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Speech by SCIT at APEC CEO Summit


The following is a speech by the Secretary for Commerce, Industry and Technology, Mr John Tsang, at the APEC CEO Summit in Bangkok, Thailand today (October 20) (English only):

Ladies and Gentlemen,

It is my great pleasure to have the opportunity of sharing with you the experience of Hong Kong in intellectual property rights protection. My interest in this subject dated back a few years ago to my days as the Commissioner of Customs and Excise when combating piracy of intellectual property rights was my priority area of work. Now that I am the Secretary for Commerce, Industry and Technology, with my policy portfolio covering intellectual property rights protection as well, I remain committed as ever to eradicating piracy in Hong Kong.

We have for long recognised that it is very much in Hong Kong's own interest to protect intellectual property rights. And we do not have to look far for the reasons. Much of our economy depends on the creativity of our people. Whether we are talking about fashion, toys, watches, jewellery, which together account for a large chunk of our exports, a significant part of the value added has come from the design of the products. We are also renowned as one of the major film production centres in Asia. In 2000, our output in film production was third in Asia, only after India and Japan. Four out of the "big five" of the world's largest music production companies have their regional headquarters in Hong Kong, and many local companies are engaged actively in different aspects of the music and music-related industries.

As Hong Kong moves more and more towards a service and knowledge-based economy, our economic well-being depends more and more on the brain power of our people. We have to establish and sustain in Hong Kong a platform for innovation and creativity, not just in science and technology, but also in the arts and consumer products. We have to reinforce this platform by attracting quality investment to Hong Kong. No one will, however, be prepared to invest their time and effort in innovation if their output is easily stolen. It is, therefore, critical that a robust regime of intellectual property protection is in place to support our economic development in the future.

I am very happy to tell you today that Hong Kong has established such a robust regime, and we have put the piracy situation in Hong Kong firmly under control. Before I share with you how we have done that, let me present a couple of statistical snapshots that clearly substantiate our case.

At the time when I assumed the post of Commissioner of Customs and Excise in 1999, there were over 1,000 retail outlets of pirated CDs, each carrying on average some 5,000 CDs and operating over 12 hours a day. This translated into a market with the availability of some five million CDs at any one time. I am using CD here as shorthand for all forms of intellectual property stored in the disc format.

When I left the post of Commissioner of Customs and Excise in 2001, the number of retail outlets has been brought down to fewer than 100, each carrying on average fewer than 1,000 CDs and operating fewer than three hours a day. This translated into a market with the availability of about 100,000 pirated CDs. The reduction in CDs was an astonishing 98%. Today, the number of retail outlets has gone even further, with circulation of pirated CDs reduced to fewer than 20,000 at any one time.

Essentially what we have done to achieve the substantial reduction in the piracy figure is to take a multi-pronged approach against the production, the retail and the end user side of the pirated CD business in our community.

Let me start with the production aspect first. Over the past few years, we have introduced a series of legislative amendments to tackle the problem of CD piracy at source. For example:

(a) in 1998, we enacted the Prevention of Copyright Piracy Ordinance to establish a licensing system for CD manufacturing in Hong Kong. Following this, all optical disc manufacturing plants must be licensed and all locally manufactured CDs must bear an identification code unique to the licensed manufacturer who makes the disc;

(b) in 2001, we amended the Ordinance to make it illegal to possess video recording equipment in cinemas, theatres and concert halls, thereby eliminating a possible source of pirated CDs; and

(c) in 2002, we amended the Ordinance again to establish a licensing system for manufacturing of stampers to facilitate the combat against illegal production of optical discs containing pirated copyright works.

With these legislative initiatives, our Customs officers are better guarded against the supply of pirated CDs. For instance, CD factories can now only operate under licence from Customs, and Customs officers are authorized to carry out inspections in these premises any time of the day. And we do that in the small hours of the day just to keep them honest. This helps us to ensure that our licensed factories are not conducting any illicit business under the disguise of legitimate operation.

Having been assured of the legitimacy of our licensed factories, our Customs officers can concentrate their energy on the underground plants. Since the coming into effect of the Prevention of Copyright Piracy Ordinance, we have cracked down on 22 underground CD factories and seized 40 production lines worth some US$25 million.

With the implementation of these measures, I am happy to say that large-scale production of pirated CDs has been driven out of Hong Kong. Illegal suppliers are now getting smaller in size, using CD writers instead of large replicating machines. More than 90% of pirated CDs available in our retail market now are produced by CD writers, but fortunately, we have been successful also in smashing these small production operations by tracing back the source of pirated of CDs from retail outlets.

Turning now to the retail side, we have been able to exert intensive enforcement efforts against the notorious blackspots. To accomplish this difficult task, we have allotted a dedicated special task force of some 300 officers to stamp on the pirates. They were so successful that their story was repeated on a popular television serial in Hong Kong. As a result, we have forced vendors of pirated CDs out of their mainstream bases to operate, if at all, underground. Some pirates have resorted to very short term leases in vacated premises, and some have been driven to operate as mobile hawkers. Those few that still dare to run their business in shopping centres now only operate at intervals and display a very small selection of pirated CDs to minimize loss. Some have even resorted to the modes of self-service and pre-order sales. In sum, Hong Kong is no longer the haven it used to be for these pirates.

