Piracy Problem in China, Taiwan and
Hong Kong
Created by Claudia Lam, Florence Lui and Sally Ngan



Introduction
Since the Second World War, with the advancement in science and technology, especially the rapid development of computer technology since the 1980's, international economic integration has become a possibility, an undeniable fact and the main trend of the contemporary world. The basis of international economic integration is that most members of the international community have adopted the market economic system with an establishment of legal norms and framework suitable for bringing out fully the potentialities of the market economy both at the international and national levels. Currently at the international level, World Trade Organization (WTO) is one of the pillars of the legal framework of international trade. China and Taiwan became WTO members on December 11, 2001 and on January 1, 2002, respectively. Hong Kong is a founding member. One prominent area being used as benchmark in measuring each WTO member's compliance is the protection of intellectual property (IP). Upon China and Taiwan's entrance into WTO, US was the most demanding member. Since then, US has influenced laws and regulations of China as well as Taiwan especially on issue of intellectual property. For instance, in its entry into the Chinese software market, however, the US software industry complained that up to 98% of the copies of US software products sold in China were unlicensed or "pirated". Therefore the Chinese government has to take blame into account and revise its laws when they are not compatible with international treaties, so as to show to the world that China is a country in order.

Intellectual property issues loom large in the international area, as the world becomes more technology-oriented. For instance, the landmark case of Microsoft (China) vs Beijing Yauda concerning software copyright infringement in China. Following this landmark case in China, more and more disputes are anticipated not only in China regarding online and new media piracy. In this paper, we will attempt to look into factors that affect piracy in the greater China: China, Taiwan and Hong Kong; the development of laws and regulation as these regions go to integrate with world's economy; as well as case studies of these regions.

IP-Related Organizations and Conventions

The basis of international economic integration is that most members of the international community have shared substantive standards to ensure that each of its member's domestic laws and policies related to them are fair, non-discriminatory, and transparent. This is very important for the establishment of multilateral agreements to encourage exchange, trade, and some level of international technology transfer and a fair investment framework.
  • The Berne Convention (BC) and the Universal Copyright Convention (UCC) are two principal international conventions protecting copyright. The Berne Convention Implementation Act of 1988 brings the United States, as of March 1, 1989, into the Convention of Literary and Artistic Works, a group of countries that recognizes international copyright protection, commonly known as the Berne Union or the Berne Convention. At the present time, membership in the BC has doubled from 74 countries in 1984 to 149 in 2002). Each member nation of the Berne Convention is required to apply its own copyright laws on works from other member states, and to include certain requirements of the convention in its laws. In joining Berne, the US Congress adopted a "minimalist" approach that keeps the old copyright laws intact as far as was deemed possible.
  • The Universal Copyright Convention (UCC), adopted at Geneva in 1952 was developed by United Nations Educatioanl, Scientific and Cultural Organization (UNESCO) as an alternative to BC for those states which disagreed with aspects of BC, but still wished to participate in some form of multilateral copyright protection.
  • The World Intellectual Property Organization (WIPO) is an international organization dedicated to promoting the use and protection of works of the human spirit. These works - intellectual property - has become significant nowadays as integration of world's economy. Through its work, WIPO plays an important role in providing guidance and view for nations regarding IP issues.
  • The Paris Convention for the Protection of Industrial Property (PC) was first held in 1883 to adopt a treaty providing the foundation for international patent protection. As of January 1993, 108 countries were members of it. The Convention applies broadly and includes all forms of intellectual property. Its membership is open to all countries. The treaty signifies two important provisions: (1) each member country guarantees citizens of other member countries the same rights as its own citizens, and (2) the right of priority ("priority date") is recognized for subsequent filing in the member countries within a certain period (12 months for patents). Thus, if someone makes his application in a member country, other countries will honor that first filing date. Thus, an inventor wishing protection in multiple countries need not file all applications at the same time, but has 12 months from the first application to decide on subsequent filings.
  • The Trade-Related Aspects of Intellectual Property Rights (TRIPS), signed in 1994, incorporates basic standards of IP protection from the PC and BC. TRIPS includes provisions protecting a broad spectrum of IP rights, including patents, copyrights, trademarks, geographical indications, and industrial designs. TRIPS requires all WTO members to protect IP through compliance with the PC, as well as other industrial property and intellectual property related agreement.

