EMERGING AREAS/COPYRIGHT/INTELLECTUAL PROPERTY

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Optical Disc Legislation: A New Tool to Combat Digital Piracy
by Anju Jain*

Cite as : (2002) 5 SCC (Jour) 26

Distribution of entertainment content on optical media such as compact discs (CDs) and digital video discs (DVDs) has fed the boom in worldwide consumption of film, music and entertainment software. Unfortunately, optical media piracy has become an increasing threat to these key copyright industries. It is estimated that in Hong Kong alone the losses to the US Motion Picture Industry due to optical media piracy of film titles is estimated at US $ 30 million in 1998 and has more than doubled in 1999.2 Countries like Malaysia, Taiwan, China, Philippines and Macua also encounter high levels of optical media piracy. These countries have become major export centres for much of the infringing optical disc products appearing in US, Latin America and Europe where the VCD/DVD hardware base is growing.3

Till recently, piracy, both analog and digital, has been fought through the traditional protections offered under copyright laws. However, optical disc piracy comes with new challenges. An explosion in the world's capacity to produce optical media products has accompanied the growing demand for these products.

Unfortunately, production capacity greatly exceeds legitimate demand, and much of this excess capacity is devoted to unauthorized production.4 Copyright laws protect content and its unauthorized copying and distribution. However, this often becomes difficult. For example distribution of optical products is so rapid that copies of the film "Dinosaur" which opened in the United States on 19-5-2000 were available days later in Kuala Lumpur's night markets and a month before its official Malaysian release.5 Therefore a new legal mechanism, the optical disc regulation, is being adopted in high piracy regions to combat the problem at the manufacturing stage.

This paper discusses how the new optical disc law seeks to combat piracy at the manufacturing stage. Beginning with an overview of the optical disc manufacturing process and the magnitude of the piracy problem, the paper discusses basic elements of an effective optical disc law,6 the WTO obligations of member countries in enforcing an optical disc regulation and lastly, the status of actual implementation and enforcement of this law in the high piracy countries.

2. The manufacturing process

Optical disc technology includes media such as CD (compact disc), CD ROM (compact disc — read only memory), CD-R (compact disc — recordable), DVD (digital video disc), VCD (video compact disc), LD (laser disc), SVCD (super video compact disc) and other media or devices on which digital information may be stored using laser technology.

Manufacturing optical discs is essentially a five-step process that involves premastering, mastering, electroforming or preparing the stampers and injection moulding.7

2.1. Premastering

In this stage, data to be embodied on a disc is converted by the replicator from a non-image ready format to an image ready format on to a CD-R (one off, gold master) or 8 mm tape. After customer approval, the CD-R goes on to mastering to be cut.

2.2. Mastering

A glass substrate with dried photoresist is prepared which is called the glass master. The glass master is then placed into a laser beam recorder (LBR) that is connected to a computer. The data image source or CD-R or 8 mm is then loaded into the computer and the data image is read from the computer and recorded to the photoresist on the glass master using the laser. The metallized glass master is then sent onto electroforming or preparing the stamper.

2.3. Electroforming or preparing the stamper

The metallized glass master is placed into a tank of nickel sulphamate solution from which a layer of nickel grown onto the glass stamper is removed and called the "father". The "father" is a reverse image of the data and can be used to stamp discs. However, any damage to the "father" would involve going through the entire process again, therefore the "father" is then put through the same process of electroforming and a new nickel layer is grown called the "mother". From the "mother", again through electroforming another nickel layer called the "stamper" is prepared. The stamper like the "father" is a reverse image of the data and is used to create the discs.

2.4. Injection moulding

The stamper after punching the centre hole and polishing is placed into an injection moulding machine, which is connected to a continuous supply of polycarbonate. Polycarbonate is the plastic material used to make compact discs. Through a process of heating, compression and cooling the discs are prepared with the stamping of the data on it. After stamping, which takes about 5-10 seconds, the discs are metallized, coated and dried, after which they proceed for printing and distribution.

3. The problem

Optical disc piracy is unusually challenging due to the nature of the technology and the efficiency with which it can be replicated. One of the key reasons for the high frequency and volume of piracy is that the manufacturing capacity exceeds legitimate demand. A large portion of the manufacturing capacity is expended in pirated production.

In 2001, the International Federation of the Phonogram Industry (IFPI), an organization representing the recording industry reported that the supply of optical disc media has substantially outstripped legitimate demand and the resulting overcapacity has fuelled the pirate market.8 Pirates profit from this overcapacity by filling in the difference between legitimate and actual demand with unauthorized reproductions of entertainment content. IFPI reported that the most significant reason for the growth of optical disc piracy in the last seven years was the explosion in the compact disc manufacturing capacity around the world.9 It is precisely this overcapacity problem that an optical disc law seeks to regulate through the mechanisms of licensing, coding and enforcement. The provisions of the Prevention of Copyright Piracy Ordinance, 1998 of Hong Kong are examined in relation to the problems addressed here.10

4. What is the optical disc regulatory law and how does it combat piracy

The optical disc law allows Governments to regulate the manufacturing and replication of optical discs manufactured through the mechanisms of licensing. An optical disc law includes four key features11: (1) registrations and licences; (2) identification coding; (3) criminal remedies; and (4) enforcement.

