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View From Here: Copyright clampdown
[November 23, 2005]

View From Here: Copyright clampdown

(Legal Week)Enforcement agencies and IP rights owners are struggling to contain the modern scourge of piracy. Markets are still flooded with fakes, while a pervasive apathy towards intellectual property means that otherwise law-abiding citizens will routinely exploit new technologies to commit copyright infringement without batting an eyelid.

Around the world, efforts have thus redoubled to tackle the pirates head-on through tighter legislation and tougher penalties. In Asia in particular - where the problem is perhaps at its most acute - governments are increasingly adopting a zero-tolerance approach to this contemporary crime and are spearheading vigorous campaigns to stamp out piracy in all its forms.

Copyright infringement

In Malaysia - recently identified by the International Federation of the Phonographic Industry as a leading exporter of pirate optical discs - the Government has effectively declared open war on pirates and has shown itself willing to use all weapons at its disposal to win the battle, no matter how deadly. In 2004, the Copyright Act 1987 was revised to beef up penalties for infringement and allow Ministry of Domestic Trade and Consumer Affairs enforcement officers to arrest suspects without a warrant.

Increased police powers

Then earlier this year the Malaysian Government announced that it was considering turning the draconian provisions of the Internal Security Act 1960 against repeat infringers as a last resort. Michael Soo of Shook Lin & Bok explains that the Act empowers police officers to arrest without warrant anyone they "have reason to believe" has acted or is likely to act "in any manner that is prejudicial to the security of Malaysia".

Suspects may initially be detained in solitary confinement for up to 60 days - extendable for up to two years with the approval of the Minister for Home Affairs - and may be denied legal representation and access to relatives during this time.

Working in tandem with the revamped Copyright Act, these sweeping powers of arrest without trial should act as a powerful deterrent against would-be pirates.

Government clampdown

In a separate initiative, the Ministry of Domestic Trade and Consumer Affairs has teamed up with the Recording Industry Association of Malaysia (RIM) to crack down on the estimated 3,000 outlets that offer truetone mobile phone ringtones without paying royalties to the artists whose songs they use.

This relatively new form of infringement is soaring alarmingly: piracy rates have already topped 90% and one company is reportedly raking in almost RM4.7m (723,000) in illegal ringtone sales. In a bid to nip this disturbing trend in the bud, the ministry and the RIM recently sent out more than 100 warning letters to known truetone pirates, spelling out the potential consequences of their illicit activities: the courts can impose a fine of between RM2,000 (307) and RM20,000 (3,070) for each infringement, as well as a possible jail term of up to five years.

The initiative appears to have had some success: at least four major ringtone companies which previously advertised truetones in local newspapers have fallen conspicuously silent since receiving the warning letters.

Hong Kong, too, has thrown its weight behind the copyright enforcement drive, according to IP lawyers at Wilkinson & Grist. After government dithering last year over whether facilitating the use of peer-to-peer (P2P) file-sharing would incur liability, the recent arrest of a P2P infringer for the illegal online distribution of copyrighted movies using BitTorrent technology suggests that this question has now been answered in the affirmative.

The customs authorities cooperated closely with the film industry in cracking the case, setting up a special taskforce whose in-depth investigation ultimately unmasked the culprit. Under Hong Kong copyright law, the penalty for distributing illegal copies of a copyrighted work is a fine of up to HK$50,000 (3,750) per infringing copy, plus a maximum four years' imprisonment. The arrest - the first of its kind - hit the headlines in Hong Kong and has also piqued international interest among rights holders, IP practitioners and file-sharers alike. The Hong Kong Government cautioned that the incident should serve as a salutary lesson of the inherent risks of copyright infringement.

In China, meanwhile, new measures jointly introduced by the National Copyright Administration and the Ministry of Information Industry have increased the options available to victims of online copyright infringement, who can now seek administrative relief from internet service providers (ISPs) in addition to civil remedies as before.

An ISP that hosts a website, bulletin board or chat room will be held jointly liable with the content provider either if it knows from the outset that content is infringing, or if it fails to delete or disable access to infringing material after receiving a takedown notice from the copyright owner. Where a takedown notice is ignored, the copyright owner can launch court proceedings and/or seek administrative relief by filing a complaint with the National Copyright Administration, which may order the ISP to cease the infringement immediately, confiscate any illegal income generated from the infringement and fine the ISP either up to three times the illegal income earned, or a statutory fine of up to $12,000 (7,000).

Freshfields Bruckhaus Deringer's Connie Carnabuci and Jennifer Li note that since an administrative action is swifter than court proceedings, the new measures afford a more efficient alternative for copyright owners to protect their rights online. One shortcoming, however, is that no mention is made of how quickly an ISP must react to a takedown notice in order to avoid either administrative penalties or civil liability.

Software piracy

Like copyright infringement, software piracy is rampant thanks to the public's relaxed approach to licensing and the ease with which computer programs can be ripped off. In Malaysia, the Government is casting the enforcement net wider to ensnare software thieves across the whole spectrum of society.