Piracy Problems in China

The Chinese government has recognized the importance for its long-term growth of protecting foreign investments in intellectual property and has developed copyright laws modelled on international standards as a first step towards effective protection of IPR. On Chinese government's face, China's laws meet or exceed the standards of the principal international treaties. However, in eyes of some foreign countries, the implementation of these laws may have proven lacking, probably due to ambiguities in the law and difficulties in enforcement. In China, the situation is a complex.

Historical and Cultural Factors
The widespread disregard of IPR can be partly attributed to historical and cultural characteristics. Chinese culture has long emphasized learning by copying in all aspects of life; the emulation of works of almost any kind has for centuries been regarded as honourable and necessary. Under the traditional Chinese education system, attainment of the highest academic qualifications was demonstrated by faultless reproduction of the classical works of the past. These principles strongly influence contemporary education in China. In the environment where children are taught "right" and "wrong" answers as opposed to creative problem solving, it often follows that originality is not prized and "copying" is widespread (Spierer, 2001).

Social Factors
Compared with the historical and cultural factors mentioned above, perhaps more relevant to the situation in China today is the fact that sharing has been mandate for over forty years in this Communist state. Much of the period since the formation of the People's Republic of China, wealth and property, whether private or industrial, were belonged to the state. The mass public has barely any idea of intellectual property, as a result low public awareness has become a major obstacle to IP protection in general (Ho, 1995).

Economic Factors
In order to open itself to the outside world and to integrate into the global economy, China adopted domestic economic reforms. The biggest problem encountered at that time was the absence of a compatible legal system with the outside world. An effective set of laws was crucial for reforming the economic system and attracting foreign advanced technology and capital. Nevertheless, to draft such kinds of law immediately were impossible taking into account the ideological and technical considerations. The result was to draft more brief laws and skeleton provisions to meet the changing needs. As such, these laws were difficult to implement without the help of the detailed rules and regulations of the administrative organs (Ho, 1995).

After China joins the WTO, its laws and legal system must be substantially revised. The WTO agreements are not only concerned with transnational trade in goods but also concerned with a wide range of issues such as trade in services, IP, trade related investment measures, dispute resolution and the like. It is not exaggerating to say that the WTO regulates almost every aspect of the world economy. Under the Chinese law, international treaty provisions prevail in case of conflict with domestic laws and administrative regulations. As a result, the Chinese government has acceded to several international treaties concerning IP in order to show the world that China is a safe marketplace.
Development of Rules and Regulations

The introduction of regulations concerning piracy is still relatively new and much of the legislations are open to interpretation. Regardless the effectiveness of these laws, we will take a look at significant piracy rules and regulations developed in China.
Year Law Passed/Important event Significance
July 1979 US-China Agreement on Trade Relations was signed. This agreement marked the beginning of People's Republic of China (PRC) as an IP protection regime. Both sides stipulate that each will offer the other reciprocal protection of patents and copyrights.
June 1980 China acceded to the WIPO.

August 1982
Trademark Law of The PRC was enacted.
Detailed Implementing Regulations were passed in 1983 and 1988 to replace the 1963 Act. Based on a first-to-file system, registration is valid for 10 years after approval, with a 10-year renewal option. 1988 revisions introduce protection for service marks.

March 1985
China acceded to the Paris Convention for the Protection of Industrial Property.

May 1989
US-China Memorandum of Understanding (MOU) on Enactment and Scope of PRC Copyright Law was signed.
It stipulates that copyright legislation will include computer programs as a specific category; expands patent protection without specifying industries or time limits.

June 1991
Computer Software Protection Regulations was promulgated.
Software Registration Procedures was issued in 1992. It protects published software registered after the enactment date, leaving all existing software in China in the public domain. The new regulations also extended protection to computer software, literary, artistic, and scientific works.

January 1992
U.S.-China Memorandum of Understanding (MOU) on Intellectual Property Rights was signed.
China pledges to extend copyright protection to foreign owners of software, books, firms, sound recordings, and other mediums previously unprotected.

September 1992
Regulations for the Implementation of International Copyright Treaty Provisions were signed. 		It provides further amendments to the Copyright Law. Extends protection to "applied art" (jewelry, watches, toys, furniture, etc.), which are subject to registration requirements.
October 1992 China acceded to the Berne Convention for the Protection of Literary and Artistic Works. Establishment of bilateral copyright with the US.

October 1992
China acceded to the Universal Copyright Convention.
China explicitly recognized computer as literary work and extended protection to computer programs for 50 years without mandatory registration requirements.

June 1993
China acceded to the Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonograms (Geneva Convention).

December 1993
Unfair Competition Law was passed.
It protects unregistered trademarks, packaging, and trade dress and prohibits unfair competition by monopolies/cartels in controlling prices.

