08 November 2006
Eddy Yu
Eddy Yu

After having now been implemented for a month and a half, media scrutiny of the Intellectual Property (Miscellaneous Amendments) Ordinance 2000 is finally beginning to ease. However, summarising the discussions of various media, two areas of concern have been highlighted: the use of pirated computer software, and illegal copying of printed and electronic media. As pointed out by the public and media at the time, the government did not make a close enough study of the Ordinance before implementing it and seriously underestimated its effects on industry.

However, while implementation of the Ordinance in cases of copyright infringement on film, the downloading of songs from the Internet, and the use of pirated computer software proceeded as scheduled, Secretary for Industry and Trade Chau Tak-Hay was forced to make an embarrassing about-face on Government plans to classify reproduction through photocopying or downloading from the Internet as a criminal offence. Public criticism was so great that he made an open apology in a panel meeting of the Legislative Council and announced a deferral of implementation of related parts of the legislation.

As a graphic designer, it does not seem proper for me to criticise the criminalisation of pirating movies or downloading songs. However, I believe computer software piracy is another matter.

Looking back on the mid-1980s, when Apple Computers were first introduced to Hong Kong, the issue of software has been a source of numerous challenges for the designer, both in terms of operation and money involved. It is s subject upon which designers have long voiced their worries. Yet until this tangled relationship is properly resolved, it is shocking to find that the designer could find himself as a criminal, facing financial penalties and possibly prison.

The problems are particularly acute for small and medium-sized enterprises (including design, printing and publishing firms), who, faced with a limited range of suitable software on the market, have little bargaining power with the big software suppliers in Hong Kong.

Of course, no one is questioning the idea that the use of pirated software is illegal. The spirit of the legislation is to protect intellectual property rights, which, as a designer, I entirely support. What I am not in favour of, however, is the granting of unfair privileges that assist companies in making unreasonable profits at the expense of the consumer and a properly balanced system. Sadly, it is not a subject the Government believes worth review, and it has clearly stated that the commencement of the new law will not be deferred. Yet the question persists of whether there exists excessive protection of software producers' intellectual property rights.

A recent seminar on the practice of competition law and surveillance of fair trade, The Competition Policy of Hong Kong: Review and Forecasting, raised some interesting points. In his paper, Professor Tsang Shu-ki, Chairperson of Competition Policy Committee, explained that traditional approaches to competition policy encompass three key points: structure, conduct and performance.

In order to check whether unfair trade practices have occurred one must first find evidence of unreasonable market concentration within a few suppliers. These suppliers must then be scrutinsed for operating restrictive trade practices, such as vertical and horizontal restraints. Vertical restraints include resale price maintenance, tie-in sales and exclusive dealings. Horizontal restraints include price-fixing, collusive bidding and division of output and market. Finally, one must judge whether products offer reasonable value for money and how far - if at all - producers gain abnormally high profits.

Let me use the above three criteria to examine the computer software market in Hong Kong.

It is common knowledge that several very large producers control a market where few suitable substitutes are available. It is claimed - most often by the software producers themselves - that this situation is the result of widespread piracy, which in turn has limited the amount of space available in the market for alternative software. The inference, in effect, is that users are suffering the consequences of their own actions.

Ostensibly, the above opinion is quite rational. However, I also believe the situation has been exacerbated, and even encouraged, by the ambitions of large software companies. Take Apple Computer as an example. In the mid-1980s, when Apple was launched to huge fanfare in Hong Kong, one of the strategies used to ensure high occupy before other competitors joined the market was a lax attitude towards piracy prevention. Partly as a result of this, Apple Computers and software rapidly became indispensable in many industries, especially the printing, design and publishing industries.

Today, with the now widespread use of Apple software, producers can demand more vigorous prohibition of piracy in the knowledge that companies will not want the disruption or expense of switching to alternative software. However, I imagine that if the Government had pursued the same policy when Apple just entered the market, all software producers would have quickly voiced their opposition.

Have the software suppliers carried out any restrictive practices in trade? It is difficult to answer this question because it is difficult to prove. When Microsoft installed a mandatory Internet browser in their Windows software, Internet Explorer, the company was sued by the State Government for creating a monopoly. The case, which attracted massive worldwide attention, dragged on for months and cost the US taxpayer a huge amount of money before it was found that Microsoft s strategy of providing a tie-in sale imposed a vertical restraint. The case has clearly demonstrated the difficulties in proving restrictive practices.

In Hong Kong, software suppliers raised their prices soon after the commencement of amended copyright laws. Was this a simple case of demand exceeding supply or the result of resale price maintenance? Consider Adobe Font Folio 9.0, which, when compared with the earlier - and now discontinued - 8.0 version, consists of a number of rarely used types, yet is 40 percent more expensive (i.e. about HK$20,000). Is this actually another form of a tie-in sale or a necessary a commercial mechanism deployed by software producers to compensate their rapid development of a new product? It is difficult to judge.

Performance is an even more difficult quality to ascertain. Being ordinary users, we have no way of knowing whether software producers are earning abnormally huge profits - although Bill Gates might seem like evident enough that they are. Is one license for one computer a measure of abnormal profit? Or is "three computers per one piece of licensed software" a case of no profits? It is beyond our knowledge. The question of whether computer software is genuinely value for money is another highly complex issue.

So how is the price of software set? Why does Freehand 9.0 cost only HK$2,000, whereas Pagemaker 6.5 costs over HK$4,000? Does the latter function better than the former, or help the user to generate more profits? Not necessarily. The price of the software is actually determined by cost and profit to the producer, rather than to any benefit it might finally bring the user.

As a result, the question arises of how far computer product development is driven by the market or by production? The late designer Marcello Minale once said that in general, products were invented and designed to meet the user s need. Yet is this the case with the computer? Did designers ever demand such a thing? Minale questioned whether computers actually brought more harm than good. One might not totally agree with him, yet do we ever really question whose decision it is to have a new version of the same software when we still do not fully understand the previous one? Has Freehand 8.0 failed to meet our design needs to such an extent that Freehand 9.0 is indispensable? Does design quality rise continuously as software functions increase?

The discussion can ramble on, but it does serve to bring out the core concern of whether software is value for money; whether it meets our needs and gives added value to our products or services? Besides increasing operational cost, does the frequent upgrading of software bring more problems than it solves? Put another way, is rapid upgrading a result of users needs or it is a surviving strategy of the software companies?

Until now, there is no compelling evidence to suggest that the behaviour of software companies has infringed competition laws. The aim of this article is to highlight unreasonable phenomenon in the software market by making competition law a point of reference. The main problem is that of a monopolised market - something that may not entirely be the result of software piracy.

Perhaps, under the international trade pressure, the Hong Kong Government cannot but criminalise piracy (Hong Kong is a member of World Trade Organisation and a result copyright law is closely scrutinised). The pressure may perhaps come form Western capitalistic hegemony through the process of globalisation. A fully accountable government should be rigorous in setting the right balance between the public interest and business interests. It should not solely afflict the users. Legislator Audrey Yu succinctly expressed the issue when she asked: "Should laws and tax payers' money be used to assist software companies to monopolise the market?"

About this article

Reprinted with permission from XPress.

About the Author
Eddy Yu Chi-kong is a 41 years old graphic desiger from Hong Kong. He obtained Master of Design at the The Hong Kong Polytechnic University. He is Design Director at the Alan Design Company (Hong Kong, China).

About Xpress
The Xpress is a design journal published by the Hong Kong Designers Association. The Journal is distributed free to members, design schools, design associations, professional bodies, creative industries, sponsors and overseas design institutions.