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By Dave L. Llorito, Research Head
First of 3 parts
Law enforcers used to think that the optical
discs containing illegally copied software, music, computer games,
and other copyright materials being sold in the malls, corner
stores, and in open streets are smuggled in from abroad by
syndicates. Lately, they were alarmed to learn that many of these
syndicates have moved their underground production lines into the
country, making the Philippines a producer as well as exporter of
pirated copyright products.
“Until early this year, the Philippines is
known to be a distributor country; the pirated stuff they are
selling here came from neighboring countries,” admits Carmen G.
Peralta, director of the documentation, information, and technology
transfer bureau of the country’s Intellectual Property Office.
“Only lately, in the middle of the year, did
our enforcement agencies catch increasing numbers of stamping or
duplicating machines.”
Peralta says the machines can produce four
copies in just a second, implying that one such gadget could
produce tens of thousands of copies in a day. “These are done
mainly by foreigners.”
The syndicates could actually have begun
expanding their local operations as early as 1999. Sources from the
recording industry revealed that on October 1999, a raid on a
clandestine CD production facility in Manila yielded 53,000 pirated
music CDs, 396 stampers, one replication machine, and a printing
line.
Subsequent investigation by the International
Federation of Phonographic Industries revealed that the underground
facility was financed and established by a syndicate based in Hong
Kong. The stampers were brought in by another company, based in
Macau.
In August 2001, another plant, located in a
factory in Bulacan, was found replicating unauthorized copies of an
American recording using stampers supplied by a Hong Kong syndicate.
Two separate raids of illegal CD makers in
February and September last year resulted in the arrest of illegal
immigrants from China. Early this year, a plant in Manila was found
to have been set up by Malaysians who shifted their operations to
the country to escape tight law enforcement in Malaysia after that
country passed its optical disc law. The second raid against the
same plant yielded large quantities of optical disc, replicating
machines, and stampers of Malaysian origin. Enforcers arrested
several suspects, including six Malaysian nationals.
Optimal media include compact discs (CD), video
compact discs (VCD), digital versatile discs (DVD) – read only
memory (CD-ROM). They are called optical media because optical
devices such as laser are used to read them.
“Replication orders and supplies apparently
originated from the parent company in Malaysia, and completed orders
were then shipped back to the Malaysia market,” says the IIPA
Report.
The IIPA is a private-sector coalition of
copyright industries in the United States representing more than a
thousand firms producing and distributing computer software,
theatrical films, television programs, home videos, music, records,
textbooks, trade books, reference and professional publications and
journals. Among its prominent members are the Business Software
Alliance, Interactive Digital Software Association, Motion Picture
Association of America, Association of American Publishers,
Recording Industry Association of America, and American Film Making
Association.
Pirate production lines
Intelligence sources estimate there may be about
35 underground CD production lines in the country. Almost half of
them have been busted, according to the NBI.
But CD piracy in the Philippines is far from
being licked.
Sources say underground pirate production plants
are heavily dependent on organized crime groups from Malaysia,
Thailand, Singapore, Hong Kong, and Taiwan for finance, management,
technical assistance, and the production of stampers and other
equipment.
Taking advantage of the country’s porous
borders, the CD pirates relocated in the Philippines where IPR
enforcement is weaker to escape tighter enforcement in their own
countries. The pirated optical media are sold to Southeast Asian and
other global markets, including Latin America.
“In pursuit of profit, music pirates seek out
jurisdictions with weak laws and even weaker enforcement,” says
the 2002 Music Piracy Report prepared by the IFPI. In some Southeast
Asian countries, CD manufacturing plants under pressure from
increased enforcement activity and plant regulations have moved to
new locations.” These “new locations” include Thailand and the
Philippines.
According to Jay Bergman, IFPI chairman and
chief operating officer, Taiwan started to introduce stricter CD
plant regulations in 2001 following the example of Hong Kong, Macau
and Malaysia. And in early 2001, China started to strengthen IPR
enforcement in its campaign to secure entry to the World Trade
Organization. By the end of 2001, China has joined the WTO and
agreed to fully implement its obligations under the Trade Related
Intellectual Property Rights (Trips).
Feeling the heat, some of the syndicates found
the Philippines a safer haven for their activities.
Sources say the syndicates bring in their
equipment piece by piece to avoid detection. The pieces are
assembled and established in a heavily secured site equipped with
hidden cameras and other surveillance gadgets to enable the
operators to escape before law enforcers could get them. Aliens
operate these machines before turning them over to their local
apprentices.