At the corporate end user level, we have amended our law to make it an offence for any person to use pirated copies of computer programs, movies, TV dramas and musical recordings in the course of their trade or business. It is, for instance, an offence for a shipping company to use infringing copies of software to do word processing in the course of business. The amendments came into effect in April 2001 and so far, we have effected 28 cases.

In fact, our enforcement efforts are matched by the sentences decreed by our courts. Our judges acknowledge that IPR protection is important for the development of our economy. They have handed down heavy sentences to underline this aspect. Record sentences reached as high as 48 months of imprisonment and US$130,000 in fine. This level of penalty compares extremely favourably to those decreed in other countries and to the imprisoned pirates, I guess, extremely harshly. Hopefully, such sentences will continue to set a powerful deterrence against prospective offenders.

Looking back, we have made significant achievements driving the copyright pirates to the wall. However, the piracy problem cannot be uprooted by stringent enforcement alone. Incessant demand from the public will sustain the illicit trade. The long term solution, therefore, rests with education in changing peoples' mentality and in raising their respect for intellectual property rights. On this front, our Intellectual Property Department has been spending about a million US dollars a year to produce different activities and products varying from pop concerts and sponsored movies to organising seminars in schools and development of educational computer games. All these programmes aim to promote the awareness of the importance of protecting intellectual property rights.

We should not, of course, forget the role played by the industry. Whilst governments have the responsibility to provide a sound legal framework and take enforcement action against statutory offences, the primary responsibility for the protection of intellectual property rights rests invariably with the rights owners themselves. They can build up their guard technically in protecting their products and take civil litigations against unauthorized exploitation of their rights. We also need their assistance and cooperation in pursuing prosecution.

Any presentation on IPR today will not be complete without mention of the digital pirates who storm the cyberworld with Internet piracy. The digital technology today has made it possible for a much wider range of copyright works, be it music, software or film, to reach a much wider user community in a much shorter period of time than ever before. It has helped facilitate the exploitation of intellectual property rights. It has also provided a convenient avenue for piracy. I am sure you will agree that the biggest challenge to us ahead is how to tackle the new piracy possibilities brought about by the advent of the Internet. These are serious issues that do not come with a ready set of solutions, but it does not mean that we should simply abandon the technology just to avoid piracy. We must confront them with new initiatives and commitments.

Hong Kong is probably among the first in the world to extend copyright protection to materials on the Internet. It is an offence under our law to provide infringing copies to the public through the Internet. On the enforcement front, we have trained up a team of qualified personnel to go into the nuts and bolts of cyber crime investigation. These trained experts, around 20 in total, have been pooled together to render field officers with logistic support whenever cases involving digital evidence are detected.

In parallel, we set up an Anti-Internet Piracy Team in 1999 to delve proactively into the cyberworld to deter internet piracy. To help us stay tuned to the latest technology, we have called upon the assistance of the industry, for example, the internet service providers, who are much closer to the leading edge of the business. This partnership is crucial not only in helping to raise our awareness of the piracy trend and the availability of the leading technology, but also to facilitate our investigation and prosecution. So far, the Anti-Internet Piracy Team has effected 28 infringement cases on the Internet covering different modes of application. Surely, there is still a long way to go before we or indeed any government or copyright owner can confidently claim control over internet piracy. But I believe we are moving in the right direction.

As I mentioned earlier, the role played by the industry is important in combating piracy. This is particularly true in the case of internet piracy. Cyber criminals can surf across customs boundaries unobstructed and undetected, hiding behind countless links and leaving no traces. They can easily conceal their evidence in "data havens" where their acts are not considered to be criminal. They can also arbitrage between administrations exploiting those which are lacking in legislation, resources and expertise to track them down. What we need is a modernized framework for assistance and cooperation, and the industry would be in the best position to spearhead their effort in facilitating the establishment of such a network.

It is gratifying to note that cooperation within the industry is progressing. Technology-wise efforts have been made to develop common electronic safety devices for encoding to guard against illegal activities. No matter how technology can help guard against theft, the best way is still to eliminate the desire to steal. Hence, setting up authorized websites where copyright products can be legally downloaded at reasonable prices will, I believe, reduce the temptation of piracy. The industries must seek to establish new business models that would on the one hand protect their intellectual property rights and on the other hand offer true value to consumers allowing them to choose and use copyright products on the computer to a reasonable extent.

Ladies and gentlemen, we have seen the back of the golden age of piracy in Hong Kong. Many once thought that it was too big a problem for us to cope with. But we have overcome that. We have made considerable headway in protecting intellectual property rights in Hong Kong. We are happy with the developments but we are not complacent and we cannot be.

Piracy is a global issue. We must all work together to contain piracy and if at all possible, ridding it at source. In the process, we need co-operation from copyright owners and support from the community. The aspirations and demands from these two groups may not be the same at times. However, I think no one will argue against the fact that intellectual property rights protection is important, especially if we wish to nurture the development of knowledge and creative industries. With this common goal in mind, I believe that we will find our way through to ensure that creativity and innovation would be encouraged, safeguarded and rewarded.

Thank you.

Ends/Monday, October 20, 2003


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