4.1. Registration and licences

The backbone of an optical disc regulation is the registration and licensing of optical disc manufacturing. As discussed above, optical disc manufacturing involves preparing the master, stamper and then replication. Therefore a comprehensive licensing scheme would involve authorizations for (i) the manufacturing process (including mastering, preparing stampers and replication); (ii) the manufacturing premises or plant; and (iii) importing or exporting of mastering or replication equipment, optical disc polyurethane and other raw material used to manufacture optical discs.

The objective of a licensing scheme is to enable the administration to exercise control over pirate optical disc manufacturers. A licence would not be granted to persons or entities who have been held liable for copyright infringement or liable for actions against the interests of rights owners. In addition to pre-licensing checks, an optical disc law would allow the administration to cancel, suspend, revoke and refuse renewal of licences to persons who subsequently engage in copyright infringement or other violations.

4.2. Coding

Two forms of coding typically contained in an optical disc law are: (i) the manufacturer's code each manufacturing line (CD, DVD etc.) marked with a separate code; and (ii) the registered equipment code. Identification codes are normally granted by the administration, exclusive to each manufacturer and exclusive to each manufacturing line.

4.3. Criminal remedies

The effectiveness of anti-piracy laws depends more in being a deterrent than punitive. Since the incidence of optical disc piracy is large, criminal sanctions under optical disc laws include heavy fines and imprisonment. Three to four tiers of penalties are provided, each tier of penalties dependent on the magnitude of the offence. The first tier attracts the maximum penalties. Offences under this class include the committing of an act for which a licence is mandatory and the false or forged coding of optical discs or optical disc equipment.12

Under the second tier acts such as the failure to maintain records of manufactured optical discs and wilful obstruction during enforcement, constitute offences. Wilful obstruction during enforcement attracts one-year imprisonment and level four fine in Hong Kong.13

Finally under the third tier, offences include (i) contravention of licence conditions, (ii) failure to surrender licence, (iii) the violation of a standard or requirement of the optical disc regulation, and (iv) making false or misleading statement. Offences under this category in Hong Kong attract level two fines and imprisonment for six months.14

Besides the classification of offences, optical disc laws provide increased penalties for second convictions, which could be up to double the fine and term of imprisonment.15

Besides these penalties, a conviction under the optical disc law normally becomes a ground for cancellation, revocation or non-renewal of the licence.

4.4. Enforcement

Optical disc laws contain provisions of inspection, seizure, closure, forfeiture, removal, disposal of any unlicensed equipment, raw material or optical discs. However, for searches and seizures to be constitutionally valid, they are normally conducted only on obtaining a warrant from a court. However, in case of delays in obtaining a search warrant, a search can be conducted without a warrant in order to avoid destruction of evidence.16 Provisions for making forcible entry are provided for in optical disc laws.17 Often enforcement officials encounter strong and sometimes armed resistance by pirates during raids. Therefore, forcible entry with police assistance sometimes becomes crucial.

4.5. Other provisions

Besides the key elements, optical disc laws of many countries include ancillary provisions such as display of the licence at all times, duty of the licensor to maintain books and records of the optical discs manufactured and sold. This allows inspection officials to tally production levels with legitimate procurement of raw material. Imposition of corporate liability on financers of pirates,18 offering protection to informers are some additional features of this law.19

While having seen what an optical disc law contains, it is also important to understand what an optical disc law ought not to contain.

5. Copyright and optical disc regulation

One of the dangers in adopting a broad optical disc law is "over-regulation". There are several parties involved in the process of an optical disc product with embodied copyrighted content reaching the consumer. They include:

Copyright owner (content or data)

Manufacturer (mastering, preparing stamper, replication)

Distributors (finished products)

Retailers (finished products)

Consumers

An optical disc law aims at regulating only the manufacturing level in the chain (viz. manufacturers and suppliers of raw materials). Over-regulation could lead to regulating even the distribution channels of data embodied optical discs, the dangers of which would be several. For example (a) slowing or inhibiting trade, (b) administratively burdensome as the number of parties increase lower in the chain, and (c) overlap with copyright protection that prevents unauthorized distribution of copyrighted content. The optical disc bill in the Philippines borders on these precise dangers discussed above.20 The Entertainment Media Anti-Piracy Bill, under consideration in the Philippines, contemplates regulating all forms of entertainment media including analog technology (video, audio etc.)21 Secondly, it proposes regulation of not just the manufacturing of entertainment media but also distribution, copying, sale and lease.22 Foreseeable dangers are inhibiting free trade and an overlap with copyright protections. Optical disc regulation aims at controlling manufacturing of the unlicensed optical discs and not replacing the protections offered under the copyright or other intellectual property protections. As seen from the chain of parties, an optical disc law would regulate manufacturing of optical discs themselves, while copyright laws would control reproduction, distribution and communication of the content or intellectual property embodied in the optical discs.