Rafael Ragos, head of NBI’s IPR division,
suspects that the illegal nationals came from China, Taiwan, or Hong
Kong.
Besides the sophisticated replicating machines,
software industry insiders say that a more recent problem has been
the use of “burning” machines to illegally produce CD-R copies.
This is because the strategy of local law enforcers like the NBI has
been to seek out and confiscate the stamping machines that produce
“pressed” CDs. Some syndicates shifted to high-volume,
high-speed CD-R burners that are more portable and cheaper to obtain
than the stamping or replicating machines.
On a smaller scale, there has been a trend among
“enterprising” students who, with the use of a personal computer
equipped with a CD writer, charge their fellow students a fee
ranging from P10 to 60 for a collection of pirated music containing
15-20 songs per CD. The “client” provides the list of titles and
a blank CD.
“Compared to mass-produced pirated CDs, we
offer a better compilation because the titles are given by the
client,” says Rocky, a 15-year-old high school student from a
middle-class family. “If we cannot find it in the Internet, we
look for the songs from friends and other sources who are also in
the same business as ours.”
“We are even more competitive than the
mass-produced pirated CDs,” he says, explaining his production
cost is low because he uses the family computer purchased by his
parents.
What are intellectual property rights?
What worries IPO officials is that this new
dimension to the copyright piracy problem in the country could be
misinterpreted to mean that there are wholesale IPR infringements
and that law enforcers are not doing something about it. The true
picture, Peralta says, is that IPR infringements are confined to
certain types of intellectual property particularly trademark and
copyright.
“It would be very hard to copy patents because
one has to set up an entire factory to be able to copy or make money
from the stolen patents,” says Peralta.
In terms of trademark infringements, the most
affected are high-profile brands such as Levis (jeans), Calvin Klein
(jeans, shirts), Guess (jeans), Nike (shoes), Hanes (shirts),
Skechers (shoes), Lacoste (shirts), Jansport (sports bags), Reebok
(shoes), Eagle (electrical products) and Rubie (blades).
The favorite targets of software pirates are
Microsoft products (Windows and Microsoft Office), Adobe (PageMaker,
Photoshop, and Illustrator), and Autodesk (AutoCAD, AutoCAD Map,
Autodesk Survey), and entertainment software for console-based games
such as Sony Playstation. In terms of music, the main targets are
those of widely known artists.
“The top target for pirates tends to be the
top-selling, best-known international titles,” says IFPI’s 2002
Music Piracy Report. “Pirates don’t engage in marketing and
promotion. They want to make quick and easy profits, so they
counterfeit those titles that are already heavily promoted by the
record companies and are likely to sell in large quantities across
the world.”
IPR are rights awarded by society to individuals
or organizations to owners of “intellectual property”(IP) or
creative works so they may have the same legal status as tangible
property. IPR give the creator the right to prevent others from
making unauthorized use of the property for a limited period of
time, say 20 years for a patent, to reward the creator for his or
her creative works. Since those creative works are potentially
useful to society, the culture of innovation that results from IPR
protection leads to technological progress and development.
IP could either be industrial property (such as
inventions or patents, trademarks, industrial designs, trade
secrets, among others) or copyright and related rights covering the
creators of original literary, scientific, and artistic works like
music. According to the London-based Commission on Intellectual
Property Rights, computer programs are protected by copyright
because “software source and code have been defined as a literary
expression.”
Copyright prevents unauthorized reproduction,
public performance, recording, broadcasting, translation, or
adaptation. Those who will use copyrighted materials will have to
pay royalties to the original creator. In general, unauthorized use
of these “intellectual properties” is called “IPR
infringement.” Copyright violations, however, are generally called
“piracy” as the violator is stealing the content of the product,
say a VCD.
Counterfeiting could be typically used to
describe trademark infringement where the violator uses the
“trademark” (e.g. logo) of a popular product to sell a fake one
that is typically inferior in quality. Some counterfeiters
“modify” the trademark a bit to show that they are not violating
an IPR but achieve the same effect and make money off the original
trademark. This is the case of cheap “Lev” jeans imported from
Thailand that were once sold in Divisoria and other popular
low-priced retail outlets.
There are also cases where the trademark of a
popular product is illegally used to sell a totally different
product. One example is the use of the “Playboy” mark to sell
cheap undergarments. There are also cases where law enforcers had
apprehended retailers in Baclaran selling sandals and slippers with
the “bee” mark owned by Jollibee Corp. This could also be
considered counterfeiting.
