S. China
S1. China is not one of the countries specifically referred to in the Terms of Reference. However China is probably the largest single source of counterfeit product in the world, and its position therefore is very relevant to piracy and counterfeiting in New Zealand.
S2. Most product exported from China is through what is now known as the Hong Kong Special Administrative Region, which in turn has its own laws, based on English common law, which are distinct from those in China.
S3. Accordingly action against pirated and counterfeit goods in Hong Kong is vital to controlling the world trade in these goods.
S4. Hong Kong copyright and trade mark laws, and enforcement laws, are generally similar to New Zealand law.
S5. In order to cope with the large quantity of piracy and counterfeiting product believed to be exported from Hong Kong, the Customs and Excise Department there has a separate Intellectual Property Investigation Bureau which is a dedicated force established for the purposes of ineffective enforcement. In 1996 this Bureau had an establishment of 140 investigators.
S6. The most prevalent form of counterfeiting sourced from Hong Kong is infringing CDs and CD-ROMs mostly manufactured outside Hong Kong and then smuggled into the territory across the border. There is however evidence of increasing counterfeit CD production in Hong Kong.
S7. Penalties for merely possessing infringing copies of copyright works are 2 to 4 years imprisonment and a HK$25,000 to HK$50,000 fine.
S8. Penalties for possessing infringing plates used or intended to be used for making infringing copyright works carry penalties of imprisonment of 4 to 8 years and fines of HK$250,000 to HK$500,000.
S9. Under the Hong Kong Trade Description Ordinance the penalty for possession of goods bearing forged trade marks or false trade descriptions is 2 to 5 years imprisonment and up to HK$500,000 fine.
S10. Under a Prevention of Copyright Piracy Law passed earlier this year, the Commissioner of Customs and Excise administers a licensing scheme for optical disk manufacture in Hong Kong. This is designed to control the manufacture of all kinds of optical disks, and will considerably assist the tracing of pirated and counterfeit CD manufacture.
S11. Due to the increased sophistication of counterfeiting activities, and with a large number of vehicles crossing between main land China and Hong Kong border everyday, intelligence gathering has become the key to successful control against counterfeiting.
S12. The Intellectual Property Investigation Bureau has become more pro-active in intelligence gathering and in-depth investigation work, and last year launched two high profile operations involving 200-300 Custom Officers specifically targeted against counterfeit CD products.
S13. Customs now have power to seize suspected infringing articles whether or not any person is charged for an offence and the burden is on the person claiming an interest in such seized articles to prove his ownership and to prove that they do not infringe copyright before they can get the articles back.
S14. The evidential burden is now on the accused to prove that the accused did not know and had no reason to believe that the copy in question was an infringing copy or the article in question was used or intended to be used for making infringing copies. Affidavit evidence is now acceptable in criminal proceedings to establish existence and ownership of copyright in Hong Kong.
S15. Despite constant pressure from the United States, enforcement of intellectual property laws in mainland China remains erratic.
S16. The most effective action is taken at an administrative level by local officials using the Administrative Authorities for Industry and Commerce. Depending on local politics these officials can be persuaded to conduct raids and seize counterfeit goods and the machinery for making them. This avenue is much more prompt than using the People's Court.
S17. In general monetary fines imposed in China are quite light, and may well not be much more than a cost of doing business.
S18. In one high profile case in Shanghai in 1996 compensation of US$101,000 was awarded following raids on a network of shoe counterfeiters, although there was evidence of several million dollars worth of shoes having been counterfeited by this network.
S19. Certainly as soon as one counterfeiting operation is closed down it soon reappears in much the same form somewhere else.
S20. In recent years Customs has been intercepting the export of counterfeit goods from Asia. In 1994 infringing goods worth NZ$30 million were seized.
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