Overregulation would in itself be a violation of the member country obligations under the Agreement on Trade Related Aspects of Intellectual Property (TRIPS). Section 1 Article 41(1) of TRIPS sets out the general obligations of member countries and specifically prevents barriers to legitimate trade:

Members shall ensure that enforcement procedures as specified in this part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement. ... These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse. (emphasis added)

Many high piracy countries, particularly in Asia, have taken up as a priority, enactment of optical disc laws as part of their obligations under TRIPS. The precise relationship between adopting an optical disc law and World Trade Organization (WTO) obligations is unclear. However, an indirect obligation arises under enforcement provisions of TRIPS.

6. Relationship between WTO obligations and the optical disc law

Though enacting a sui generis optical disc law is not an explicit obligation under TRIPS, however, in Part III of TRIPS rest the obligations of member countries to provide adequate enforcement measures for protecting intellectual property rights. It is under the ambit of enforcement and cross-border measures that member countries facing a high problem of optical media piracy have resorted to adopting the optical disc regulatory law as another tool to strengthen its enforcement arm. While Section 1 Article 41(1) sets out the general obligations of member countries, the civil and criminal measures are detailed in subsequent provisions. Section 4, Article 51 et seq. mandate border control measures and Section 5, Article 61 mandate criminal remedies of monetary fines, imprisonment, seizure, forfeiture, destruction of infringing goods, material and implements the predominant use of which has been for commercial piracy. The provisions of an optical disc law fit within these enforcement obligations of member countries. However, this obligation is selective and is imposed only in countries that firstly, face high levels of optical disc piracy and secondly, where the traditional anti-piracy laws are insufficient to meet the challenges of optical disc piracy.

7. Conclusion

As seen above, the optical disc regulatory laws are only just the beginning. While the actual effectiveness of this new piece of regulation is yet to be fully seen, the optical media piracy problem has gained full momentum. No one law can address the vast levels of optical disc piracy around the world. It is the synchronized enforcement of the various anti-piracy laws that will together bring about a significant impact. The WTO obligations of member countries do not extend only to adopting new laws but more in their implementation and tackling the problem at hand.

* Associate, Thakker and Thakker, Mumbai; Summer Intern, Motion Picture Association, Los Angeles (June-Aug 2001), LLM Franklin Pierce Law Center, USA. Return to Text

1. See press release "Herbert Smith escalates the war on optical disc piracy" http://www.herbertsmith.com/news/news_info.asp, 2-7-1999. Return to Text
2. See The Motion Picture Association, Trade Barriers to Exports of U.S. Filmed Entertainment-2000 Report to the USTR at 1 (2000). Return to Text
3. See International Intellectual Property Alliance, 2001 Special 301 Report at 6, (2001). Return to Text
4. See article "Malaysia reigns as Piracy Capital", www.bizasia.com/gen/articles/stand_art, 6-6-2000. Return to Text
5. Comments are primarily based on the provisions of the Prevention of Copyright Piracy Ordinance, 1998 (Hong Kong). Return to Text
6. See Compact Disc Manufacturing Overview, www.bigboys-toys.co.uk/products/cdmfr.htm. Return to Text
7. See 2001 IFPI Music Piracy Report at 3, www.ifpi.org/library/piracy2001.pdfnews, (June 2001). Return to Text
8. See IFPI Formal Submission to Australian Parliament, House of Representatives Standing Committee on Legal and Constitutional Affairs, Terms of Reference: Inquiry into Copyright Enforcement at 3, http://www.aph.gov.au/house/committee/laca/
   copyrightenforcement/sub 37ifpi.pdf (June 1999). Also see 2001 IFPI Music Piracy Report at 3, www.ifpi.org/library/piracy2001.pdfnews, (June 2001). Return to Text
9. Comments are primarily based on the provisions of the Prevention of Copyright Piracy Ordinance, 1998 (Hong Kong). Return to Text
10. Ibid. Return to Text
11. For example in Hong Kong, any person who manufactures optical discs without a licence or forges or applies a false code commits an offence liable for first conviction of a fine of HK $ 5,00,000 and 2 years' imprisonment. See Prevention of Copyright Piracy Ordinance, 1998 § 21(1)(a) & § 22. Return to Text
12. Prevention of Copyright Piracy Ordinance, 1998 § 24. Return to Text
13. Id. § 21(2) & (3), § 23. Return to Text
14. For example under the Hong Kong law the penalty for manufacturing optical discs without a licence on the first conviction is HK $ 500,000 and two years' imprisonment and a second conviction HK $ 1,000,000 and four years' imprisonment. See Prevention of Copyright Piracy Ordinance, 1998 § 21(1)(b). Return to Text
15. Prevention of Copyright Piracy Ordinance, 1998 § 19(3). Return to Text
16. Id. § 18(4). Return to Text
17. Id. 1998 § 26. Return to Text
18. Id. § 28. Return to Text
19. Entertainment Media Anti-Piracy Bill, 2000, Eleventh Congress House Bill No. 11855 (Philippines). Return to Text
20. Entertainment Media Anti-Piracy Bill, 2000 § 2(9). Return to Text
21. Id. § 10(3)(c). Return to Text