July 1994
Copyright Implementing Regulations was made.
It makes copyright infringement a criminal offence. Violators can be sentenced to prison for up to seven years or executed in severe cases.

February 1995
U.S.-China IPR Enforcement was reached.
China promised to markedly reduce piracy, to improve enforcement at the border, and to open its markets for U.S. computer software, sound recordings and movies.

October 2001
The New Copy Right Law Amendments: 2001 Copyright Law was passed.
The amendments make a number of significant and welcome changes to the 1990 law and attempt to bring that law into compliance with TRIPS.

December 2001
China became member of WTO.
The entry of WTO has a great impact on China's future legislation as TRIPS requires all WTO members to protect IP through compliance with the Paris Convention, as well as other related agreement.

December 2001
The New Computer Software Regulations was made.
The regulations created other, new problems such as Article 17 of the regulations establishes a potentially huge and TRIPS-incompatible exception to protection for software.

Government Agencies and Departments

The major government agencies and departments that deal with IP protection in China are: (1) China National Intellectual Property Rights Information Net, (2) China Intellectual Property Training Center, (3) National Copyright Administration of China, (4) State Copyright Bureau, (5) State Intellectual Property Office of the People's Republic of China (SIPO), and (6) State Administration for Industry and Commerce, Trademark Office.

Since 1992, a special adjudication division for the trial of IP cases, IP Division, has been set up in the areas where IP cases are concentrated: (1) the High People's Courts in Beijing, Shanghai, Tianjin, Guangdong, Fujian, Hainan, etc.; (2) the Intermediate People's Courts in Beijing, Shanghai, Tianjin, Qingdao, and several Special Economic Zones; and (3) the grassroots courts in Haidian District of Beijing, Pudong District of Shanghai, etc. As to courts without these divisions, special trial groups have been set up within the civil or economic adjudication division. Usually there are three full-time judges to deal with IP cases.

The National Copyright Administration Office and the copyright department under the local peoples governments are responsible for copyright administration and enforcement of the Copyright Law. These administrative authorities can impose sanctions in the forms of public warning, injunction in relation to the production and distribution of infringing copies, confiscation of unlawful gains, seizure of infringing copies and equipment used for making infringing copies, and fines. The IP administrative authorities in China are known for efficiency, simple procedure and promptness to put a case on file for investigation. Some IP cases redressed by the administrative authorities have influenced both inside and outside China (Zhang, 1998).

Cases

1. Beijing Online
On June 15, 1999 six renowned writers jointly filed a civil complaint before the Haidian District People's Court in Beijing, charging Beijing Online, one the largest Internet access and content providers in the PRC owned and managed by Beijing Cenpok Intercom Co., Ltd., for unauthorized and illegal copying and distribution of their works over the Internet. They specifically demanded compensations for their economic losses and mental suffering. On September 18, the district ruled in favour of the plaintiffs, awarded Renminbi 26,580 (US$3,200) in compensatory damages but rejected award for mental distress. The defendant appealed. In December, 1999, the Beijing First Intermediate People's Court (BFIPC) reviewed the case. Despite some speculations that the court mightneed more time to ponder the issue, decision was issued right the trial. The court affirmed the lower court's ruling is appropriate.

Analysis: This is one of the well-known copyright infringement lawsuits in the PRC concerning the liability of an Internet service provider. Indeed the case has generated very mixed feelings within the legal, political and business communities in the PRC. The significance of the case has brought more challenges to the Copyright Law of 1990 (**this law was not mentioned in the table above) and other IP laws in the days ahead concerning the use of Internet. Second, it is inevitable that the current law must be revised and the National People's Congress will be the final forum for similar debates to take place. Regardless what the outcome may be and how many people in China are still living without electricity, a good part of China has clearly crossed the threshold and entered the squabbling stage in how to deal with the new digital age.

2. Microsoft (China) vs Beijing Yadu
On December 17, 1999, BFIPC issued its judgement on another landmark case, Microsoft Corporation (China), Ltd. vs. Beijing Yadu Science and Technology Group (hereinafter Yadu Group). This is the first time a major foreign software manufacturer went directly after an end user for copyright infringement in the PRC and the judgement came only three days after the Beijing Online case. Unlike Beijing Online, however, the BFIPC is the court of first instance. Having concluded the trial the court summarily dismissed plaintiff's complaint for lack of sufficient evidence. Specifically, the court held that the plaintiff misidentified Yadu Group as the defendant in its allegations. Microsoft (China) indicated that it would fight on by filing a new complaint against the proper defendant in the near future.

