Hong Kong Introduces New Law to Protect Copyright in the Digital Age

According to recent comments by the IFPI, 95% of the online music downloads today are unlicensed. Around £5 billion is generated annually by these illegal activities (at the expense of the music industry and the right owners). With the international community struggling to update copyright laws to address the challenges of the digital environment, Hong Kong has introduced amendments to the Copyright Ordinance, intended to enhance protection for copyright works in the digital age.

Summary of key proposals

The Copyright (Amendment) Bill 2011 introduces:

• A technology-neutral exclusive right for copyright owners to communicate their works through any mode of electronic transmission.
• A statutory "safe harbour" to limit the potential liability of Online Service Providers ("OSPs") for copyright infringement occurring on their service platforms.
• An exception to allow media shifting of sound recordings for private and domestic use. This is relatively uncontroversial but the exemption is quite limited as it applies to sound recordings only. The copy must be made from the original by the lawful owner of the original copy and must only be for private and domestic use by the owner or a member of the household in which the owner lives. Only one copy can be made and stored in each device lawfully owned by the owner and the owner must retain ownership of both the original recording and the copy.
• Additional factors to assist the Court in considering the award of additional damages in online infringement cases.

What does "communicating" mean?

An issue that has arisen in many cases involving online distribution of infringing copyright works is whether "distribution" requires actual dissemination, or whether passive conduct by simply making available, or offering to distribute, is sufficient to violate a copyright owner's rights. The UK and the US courts have been divided on this issue. In Hong Kong, the distinction is particularly important since, under the existing law, "making available" is only a civil offence whilst "distribution" may also be criminal.

The new law introduces an exclusive right for copyright owners to communicate their works to the public through any mode of electronic transmission. "Communication" is defined to include broadcasting a work, including it in a cable programme service and making available a work to the public. There will also be a new criminal offence for those who make unauthorised communications of copyright works to the public:

• in the course of any trade or business that consists of communicating works to the public for profit or reward; or
• non-commercial communication to such an extent as to affect prejudicially the copyright owner.

Active dissemination of digital copies of infringing works will clearly be caught either by the existing distribution offences or the new communication offences. However, the new definition of "communication" results in a departure from the previous law in that, simply "making available" unauthorised copyright works via electronic means (including via the Internet), becomes a criminal offence.

Unauthorised file sharing of works such as music, movie and games should be covered by the offence. This is even if the activity is done on a non-commercial basis, provided that the copyright owner is "prejudiced". The position of copyright owners is strengthened as they will no longer have to rely on the "distribution" provisions only and it will not be necessary to show that the infringing work was actively transferred by the defendant, or that anyone actually downloaded the work. In theory, all parties involved in P2P file sharing of infringing works, may be liable.

It would seem that simply posting links to infringing material on the internet may escape criminal liability. The bill provides that a person is not regarded as "communicating" a work to the public if he does not determine the content of the communication. The administration has indicated that this means forwarding or sharing a link, per se, does not constitute communication. However, will this interpretation of the law really be sustainable where someone knowingly and intentionally posts links to an infringing movie on the internet?

Prejudice

The bill goes on to set out some non-exhaustive factors to help determine what constitutes "prejudicial extent":

• The purpose of the distribution;
• The nature of the work, including its commercial value;
• The amount and substantiality of the portion copied (in relation to the work as a whole);
• The mode of distribution; and
• The economic prejudice caused to the owner of the copyright as a consequence of its distribution, including the effect of the distribution on the potential market or value of the work.

The factors have been distilled from Hong Kong, UK and Australian case law. It seems likely that the courts will find criminal liability where a work has commercial value and the mode of distribution will facilitate widespread circulation of a work, even where the distribution is not in the course of trade or business which affects the revenue stream of the owner. The administration has made clear that the policy intent is to combat large scale piracy but this is not evident on the face of the legislation. Arguably, even very small scale, non-commercial, infringement can still be regarded as "prejudicial".

"Safe Harbour" for OSPs

The bill limits the liability of OSPs for copyright infringement occurring on their service platform, subject to compliance with certain prescribed conditions. The conditions include requiring the OSP to have taken reasonable steps to limit or stop the infringement as soon as practicable after it:

• receives a notice of the alleged infringement;
• became aware that the infringement has occurred; or
• became aware of facts or circumstances that would lead inevitably to the conclusion that the infringement has occurred;
• The OSP must also have not received any financial benefit directly attributable to the infringement.

The "safe harbour" is underpinned by a non-statutory Code of Practice, which sets out practical guidelines and procedures for OSPs to follow. An OSP will be regarded as having taken "reasonable steps" if it complies with the Code of Practice. After much discussion, a draft Code was published for comments in August 2011. The Code provides for the "Notice and Notice" and the "Notice and Takedown" systems practised in many other jurisdictions and sets out detailed steps to be followed by the service provider. The requirements are different depending on whether the OSP is a network, storage, or search engine provider. Some of the deadlines for performing certain procedures are quite tight, depending on the copyright work in question.

The burden on OSPs has definitely been increased although, in return, the bill provides more certainty regarding OSP liability. Whilst the bill makes clear that OSPs are not obliged to police activities, once an OSP is aware of an infringement, they need to take active steps to prevent the infringement. What facts or circumstances will lead inevitably to the conclusion that infringement has occurred, is something that will no doubt be argued in individual cases, but this clearly means that OSPs cannot afford to turn a blind eye to blatant illegal activity occurring on their service platform.

Authorising infringement

A party who is not a primary infringer can still be liable under the copyright law on the basis that it "authorised" the infringement. There is no Hong Kong case law on this issue but UK cases have traditionally required the defendant to have some degree of control over the acts of the infringer and to show that the party had actively authorised, or facilitated, the infringing acts, or had deliberately collaborated with, the infringer.

The bill seeks to clarify what constitutes "authorisation" of copyright infringement and provides that the court may take into account all the circumstances of the case, in particular:

• The extent of that person's power (if any) to control or prevent infringement;
• The nature of the relationship (if any) between the parties; and
• Whether that person has taken any reasonable steps to limit or stop infringement.

Going forward, there is more likely to be a finding of liability where a person is in a position of control over the infringer, or has received a financial benefit. This will include online retailers, or auction websites, which is in keeping with the international trend.

However, the bill does not address the issue of knowledge, which can be very important where authorisation is alleged. To the extent that there are specific provisions for OSPs to be found liable where they have been fixed with knowledge of infringing activity, it remains to be seen whether the authorisation provisions will be interpreted in a manner consistent with this approach.

Conclusion

The bill is currently before the Bills Committee. It appears to have escaped the controversy that has dogged other countries such as the UK, where the Digital Economy Act 2010 has been the subject of a judicial review, as well as being accused of breaching human rights. The main problem is the provision for disconnecting persistent downloaders of copyright infringing material. Hong Kong has chosen not to go down this route, for now. However, there is evident concern from stakeholders regarding the terms of the Code of Practice, the meaning of "prejudice" and the implications of the change in the law on freedom of expression. These issues are currently being debated and further changes to the law could be made.

Key Contacts

Charmaine Koo

Consultant | Intellectual Property

Email or call +852 2825 9300