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First Asia CyberCrime Summit

25 April 2001


Anti-Piracy Enforcement in Hong Kong

Ladies and Gentlemen,

I am delighted to have been invited to attend the First Asia CyberCrime Summit to share with you how we have achieved the current level of success in anti-piracy enforcement in Hong Kong. I shall be covering our experience both in the hard copy world as well as cyberspace.

Retail Piracy Under Control

When I took up my job in March 1999, there were 1,000 or so outlets scattered in some 120 shopping centres around the territory selling pirated discs. Each outlet was carrying over 5,000 discs, mostly musical CDs and VCDs of Chinese and Western films, making the total circulation a stunning five million discs. The outlets were opened for 12 to 15 hours per day. Business was certainly brisk during this golden age of retail piracy.

It was clear to me then that we had to do something drastic. Short of declaring war, we had to send out the strongest possible signal that Customs would no longer tolerate the piracy situation. We mounted the largest ever operation against illegal outlets, taking the pirates by total surprise. We mobilized more than 300 investigators, and we raided 70 outlets each day for an entire week. That really dampened the pirates' enthusiasm for a while.

The result of the operation confirmed our belief that extending adequate resources to cover the entire territory for a sustained period of time is the most appropriate measure in suppressing the rampancy of piracy. Three months later, we formed the Special Task Force comprising 185 officers to do just that. Together with the 285 officers in the Intellectual Property Investigation Bureau, we have probably the largest dedicated enforcement unit of anti-piracy fighters in the world.

Repeated, sustained and vigorous regional enforcement action became the norm of the day. This strategy has proved to be effective as we witnessed a rapid shrinking in copyright piracy in Hong Kong. After two years of hard work, we have now broken the back of the pirates and the situation is firmly under control. A recent survey revealed that the number of shops selling pirated discs has reduced by 90%, dropping to fewer than 100 outlets which now include many itinerant hawkers. The number of pirated discs in circulation was reduced by 98%, falling from five million to fewer than 100,000 discs. Working hours have also dropped to a meagre couple of hours per day.

We still have about 100 outlets operating peripatetically around Hong Kong. They are not the same outlets in the same locations operated by the same people. They are highly mobile, but it seems that the current level of demand has been able to maintain the operation of about 100 outlets even in light of our tight enforcement. We have come to realize that increasing the resources would not produce proportionate results but if we were to loosen our grip, the piracy situation could mushroom again. It is similar to the problem that we face dealing with drugs, prostitution and illegal gambling. These problems have been with us for some time and there is also no sign of complete eradication. I am confident, however, that the unreliability and inferior quality of pirated products, coupled with sustained education of consumers and proper marketing strategy of the copyright owners will ultimately drive the pirates to their doom. Meanwhile we have to be patient, and with our recent decision to make permanent our Special Task Force, we are getting ourselves prepared for the long haul. We will continue until piracy has become history.

Illegal Manufacturing

As for the supply of pirated discs, we have been able to make extinct large scale underground plants using expensive replicating machines. Last year, we raided six underground factories, seizing HK$24 million worth of machinery. As we drive underground production plants out of Hong Kong, we have warned the next ports of call of their arrival so that we could keep a close watch over these rogue operators around the world.

As large scale production has been curtailed, we see illegal suppliers getting smaller in size. The new operators are now using CD writers instead of the large replicating machines. They have thrived because of the availability of inexpensive domestic type CD writers which make illegal copying as simple as a push of the button and because of the minimal technical skill required in setting up these machines. More than 90% of the pirated discs in our retail market now are produced by CD writers, but fortunately, we have been successful also in smashing a number of these small production operations by going in the reversed direction up the supply chain.

Control Of Disc Manufacturing

We have also been able to ensure that licensed factories are not producing any pirated copies by empowering Customs officers to inspect licensed disc manufacturers at any time of the day. In their inspections, they will make sure that a tiny code, unique to the factory where it is produced, is engraved onto each disc before it is allowed to leave the factory. With the identification codes, the source of production can be easily traced. The licensed factories have been kept honest.

In the pursuit of a total piracy free territory, we are now attempting to prevent Hong Kong from turning into a spawning ground for the export of the mother of pirated discs - the stampers. This is also consistent with our international obligation to protect IPR and not to turn a blind eye to activities that are fueling piracy activities in other territories.

We see the need to extend licensing control to stamper factories as we have done for disc manufacturers. We are consulting the stakeholders now and we intend to move forward once this phase of the exercise has been completed.

Legislation

The effectiveness of our enforcement is derived from the strength of our legislative framework which is among the best in the world. Last year, we incorporated copyright offences into the Organized and Serious Crimes Ordinance (OSCO), adding more power to our arsenal of weapons. Under the new law, a court can impose more severe sentences for crimes committed by persons who are connected with organized criminal activities. OSCO also provides enforcement officers with special investigative powers, including the investigation of financial assets of suspects for the eventual purpose of confiscating the pirate's proceeds.

We have also brought into effect another piece of legislation which has really hogged the limelight in the last few weeks. This law broadens the definition of infringing activities to go beyond the remit of trade and business only. This is a powerful weapon which will help to reduce piracy in the corporate sector.

Internet Piracy

I turn now to the digital pirates who storm the cyberworld with Internet piracy.

Obstacles

I must admit that digital piracy brings serious challenges to law enforcement agencies both in terms of investigation and prosecution of these offences. In the physical world, running a copyright piracy business typically requires installation of expensive manufacturing equipment, renting storage facilities, establishing a distribution chain, including the recruitment of middlemen and retailers, and finding the clients. The number of people involved in the chain of the illegal business provides many crevices for criminal investigation. In contrast, illegal digital distribution of pirated works requires only a modest computer, a telephone line and an Internet account. That means that almost anyone so inclined can become a digital pirate without any significant investment of resources. What is more, the Internet pirate does not work in the open and is often a difficult target for criminal investigation. Besides, distribution at the speed of light makes our investigation a tad more difficult.