Analysis: During the legislative process of the 1990 Copyright Law, there was an internal debate regarding the necessity of having a set of additional rules specifically in dealing with the registration, protection and licensing aspects of computer software. Eventually those in favour carried the day and Article 53 was created to give the State Council the authority to do so. The State Council then promulgated the Regulations on Computer Software Protection on June 4, 1991. But the controversy did not end there. Microsoft case is a good example.

3. Domain Name disputes
On June 20, 2000, the Beijing Second Intermediate Court handed down its judgement concerning the domain name dispute over ikea.com.cn. In InterIKEA Systems (China), Ltd. vs. China International Network Corporation, Ltd. (CiNet), the court handed a total victory to InterIKEA and ordered defendant CiNet's registration of ikea.com.cn be terminated immediately because it has violated the plaintiff's well-known mark.

Analysis: The judgement of this case carries a strong signal that even for a company that has the full backing of the government such as the China International Network Corp Ltd, it is not exempted from infringement liability. This is the first domain name dispute in China that happens to involve a foreign firm and the question of well-known mark. This ruling established at least three precedents: (1) for the first time, a court in China declares that domain name dispute is a trademark issue; (2) for the first time, a court in its own rite decides what constitutes a well-known mark, opposed to leaving the task to the authority of State Administrative Department of Industry and Commerce; and (3) for the first time, the court combined application of Article 5, Section 2 Anit-Unfair Competition Law, Article 6 of the Paris Convention for the Protection of Industrial Property (on well-known mark), among other things, in reaching its conclusion. Although defendant has indicated its appeal, the outcome of this case could open the floodgate of many other similar cases.

Piracy Problems in Taiwan

Cultural Factor and Government Attitude
When we look at the culture and government attitude of Taiwan, it is not difficult to understand why Taiwan becomes the "pirate kingdom of the world". Shared the same Confucian legacy as China, Taiwanese are generally having the concept of "knowledge should be shared" and it is not a problem to disseminate one's creation to benefit others. In addition, people's concept on protecting intangible property rights is very weak that they do not consider infringing intangible property a kind of stealing.

This concept was further reinforced by the Taiwan government's attitude in the early decades. As cited in the "Intellectual Property Rights Protection: A Republic of China Prospective (1983)" published by the Ministry of Economic Affairs (MOEA), "the R.O.C. [Republic of China] government has viewed imitation as a necessary process in the evolution of human civilization and believed that commercial counterfeiting is an inevitable phenomena in most developing countries" (Sun 1998). Apparently, the Taiwan government also agreed that piracy gives the country tools and competitive edge to foster its own industry. According to a survey conducted by the Directorate General for Budget, Accounting & Statistics (DGBAS) on SAM practices within central level government ministries, departments and agencies in 2001, there was over 30% of respondents admitted they did not purchase software through the authorized central office (International Intellectual Property Alliance 2002).

Historical Factor
Since the United States ceased its official recognition of Taiwan in 1979 while establishing formal diplomatic relations with PRC simultaneously, the political difficulties that Taiwan faced had almost left Taiwan completely out of the international arena. The awkward situation made Taiwan's inability to seek IP protection under any international convention and rely exclusively on bilateral arrangements to gain international benefits (Sun, 1998).

Taiwan's lack of international standing precludes its participation in all multilateral international conventions for IP protection. As such, Taiwan's IP laws only protect those works that are produced by countries with bilateral treaties and agreements with Taiwan. This gives Taiwan a way to deflect the other countries' demand to revise its domestic law to conform to certain international standards and allow certain loopholes for piracy activities in Taiwan.

Economic Factors
Although Taiwan has been sort of a secret child of the United States that its existence is still officially denied, US is still the single most influential player in shaping Taiwan's IP policy and reform. The reason is that Taiwan has been enjoying a significant trade surplus with the United States for years and its economy still depends heavily on this relationship. In 2002, the US trade deficit with Taiwan was $13.8 billion, so the imposition of "Special 301" sanction may directly blow to Taiwan's domestic economy (2003 National Trade Estimate Report on Foreign Trade Barriers).

While Taiwan is considered as the most important place for worldwide OEM (original equipment manufacturer) product manufacturer, it is also a place that has a very high piracy rate. Being the major supplier of optical media, Taiwan is usually blamed for allowing various types of optical media related piracy activities. For 2002, trade losses to the U.S. copyright industries due to piracy in Taiwan were an estimated US$757 million (International Intellectual Property Alliance 2003) (Appendix 1).