According to Shook Lin & Bok's Michael Soo, large companies are a new target: a series of raids this year revealed that many otherwise reputable businesses habitually use pirated software. The Ministry of Domestic Trade & Consumer Affairs has responded to this revelation with a media campaign intended to educate company directors of the dangers of turning a blind eye to software piracy: they may be held personally liable for such violations, and face up to five years in prison and a fine of up to RM20,000 (3,080) if found guilty.

The ministry also has cybercafe owners in its sights and has advised them to take immediate steps to ensure that all software used on their premises is duly licensed and that licensing terms and conditions are strictly observed.

Indian courts get tough

The Indian courts have also begun to clamp down on software piracy. This represents a turnaround in judicial practice, as for years IP theft was not taken very seriously in India, viewed more as a petty white-collar infraction rather than a true criminal offence.

The Delhi High Court recently heard a case in which an Indian company was accused of loading unlicensed Microsoft programs onto the hard drives of computers it sold. The software giant produced incontrovertible evidence of the infringement in court: it caught the defendant red-handed when an incognito Microsoft employee purchased a computer chock-full of pirate Microsoft software.

Microsoft also submitted as evidence an affidavit from a chartered accountant showing how long the defendant had been in business and the sale price of the computers it sold. Weighing up the evidence, the court awarded substantial damages in an amount of rup1.98mn ($25,150), plus interest at a rate of 9% until the date of payment, based on the software's popularity and an assumption that 100 computers with stolen software were sold each year.

Singh notes that the Delhi High Court judgment should lay the foundations for a vigorous new enforcement regime across the country.

Hard-line Danish approach

Outside of Asia, the Danish judiciary is also taking a hard-line stance towards software theft. Sentences were recently handed down in the biggest piracy case ever to come before the Danish courts. Eight defendants were in the dock, accused of producing, importing and reselling hundreds of thousands of illicit copies of protected computer programs created by cutting-edge software houses such as Microsoft, Adobe and Macromedia. The pirate copies were manufactured by companies in Austria, the Czech Republic, Germany, Israel and Poland, and were then sold online to Danish buyers.

Lawyers representing some of the rights holders made undercover purchases of the pirate software with the aim of launching a civil action against the pirates, but passed this evidence over to the police after they realised the extent of the infringement. Seven of the eight defendants were found guilty by the Copenhagen City Court.

In sentencing the pirates, the court took account of the sheer extent and sophistication of the racket, as well as the handsome profits generated. The two ringleaders were imprisoned for one year and eight months respectively; as the remaining defendants played a lesser role in the infringement, four received jail terms of between two and four months while the fifth escaped with a fine of DKR25,000 (2,300).

The litigation team at Plesner notes that the custodial sentences could conceivably have been longer, given the magnitude of the case - under the Criminal Code, serious copyright infringements can attract penalties of up to six years' imprisonment; but they nonetheless send out a strong message that software piracy will not be tolerated.


Today's brand-saturated society is characterised by an insatiable demand for designer labels, but many consumers are unwilling to pay top dollar for high-end goods. The result is a surging trade in counterfeits which shows no sign of abating.

In Hong Kong, whose night markets are still thronged with vendors hawking knock-off products, an anti-fakes campaign originally launched back in 1998 has been revived following the conclusion of a new cooperation framework agreement with Guangdong province. The agreement was hammered out at the inaugural meeting of the Guangdong/Hong Kong Expert Group on the Protection of IP Rights, which aims to enhance cooperation on IP enforcement between Hong Kong and the mainland.

Shops participating in the campaign pledge to trade only in authentic products, and to identify themselves as fake-free outlets on their signage. Rights owners and customs officials have also joined forces to set up the IP Rights Protection Alliance, which will monitor compliance with the anti-fakes pledge.

Elsewhere, the detrimental effects of counterfeiting are felt particularly acutely in Italy, home to some of the world's leading fashion houses. The near-ubiquitous availability of cheap imitations is tarnishing the exclusive image and pristine reputation of luxury Italian brands.

The Government has thus moved to safeguard its celebrated fashion industry with the enactment of a new Competitiveness Decree, which bolsters anti-counterfeiting laws.

As before, fines may be imposed not only on the vendors of fake products, but also on anyone who buys or accepts counterfeit goods, or who persuades others to buy or accept such goods without first determining their origin. But there has been a staggering increase in the level of administrative fines that may be imposed for such offences, from 1,000 (680) to a whopping 20,000 (13,700).

Similarly, the administrative fine that may be imposed for buying or accepting goods which appear fake, due to their quality and the circumstances of their sale or supply, has gone up from 3,000 (2,060) to 10,000 (6,870). Vendors that fail to determine the legitimate origin of goods before offering them for sale can also be fined, and goods purchased `imprudently' - that is, at a price which should raise suspicions that the goods are of dubious provenance - may be seized.

Since the decree came into force, the Italian police have made successful swoops on several historic towns where the summer influx of tourists generates a booming trade in counterfeit goods. Trevisan & Cuonzo's Julia Holden notes that the decree may finally turn the tide in the fight against IP theft, tackling as it does not only the pirates, but also those consumers whose cavalier attitude towards IP rights is the fuel that drives piracy itself.

Carolyn Boyle is editor of the International Law Office.

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