6. Intellectual Property Rights Protection

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 trademark counterfeiting activities at all levels remained under control in 2006 and significant results were achieved.

Anti-Piracy Enforcement

In 2005 and 2006, the department processed 9 794 and 9 126 cases, and arrested 957 and 1 061 persons respectively in connection with copyright piracy activities. The total seizure of pirated optical discs (ODs) amounted to 3.79 million in 2005 and 3.03 million in 2006. Together with other seizures such as OD production equipment, the total seizure in 2005 was valued at $137.2 million while the seizure in 2006 was worth $127 million.

Anti-Piracy Enforcement: Retail Sales

In the past two years, the department continued to take vigorous enforcement actions against retail outlets of pirated ODs and made significant achievements. The number of retail outlets dropped from some 1 000 in 1998 to around 50 in 2006 and the circulation of pirated ODs at any one time reduced from some 5 million to about 3 000 (a reduction of 99.9  per cent). 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 very small quantity of ODs on the premises to minimize loss.

Anti-Piracy Enforcement: Manufacture and Import & Export

Since the enactment of the Prevention of Copyright Piracy Ordinance in May 1998, every local OD factory has to obtain a manufacturer licence issued by the department and is 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 2005 and 2006, Customs officers carried out 313 and 311 inspections respectively at the licensed factories to detect and deter the manufacture of pirated ODs and stampers.

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 2005 and 2006, the department smashed, respectively, 16 and 7 replicating workshops of this kind, with 919 and 238 disc writers as well as 267 984 and 51 148 pirated ODs seized. The total value of seizures amounted to $8.88 million and $1.96 million respectively.

Anti-Piracy Enforcement: Internet Piracy

The department established its first Anti-Internet Piracy Team (AIPT) in April 2000.  To strengthen enforcement against infringing activities in the cyber world, a second AIPT was set up in April 2005 through internal redeployment.  Over the years, there were changes in the trend of Internet piracy, namely, from the setting up of websites that offer infringing copies of MP3 music, films or software for downloading to the growing use of auction sites as an avenue for the sale of pirated ODs and counterfeit goods. Since their establishment, the two teams have detected 64 Internet piracy cases in which 101 persons were arrested and a total seizure worth $5.07 million was made.

The department and the film industry set up a Peer-to-peer (P2P) Task Force on 16 December 2004 to monitor on a 24-hour basis the illegal activities of uploading infringing movies onto the Internet through BitTorrent (BT) platforms. The joint action quickly led to our first-ever successful enforcement action against illegal P2P activities on the Internet and the arrest of a man on 12 January 2005 who was found to have uploaded three infringing movies of different titles to a local BT discussion forum for online sharing. The arrested person was subsequently convicted and sentenced to 3 months’ imprisonment.  Appeals lodged by the defendant against his conviction were dismissed by the Court of Appeal on 12 December 2006 and the Court of Final Appeal on 18 May 2007. The successful prosecution of the internet uploader served as a strong deterrent against all similar online infringement activities.

Anti-Piracy Enforcement: Corporate Piracy

The Intellectual Property (Miscellaneous Amendments) Ordinance 2000 which came into effect in 2001, aims at enhancing 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 and sound recordings. Business software piracy cases remain the major type of corporate end-user piracy cases. The department has been working closely with the software industry, in particular the Business Software Alliance (BSA), to combat such piracy cases. Apart from corporate software cases, the department also takes swift enforcement action against karaoke bars using infringing music video in the course of their business. Since 2001, the department has detected a total of 141 corporate end-user piracy cases leading to the arrest of 309 persons and seizure valued at $7.06 million.

Restraint of Copyright Crime Proceeds

The department applied the Organized and Serious Crimes Ordinance (OSCO) to restrain the crime proceeds in copyright piracy cases since 2004. In July 2005, the department achieved a breakthrough by applying OSCO to a counterfeiting case for the first time. A large-scale operation codenamed “SNIPER” was mounted against a syndicate in connection with the exportation of counterfeit clothing to Japan.  A restraint order was successfully applied from the court to freeze the crime proceeds of about $22 million of the syndicate.  Up to the end of 2006, OSCO has been applied to 6 IPR cases with crime proceeds of some $95 million restrained.

Reward Schemes

To augment the government’s effort in IPR protection, the department administers four reward schemes sponsored by the IPR industry whereby cash rewards will be paid to informers who provide information to the department leading to the successful seizure of specified types of infringing goods of substantive quantity under the respective schemes. The “Reward Scheme to Combat Illegal Photocopying of Books” was launched in October 2005.  The reward schemes cover the following areas of IPR enforcement:

• Pirated optical discs (except retail level) and Internet piracy – sponsored by the copyright industry
• Corporate piracy – sponsored by BSA
• Counterfeit pharmaceutical products - sponsored by the Hong Kong Association of the Pharmaceutical Industry
• Illegal photocopying of books - sponsored by the Hong Kong Reprographic Rights Licensing Society

Anti-Counterfeiting Enforcement

Apart from maintaining persistent enforcement against copyright piracy, the department also accords equal enforcement priority to combating trademark counterfeiting activities. As a result of our sustained and vigorous enforcement action, counterfeiting activities in Hong Kong are now fully under control.  There is no sign of any significant manufacturing activities taking place locally.  What remains of counterfeiting in Hong Kong only concerns low-level selling and of a limited scale.  The number of hawker stalls involved in the sale of counterfeit products has significantly dropped.

In enforcing the Trade Descriptions Ordinance, the department processed, respectively, 1 114 and 990 cases relating to counterfeit goods and goods bearing false trade descriptions and arrested 726 and 718 persons in 2005 and 2006.  A total of 8.12 million and 6.95 million pieces of counterfeit goods with a total value of $305 and $127 million were seized respectively. The most popular items that were seized include clothing, watches and leather goods with fake brand names.

