Amendments to the Copyright Ordinance (2001-2004)

In early 1999, we consulted the public on additional legal tools to combat intellectual property rights infringements. One of the proposals that gained wide public support was to combat corporate copyright piracy activities by criminalizing the use of infringing products, for example, pirated computer software, in business. According to an unofficial estimate, about 50% of all computer software used in business is pirated. Such an excessive degree of violation of intellectual property rights has significantly affected the legitimate interests of copyright owners, discouraged innovation and investments, and tarnished the international image of the Hong Kong SAR.

The Copyright Ordinance was amended to implement the proposal. The amendments took effect from 1 April 2001.

To address the public concern that the amendments had hampered the dissemination of information in enterprises as well as teaching activities in schools, the Legislative Council passed the Copyright (Suspension of Amendments) Ordinance 2001 in June 2001.

As a result, the criminal provisions in the recently amended Copyright Ordinance will continue to apply, with a slightly narrowed scope, to computer software, movies, television dramas and music recordings. For copyright works other than these four categories, the criminal provisions will revert to the position before the amendments took effect.

The effects of the Copyright (Suspension of Amendments) Ordinance 2001 on criminal liabilities are as follows -

1. >anyone who possesses an infringing copy of computer program, a movie, a television drama or music recording for the purpose of or in the course of any trade or business may be found guilty of a criminal offence, unless they can prove that they did not know and had no reason to believe that the copy in question was an infringing copy;
2. the use of a parallel-imported computer program in business is not a criminal offence [For further liberalization of parallel importation of computer program, please see Part II on the Copyright (Amendment) Ordinance 2003 starting from Q31.]
3. anyone who deals in (i.e. buying, selling, distributing, importing or exporting otherwise than for private and domestic purposes) infringing copies of copyright works may be found guilty of a criminal offence, unless they can prove that they did not know and had no reason to believe that the copy in question was an infringing copy; and
4. the use of infringing copies of copyright works other than those mentioned in (a) above in business is not a criminal offence.

The maximum penalty of the offence for (a) and (c) above is a fine of $50,000 per infringing copy and 4 years' imprisonment.

No. In effect, the Copyright (Suspension of Amendments) Ordinance 2001 suspends the criminal sanctions against the possession of an unauthorized photocopy of a newspaper cutting, an unauthorized recording of a television programme, or an unauthorized copy of a photograph downloaded from the Internet in the course of business (which includes teaching activities in educational establishments).

These sorts of copyright works are not normally disseminated in enterprises or schools as "information".

Moreover, these products generally have substantial commercial value. Piracy of these products, in particular computer software, in the Hong Kong SAR and elsewhere is rampant and it is therefore necessary for the Copyright Ordinance to provide a higher level of protection to them.

1 April 2001.

Section 3 of the Copyright (Suspension of Amendments) Ordinance 2001 provides that the suspension provisions will lapse on 31 July 2006.

Suppose a company engages in the sale of clothing. The company needs computer software to support its business activities. The company then buys one set of computer software which is licensed for use in one computer only, and installs the same software in the computer of each of its 50 employees (or else in a network server for shared use by its 50 employees).

Before 1 April 2001, it was not absolutely clear whether such acts amount to criminal acts, as the business of the company is selling clothing rather than pirated computer software.

After 1 April 2001, it is clear that the company will commit a criminal offence under such circumstances.

Another example is a barber shop playing music recording or videos containing television drama or movies for the enjoyment of customers in the course of its business. If the music recording or video is played from a pirated CD or VCD, and the shop owner and the employee responsible for operating the CD or VCD player know that the CD or VCD is a pirated copy, they may be criminally liable.

Depending on the circumstances of the case, employees responsible for the infringement may also become liable. For example, an IT manager of the company who knowingly installs infringing copies of software on his workplace's computers may commit a criminal offence. He would not be exempted from criminal liability because he acted on the instruction of the company's proprietor. In addition, employees who know that software installed in their computers is infringing copies and who continue to use it may also be liable to criminal prosecution.

The following guidelines may be useful -

1. Generally do not buy from unlicensed hawkers or temporary premises. Legitimate distributors of computer software, movies, television dramas or music recordings do not normally authorize such places to sell their products.
2. By all means seek the best price for the product; but if the price is no more than a fraction of the price for which an authorized version of the product is normally sold, this may be a clue that the copy may be pirated. If in doubt, approach the copyright owner for additional information.
3. If you are purchasing computer software for your business, get a set for each computer that will run the software, or purchase an appropriate network software licence.
4. Carefully study the licensing conditions to ensure that the software installed in your computers is properly licensed for use in your business. Be sure you know your rights and obligations.
5. Conduct periodic software auditing to ensure that only properly licensed computer software has been installed in any computer in your office.
6. Ensure that all employees in your office are fully aware of the company's policy and practice on the use of computer software.
7. Do not play music recording, movies or television drama videos for your business using pirated CDs, DVDs, VCDs or videotapes.
8. If you are an employee, do not use computer software for your job if you know or have reason to believe it is pirated.