Though the high piracy rate in Taiwan, Taiwanese is now getting more aware of the importance of their own IP protection following along with the growth of domestic high-tech industry. Instead of relying on the bilateral arrangements with individual countries, Taiwan is anxious to be concluded in the WTO because Taiwan could then be protected under various WIPO conventions.

Development of Rules and Regulations

In Taiwan, there are two major milestones: one is Taiwan's conclusion of Uruguay Round multilateral trade negotiations in 1993; the other one is the approval of the accession to WTO in 2001. Both incidents changed Taiwan's awkward situation and isolation in the international arena. In order to be accepted by General Agreement on Tariffs and Trade (GATT) and WTO, Taiwan agreed to be bound by the TRIPS and certain areas even exceeded the TRIPS requirements. For example, in addition to civil liability, patent infringement may also constitute a criminal offense (Sun, 1998).

Though the improvement on IP protection, Taiwan is still being accused for not enforcing the laws adequately. Taiwan has been placed on the Special 301 Priority Watch List for many years and is being requested to implement, enforce and follow up with tough, deterrent penalties and equipment seizures to effectively reduce piracy rates (2003 International Intellectual Property Alliance).

Current Ordinances
Since the first promulgation on May 14, 1928, the Copyright Law of Taiwan has since gone through several revisions. In response to the strong request on IPR protection by US, certain copyright-related legal reforms have been implemented in Taiwan recently (International Intellectual Property Alliance 2002 and Taiwan Intellectual Property Office Website):
Year Law Passed Significance
January 1998 117 Articles of Copyright Law amended and promulgated in full on 21 January 1998. US response was made in particular to the live performance and public broadcasting. Also, US commented that the transition provisions for the reciprocal relationship are far too broad and the period is far too long.

November 2001
Amendment of Copyright Law: Articles 2, 34, 37, 71, 81, 82, and 90bis
Such amendment is to provide a TRIPS-Compatible term of protection needed for Taiwan to join the WTO.

November 2001
Optical Media Management Statute (2001) ("OD Law")
This statute is to control the serious piracy activities through the control of the production of optical media. However, US does not satisfy with Taiwan government's weak permit requirements as to "blank" media, and its refusal to require permits to produce stampers/masters. In addition, the OD Law fails to cover persons/entities that engage in the unauthorized "burning" (or "manipulation") of recordable, writable and rewritable optical media. Lastly, this law increases in 'transition' periods allowed existing plants either to file an application for a permit or to file a report as to already-allocated identification codes to six months which further weaken the transition provisions for implementation of this Law.

From the above responses, we see large gaps that need to be filled on piracy between Taiwan and US.

Government Agencies and Departments

Taiwan is a civil law jurisdiction, which means statutes and administrative rulings take precedent over court decisions, although the latter's influence is clearly increasing in recent years.

In 1999, the National Bureau of Standards (NBS) and the Copyright Commission were grouped together and formed the Intellectual Property Bureau (IPB) and placed it under the MOEA. In addition, there are many outside and in-house patent examiners and trademark examiners appointed to execute the IP policies. However, the lack of formal training and the uneven quality of work has been the subject of numerous criticisms (Sun, 1998).

Furthermore, even with the integration of IPB, there is still the need for "horizontal coordination" and delineation of duties among the various agencies charged with the responsibility of IP enforcement. For example, currently there are six ministries having IP-related duties under the Executive Yuan (Appendix 5) (Sun, 1998).

Cases

1. Fair Use
Taiwan was having a vague concept of fair use. It can be seen by a case regarding the copyright of MP3 (Sun, 2000). The National Cheng-Kung University (NCKU) is a renowned engineering school. Students of this university maintain an active usage of internet and downloading and swapping MP3 music files. Local police received an anonymous complaint that NCKU students were involved in the downloading of illegal music and pornographic files. After investigation, the police discovered at least 14 computers contained such kind of files and International Federation of the Phonographic Industry (IFPI) Taiwan was involved to pursue the case. Since the involvement of several senior government officials as well as the university presidents, the case was settled merely by a formal apology from the 14 students and their parents, plus a number of concrete steps NCKU agreed to undertake in the management of online IP issues.

Analysis: Taiwan is adopting a take-no-prisoner attitude regardless how wrong those consumers were. Instead of examining the purpose and character of the use, the nature of the work, the amount and substantiality of the work used, and the effect of the use on potential market before passing judgment on the issue, they emphasize much on the "individual or family" consumption, not-for-profit and within reasonable scope only. This seems to suggest that the not-for-profit use of a personal computer duplicating files is always within the fair use protection that will possibly result in a blurred legal system.

