CHINA INFORMATION TECHNOLOGY LAW NEWSLETTER
Vol. 4, No. 10- July 3, 2003
TOPICS THIS ISSUE:
- Interim Rules On Internet Culture Administration
- 10 Companies Licensed To Operate Nationwide Internet Bar Chains In China
- Asia's Software Piracy Rate Keeps Rising
- Pay-Tv Piracy A Problem In Hong Kong, But Not Yet In China
- Judge Rules Against Hong Kong Firm In Nintendo Piracy Case
China Litigation and Arbitration
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Interim Rules On Internet Culture Administration
The Ministry of Culture has issued interim rules on the administration of Internet culture. The interim rules shall be effective on July 1, 2003.
The interim rules define what are Internet culture units and their products, the requirements for establishing an Internet culture unit and how the same should be operated.
Under the rules, Internet culture units ("ICUs") refer to Internet information providers approved by culture administration authority and telecommunication authority engaging in Internet culture activities.
Internet culture activities refer to (i) providing Internet culture products (see definition below) and services (including the production, reproduction, import, wholesale, retail, rental and broadcast of Internet culture products); (ii) posting culture products on the Internet, or sending such culture products via Internet to end user computer, fixed line telephone, mobile, radio, television or game player for browsing or downloading; or (iii) providing exhibition and competition events of Internet culture product.
Internet culture products are defined as culture products produced, transmitted and circulated via the Internet, including audio-visual products, game products, performance shows (programs), art works and animation works.
Internet culture activities are categorized into profit and not-for profit activities. The establishment of profit and not-for-profit ICUs is subject to different application requirements. Approved ICUs shall post its Internet Culture Business Permit on its website main page. Operating profit type of ICUs without approvals from the culture administration and telecommunication authorities is deemed to be violation of law and subject to fines below RMB1,000.
(Source: China Daily)
10 Companies Licensed To Operate Nationwide Internet Bar Chains In China
The Chinese Ministry of Culture has recently issued licenses to 10 local firms to open Internet cafe chains. According to analysts the said move by the government was designed to squeeze out smaller players and tighten the control over sensitive political information.
Most of the franchise licenses were given to state-owned companies such as China United Telecommunications, parent company of China Unicom, Great Wall Broadband Network Service or those affiliated with the Ministry of Culture.
An official at the ministry's Internet culture division revealed that they aim to boost the Internet cafe business by encouraging chain operations, which will help to standardize the business. However, this move is not to limit or forbid the existence of individual or private Internet cafes. The official said that the ministry encourages mergers and acquisitions by chain operators. The official also informed that more than 95% of China's 110,000 Internet cafes were privately owned.
The newly licensed operators must open at least 20 outlets in two cities or provinces. Provincial governments can also approve three franchises as long as outlets stay within the region.
According to the report, the ministry did not plan on issuing further licenses at the moment, but that foreign firms were welcome to apply.
State media reported that the fragmented industry, dominated mainly by small, grungy Web cafes filled by students playing online games or surfing the Internet is currently worth about RMB100 billion (approximately US$12 billion).
Analysts and operators opined that the said licenses, in a country where information flow is a matter of national security, were intended to clamp down on information deemed harmful to the government.
Internet watchers say China already filters text for controversial terms related to the banned Falun Gong spiritual movement or the 1989 Tiananmen Massacre as it passes routers at international gateways. It routinely blocks foreign news sites. Last year, China temporarily blocked access to popular search engine, Google, and continues to block searches of politically taboo subjects. As such, tracking postings at the national Internet cafe level would be another way to stamp out information deemed subversive.
"By setting up chains of Internet cafes, it will be easier to verify what is being looked at or posted over the Internet," said Nathan Midler, a senior analyst at IDC Asia Pacific. He said licensed firms must enforce rules about registering user names and citizenship numbers, which can later be used to determine who posted a sensitive message on the Internet.
Internet cafes must also vow to follow regulations banning downloads of pornography and politically unsavory topics.
The approved firms include three affiliated with the Ministry of Culture: China Audio-Visual Publishing House, which plans to set up 50,000 cafes in 40 cities in three years, the China Cultural Relics Information Centre and the China National Library. A fourth operator, China Youth Net, is affiliated with the politically powerful Central Committee of China Youth League. The other six include telecoms operators or Internet service providers such as www.readchina.com that has plans to build 2,500 Internet cafes within a year and a half. It belongs to Read Investment Holdings, a high-tech conglomerate founded in 1988 that has annual revenues of RMB10 billion.
(Source: Reuters)
Asia's Software Piracy Rate Keeps Rising
The average piracy rate for commercial software across Asia-Pacific is at its highest level since 1996 and losses in the region in 2002 were at an all time high of US$5.5 billion, according to a latest survey of the Business Software Alliance (BSA).
According to BSA Hong Kong, the average software piracy rate in Asia-Pacific rose for the third year in a row and stood at 55% in 2002. In 1994, Asia-Pacific's piracy level was 68% and by 1999 the rate had dropped to 47%. The upturn, however, started in 2000.
