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Cover Story

PIRACY

Present copyright law is weak and needs to be strengthened

By Syed M. Aslam
Mar 13 - 26, 2000

Imitation may be the best form of flattery but don’t try to use this oft-used saw to convince the owners of intellectual property and copy rights who regard modern day pirates as piranhas of the wired world of today.

The exponential growth of the internet has turned the world into a global village to offer greater opportunities, and even more faster money, to the pirates of electronics, audio-visual, computer software and published materials. The cyberspace has created a new breed of pirates the world over, developed countries in general and developing in particular.

Ironic as it may seem, despite strong aversion to the connotation that the word piracy denotes, the developing economies have no qualms to use pirated products due primarily to economic necessities than anything else. For the majority of faminished masses deprived of even the barest necessities such as shelter, livelihood, health facilities and education, the virtue of protecting copyrights hardly makes any sense. The plight of the majority of people in the middle to moderate income groups in the developing economies is no different. With a low per capita income the developing economies have become a high piracy prone markets of an array of products for obvious economic reasons. For many, particular the students of engineering, medicine and Business Administration; and individual as well as commercial users of personal computers, buying original text books, software and home entertainment videos is highly uneconomical. For tens of millions of consumers piracy though unethical offers an affordable choice without which many of these students, individuals, small and even middle and big businesses would not be able to carryout their activities. For many, the availability of pirated products and services is the only viable choice.

Like all developing countries, Pakistan has its own share of problems to implement a strict copy and intellectual property rights protection laws, a commitment that have to be honoured by the country as the signatory of relevant international conventions. A changing attitude towards protection of intellectual property rights in the developing countries and the significant increasing demand to implement it strictly in the context of the globalisation of economic activities have exerted immense pressure on the developing countries like Pakistan to implement the intellectual property rights strictly under Berne Convention and the International Copyright Order. The economics thus has come in direct conflict with the ethics.

The raid and sealing of Rainbow Centre Karachi, the biggest market of home entertainment videos, CDs, DVDs, CD ROM in Pakistan, in mid of January this year and the attention which it drew to force the administration to abruptly lift the seizure without pursuing the anti-piracy cases which it said it would carryout highlights this conflict between economic and ethics clearly.

In principle, hardly anyone seems to disagree that piracy is unethical. In practice, however, there are many who feel that the increasing pressure by the developed countries is a pretext to ensure the markets of their products in the developing countries. Globalisation— the GATT and World Trade Organisation— have resulted in liberation of national economies and a free movement of goods, services, capital, and productive capacity usually at the benefit of the developed countries at the cost of the developing economies.

Mergers

The recent mega-mergers in the developed world would have a direct impact on the developing economies of the world. Multinationals are poised to play a much greater role to enjoy a truly global role the tremors of which would be felt in the developing nations. The developed countries who have already enjoy a deep penetration of the developing economies would be stronger in the times to come to influence and dominate the markets of the developing countries. The gradual removal of the tariff barriers in the developing countries to accommodate free trade as per the directives of the WTO, for instance the reduction in import duty from maximum 90 per cent to 35 per cent over just five years in Pakistan, threatens the national industries. Who would like to manufacture if the imported goods are available at competitive prices?

Former South African President, Nelson Mandella, asked the South ‘to realise that the playing fields are not yet level’ and to observe that ‘globalisation hasn’t helped the poor.’ He also said that ‘the poorer nations in shaping policies defining global trade terms while richer countries, under globalisation, take decisions that suit their agendas.’ Speaking at the inauguration ceremony of the annual three-day Emirates International Forum in Dubai, he also said that ‘poor countries are forced to comply with global economic transformation by richer countries and that inadvertently affects their national destinies and seriously compromises their national security.’

The changing face of the global trade has also worried many other leaders. The outspoken Malaysian prime minister, Mahathir Mohammed refusing to attend the Davos Forum because instead of being invited as a keynote speaker he was later asked to be a member of six-panel people, made this observation, ‘It would seem that globalisation is leading a few big companies in the world that will dominate various areas of the economy and to us that doesn’t seem too good because . . . we are likely to be gobbled up.’

The recent raids to implement the copyrights laws should be seen in this context in Pakistan. There seem to be no objection for the implementation of copyrights laws in Pakistan in theory, however, the strong resistance and vociferous objection to them is another issue in practice. The general outcry against such actions underlines the concerns at the economic realities that buying original versions of software, publishing materials, video movies, and audio cassettes would be unaffordable.

The relevance of increasing pressure towards improved protection and strict implementation of intellectual property rights from the developed world on the developing economy like Pakistan, and some of the poorest countries where millions have to survive on less than dollar a day, pose a serious question to the effective implementation of Intellectual Property Rights. However, the ethics of the issue could hardly be underemphasised and so is the revenue loss which it causes to the national exchequer. According to one estimate the government is losing Rs 9 billion in revenues due to piracy, one-third each of it from the consumer items and home entertainment videos alone.