2. Reciprocal Intellectual Property Protection
As mentioned earlier, Taiwan used to recognize the IP protection for work produced in a country with bilateral agreement. Such arrangement can be found in Nintendo of America, Inc. vs. NTDEC case for copyright infringement and trademark damages (Sun, 1998). The accused infringers are NTDEC, Nintendo Electronic Co. (located in Taiwan), Mega Soft Inc. (a California company served as a front for the defendants) and four other individuals (all citizens of Taiwan). The defendants openly acknowledged that they had knowingly sold counterfeit Nintendo video game cartridge to the United States and elsewhere from at least as early as 1990 and they knew their action were illegal. Nintendo Co. Ltd. of Japan used to seek Taiwan's enforcement of its rights, but since Japan has only a limited reciprocal arrangement with Taiwan, it only filed the claim through its subsidiary, Nintendo of America, Inc. which locates in the United States. In the default judgment, the district court held the defendants liable both jointly and severally and awarded Nintendo of America Inc. more than US$24 million in damages and US$109,000 for attorney fees.

Analysis: The reciprocal arrangement can be used by the counterfeit businesses to infringe others' IP rights for companies or individuals of foreign origin which do not have a reciprocal arrangement on IP protection with Taiwan. Followed by Taiwan's accession to WTO, both the foreign companies and Taiwan's own interests are being better protected.

Piracy Problems in Hong Kong

Unlike China and Taiwan, Hong Kong does not need to do anything special in order to be accepted as a member of the WTO as it is a founding member of the international organization. However, like China and Taiwan, Hong Kong's IP protection was primarily the result of pressure from the international community, particularly from the USA. In describing what set Hong Kong apart from China, Gargan (1995) noted the pervasiveness of piracy in all layers of the Hong Kong society. Pirated material was found not only in the back alleys of Kowloon but also in the executive suites of major companies. This made him conclude that piracy was a problem deeply rooted in the territory. Due to the promulgation of a series of anti-piracy ordinances and the effort by government departments, Hong Kong's piracy rate in 2001 was 11 percent lower than that of 1996 and was removed from the US Special 301 Watch List. According to a survey conducted in 57 countries in 2001, Hong Kong ranked 24th with 53 percent of software piracy rate (Hong Kong Standard, April 4, 2003).

Cultural Factor and Public Awareness
Similar to the case of China, the ethics of Confucianism is a powerful force shaping the modern Hong Kong society, though to a lesser extent. Confucian compliment to copying others' works has had a negative impact on the territory's respect to creativity, originality and intellectual property right. Compared with the Western populace, it is more difficult for the Hong Kong Chinese to understand the notion of intangible asset, such as copyright and patent, and to acknowledge the negative effects of software piracy (Ho, 1995).

Education
The education system of Hong Kong is very much based on a force-fed environment. Children are ingrained with a plentitude of information at a very early age. The result of such an education system is low level of originality and widespread copying activities, be it piracy of computer software, music, movies or product designs (Ho, 1995).

Government Policies
Much of Hong Kong's success has been attributed to its policy of positive non-interventionism. Under this policy, investment in original research and development is always left in the private sector. In the absence of giant multinationals to fund research, the inevitable outcome of the policy of non-intervention is low level of creativity and pervasiveness of copying from others (Ho, 1995).

However, government effort to combat piracy started a new page in the late 1990s. An anti-piracy task force was set up in the Customs and Excise Department in 1999 to make piracy-related arrests; the courts began imposing longer jail terms for violation of copyright ordinance; the Legislative Council reclassified piracy under Hong Kong's Organized and Serious Crime Ordinance in 2000.

Attitudes of Software Manufacturers
Marketing strategies of software manufacturers and pricing policies of their software also contribute to the piracy in Hong Kong. It was argued that piracy was partly a result of software manufacturers' strategic calculation. Some software manufacturers realized that they could not gain a significant amount of business even if all pirated material was non-existent. They therefore allowed piracy to exist in the hope that their software would be widely used and become a necessity in many organizations. By the time this happened, they would take action to combat piracy and gain profit as the users had to rely on them to supply legitimate copies. On the other hand, retailing prices of the same legitimate software in USA was 20% lower than that in Hong Kong. The huge gap between the retailing prices of legitimate copies and pirated copies led to a greater incentive for people to buy pirated copies (Ho, 1995).