The BSA vice-president and regional director for Asia-Pacific said that BSA is very concerned that the average software piracy rate in Asia-Pacific is rising, in contrast to every other region except for Eastern Europe. Furthermore the enormous losses in the region due to software piracy are particularly troubling and if Asia-Pacific countries are to realize the economic benefits the software generates in an economy, software piracy levels must be brought down.
(Source: Xinhua News)
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Pay-Tv Piracy A Problem In Hong Kong, But Not Yet In China
The high court in Hong Kong on June 11, 2003, announced a judgment in favor of plaintiffs represented by the Hong Kong trade organization Cable & Satellite Broadcasting Association of Asia (CASBAA) in a civil action against five defendants accused of importing and distributing unauthorized satellite TV signal decoding equipment. The five defendants are prohibited by the ruling from the continued sale of illegal decoding equipment and are liable for costs and damages incurred by the plaintiffs. In addition, the defendants were also ordered to turn over all illegal devices still in their possession.
CASBAA originally initiated the civil action against seven defendants (Gamestar Technology Ltd., Philip Yeung Fei Lap trading as J.P. Technology, Tongyong Youhe Ltd., Li Ka Siu, Flying Dragon Engineering Ltd. trading as Yau Po Satellite Co., Alpha Communications Technology Ltd and Andy Yeung Chun Wah), but Alpha Communications Technology Ltd and Andy Yeung Chun Wah settled out of court in April, admitting to unauthorized use of the plaintiffs' intellectual property, and agreed to pay the plaintiffs an undisclosed sum for costs and damages.
The CEO of CASBAA described the decision via press release as a 'historic' one and said that similar civil actions will soon be initiated by CASBAA in several other Asian markets, including the Philippines and Thailand.
However, according to the CASBAA Communications Manager, CASBAA does not plan to pursue such actions in China. This is because the cumbersome regulations in the mainland make it harder to get into the Chinese mainland market. According to the manager, there are very few operators who show programming from our members in China. Only three-star or higher hotels and some more up-scale bars do. Pay-TV Piracy in the mainland is not on their agenda right now because they just do not have a large enough presence in the Chinese mainland market at the moment.
In any event, CASBAA members are eager to enter the Chinese market. The strategic partnership agreement signed in April between CNBC Asia Pacific, a CASBAA member, and Shanghai Media Group, is evidence that foreign media companies are moving into China. CNBC Asia Pacific will provide Shanghai Media Group with international financial news and in exchange Shanghai Media Group will provide CNBC Pacific with Chinese financial news.
CASBAA, the leading trade organization in Asia in promoting multi-channel television and data transmission via cable and satellite networks, has over 120 member companies, including AOL Time Warner, ESPN Star Sports and MTV Networks Asia.
(Source: Interfax)
Judge Rules Against Hong Kong Firm In Nintendo Piracy Case
Game publisher Nintendo Co Ltd recently won a series of judgments against a Hong Kong company Lik Sang that sold devices capable of copying its games and putting them on the Internet for limitless downloading. The Court of First Instance in Hong Kong ordered Lik Sang International, Visoly and their principals to pay the Japanese company HK$5 million (approximately $641,000) as an interim amount of compensation. The defendants are also liable for Nintendo's costs. A later hearing will determine the full amount of compensation the Hong Kong company will have to pay Nintendo.
Kyoto-based Nintendo described the rulings against Lik Sang International as one of its "most significant anti-piracy judgments ever."
The game maker had sought US$20 million in damages in its original complaint for lost revenues in 2001 and 2002.
The device, called a Flash Card, which Lik Sang and Visoly distributed, allowed players to copy Nintendo's software from games cartridges for its Game Boy console and store it on the Flash Card. Distribution was stopped after a September 2002 ruling in which the High Court in Hong Kong granted Nintendo a seizure order against Lik Sang. Since then, according to an official Nintendo statement, the court has gone on to allow the company to confiscate all offending products and the business documentation associated with them. Nintendo has also obtained an injunction against Lik Sang's assets worldwide.
The copied games are normally sold between US$5 to US$15 each, compared with US$25 to US$45 for the legal products.
"Nintendo has the best game developers in the world," said the director of anti-piracy for Nintendo of America. "They have spent years developing unique and creative games. Their respective efforts deserve to be protected and respected, not stolen."
Nintendo estimates that it and its partners lost about US$650 million in sales in 2002 due to piracy, while the entire industry lost more than US$3 billion.
China is one of the world's biggest bases for the manufacture, assembly and distribution of pirated video game products, both hardware and software, while Hong Kong is a major centre for copying.
Following the rulings, Nintendo believes the devices, which were manufactured in China, are no longer on the market. According to officials in Nintendo, this is an important case for Nintendo in battling Internet piracy at its source. They are continuing to take aggressive actions in China.
According to Nintendo, while it has prosecuted vendors of pirated games before, this is the first time it has won a court action against a distributor.
The China Information Technology Law Newsletter is intended to be used for news purposes only. It should not be taken as comprehensive legal advice, and Lehman, Lee & Xu will not be held responsible for any such reliance on its contents.
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