There are also “bootleg” which — according
to the International Federation of Phonographic Industries —
involve the unauthorized recording of a live or broadcast
performances and are duplicated and sold without the permission of
the artist, composer, or a recording company.
Peralta stresses that, contrary to popular
notions, IPR violations in the Philippines have largely been
confined to trademark infringement and copyright or piracy, mostly
involving the sale of CD, VCD, DVD, and other optical media.
“There is no wholesale violation of IPR. We are doing our best,
given limited resources, to address the problem,” he says.
According to lawyer Bienvenido A. Marquez III of
the Quisumbing-Torres law firm, which specializes in IPR cases, it
is in optical discs where IPR problems have been very glaring and
where the country has started to be known as a production base for
pirate products both for the domestic and export market. Counterfeit
products of popular industrial brands are either smuggled in from
Taiwan or China or are produced by small backyard operators. He
noticed, however, that lately accessories (e.g. casings and chargers
with labels) for popular cellular phone brands like Nokia are being
produced at an industrial scale in the country. Whether these
gears are also exported is not clear.
Piracy in various ways
According the Ragos, the most visible IPR
problem is the counterfeiting of optical discs, particularly of
business and entertainment software. He says there are five common
types:
• End-user piracy. This occurs when individual
businesses, schools, non-profit organizations, make additional
copies of software without authorization.
• Client-server “overuse.” This occurs
when too many employees on a network use a central copy of a program
at the same time. This also involves multiple installation of one
server program.
• Internet piracy. This involves pirate Web
sites making available some copyright material for free download or
in exchange for uploaded programs; Internet auction sites offering
counterfeit or infringing copyright software; and peer-to-peer
networks enabling unauthorized transfer of copyrighted programs.
• Hard-disk loading. This occurs when computer
stores load illegal copies of software into the hard disk of the
computers being offered for sale as an additional incentive to
buyers.
• Software counterfeiting. This involves the
illegal duplication and sale of copyrighted materials. This includes
the sale of “installer” software containing several programs.
The most blatant example of this type of piracy is the mass
production of original copyright products in optical discs using
high-volume replicating machines and stampers.
Aside from being a production base of pirated
optical discs for various export markets, the smuggling of local and
international copyright products has continued despite government
efforts to curb them.
IIPA says those smuggled in are mostly Filipino
repertoire produced elsewhere to cater to local demand. Some of them
are brought in through ports in Mindanao along with other contraband
such as luxury cars and rice. In 2001, the group uncovered one plant
manufacturing pirate Philippine repertoire.
Illegal copying of local movies is just as
rampant. Movie industry sources, for instance, disclosed that
illegal copying of local movies usually takes place after the master
copy of a newly completed film is submitted to a film production
outfit for reproduction. There are cases where some
“enterprising” technicians would surreptitiously make illegal
copies of the films while doing the legitimate ones.
Domestic production and smuggling of pirated
optical discs appears to have been hitting particularly motion
pictures, music and sound recordings, and entertainment software. As
to business software and applications, industry sources think the
problem is particularly end-user piracy.
“As in other countries, much of the business
software piracy in the Philippines is committed by end-users who
make multiple unauthorized copies of a single legitimate copy of a
business application,” notes IIPA. “This enables the program to
be installed on or made accessible to computers throughout a
business, educational facility, or other institution without
purchasing a license for this arrangement from the copyright
owner.”
Besides pirating of optical media, copyright
industry sources also stress that cable piracy, book piracy, and
videocassette piracy is rampant as well.
IIPA notes: “Hundred of cable systems,
especially those outside Manila, make unauthorized transmissions of
new and recent Hollywood productions their standard fare. Cable
piracy hurts all the legitimate markets for these products,
including theaters and home video. Although cable systems outside
Manila are supposed to be regulated, there is still a proliferation
of infringing transmissions, and it is possible to see new releases
repeated several times a day.”
Besides, optical disc and cable piracy, IIPA is
also complaining about rampant book piracy that is said to be common
in and around universities. “Commercial reprint piracy…remains
rampant. The piracy of scientific, technical, and medical books also
continues to undermine legitimate sales, …” the IIPA Report
says.
With Meryl Mae Marcon and Kristine R. Payuan, Researchers
Continued tomorrow
Part 2
| Conclusion
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