Lack of Localized Software Industry
Hong Kong does not have its own software producing industry. As they are not the ones to suffer from software piracy, many Hong Kong people do not have the incentive to protect IP. This is contrary to its fight against piracy of Cantonese pop music. Hong Kong had a prosperous record industry in which millions of locally produced compact discs were sold each year. With the influx of counterfeit compact discs, many of the local record companies united together to launch various advertising campaigns to raise public awareness (Ho, 1995).

Development of Rules and Regulations

Hong Kong's major ordinances on copyright protection are (1) Copyright Ordinance as amended by Intellectual Property (Miscellaneous Amendments) Ordinance 2000, (2) Copyright (Suspension of Amendments) Ordinance 2001 and (3) Prevention of Copyright Piracy Ordinance. The Copyright Ordinance was first introduced to Hong Kong in 1990 by extension of the United Kingdom Copyright Act 1956. As Hong Kong is a founding member of the WTO, it has the obligation to comply with TRIPS. Since July 1, 1997, by virtue of China's membership, the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention on Industrial Property, and the Universal Copyright Convention (Geneva, Paris) apply to Hong Kong (Department of State, USA, 2001).Hong Kong's major ordinances on copyright protection are (1) Copyright Ordinance as amended by Intellectual Property (Miscellaneous Amendments) Ordinance 2000, (2) Copyright (Suspension of Amendments) Ordinance 2001 and (3) Prevention of Copyright Piracy Ordinance. The Copyright Ordinance was first introduced to Hong Kong in 1990 by extension of the United Kingdom Copyright Act 1956. As Hong Kong is a founding member of the WTO, it has the obligation to comply with TRIPS. Since July 1, 1997, by virtue of China's membership, the Berne Convention for the Protection of Literary and Artistic Works, the Paris Convention on Industrial Property, and the Universal Copyright Convention (Geneva, Paris) apply to Hong Kong (Department of State, USA, 2001).

Action taken by Hong Kong and Response of the US

Year Action taken by HK Significance
1995 In May, Legislative Council increased criminal penalties for commercial piracy: jail terms of up to 8 years were provided for the most serious cases. US criticised the Hong Kong government incapable of combating the continuous influx of pirated material from China and the fine levels of laws the lowest in Asia. International Intellectual Property Alliance (IIPA) recommended to place Hong Kong on the Special 301 Watch List for the first time (IIPA, 1996)

Feb 1999
Hong Kong was removed from the Special 301 Watch List. However, the report released by the Office of the U.S. Trade Representative (USTR) stated that 'HK piracy rates, which are some of the highest in the world, have not been significantly reduced. Hong Kong has only just begun to address the situation since that review. The U.S. remains deeply concerned that Hong Kong has not devoted adequate resources to address the piracy problem.'

2000
The Legislative Council reclassified piracy under Hong Kong's Organized and Serious Crimes Ordinance.
In Jan 2002, in the Ninth Report on the Hong Kong Transition presented to the US Congress, it was stated that 'Hong Kong continues to make progress in the fight against copyright piracy. Legislation was introduced ... reclassify IPR piracy as a serious crime ... The 185-member Special Task Force established by the Customs and Excise Offices continues to perform effectively ... The USTR now cites Hong Kong as a model for other Asian economies attempting to deal with IPR piracy.' (Retrieved in April 2003 from http://www.freeconomy.org/ freeconomy/eng/test/page_b72.html)

2001
After the establishment of the Special Task Force in the Customs and Excise Department, around 90 percent of the retail outlets selling pirated optical discs of all types were closed.

Cases

Copyright (Suspension of Amendments) Ordinance
The two major copyright ordinances in Hong Kong, the Copyright Ordinance and the Prevention of Copyright Piracy Ordinance, were amended by the Intellectual Property (Miscellaneous Amendments) Ordinance that came into effect on April 1, 2001. The amendment aims to combat corporate piracy. Anyone will be made criminally liable for possessing pirated copies of copyrighted works in the course of, or in connection with, any trade or business. The Ordinance was short-lived. One month after it came into effect, the Copyright (Suspension of Amendments) Ordinance was enacted in June 2001 to make it partly suspended after protests from the public and the industry.

The Intellectual Property (Miscellaneous Amendments) Ordinance was suspended except as it applied to four categories: computer programs, movies, television dramas and musical recordings. In other words, only the use of pirated copies of four categories will bear criminal liability. The relevant provisions on the suspension would expire on July 31, 2003. Again in Feb. 2003, the government proposed to make permanent the suspension arrangement of the Copyright (Suspension of Amendments) Ordinance 2001. Whether the suspension arrangement will be made permanent is yet to be decided.

