Clifford Chance

The long-awaited amendments to the Hong Kong copyright legislation will come into operation on 1 May 2023. The amendments introduce important changes to facilitate the digital economy and combat prevalent online piracy in the digital environment.

The key changes introduced by the Copyright (Amendment) Ordinance 2022 (the "Amendment Ordinance") aim to align protection of copyright works with technology developments in the digital environment whilst facilitating cooperation and balancing legitimate interests between copyright owners, online service providers and genuine users of copyright works.

Key changes introduced include:

(1) Introducing express technology-neutral electronic transmission rights. The Amendment Ordinance introduces rights for copyright owners to communicate their works and make available to the public works via any mode of electronic transmission (including streaming). It is thus put beyond doubt that communicating a copyright work via electronic transmission without the authority or consent of the copyright owner may be an act of infringement of the copyright work, which is also subject to criminal sanction if the copyright owner is economically prejudiced.

(2) Safe harbour for online service providers. A "safe harbour" regime where online service providers (OSPs) will not be liable for damages or other pecuniary remedies for copyright infringement provided that they meet certain prescribed conditions in cooperating with copyright owners in combating online piracy that occurs on their platforms, including taking reasonable steps to limit or stop the infringement as soon as practicable after receiving notice or becoming aware of the infringement. OSPs are deemed to have taken reasonable steps if they comply with the provisions of a code of practice published by the Secretary for Commerce and Economic Development. It is not mandatory to comply with the code of practice, but it provides practical guidance of the procedures that OSPs should adopt to limit or stop an alleged infringement including upon receipt of a notice of the alleged infringement: (i) notify their subscribers or users that their accounts have been used in activities that infringe copyright ("notice and notice" system); (ii) remove infringing materials or disable access to such infringing materials residing on their service platforms ("notice and takedown" system). The notice to subscribers must include a copy of the alleged infringing material, information on the legal consequences of copyright infringement, information on the service provider's policy or contractual terms against the use of its online services in breach of copyright, and the consequence of such use.

Notably, OSPs may not hide behind the "safe harbour" provisions if they have received financial benefits directly attributable to the infringement (which exclude one-off set up fees and flat periodic payments charged on a non-discriminatory basis) or they interfere with standard technical measures that are used by copyright owners to identify or protect their copyright works. Even if OSPs remove materials or disable access to materials that are ultimately determined to be non-infringing, they will not face liability if they have acted in good faith and have followed the requirements under the exemption of liability provisions.

Based on the code of practice, it is important to note that OSPs including online service platforms must establish a "notice and notice system" and/or "notice and takedown system" in order to qualify for the safe harbour exemptions, and this puts Hong Kong in line with many overseas jurisdictions that have long-standing "notice and takedown" provisions in place such as the US, the UK, and China.

In implementing take down policies, due consideration should be given to the unlawful interception provisions in the Hong Kong Telecommunications Ordinance which may be violated where the take down involves removing content or disabling access to content which is transmitted through a telecommunications service. To manage the risk of violating the Telecommunications Ordinance, relevant terms in customer agreements should include prior consent from the customer in the relevant circumstances.

(3) New and expanded exceptions to copyright infringement. New and expanded exceptions aim to balance copyright protection against reasonable use of copyright works in online activities and creative expression through comment, including:

• New right to fair dealing with copyright works for the purposes of parody, satire, caricature and pastiche;
• New right to fair dealing with copyright works for the purpose of criticism and review, quotation, reporting or commenting on current events if accompanied by a sufficient acknowledgement;
• Expanded right to communication of copyright works by way of online instruction for educational purposes – aims to facilitate online learning by educational establishments and the daily operation of libraries, museums, and archives; and
• New right to conversion of sound recordings from one media form to another for private and domestic use – essentially allows the making of an additional copy for private use.

The newly added provisions are broadly drafted and no guidance or examples have been provided as to what precisely is exempted. Whilst this allows flexibility for the court to decide the perimeters of the exemptions, guidelines and examples should be given to allow the development of creativity and innovation.

(4) Additional damages for civil copyright infringement claims. Two additional statutory factors are introduced for the court to consider when assessing whether to award additional damages to copyright owners in civil cases involving copyright infringement as owners often face difficulties in proving the actual loss incurred as a result of the infringement:

(i) unreasonable conduct of an infringer after having been informed of the infringement, such as acts done or attempts made to destroy, conceal or disguise evidence of the infringement; and

(ii) likelihood of widespread circulation of infringing copies as a result of the infringement.

Prior to the change, courts would consider only 3 factors, including the flagrancy of the infringement, any benefit accruing to the defendant, and the completeness, accuracy and reliability of the defendant's business accounts and records.

The changes are welcomed by stakeholders as they bring Hong Kong's copyright regime more in line with global standards and strengthen copyright protection in the digital environment, encouraging the development of creativity and technology in Hong Kong. Those creatively expressing themselves through comment will better be protected from copyright infringement by the new copyright infringement exceptions. At the same time, specific provisions are introduced to address the concerns of copyright owners in combatting online piracy.

On the other hand, other questions relevant to the digital environment and on which other jurisdictions have already taken legislative steps to address, remain open and uncertain which include, for example, treatment of ownership of intellectual property and infringement in relation to AI generated works.