Approaches in curbing Internet piracy

Notwithstanding the many difficulties, we have taken on a number of measures in the Hong Kong Customs to deal with the challenges.

Expertise cultivation

We began with the cultivation of technical experts in our own organization. We fully recognize that Customs officers were not born with knowledge of computers and investigating digital copyright piracy requires not only experienced criminal investigators, but also investigators who possess special technical skills. Even though investigation into the criminal mind is technology neutral, enforcement officers must be properly equipped with the latest investigative tools to face the challenges of cybercrime.

Computer Forensic Special Interest Group

Using the lure of technological enhancement, we were able to enlist 75 officers of all ranks voluntarily to form a Computer Forensic Special Interest Group. We arrange seminars, trainings and workshops for these members during their free time to build up their skills and to keep the members posted of the new trends in cybercrime. In their spare time, they help also to monitor illegal websites and feed the information to the Anti-Internet Piracy Team for follow-up investigation.

Computer Analysis and Response Team

Amongst the 75 members of the group, we selected 20 highly technically capable officers and offered them generous but demanding professional courses in institutions of higher learning both here and overseas. They are now fully prepared and are ready to go into the nuts and bolts of cybercrime investigation. These 20 experts have been pooled to form the Computer Analysis and Response Team, rendering field officers with logistic support whenever cases involving digital evidence are detected. They are the cyber-investigators who appear at raided premises packed with interwoven stacks of computer servers, CD writers, modems and networks to help case officers take care of the digital evidence.

Anti-Internet Piracy Team

In parallel with the development of expertise throughout the Department, we have further established a team of professionals whose role is to delve proactively into the cyberworld to deter Internet piracy. The Anti-Internet Piracy Team started work early last year. These officers, who were selected amongst the most experienced investigators in the Intellectual Property Investigation Bureau, quickly took up their new role once they have acquired new investigation skills and tools for the virtual world. They have so far effected seven piracy cases covering different modes of application, resulting in the arrest of 16 persons.

Computer forensic support

To support the processing and prosecution of Internet-related cases, we have established our own Computer Forensic Laboratory. The laboratory, stocked with high-end equipment, is run by specially trained Customs officers from the Office of Information Technology. We have spent a sum of HK$2.6 million so far to procure equipment for the Laboratory. We will be spending another HK$4 million next year to enhance the equipment for the preservation, collection and analysis of computer evidence for future legal proceedings.

Legislation to tackle Internet crime

To ensure that we are prepared to tackle cybercrime properly, my government has undertaken a comprehensive review of the legal environment and the capability of the law enforcement agencies to deal with cybercrime. A dedicated Inter-departmental Working Group on Computer Related Crime has been formed to push forward reforms.

Serious consideration has been given to amending laws to better deal with cybercrime committed in territories outside Hong Kong since the great majority of the not actionable cases fall in this category. We are also beginning to address the role of Internet Service Providers (ISP) in making records available to assist investigations by law enforcement agencies.

Co-operation

Copyright Industry

Intellectual property is essentially a private economic right, the safekeeping of which rests with its owner. The industry has the ultimate responsibility for IPR protection, and setting out authorized websites where copyright products can be legally downloaded at reasonable prices will reduce the temptation of piracy. The industry must seek to establish new business models that would serve to protect on the one hand their intellectual property rights but also offer true value to consumers.

In the area of illegal distribution in cyberspace, it is encouraging that the industry has taken a proactive role as vigilant monitors of their own rights. We understand that IFPI, in conjunction with other rights holders, is embarking on a project to develop state of the art automated search and identification software aimed at vastly increasing the speed of detection and take-down of infringing sites.

IFPI in Hong Kong has also been issuing warning letters to Internet Service Providers to take down illegal MP3 websites. This is an effective measure to close down illegal sites within a short period.

Internet Service Providers

We have also been calling upon the Internet Service Providers to stay alert against any suspected piracy activities on their websites, and they have responded positively. In the piracy cases that we have effected so far, we have received excellent assistance from the ISPs concerned in tracking down the pirates, and if it were not for their assistance, our investigations would not have been so fruitful. The ISPs are the community's watchdogs.

Members of the public

The most crucial link in the anti-piracy drive rests with the public. Piracy cannot be uprooted by mere stringent enforcement alone. Incessant demand by the public will sustain the illicit trade, thereby nullifying the enforcement effort. The long term solution, therefore, rests with education in changing people's mentality, and in raising respect for intellectual property. Our colleagues in the Intellectual Property Department are helping us in organizing publicity and education campaigns, and we are beginning to see the fruits of their labour.

Conclusion

We have seen the golden age of retail piracy in Hong Kong. Many thought a few years ago that it was too big a problem for us to cope with, and we even detected a sense of hopelessness that has at one time threatened the fabric of our society. We have overcome that. We have made considerable headway in protecting intellectual property in Hong Kong. The music industry, the film industry and the software industry are seeing encouraging signs in their business, and they are busily planning to move forward from there.

We are happy with the developments too, but we are not complacent. We are constantly on guard against the erosion of our achievements so far. IPR violations are lucrative and we must continue to exert strong enforcement effort to avoid the rekindling of the piracy situation. At the same time, we are seeking to galvanize community resolve to fight the long battle.

Above all, we want to assure investors that their rights will be properly protected here and they should feel confident investing in Hong Kong. Our immediate goal is to build a platform of innovation where we will continue to thrive in the New Economy of the 21st Century.

Thank you.

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