Analysis: Originally, the Intellectual Property (Miscellaneous Amendments) Ordinance was made after public consultation. It was reported that it was the result of pressure from international organizations such as Business Software Alliance. However, the public and local industry were dissatisfied with the government for not consulting them and for putting too much emphasis on the interests of the copyright owners and business software companies rather than local industry. The Ordinance was criticized as having implications unforeseen by the government, for instance, hampering the dissemination of information and classroom teaching as photocopying of printed matters and downloading of information from the Internet might be a criminal offence (Managing Intellectual Property, April 2001; Managing Intellectual Property, June 2001).

Conclusion

Being part of the Greater China, China, Hong Kong and Taiwan are having many similarities as well as differences in IPR protection due to their own cultural, historical and economical backgrounds. The following table is a summary on the three locations on IP issue:

  China Hong Kong Taiwan
Cultural Sharing of creative works and ideas stemmed from Confucian beliefs. In addition, sharing has been the mandate for over 40 years in this Communist state. It is still under Confucian influence. The education system discourages creativity. The public widely holds that "knowledge should be shared" and does not have a clear notion of intangible property concept. The government is lenient towards piracy.

Political influence
Urge to open up the market after becoming member of WTO, to make compatible laws with different bilateral treaties to protect IPR.
As a founding member of WTO, Hong Kong is obliged to comply with TRIPS. In the mid-1990s, it was subject to stronger pressure from the international community to commit IP protection.
It has to make bilateral treaties and agreements with individual countries due to lack of international standing.

Economy
$103.1 billion trade surplus with US in 2002
US$3.3 billion trade deficit with US in 2002
$13.8 billion trade surplus with US in 2002

WTO member since
December 11, 2001
1995 (founding member)
January 1, 2002

IIPA Special 301 Recommendation (1990-2002)
306 Monitoring (6)
Priority Watch List (1)
Watch List (3)
Priority Foreign Country (3)
Other Observations (1)
Watch List (2)
Priority Watch List (3)
Watch List (6)
Priority Foreign Country (1)
Other Observations (1)

2002 Estimated trade losses due to copyright piracy
US$1,849.3 million
US$164 million
US$756.7 million

Rules and regulations
China has patterned its IPR laws on international treaties: the Berne Convention and the WTO 's 1995 Agreement on TRIPS. Nevertheless, China still receives pressure to improve the transparency of its legal system, and to eliminate "local protectionism" In the future, China has to develop more stringent IP protections and to assure foreign IP rights holders equal treatment under those laws.
Continue to make good progress in IPR protection and sentence those convicted into jail.
Follows largely TRIPS Agreement. In some areas it has even gone beyond the Agreement's threshold. Convicted offenders have to face both imprisonment and monetary penalty.

Legal enforcement
Inadequate
Acceptable
Inadequate

Discussion

From the perspective of copyright owners or western intellectual property right (IPR) regimes, like the USA, piracy is an act of usurping copyright owners' product of hardship and neglecting their effort in inventing knowledge. It is an immoral act that incurs economic loss to the copyright owners. It is therefore the users of pirated material to be blamed and copyright owners are the victims. This perspective, or the perspective of the North, represents only one side of the coin. Examined from another angle, an angle from the Third World or the South, piracy will tell a completely different story.

From the viewpoint of the Third World, patents or the broader label of IP protection are always used by IPR regimes as instruments of conquest or recolonization in the digital age. The knowledge that is claimed to have been 'invented' and hence 'patented' and converted to 'intellectual property' by IPR regimes is very often an existing innovation in indigenous knowledge systems of the Third World. Prior art or prior use of this 'invention' in other countries is systematically ignored in IPR regimes, such as the USA. According to US laws on patents and monopolies, if somebody invents something that already exists elsewhere and he or she does not know the existence in good faith, he or she can still claim to have invented something and be given a patent in the States. Shiva criticizes this legal system that aimed at preventing intellectual piracy is itself legitimizing piracy. IPR regimes' claim to invention and the reward given to invention are simply cloaks for their attempts to control over the global market (Shiva, 2001).

Shiva's analysis highlights the fact that the issue of piracy is not simply one of "right" versus "wrong" or "economic loss suffered by the copyright owners" versus "economic gain enjoyed by pirated work users", but also of power and politics. One day when the balance of power of the international political arena shifts, for instance it becomes more balanced between the North and the South, or between IPR regimes and IP users, piracy may have a new definition.