Cablegate: Hong Kong's New Copyright Amendments Welcomed By

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E.O. 12958: N/A

1. Summary: After more than a year of consultations with
industry and consumer protection groups, the Hong Kong
Government (HKG) has passed amendments to the Hong Kong
Copyright Act. Industry associations and IP rightholders are
pleased with revisions that lower the bar for Hong Kong
Customs to initiate criminal cases, increase penalties for
circumvention of technical protection measures, and hold
company directors criminally liable if their companies use
counterfeit products in the course of business. A compromise
measure to relax restrictions on parallel imports met with
industry approval but fair use provisions for educational
institutions were criticized as overly broad. IPR protection
groups are expecting the HKG,s next step will be to create
digital protection laws; a discussion paper is currently
being drafted and should be published before the end of the
year. End Summary.

2. Comment: The June passage of these amendments to the
copyright law is a positive development for Hong Kong,s
copyright protection framework. The amendments updated a law
that had last been revised in 2001 and had fallen behind the
times. The HKG deserves high marks for its willingness to
consult with intellectual property rightholders who were
generally pleased with the changes to the law. However, Hong
Kong authorities have yet to address digital rights
management, need more serious enforcement actions against
counterfeit pharmaceuticals, should consider reforms to the
legal system that makes civil remedies prohibitively
expensive, and provide legal recognition of U.S. copyright
registrations. Some rightholders complain that the
consultation process took too far too long and are waiting to
see whether enforcement action will follow. Rightholders
agree that Hong Kong's IPR protection remains a model for the
region in many ways, but has fallen behind others in the
region in some sectors. End Comment.

Director,s Liability for Infringing Workplace

3. A lengthy consultation process concluded June 27, 2007
with the first revisions to Hong Kong,s copyright laws since
2001. Among the more significant provisions is the
establishment of criminal liability for company directors
found to be using copyright infringing products in the course
of business. Directors and partners can escape criminal
liability if they can show that they were unaware, did not
authorize and specifically took steps to prohibit use of
infringing products. These steps can include budgeting funds
to purchase legitimate product and demonstrating policies,
practices, and actions designed to prohibit and prevent the
use of counterfeit products in the workplace.

4. Employees may also be held liable for use of infringing
products in their work, but can escape liability if able to
demonstrate that they were not in a position to authorize
installation or removal of infringing materials. Local
business associations, including the Hong Kong General
Chamber of Commerce and the Chinese Manufacturing Association
of Hong Kong, raised concerns that business leaders would be
unfairly forced to bear liability for the actions of their
staff, while the Business Software Alliance (BSA) complained
that the law continued to leave a large loophole for
directors and partners to avoid prosecution. Although the
law officially went into effect when gazetted on July 7, the
Hong Kong government plans to conduct educational activities
to ensure business owners are aware of their obligations and
can correct any shortcomings. The director liability
provisions are not expected to be enforced before the
beginning of 2008.

============================================= =========
Support for Technical Protection Measures Strengthened
============================================= =========

5. The International Federation of Phonographic Industries
(IFPI) was particularly pleased with the addition of criminal
liability for circumvention of technical protection measures
(TPMs). (Note: previously TPM circumvention was only a civil
offense and police would not pursue investigations against
violators. End Note.) Businesses providing TPM
circumvention services or devices, regardless of whether they
charge for the service or device will now be held criminally
liable. A person using such a service or device can be held
civilly liable under the amended law. While there are some

HONG KONG 00002252 002 OF 003

limited exceptions to the TPM circumvention regulations for
research and security testing, IFPI representatives in Hong
Kong told econoff the industry "got everything it wanted" in
the current law.

But Parallel Import Restrictions Loosened

6. The amendments also relaxed restrictions on parallel
imports, reducing the period in which parallel imports are
prohibited from 18 to 15 months of the release of the work.
This was a compromise with industry; the original proposal
had called for reducing the prohibited period to 9 months.
Representatives from the Motion Picture Association of
America (MPAA) were pleased with the results of their
consultation with the government and told econoff that
because the amendments set the date of official video
release, not the film release, as the effective date for
protection to begin, film makers could actually benefit from
an increased period of protection under the new law.

Fair Dealing Still Not Fair Says Industry

7. The IPR-protection associations criticized the
liberalization of "fair dealing" provisions as overly broad
and open to abuse by Hong Kong,s numerous commercial
educational institutions. These provisions allow educational
institutions to use portions of copyrighted works for
educational purposes as long as certain subjective
requirements are met. The amendments also allow a specified
number of copies to be made under a "safe harbor" exception
-- the allowable number is determined by the number of
copies, the percentage copied and the retail cost of the
work. Copying of newspapers, magazines, books and
periodicals beyond the safe harbor limits will now be a
criminal offense. The Hong Kong government has responded to
industry criticisms by noting that the fair dealing
provisions are based on U.S. regulations. The Hong Kong
Commerce and Economic Development (HKCED) Bureau is currently
drafting implementing regulations and expects to issue them
before the end of 2007.

Coming Attractions: The Digital 21 Agenda

8. Hong Kong has periodically conducted a review of its
digital technology laws since 1997, with an eye towards
improving infrastructure, promoting innovation and creating
the legal environment that will allow digital content
industries to thrive. The 2007 Digital Agenda consultation
paper was circulated in October 2006 and received over 70
comments. An April 2007 Digital Agenda Forum, organized by
Sin Chung-kai, the Information Technology Functional
Representative in the Legislative Council (LegCo), drew
additional comments from the public and industry. HKCED is
currently in the process of reviewing the comments and
drafting legislation that will address questions of ISP
liability, codifying notice and take-down requirements, and
considering whether current criminal liability provisions for
uploading copyright infringing materials can be extended to
cover downloading as well.

9. According to CED, draft proposals could be ready for
public consultation before the end of 2007 but are unlikely
to be considered by the LegCo in this session. The current
LegCo session will close in 2008. Any legislation not passed
before that time will need to be reintroduced in the newly
elected LegCo. Given that a major revision of the copyright
law has just been passed and the difficulty of soliciting and
responding to comments before the end of the current LegCo
session, CED plans to submit the draft to the new Legislative
Council for consideration late in 2008.

Still Areas for Improvement

10. Intellectual property protection associations were
pleased with the results of their consultations with the HKG,
but pointed out that Hong Kong is falling behind in some
important areas. Hong Kong,s slow consultation process

HONG KONG 00002252 003 OF 003

means that downloaders and users of pirated media will
continue to be free from criminal sanctions. High legal fees
make the cost of civil action prohibitive, allowing violators
to continue their infringing activities with impunity.
Trademark violations in company registrations continues to be
a problem and Hong Kong authorities still do not provide
legal recognition of U.S. copyright registrations.
Rightholders complain that the HKG is unwilling to share
information on IPR crimes that could be used to pursue
cross-border IPR investigations and are discouraged by Hong
Kong's lack of enthusiasm for prosecuting pharmaceutical
counterfeiting and transshipment cases.

© Scoop Media

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