A person who possesses an infringing copy of computer software, a movie, a television drama or music recording for use in his business will not commit an offence if he or she does not know and has no reason to believe that the copy in question is an infringing copy. In case your business were suspected of breaking the law, showing that you have followed the "dos" and "don'ts" set out in question 9 could help you to demonstrate that you did not know and had no reason to believe that the copy is an infringing copy. The court will decide ultimately on the basis of all relevant facts and circumstances.

After 1 April 2001, if a bar or restaurant (including a private club with restricted membership) plays music recording from pirated VCDs/CDs etc in the course of its business,( e.g. for the enjoyment of customers), it may commit a criminal offence.

No. Investigations will be carried out in response to reports lodged, for example, by, copyright owners or members of the public.

Customs will not enter or search the premises of a business organization unless there are reasonable grounds for suspecting that it has committed an offence. Under such circumstances, Customs will normally apply to a magistrate for an entry and search warrant for searching the premises concerned.

No. According to section 61 of the Copyright Ordinance, a lawful user of a copy of a computer program may copy the program without infringing the copyright in the program if the copying is necessary for his lawful use.

No. According to section 60 of the Copyright Ordinance, a lawful user of a copy of a computer program may make a back-up copy of the program without infringing the copyright in the program if it is necessary for him to have the back-up copy for the purpose of his lawful use. But if the software licensing agreement prescribes conditions for making back-up copies, users must follow the relevant conditions.

Enterprises may be able to make use of the "downgrade" arrangement provided by some software publishers. According to the Business Software Alliance ("BSA"), most of its members provide a "downgrade" arrangement so that users can continue using "pirated" out-dated versions of the software legally as long as they have purchased new versions of the software. Users must contact relevant software publishers directly to make the necessary arrangements.

If the employee installs the pirated software with employer's consent, and the employer knows or has reason to believe that the software in question is an infringing copy, the employer could also be prosecuted.

Employers should implement proper software asset management measures and ensure that all employees are aware of the requirement that only authorized software should be used. Companies should also conduct periodic software asset audit. Such measures will reduce employers' risk of facing prosecution if their company falls under suspicion of breaking the law.

According to the amended Copyright Ordinance, if a person knowingly uses infringing copies of computer software in business, he will commit a criminal offence. The company should check with the supplier and request confirmation that all software installed in the computer is legitimate and has been properly licensed for business purposes. All pirated software should be removed. Do follow up with the supplier if it cannot provide all the licences of the software pre-loaded onto the computer.

Licensed software must be used according to the terms of the licence. The installation onto multiple computers of software licensed for use on a single computer violates the licence condition. This is the same as making infringing copies of the software. Possession of such infringing copies in business may put you at risk of prosecution.

No. The use of infringing software for private and domestic purposes is not a criminal offence.

No. The use of a parallel imported computer software is not a criminal offence.

If someone knowingly installs pirated software in his home computer for domestic as well as business purposes, he may commit a criminal offence.

Genuine 'freeware' is authorised by the software copyright owner, and so downloading it will not be infringe copyright. Note that you should only use 'freeware' in accordance with the licence conditions. Some "freeware" and "share-ware" products have a licence condition that says that they can be used for personal or private purposes at no charge, but one must pay if it is used for commercial purposes. Users must therefore read carefully the licence conditions before downloading.

Here are some useful guidelines:

• Try to make purchase at well-known and credible web sites. One can also ask the software publishers for authorize web sites.
• By all means seek the best price for the product; but if the price is no more than a fraction of the price for which an authorized version of the product is normally sold, this is a clue that the copy may be pirated. If in doubt, approach the copyright owner for additional information or call BSA's hotline.

If you do not know whether the relevant web site has permission from copyright owners to provide the software, you should use reasonable judgement and make some enquiries. If you possess infringing software but you did not know and you had no reason to believe that it is an infringing copy, you would not commit an offence. Should you for any reason be suspected of breaking the law, showing that you have used reasonable judgement and made appropriate enquiries can help to demonstrate that you did not know and had no reason to believe that the software was an infringing copy. The court will decide ultimately on the basis of all relevant facts and circumstances.

Use of pirated software is like using stolen property. Government encourages employers to adopt proper software asset management measures. As an employee, you should assist your company in obeying the law by requesting your employer to use only properly licensed software. Other possible actions that you may take include refusing to use the pirated software and reporting the matter to the Customs and Excise Department.