Motion Picture Assciation

Talking to PAGE Nisar Sarwar, the executive director of Anti-Piracy Operations in Pakistan for the Motion Picture Association of America, refuted the general perception that original products marketed under licence in Pakistan need not be expensive. The lack of economy of scale primarily due to the easy availability of pirated home entertainment videos deprive the two licenced companies, namely Pulse Global and Communication City to have a deeper penetration of the market to help lower the prices of their genuine products, he said.

Not only the wholesale piracy of video business in Pakistan, including the movies of the major Hollywood studios is not causing phenomenal losses to the two legal companies but is also depriving the government billions in lost revenues in sales tax, duties and Censorship fee which cost Rs 10,000 for each title. In addition, the video piracy is also destroying the moral fibres of our society by flooding millions of households nationwide with uncensored movies as unlike legal licencees they decline to spend Rs 10,000 censorship fee.

Similarly, unlike the licenced companies which contribute almost 30 per cent or over Rs 105 taxes on their single videos which retails for about Rs 350 the video pirates pay no such taxes. While video pirates contribute no revenue to the government, Pulse Global has paid over Rs 100 million in taxes since its operations in 1995.

Nisar, whose clients include many multinational producers of consumer products such as shampoos, detergents and food items, as well as software companies of international repute; publishers; satellite channels such as Star and TNT television; and Hollywood studios, said that prices of text books, videos, software programmes, consumer products produced by licenced manufacturers can only go down with the elimination of piracy necessary for a deeper penetration of the market and economy of scale and turnover.

Asked if the individuals and businesses of developing country like Pakistan can afford to install original software compared to pirated versions easily available at affordable prices, Nisar argued that proportionate pricing formula adapted by the multinational pharmaceutical companies to market their products at lower prices here compared to prices in their own countries could not work for software. Firstly, he said, unlike medicine the software is not an item of everyday use irrespective of one’s financial status. The personal computer is used by only the middle and high income group in Pakistan which can also afford to buy the original software. Secondly, installing an original software is not only carry a guarantee and is unlikely to cause damage to the PC like the pirated copies. It only makes a good common sense to pay more to install an original programme than to buy pirated ones to risk a long term loss over short term gain, he added.

In addition, he said, Microsoft has announced a mammoth 97 per cent discount on its products to students and teachers of academic institutions to provide original software at affordable prices to provide its products to all those who matter as PC is being used only by the educated and the well-offs in Pakistan, he added.

The video, text book and consumer good piracy alone is depriving the government of Rs 9 billion revenues annually— Rs 3 billion each from video and consumer products alone and Rs 1.5 billion in text book publishing. He rejected the claim of the video pirates that the wholesale distribution of Indian movies hurt a hostile country. The reality is the pirates have trumped up this issue to give a patriotic cover to their nefarious activities as they operate totally tax-free to pocket the profits by flooding the Pakistani households by vulgar movies which are neither censored to contribute any revenue to the Pakistan Censor Board for thousands of movies each of which could provide Rs 10,000 to the Board. In addition, they flood the markets with Indian movies which are banned in Pakistan to undermine its very cultural, social, religious and moral values.

Rainbow Centre

The Rainbow Centre Karachi has not only become the major outlet of pirated videos of Indian, American, Russian and all other movies from many other origins but has now also turned into a centre for pirated computer software. Out of some 350-400 shops housed in the Rainbow Centre, 250-275 are exclusively engaged in video piracy be it video, video compact disc (CD ROM are primarily smuggled into the country from Singapore, Malaysia, Hong Kong and Indonesia) there are others which are engaged in software piracy.

As the wholesale piracy continues unabated despite the raid and sealing of the Rainbow Centre for two weeks in January (Nisar said that since its reopening the piracy has doubled) the Anti Piracy Operations blames the absence of any meaningful deterrent to discourage the illegal trade. Of the 3,000 criminal cases registered on the written complaint and raids conducted by the Anti-Piracy Operations in last two years only 1,500 have already been decided and the punishments awarded are discriminatory. Of the 1,500 cases decided so far only four were awarded Rs 15,000 penalty each while the rest of the 1,496 were left-off with a slap on the arm with penalties which ranged between Rs 300-500. No imprisonment was awarded in any of 1,500 convictions.

Nisar blamed the lacuna in the Copy Right Law which carries a maximum penalty of upto 3-year imprisonment and/or Rs 100,000 fine for first conviction an upto 3-year imprisonment and Rs 200,000 fine for each subsequent conviction. Nisar said that while the Copy Right Law seems to serve as a deterrent in theory it fails to offer any real deterrent to discourage violation of Copy Right Law. Firstly, the magistrates tend to desist from awarding imprisonment and secondly the absence of any minimum limit for fine has resulted in small fines which has failed to serve as a real deterrent. The word ‘upto’ has made it possible for the magistrates to levy lenient fines to the pirates.

