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Cablegate: Hong Kong's Tiny Steps to Curb Business End-User

VZCZCXRO2331
PP RUEHCN RUEHGH RUEHVC
DE RUEHHK #1369/01 1420658
ZNR UUUUU ZZH
P 220658Z MAY 07
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 1684
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 HONG KONG 001369

SIPDIS

SIPDIS

STATE FOR EB/TPP/MTA/IPC/FELSING
STATE FOR EB/IPE
STATE FOR EAP/CM
STATE FOR INR/EAP
NSC FOR KTONG
DEPT PASS USTR FOR SMCCOY, ACELICO, RBAE
DEPT PASS TO USPTO FOR TBROWNING
BEIJING FOR MCOHEN

E.O. 12958: N/A
TAGS: CH ECON ETRD HK KIPR TW
SUBJECT: HONG KONG'S TINY STEPS TO CURB BUSINESS END-USER
SOFTWARE PIRACY


1. (SBU) Summary: On May 15, the Business Software Alliance
(BSA) announced that Hong Kong's 2006 software piracy rate
fell to 53% in 2006, a 1% decrease over 2005. Prior to the
public release of the study, BSA privately briefed Hong Kong
government (HKG) officials and pointed out that the use of
pirated software in Hong Kong remained high for a developed
economy and that financial losses to the software industry in
Hong Kong increased substantially in 2006. HKG officials
responded that they would increase educational efforts and
that the upcoming passage of the copyright amendment will
provide Hong Kong law enforcement authorities with a stronger
legal remedy against this crime.

2. (SBU) In a separate meeting with EconOff, BSA privately
complained that the copyright amendment's provision on
directors' liability, which addresses corporate liability for
end-user software, has been watered down in the latest
version of the bill. The bill also no longer includes a
start date for the directors' liability provision, causing
BSA concern that even a weak directors' liability provision
could be delayed indefinitely. Despite these disagreements,
BSA is publicly taking a positive tone towards Hong Kong's IP
efforts, largely due to the HKG's responsiveness last year in
addressing the software piracy issue even though it did not
yield the results expected. END SUMMARY.

--------------------------------------------- ----
BSA-HKG CLOSED DOOR ROUNDTABLE ON SOFTWARE PIRACY
--------------------------------------------- ----

3. (U) BSA announced last week that Hong Kong's software
end-user piracy rate declined from 54% to 53% from 2005 to
2006. While this decline is positive, Hong Kong's regional
counterparts witnessed equal or greater declines. In
Singapore, for example, the piracy rate fell 1% to 39%; in
South Korea, it also declined by 1% to 45%, while Taiwan saw
a 2% decrease to 41% and Japan fell by 3% to 25%. These
rates show that software piracy in Hong Kong remains
particularly high compared to other developed Asian
economies. Furthermore, the estimated losses to the industry
in Hong Kong skyrocketed from US$112 million to US$180
million. BSA explained to HKG officials that Hong Kong's IT
market expanded in 2006 with more businesses buying computers
-- some with licensed software and some without. As a result
of this overall market growth, the number of unlicensed
software packages and subsequent losses incurred from them
actually increased, even though the percentage of unlicensed
software packages dropped.

4. (SBU) Priscilla To, Principal Assistant Secretary for
Commerce and Industry at the Commerce, Industry and
Technology Bureau (CITB), asked BSA whether the transshipment
of computers contributed to Hong Kong's theoretical software
piracy rate. BSA replied that their study takes
transshipment into account by including only those computers
that have been "shipped to and landed in" Hong Kong. HKG
officials concluded the meeting by noting that they must
increase educational efforts among the business sector and
that the new copyright amendment will strengthen the
government's ability to crackdown on unlicensed software
usage.

--------------------
BSA BRIEFS CONSULATE
--------------------

5. (SBU) On May 17, EconOff discussed the software piracy
study with BSA's Hong Kong/Macau Chairperson Belinda Lui of
Microsoft. BSA appears to be in an awkward position in its
relationship with the HKG. After the release of last year's
software piracy study, the HKG quickly launched the "Genuine
Business Software Campaign" to help companies with infringing
software voluntarily purchase legitimate licenses and absolve
themselves of liability. However, the program was not as
effective as the HKG and BSA had hoped because only 168 out
of 30,000 businesses contacted by BSA (less than 1%)
purchased licenses for their software through the program.
However, BSA wants to encourage the HKG's continued active
engagement on software piracy and hopes that a second round
could bring better results. Lui noted that the HKG's
leadership could provide an example to others in the region.

HONG KONG 00001369 002 OF 002


She also has stated that BSA is careful in its public
comments regarding the HKG, noting that BSA toned down its
submission for the 2007 Special 301 Report because of Hong
Kong's general willingness to address the issue, even if its
programs have yet to yield significant results.

6. (SBU) Nonetheless, Lui remains concerned over the HKG's
complacency in addressing software piracy in the legislative
framework. The draft Copyright Amendment, now in its final
phase of legislative review, not only contains a weakened
directors' liability provision, but now includes language
that could delay the start date for this provision. In the
latest draft, legislators added that the clause will not come
into force "until a day appointed by the Secretary for
Commerce, Industry and Technology." BSA was told that the
HKG wants to delay the implementation of the provision in
order to run public awareness campaigns on the new criminal
provision. However, in a letter to the Legislative Council
(Legco) Bills Committee, BSA noted that there has been much
public debate on the directors' liability clause since 2005
and that the "Genuine Business Software Campaign" was geared
last fall to build awareness and help companies legitimize
their software before the passage of the bill. (NOTE: Hong
Kong Intellectual Property Department's (IPD) own annual
survey on public knowledge of IPR laws indicates that
awareness levels in Hong Kong rose to 84.7% in 2006.) BSA
fears this new Legco provision could delay indefinitely the
implementation of the clause. If the new language is
approved, BSA urges the HKG to take no more than six to nine
months to conduct its educational outreach. EconOff
separately asked IPD Deputy Director Peter Cheung and To
about the status of the directors' liability clause. They
both responded that Legco will pass the clause, but that the
government will have to do "major educational outreach
campaigns" in advance to prepare the business community.
Cunningham

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