VZCZCXRO2331
PP RUEHCN RUEHGH RUEHVC
DE RUEHHK #1369/01 1420658
ZNR UUUUU ZZH
P 220658Z MAY 07
FM AMCONSUL HONG KONG
TO RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 1684
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 HONG KONG 001369 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/TPP/MTA/IPC/FELSING 
STATE FOR EB/IPE 
STATE FOR EAP/CM 
STATE FOR INR/EAP 
NSC FOR KTONG 
DEPT PASS USTR FOR SMCCOY, ACELICO, RBAE 
DEPT PASS TO USPTO FOR TBROWNING 
BEIJING FOR MCOHEN 
 
E.O. 12958: N/A 
TAGS: CH ECON ETRD HK KIPR TW
SUBJECT: HONG KONG'S TINY STEPS TO CURB BUSINESS END-USER 
SOFTWARE PIRACY 
 
 
¶1. (SBU) Summary:  On May 15, the Business Software Alliance 
(BSA) announced that Hong Kong's 2006 software piracy rate 
fell to 53% in 2006, a 1% decrease over 2005.  Prior to the 
public release of the study, BSA privately briefed Hong Kong 
government (HKG) officials and pointed out that the use of 
pirated software in Hong Kong remained high for a developed 
economy and that financial losses to the software industry in 
Hong Kong increased substantially in 2006.  HKG officials 
responded that they would increase educational efforts and 
that the upcoming passage of the copyright amendment will 
provide Hong Kong law enforcement authorities with a stronger 
legal remedy against this crime. 
 
¶2. (SBU) In a separate meeting with EconOff, BSA privately 
complained that the copyright amendment's provision on 
directors' liability, which addresses corporate liability for 
end-user software, has been watered down in the latest 
version of the bill.  The bill also no longer includes a 
start date for the directors' liability provision, causing 
BSA concern that even a weak directors' liability provision 
could be delayed indefinitely.  Despite these disagreements, 
BSA is publicly taking a positive tone towards Hong Kong's IP 
efforts, largely due to the HKG's responsiveness last year in 
addressing the software piracy issue even though it did not 
yield the results expected.  END SUMMARY. 
 
--------------------------------------------- ---- 
BSA-HKG CLOSED DOOR ROUNDTABLE ON SOFTWARE PIRACY 
--------------------------------------------- ---- 
 
¶3. (U) BSA announced last week that Hong Kong's software 
end-user piracy rate declined from 54% to 53% from 2005 to 
¶2006.  While this decline is positive, Hong Kong's regional 
counterparts witnessed equal or greater declines.  In 
Singapore, for example, the piracy rate fell 1% to 39%; in 
South Korea, it also declined by 1% to 45%, while Taiwan saw 
a 2% decrease to 41% and Japan fell by 3% to 25%.   These 
rates show that software piracy in Hong Kong remains 
particularly high compared to other developed Asian 
economies.  Furthermore, the estimated losses to the industry 
in Hong Kong skyrocketed from US$112 million to US$180 
million.  BSA explained to HKG officials that Hong Kong's IT 
market expanded in 2006 with more businesses buying computers 
-- some with licensed software and some without.  As a result 
of this overall market growth, the number of unlicensed 
software packages and subsequent losses incurred from them 
actually increased, even though the percentage of unlicensed 
software packages dropped. 
 
¶4. (SBU) Priscilla To, Principal Assistant Secretary for 
Commerce and Industry at the Commerce, Industry and 
Technology Bureau (CITB), asked BSA whether the transshipment 
of computers contributed to Hong Kong's theoretical software 
piracy rate.  BSA replied that their study takes 
transshipment into account by including only those computers 
that have been "shipped to and landed in" Hong Kong.  HKG 
officials concluded the meeting by noting that they must 
increase educational efforts among the business sector and 
that the new copyright amendment will strengthen the 
government's ability to crackdown on unlicensed software 
usage. 
 
-------------------- 
BSA BRIEFS CONSULATE 
-------------------- 
 
¶5. (SBU) On May 17, EconOff discussed the software piracy 
study with BSA's Hong Kong/Macau Chairperson Belinda Lui of 
Microsoft.  BSA appears to be in an awkward position in its 
relationship with the HKG.  After the release of last year's 
software piracy study, the HKG quickly launched the "Genuine 
Business Software Campaign" to help companies with infringing 
software voluntarily purchase legitimate licenses and absolve 
themselves of liability.  However, the program was not as 
effective as the HKG and BSA had hoped because only 168 out 
of 30,000 businesses contacted by BSA (less than 1%) 
purchased licenses for their software through the program. 
However, BSA wants to encourage the HKG's continued active 
engagement on software piracy and hopes that a second round 
could bring better results.  Lui noted that the HKG's 
leadership could provide an example to others in the region. 
 
HONG KONG 00001369  002 OF 002 
 
 
She also has stated that BSA is careful in its public 
comments regarding the HKG, noting that BSA toned down its 
submission for the 2007 Special 301 Report because of Hong 
Kong's general willingness to address the issue, even if its 
programs have yet to yield significant results. 
 
¶6. (SBU) Nonetheless, Lui remains concerned over the HKG's 
complacency in addressing software piracy in the legislative 
framework.  The draft Copyright Amendment, now in its final 
phase of legislative review, not only contains a weakened 
directors' liability provision, but now includes language 
that could delay the start date for this provision.  In the 
latest draft, legislators added that the clause will not come 
into force "until a day appointed by the Secretary for 
Commerce, Industry and Technology."  BSA was told that the 
HKG wants to delay the implementation of the provision in 
order to run public awareness campaigns on the new criminal 
provision.  However, in a letter to the Legislative Council 
(Legco) Bills Committee, BSA noted that there has been much 
public debate on the directors' liability clause since 2005 
and that the "Genuine Business Software Campaign" was geared 
last fall to build awareness and help companies legitimize 
their software before the passage of the bill.  (NOTE: Hong 
Kong Intellectual Property Department's (IPD) own annual 
survey on public knowledge of IPR laws indicates that 
awareness levels in Hong Kong rose to 84.7% in 2006.)  BSA 
fears this new Legco provision could delay indefinitely the 
implementation of the clause.  If the new language is 
approved, BSA urges the HKG to take no more than six to nine 
months to conduct its educational outreach.  EconOff 
separately asked IPD Deputy Director Peter Cheung and To 
about the status of the directors' liability clause.  They 
both responded that Legco will pass the clause, but that the 
government will have to do "major educational outreach 
campaigns" in advance to prepare the business community. 
Cunningham