Agreeing that except for India no other country imposes a minimum fine he added that in the countries with copyright laws similar to Pakistan the judges usually fine the maximum financial penalty for convictions. Indian Copy Right Laws clearly outlines a six-month imprisonment plus a minimum fine of Rs 50,000 for every conviction which also explains the low 65 per cent audio-visual piracy rate in India compared to 75 per cent in Pakistan, particularly when one understands Indian population is almost eight-fold than that of Pakistan. The overall piracy rate is also 20 per cent lower in India— 70 per cent in India compared to 90 per cent in Pakistan, he added.

Nisar stressed for the need of abolishment of discretionary power of the Pakistani magistrates primarily due to the ‘upto’ lacuna for maximum penalty to help discourage piracy in Pakistan.

Pulse Global

The General Manager of Pulse Global, M. Alamgir Khanji, said that defending piracy on humanitarian grounds such as loss of livelihood as the recent closure of Rainbow Centre was made to look is the ‘loss of focus. Can anyone defend a thief or a robber on the same principles? The vital question is: Is piracy legal? If not what all this talk about.’

Calling the last six years since Pulse Global became the first licenced home video company of Pakistan, as ‘trying times’, he expressed pessimism that developing a legitimate video business is hard, extremely hard. ‘It takes a lot of courage today to talk of developing a legitimate business like ours as the pirates have become so intrepid as to ask the legitimacy of a licenced company like ours.’ He was referring to a meeting arranged by the Karachi Chamber of Commerce and Industry (KCCI) after the closure of the Rainbow Centre in which hostile traders directed their insults and threats at him and Nisar.

Khanji said that three years ago Pulse Global was releasing a title a day on an average which decreased to less than half or between 12-15 a month just prior to the raid on the Rainbow Centre in January. We were optimistic to increase the number of new releases to 17 a month as the top Sindh administration had assured us that the raid would help curtail piracy. However, with business as usual after the closure, the plan no more looks possible, he added.

In addition, the number of copies released by the Pulse Global have almost declined from some 25,000 cassettes a month three years ago to between 12,000-15,000 cassettes a month. Its becoming harder and harder for us to survive by each passing day as we are currently operating at 50 per cent capacity compared to three years ago. The Pulse Global and Communication City, the only two companies allowed to release films of ten major Hollywood studios through local licences, have only been able to make one per cent penetration of the home entertainment market for their studios while the rest of the 99 per cent is in the hands of the pirates, Khanji added.

Pulse Global has contributed over Rs 100 million in various taxes since its operations in 1995 which could have at least three-times more if the business was allowed to grow at the normal rate which was rendered impossible due to piracy of movies whose licence we have for the release of home entertainment videos in Pakistan. Over Rs 100 of every video retailed by Pulse Global at Rs 350 goes towards taxes. This is also depriving the government a huge amount in revenue in taxes at the import stage— 35 per cent import duty, 5 per cent turn over tax on blank cassettes; 18 per cent sales tax at retail stage; Rs 10,000 in censor fee.

‘We are dying a slow death as not only our business has not grown as envisaged but it has actually shrunken over the years,’ Khanji said. We have not been given the due recognition despite the contribution we have made as a legitimate business. We need not only stronger laws with necessary amendments in Motion Picture Ordinance which presently covers only theatrical releases to also cover home entertainment but also a better implementation of the same. There is also the need to amend the Copy and Motion Picture Ordinance to remove the lacuna pertaining to the absence of minimum penalty, he added.

Failure to amend and enforce the TPRs, he warned, would affect our foreign trade in many ways like increased imposition of textile quota with our major trading partners. In addition, it is high time to make the issue of IPRs violation in the country more transparent and documented as despite their presence the IPRs laws remain unimplemented. The accountability of the administration, police officials, magistrates and even home secretary should not be ruled to better enforce the relevant laws, he added.

Oxford University Press

Ameena Syed is the Managing Director of Oxford University Press, a licenced publishing house in Pakistan. In her faxed reply to a PAGE questionnaire said that while no definitive statistics is available about the value of book market, the pirated market is estimated to be about one-third, if not more, of the actual market.

She said that piracy is causing the government loss revenue of millions of Rupees annually in the form of non-payment of taxes since pirates do not pay taxes and deprive bona fide publishers of income. It adversely affects the development of new and updated textbooks and teachers’ guide as it deprives the publishers of their market and income to discourage them investing in new books.

Piracy, she said, is forcing prices of books to increase because it is making the market for genuine books smaller and thus genuine publishers cannot benefit from the economies of scale. The book piracy is hurting the development of local culture and local authors because writers are not getting royalties for their books which are pirated. They are thus discouraged from writing and turning to more lucrative fields.

Ameena said that piracy is resulting in legitimate publishers withdrawing from Pakistan, is resulting in sales and usage of substandard and out of date books, and giving Pakistan a bad name internationally to cause prospective foreign investors to shy away from investing here.

She stressed that the present copyright law is weak and needs to be strengthened to include a minimum penalty to give the law a deterrent value. An effective enforcement programme should be carried out by the government to enforce the existing copyright laws. In addition, the duties and levies on such imported raw material for books such as paper, ink, film, and plates should be reduced, she added.