) and 0.36 million were music discs (5 per cent).

Anti-Piracy Enforcement: Retail Sales

4. In the past two years, the department continued to take strict enforcement actions against retail outlets of pirated ODs and reaped significant achievements. Under vigorous Customs enforcement actions, the piracy situation in Hong Kong remained under control. Pirates could only adopt stealthy modus operandi, such as through "self-service" at unmanned stalls and "pre-order sale" (i.e. customers pay first at the shops and collect the discs later at other locations by presenting their receipts) to sell small quantities of discs. Besides, these illicit outlets could only operate at short and irregular hours displaying a minimum quantity of ODs on the premises to minimize loss.

5. To counter the involvement of young people in street-level peddling of pirated ODs, the department also put extra effort on public education. Apart from the IPR awareness programmes in school and community, information pamphlets were distributed to students before the commencement of school summer holidays. The effectiveness of these measures was proved by a significant drop in the number of youngsters under the age of 16 arrested for IPR offences – from 162 in 2002 to 18 in 2004, representing a decrease of 89 per cent.

6. Besides, the Customs and the Social Welfare Department (SWD) have jointly implemented a referral scheme since April 2002, whereby young IPR offenders who need counselling and other appropriate welfare services will be referred to the SWD for follow-up actions. The feedback of the scheme has been positive, and the two departments will continue to co-operate on this front to help young people to keep off piracy.

Anti-Piracy Enforcement : Manufacture and Import & Export

7. Since the enactment of the Prevention of Copyright Piracy Ordinance in May 1998, all local OD factories have to obtain a manufacturer licence issued by the department and are subject to Customs’ inspection. To further combat copyright piracy, the Prevention of Copyright Piracy Ordinance (Amendment of Schedule 1) Order 2002 came into effect on 19 July 2002, requiring manufacturers of stampers in Hong Kong to obtain a licence as well. In 2003 and 2004, Customs officers carried out 329 and 321 inspections respectively to licensed factories to detect and deter the manufacture of pirated ODs and stampers.

8. At the manufacture level, the sustained efforts of the department against copyright piracy syndicates have effectively driven all underground large-scale production plants out of Hong Kong. Pirates have now turned to operate limited-scale workshops using computers and CD-writers to replicate pirated ODs inside small industrial or domestic premises to evade Customs detection. In 2003 and 2004 respectively, the department successfully smashed 28 and 22 replicating workshops of this kind with the seizure of 503 and 675 CD and DVD writers and 241 000 and 322 000 pirated ODs worth $6.08 million and $8.87 million respectively.

Restraint of copyright piracy proceeds

9. The department achieved a significant breakthrough in copyright piracy enforcement in 2004 by applying the Organized and Serious Crimes Ordinance (OSCO) to restrain copyright piracy proceeds. In July 2004, the department rooted out after one year of intensive investigation a major local pirated optical disc syndicate. A Restraint Order was successfully applied under the OSCO to freeze suspected copyright piracy proceeds of $18 million. This was the first time for suspected crime proceeds to be restrained under the OSCO in relation to copyright piracy offences.

Internet Piracy

10. Since the operation of the Anti-Internet Piracy Team in April 2000, 37 Internet piracy cases have been detected resulting in the arrest of 63 persons and a total seizure of pirated goods and computer equipment valued at about $2.22 million.

Corporate Piracy

11. The Intellectual Property (Miscellaneous Amendments) Ordinance 2000 which came into effect in 2001, aims to enhance the protection of copyright. The legislative amendments introduced measures to combat bootlegging activities in places of public entertainment and to criminalise the corporate use of infringing copyright works including computer software, movies, TV dramas or music recordings. In 2003 and 2004 respectively, the department detected 24 and 34 corporate end-user piracy cases leading to the arrest of 41 and 77 persons and the seizure of computer equipment worth about $0.68 and $1.6 million.

The Anti-Piracy Reward Scheme

12. To augment the government’s effort in IPR protection, the copyright industry has been sponsoring an Anti-piracy Reward Scheme since 1998. Cash rewards will be paid to informers who provide information to the department leading to the successful seizure of copyright infringing ODs or machinery for their production, or the interdiction of Internet piracy activities. To enhance its attractiveness, the scale of the financial rewards was raised when the Scheme was renewed in December 2004, i.e. with additional rewards for information leading to the arrest of offenders engaged in the storage, import and export, illegal copying of ODs for the purpose of trade, and Internet piracy activities.

Anti-Counterfeit Efforts

13. While maintaining persistent enforcement against copyright piracy, the department accorded equal enforcement priority to combating trade-mark counterfeiting activities. In enforcing the Trade Descriptions Ordinance, the department processed 765 and 900 cases relating to counterfeit goods and goods bearing false trade descriptions and arrested 743 and 705 persons in 2003 and 2004 respectively. In 2003, 39.5 million pieces of counterfeit goods with a total value of $258.4 million were seized. Major seizures included 2.02 million pieces of fake brand name clothing, 200 000 counterfeit watches and 83 000 pieces of counterfeit leather goods. Among the 32 million pieces of counterfeit goods seized in 2004 which worth $305 million, there were 1.29 million pieces of fake brand name clothing, 166 000 counterfeit watches and 235 000 pieces of counterfeit leather goods. Many other types of merchandise ranging from sportswear, foodstuff to pharmaceutical products were also seized. To effectively deal with counterfeiting activities, Customs officers continued to take proactive enforcement actions against the notorious retail black spots of counterfeit goods.

Court Penalty on IPR Infringement Activities

14. Hong Kong imposes severe criminal sanctions on IPR infringement activities. The maximum penalty under the Copyright Ordinance for indictable offences is imprisonment for eight years and a fine of $500 000. Under the Trade Descriptions Ordinance, the maximum penalty is imprisonment for five years and a fine of $500 000. In 2003 and 2004 respectively, the highest sentences handed down by the Court were 44 and 36 months’ imprisonment, both being copyright cases. There were 562 and 579 persons sent to jail for copyright offences respectively in 2003 and 2004, and another 77 and 102 persons were sentenced for trademark or trade description offences in the two years respectively. The heavy sentences imposed upon copyright pirates have indeed produced a strong deterrent effect in warning people to stay off the illicit trade.

Strategic Partnership with the Industry

15. In March and September 2004, the department established the Intellectual Property Rights Protection Alliance and its website. Through this platform of co-operation, the department and the IPR industry can monitor and crack down on the remnants of the infringing activities more effectively. The Alliance also serves to educate the general public about IPR protection. Since its establishment, nearly 40 organisations from the copyright industry have enrolled as members of the Alliance. Information and assistance provided by different members has greatly enhanced the efficiency and effectiveness of investigation and enforcement actions against piracy and counterfeiting activities.

Publicity Programmes for Intellectual Property Protection

16. With the sustained development of tourism and the implementation of the "Individual Visit" scheme for Mainlanders, the number of visitors coming to Hong Kong is on the increase. Under this trend, the department deems it necessary to further step up intellectual property rights protection to promote Hong Kong as a "Shopping Paradise for Genuine Goods". Moreover, infringing activities cannot be eradicated by taking vigorous enforcement actions alone. If there is still market demand for pirated goods, these dying illegal activities will be revitalized. The promotion of civic education is thus of great importance.

17. In this connection, the department joined hands with other government departments and related organisations to organise a series of promotion activities. For example, a large-scale publicity campaign comprising a TV API, a road show exhibition as well as an IPR seminar was held in February 2004. Moreover, the carnival entitled "Hong Kong -- The Real Experience" held in December 2004 was well received by the public.