Restraint of Counterfeiters' Proceeds

In July 2005, the department achieved a breakthrough by applying OSCO to the first counterfeiting case. A large-scale operation codenamed “Sniper” was mounted against a syndicate in connection with the exportation of counterfeit clothing to Japan.  A restraint order was successfully applied from the court to freeze the crime proceeds of about $22 million of the syndicate.

Court Penalty on IPR Infringement Activities

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 2005 and 2006 respectively, the highest sentences handed down by court were 36 and 45 months' imprisonment for copyright offences; and 16 and 45 months' imprisonment for trademark and trade description offences. A total of 522 and 597 persons were sent to jail for copyright offences in 2005 and 2006 respectively, and another 94 and 142 persons were sentenced for trademark or trade description offences in the two years, respectively. The heavy penalties imposed by the court have indeed produced a strong deterrent effect in combating the illicit trade.

Strategic Partnership with the Industry

The department has been working closely with the IPR industry in the fight against piracy and counterfeiting activities.  Assistance offered by the industry includes intelligence exchange, seizure examination, testimony in court and training for frontline staff on product identification.  The Intellectual Property Rights Protection Alliance (IPRPA) established in March 2004 added further momentum to strengthening Customs-industry partnership and enhancing the department’s efficiency and effectiveness of investigation and enforcement actions. To date, 45 organizations from the IPR industry have been enrolled as IPRPA members.

During the past two years, the department launched the following cooperation campaigns with the IPR industry:

• On 7 November 2005, the “E-auctioning with Integrity Scheme” was launched jointly with four local auction site operators and a number of IPR owners in a bid to combat the sale of infringing items on the Internet.  Upon receiving reports from the participating IPR owners through a designated reporting channel established by the department, auction site operators will take prompt action and remove the listings with items suspected to be infringing goods. With such pro-active assistance from the IPR industry, the department can direct its enforcement resources to deal with online piracy and counterfeiting that involves syndicated and organized activities of a more serious nature. It also helps secure and facilitate global trade conducted via the Internet.

• On 24 November 2005, the department launched the “Jewellery Integrity Campaign” jointly with the jewellery industry and the Consumer Council in a bid to promote industry-wide trading integrity and the sale of genuine goods.  Jewellery traders are encouraged to present clear trade descriptions in jade and diamond retailing activities and ride on the widely recognized industry grading standards in product descriptions.  The campaign aims at sustaining the image of Hong Kong as a shopping paradise for genuine goods, facilitating the department’s criminal enforcement action and strengthening consumer protection through public promotion and education on product knowledge.

• The “Fast Action Scheme” was launched jointly with the Hong Kong Brands Protection Alliance (HKBPA) on 10 July 2006.  It aims at enabling swift enforcement action by the department in response to complaints against infringement activities that take place in trade exhibitions and fairs.  An online system has been set up by HKBPA for receiving product information from its members in advance such that the department can take prompt enforcement action upon receipt of complaints.  The department has also provided training to industry representatives on the legal requirements and the type of documents required for complying with the recordation procedure. The scheme was first put into action at the Hong Kong Electronics Fair held on 13-16 October 2006 and the Hong Kong International Toys and Gifts Show on 20-23 October 2006 at the Hong Kong Convention and Exhibition Centre. During the two exhibitions, the department made swift enforcement responses to four complaints against copyright infringement lodged by the rights owners. After investigation within just a couple of hours, the department effected a total of five cases and arrested five persons involved in the infringement activities. Of these arrestees, four were convicted, with each sentenced to two months’ imprisonment suspended for 24 months and a fine ranging from $2 500 to $5 000. The infringing merchandises exhibited as samples among other goods were confiscated.

The department, in collaboration with the Intellectual Property Department (IPD) and BSA, launched the Genuine Business Software Campaign on 4 September 2006.  The campaign aims at enhancing information technology governance within the business sector, giving them the know-how to better manage their IT assets through effective Software Asset Management (SAM). It included software legalization and educational initiatives that help promote copyright protection and corporate governance. Another key element of the campaign is to encourage organizations to take stock of their software assets and acquire the necessary licences to remedy any shortfall or discrepancy identified through an audit process.

Publicity Programmes for Intellectual Property Protection

Infringing activities cannot be eradicated totally simply by taking vigorous enforcement actions alone. If market demand for pirated and counterfeit goods exists, the illicit trade will continue to survive. Promotion of civic education is of great importance to reduce infringement activities.

In early 2005, posters promoting anti-piracy were distributed to some 1 300 primary and secondary schools in Hong Kong. To appeal for the support of parents and teachers in helping youngsters not to engage in illegal P2P file sharing activities, the department arranged special seminars for the Parent-Teacher Associations of 14 local districts and two schools in 2005. A home-grown cartoon was also launched on the IRPPA website before the school summer holidays in a bid to remind students to stay away from infringing activities.

In July 2006, the department, in collaboration with IPD, 11 local uniformed youth groups and five IPR organizations, launched the “Youth Ambassador Against Internet Piracy” Scheme.  Under the scheme, participating members will report to the department on finding any suspected illegal BT file-sharing activities on local online discussion forums.  The information received will be first screened by the Customs, and passed on to the respective copyright owners who will ascertain the validity of the information and notify the respective webmasters of the discussion forums to take appropriate actions, such as deleting the messages with the infringing BT seeds.  By encouraging local youngsters to report online piracy, the scheme is able to raise their awareness of the importance of IPR protection and foster their commitment to the noble cause of serving the community.  It also expands the existing avenue for the effective monitoring of BT infringement activities and helps shorten the life span of the infringing BT seeds, whereby supplementing our online tracking of such activities.