You should adopt proper software asset management (SAM) measures to ensure that only properly licensed software is used in your business. Examples of these measures are:

1. appoint a compliance officer or an officer responsible for managing software assets to oversee and to act as a focal point for matters related to SAM and intellectual property;
2. promulgate internal instructions in respect of the proper management and use of computer software to ensure that each staff member clearly understands the requirements;
3. ensure general awareness of all staff members to use only authorised software;
4. acquire software legitimately;
5. keep software licences;
6. keep software inventory up-to-date;
7. maintain and implement proper procedures for installing and distributing software;
8. conduct periodic software asset audit; and
9. confirm proper licensing and authorization for all software used.

The infringing act in question is knowingly possessing an infringing copy of a copyright work (an infringing picture). But since the act is not relevant to the business of the firm (i.e. accounting), and the infringing copy is for personal enjoyment of the employee, it is not a criminal offence.

The infringing act in question is knowingly possessing infringing copy of a copyright work (an infringing software). As long as the infringing software is only used for personal purposes which are unrelated to the business of the firm, it is not a criminal offence.

The infringing act in question is knowingly possessing an infringing copy of a copyright work (an infringing sound recording). As the act has nothing to do with the business of the firm and is purely for personal enjoyment, it is not a criminal offence.

The public had generally expressed the view that the restrictions on parallel importation of computer software should be removed. They believe that allowing parallel importation of computer software would increase competition and availability of products in the market, resulting in more choice and lower prices for consumers. To implement the proposed liberalization, the Copyright (Amendment) Ordinance 2003 (amendment Ordinance) was passed in July 2003. The amendment Ordinance took effect from 28 November 2003.

After the coming into effect of the amendment Ordinance, the restriction on parallel importation no longer applies to products which contain a computer program ( commonly known as computer software products). However, if the principal attraction of a computer software product is musical sound or visual recordings, movies, television dramas, e-books, or a combination of them, the restriction continues to apply.

In simple terms, the restriction on parallel importation continues to apply if the principal attraction of the product in question is musical sound or visual recordings, movies, TV dramas, e-books, or a combination of them. To determine the principal attraction of the product, the amendment Ordinance has spelt out a number of tests as follows:

Test 1: this test is specifically applicable to a parallel-imported product containing a copy of a computer program, and a copy of a movie and/or a TV drama

1. Restriction on parallel importation continues to apply if the copy of the movie or TV drama in question is the whole or substantially the whole of the movie or TV drama (for example, a DVD of a movie which contains a computer program allowing specific languages to be selected).

2. Where the copy in the product constitutes only a part of a movie or a TV drama, the restriction still applies if -

   1. all the copies of all those parts of the movie or television drama together constitute the whole or substantially the whole of the movie or television drama; or
   2. the viewing time of all those parts exceeds 15 minutes in aggregate in the case of a movie, or 10 minutes in aggregate in the case of a TV drama.
3. As far as TV drama is concerned, where more than one episode is contained in the product, the tests in (a) and (b)(i) above refers to an episode of the TV drama in the product.

Test 2: this test is applicable to a parallel-imported product containing a copy of a computer program, and a copy of a musical sound or visual recording, movie, television drama, e-book, or a combination of them

In simple terms, a hypothetical test is set out in the amendment Ordinance : The test assumes that a normal person acquires the parallel imported product for his or her own use. If this person is likely to acquire the product for the purpose of acquiring

• a copy of a movie or a TV drama (other than those that are caught by (a) and (b) in Test 1 above);
• a copy of a musical sound or visual recording;
• a copy that forms part of an e-book; or
• a combination of the above copies;

rather than for the purpose of acquiring copies of any other types of works contained in the product, the product will continue to be subject to restriction.

To illustrate, assuming that there is a product containing a copy of a computer program, a movie and a musical sound recording, we have to ask: For an ordinary person acquiring the product for his own use, is he likely to acquire the product for the purpose of acquiring the copy of movie and musical recording more so than for the purpose of acquiring the copy of computer program (say the computer program which allows the user to select the language or an individual scene or the program notes) ? If the answer is yes, the product will continue to be subject to restriction.

A movie is defined in the amendment Ordinance to mean a film of the kind commonly known as a movie.

A TV drama is defined in the amendment Ordinance to mean a film of the kind commonly known as a TV drama.

A musical sound recording is defined in the amendment Ordinance to mean a sound recording the whole or a predominant part of which consists of the whole or any part of a musical work or a musical work and a related literary work.

A musical visual recording is defined in the amendment Ordinance to mean a film with an accompanying sound-track, the whole or a predominant part of which sound-track consists of the whole or any part of a musical work or a musical work and a related literary work.

An e-book is defined in the amendment Ordinance to mean a combination of copies of works contained in a product and comprising -

1. one or more copies of -

   1. a computer program; and
   2. a literary work (other than a computer program), a dramatic work, a musical work or an artistic work ("main work"), so arranged as to provide for the copy of the main work to be presented in the form of an electronic version of a book, magazine or periodical; and
2. where a main work is accompanied for illustrative purposes by any copy or copies of films or sound recordings, that copy or those copies.