been working hard to support and grow talent in the city. Deputy Director SK Lee and Assistant Director Michelle Chong of the Intellectual Property Department share the latest on the government’s efforts

By Liana Cafolla

With the number of small and mediumsized enterprises growing consistently in Hong Kong in recent years, along with the growth of creative and cultural-related businesses, many business owners are more aware of the need to protect their intellectual property. At a recent AmCham event, SK Lee, Deputy Director, and Michelle Chong, Assistant Director of the Hong Kong Government’s Intellectual Property Department shared on what the department has been doing to protect intellectual property rights in the city and raise awareness of the importance of the issue.

The department is one of the main agencies tasked with making Hong Kong a premier IP trading hub. According to Lee, the city is on a good footing to become such a hub. Its robust legal system, globalized economy, established services industries and its standing as an international finance center along with a low tax regime and excellent infrastructure already set Hong Kong at the head of the pack. But work remains to be done, and the government is focusing its energies on four strategic areas as identified by the working group on IP trading: supporting IP creation and exploitation, fostering intermediary IP services and manpower, promoting, educating and organizing external collaboration efforts and enhancing Hong Kong’s IP protection.

Government support

To encourage more creation, this year the government is injecting additional funds into its existing funding options, grants and subsidies, including an additional HK$5 billion to the Innovation and Technology Fund to support innovation and technology. It is also raising the limit of the Patent Application Grant to HK$250,000 for each first-time patent application, adding HK$200 million to the Film Development Fund, including subsidies of up to HK$10 million for small budget productions, and adding HK$400 million to the CreateSmart Initiative.

For SMEs, the IP Department has launched a pilot scheme offering free IP consultation service to find out how best to manage their intellectual property. Run in conjunction with the IP Committee of the Law Society of Hong Kong until the end of the year, businesses can apply online to book a free 30-minute meeting. They also aim to raise SMEs’ awareness of IP-related business opportunities and build the capacity of IP service providers.

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The department wants to foster intermediary IP services which include legal and non-legal services in the city, such as IP consultancies. It supports IP trading platforms such as TDC’s Asia IP Exchange, promotes business tools including IP valuation reporting standards and IP due diligence checklist for IP-related transactions, and manages the “Hong Kong – IP Trading Hub” website where various information on IP trading can be found.

In December, the department will participate at the Business IP Asia Forum where IP professionals and business leaders from around the world gather to discuss the latest developments in the industry and explore business collaborations. The IP Department has signed bilateral IP cooperation MOUs with other jurisdictions, including Korea and Mexico, and hopefully with more to come.

Locally, they run regular promotions and public education efforts. One issue they are currently working on is gauging the manpower situation of the IP trading industry in Hong Kong. An earlier survey conducted by the department to assess the city’s activities related to IP trading revealed that talent with IP or technical expertise is needed. Earlier in May, the department launched an IP manager training scheme to encourage businesses to have an in-house manager trained on IP issues. The next training course takes place in December.

Better protection

For standard patents, Hong Kong currently utilizes a re-registration system in which the grant of a patent is subject to a previous grant by one of the three designated patent offices. However, the IP Department believes that to build Hong Kong as an innovative and tech hub, it needs its own Original Grant Patents (OGP) system.

The department plans to legislate to set up an OGP system to run alongside the current re-registration system. Although Hong Kong is small, other small economies like Finland have such a system. The OGP system will make reference to overseas patent practices. The department also intends to build up indigenous capacity to conduct substantive patent examination in the long run. It aims to introduce the patent bill into LegCo before the end of 2015 and have the system up and running in 2017 at the earliest.

For short-term patents, the department proposes to refine the current system by introducing post-grant substantive examination.

Photo 27With trademarks, consultation on the Madrid Protocol ended in February this year. The Protocol does not replace substantive trademark examination in local countries, but helps to streamline the application process.

Businesses are generally in favor of adopting the Protocol, but some trademark agents are concerned about potential negative effects on their businesses, as overseas applicants would be able to apply for registration in Hong Kong directly using the Protocol.

The effects on local trademark filings in signatory countries have been mixed, with some seeing an increase in filings and others seeing a reduction. The government has not yet made a decision regarding whether the Protocol will be adopted, says Lee, although she notes adoption has become an international trend with 95 parties now signed up. ASEAN countries have all committed to signing up to the Protocol by the end of 2015.

The Hong Kong Government is now considering the legal and technical issues and how they would apply to Hong Kong which, as part of China, cannot be a direct signatory to the Protocol. Once a decision is made, it expects to take two to three years before the Protocol can be implemented.

Updating copyrights

The government is pushing for early enactment of the Copyright (Amendment) Bill 2014, possibly in October or November this year, said Assistant Director of Intellectual Property Michelle Chong. Amendments in the bill cover five key areas.

For communication rights, the government is seeking to broaden the scope of exclusive rights. This will allow copyright owners to communicate their work through any electronic means, including the existing rights of making it available through the Internet and broadcast by way of TV and radio.

Currently, around 60 copyright exceptions are granted, including those for education and library purposes. The government proposes expanding the number and scope of exceptions to facilitate distance learning and daily operations of libraries, archives and museums, as well as online service providers (OSP) using data that is temporarily cached or reproduced for technical reasons to allow for efficient transmission.

Proposed changes would also allow media users to listen to sound recordings in a more convenient way, for example on mobile phones or laptops, although they would not be allowed to lend original or converted copies to third parties.

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A new ‘fair dealings’ category would be introduced to cover use of copyright material for parodies, satire, caricature or pastiche for commenting on current events or quotations for the purpose of illustration or facilitating discussion. To determine fair dealing, several factors would need to be considered, including purpose and nature of use, nature of the work, amount of the original work used as a proportion of the whole and effect of usage on the potential market or value of the work.

A three-step test would also apply to all exceptions which require that copyright exceptions must be confined to special cases. They must not conflict with normal exploitation of the work and must not unreasonably prejudice the legitimate interests of the copyright owner.

For those who violate copyright laws, the amended legislation would include coverage of commercial communication and prejudicial communication of works, in addition to the existing clauses covering commercial distribution or prejudicial distribution of infringing copies of copyright works. The bill will also clarify the meaning of “prejudicial extent”, with particular emphasis on considering whether there is a substitution impact.

With civil liability, proposed amendments will add two additional factors for courts to consider when assessing additional damages: whether the infringer acted reasonably after being notified of the infringement, and the likelihood of widespread circulation of infringing copies.

The bill would limit the liability of OSPs if they do not receive any direct financial benefit from the infringement, or if they took reasonable steps to limit or stop infringement once notified and designate an agent to receive notice of complaints. It would also set out a voluntary code of practice for OSPs to adhere to once notified of an infringement.

In their next round of copyright review, the department would take a look at what stakeholders have requested so far, taking into account international developments. Some possible areas include TV boxes (including infringing apps and links or sites that aggregate links), judicial site blocking, extension of copyright terms, user-generated content and contract overrides (which contains similar provisions to those recently introduced in the UK) among others.

Liana Cafolla is an Irish-Italian journalist based in Hong Kong for the last 15 years. She writes about business, human resources and business trends for publications including the CFA Institute and the South China Morning Post. She has conducted business research for the Economist Intelligence Unit, HSBC, and JP Morgan.