IPR ATTACHI ENGAGES SHANGHAI CULTURAL TASK FORCE

UNCLAS SECTION 01 OF 02 SHANGHAI 000117 SIPDIS SENSITIVE SIPDIS USTR FOR CHINA OFFICE - AWINTER, ACELICO; IPR OFFICE - RBAE; AND OCG - TPOSNER DOC FOR NATIONAL COORDINATOR FOR IPR ENFORCEMENT - CISREAL DOC FOR ITA - CMCQUEEN, LRIGOLI, ESZYMANSKI LOC/ COPYRIGHT OFFICE - MPOOR USPTO FOR INT'L AFFAIRS - LBOLAND DOJ FOR CCIPS - ASHARRIN FBI FOR LBRYANT DHS/ICE FOR IPR CENTER - DFAULCONER DHS/CBP FOR IPR RIGHTS BRANCH - PPIZZECK TREASURY FOR OASIA - DOHNER/CUSHMAN NSC FOR KURT TONG E.O. 12958: N/A TAGS: ETRD KIPR EFIN EINV CH SUBJECT: IPR ATTACHI ENGAGES SHANGHAI CULTURAL TASK FORCE SHANGHAI 00000117 001.2 OF 002 (U) Sensitive but unclassified. Not for dissemination outside USG channels. ¶1. (SBU) Summary: On January 19, Senior IPR Attachi Mark Cohen met with the Director of Shanghai Culture Task Force (SCTF) Zhou Jianmin to discuss Shanghai's efforts on copyright enforcement. Cohen engaged Zhou on SCTF's authority over copyright infringement matters vis-`-vis the Shanghai Copyright Bureau and the legal means it uses to prosecute cases. Zhou outlined SCTF's function as an enforcement agency that not only handles copyright piracy but also handles pornography issues. Zhou also explained that because it is easier to collect evidence under "illegal business" criminal statutes than copyright provisions of the criminal code, his office regularly uses this legal avenue to prosecute cases. The trend of delegating copyright enforcement to Cultural Affairs Bureaus is not unique to Shanghai; Shanghai has followed the lead of Beijing and other cities in making the transition. Zhou also detailed his agency's cooperation with other city bureaus and its work with industry associations. End Summary. SCTF - A Small Agency with a Large Mandate -------------- ¶2. (SBU) Shanghai was the first city in China to establish a cultural task force in 1999. The main SCTF office is comprised of 80 staff, and there are several district level offices located throughout Shanghai. Among other responsibilities, SCTF plays an important role in regulating activities of licensed businesses, including the illegal activity of selling pirated audio and video products. By contrast, the Public Security Bureau holds general authority over IPR infringers. The Bureau of Industry and Commerce is in charge of stores without business licenses while the Shanghai Administrative Task Force (SATF) deals with street peddlers selling IPR infringing products. The SCTF is a member of the Shanghai IPR Coordinating Committee, SATF and the Market Order Rectification Office. ¶3. (SBU) Regarding copyright enforcement, the SCTF is in charge of counting, categorizing, and transferring pirated audio-visual products for authentication. It works in coordination with the Shanghai Public Security Bureau Economic Crime Investigation Team, which is responsible for criminal IPR infringement cases. Zhou mentioned three such cases in 2006. During an investigation in September 2006, the SPSB and the SCTF arrested five criminals with 2.73 million illegal discs. These criminals were punished with penalties from six months to two years in jails and fines ranging from RMB 5,000 (USD 645) to RMB 10,000 (USD 1,290). In October 2006, SCTF spent 40 hours with PSB investigating two criminal cases. These cases resulted in the arrest of three people. Zhou also pointed out that SCTF had provided assistance on numerous other IPR criminal cases carried out by the PSB. ¶4. (SBU) Zhou also explained that SCTF had a separate section in charge of Internet-based IPR infringement. SCTF uses the charge of "inappropriately broadcasting video" to prosecute most Internet-based IPR crimes. The highest penalty for this crime is approximately USD 23,000 and that the SCTF can only penalize infringers for not obtaining approval to broadcast video, not for the contents of the video. Illegal Business Operations vs. Copyright Infringement -------------- -------------- ¶5. (SBU) Cohen also engaged Zhou on the use of illegal business operation statutes to prosecute IPR crimes. In 2003, PSB, in coordination with SCTF, arrested eight criminals based on the crime of "illegal business operations." Zhou explained that one criminal was sentenced to 10 years in jail and the rest were in jail from two years to eight years. Zhou and Cohen also discussed the Randolph Guthrie case in which Guthrie was sentenced based on the crime of "selling illegal copies" under the criminal copyright law. Zhou said that, after this case, the Supreme Court noted that similar cases should be sentenced based on the copyright law. Zhou opined that it was easier to SHANGHAI 00000117 002.2 OF 002 collect evidence under the charge of "illegal business operations" since the SCTF can issue the certificate for "illegal operation" without the IPR owner's verification. He added that under the criminal copyright law provision regarding "sales of illegal copies," it was very difficult to collect evidence for verifying sales, since transactions often were in cash and there were no records. Furthermore, Zhou acknowledged the workload to prosecute a case under the "sales of illegal copies" provision was much larger because the SCTF needed to obtain verification from different copyright owners. In addition, he said copyright owners often have limited resources to provide verification of pirated discs. Thus, typically, one copyright association, such as Motion Picture Association of America (MPAA) will participate, and provide verification solely for its member companies. A Partnership of Convenience with Limited "Plea Bargaining" -------------- -------------- ¶6. (SBU) Zhou opined that the large demand for DVD/CD products in the Shanghai market created a vast opportunity for pirates. However, he claimed that the joint operation with the SCATF was very effective in cutting the supply of pirated optical discs. Zhou went on to explain the details of the joint operation, saying since SCATF had no right to confiscate pirated discs, it only collected pirated discs and then transferred them to the SCTF for confiscation. He added that to encourage the SCATF to collect pirated discs, the SCTF rewarded the SCATF, based on the numbers of pirate discs it collected. SCTF also encouraged people involved in selling pirated discs to report the underground wholesalers and producers in exchange for reduced penalties. Cooperation with the Public -------------- ¶7. (SBU) On the issue of public complaints, Zhou claimed that SCTF would investigate upon receiving a complaint, and the SCTF also tracked closely the watch lists issued by the MPAA and the International Federation of the Phonographic Industries (IFPI). He added the SCTF maintained close relationships with industrial organizations such as IFPI and mentioned that SCTF had a good training system with IFPI and the MPAA. Zhou said SCTF had coordinated training on topics such as how to distinguish pirated DVDs /CDs and the trends in the pirated DVD/CD market. Zhou also noted that, in general, it was quite difficult for his staff to differentiate between fake and legitimate discs. Acknowledging Market Access is a Problem -------------- ¶8. (SBU) In conclusion, Zhou suggested that easing the restrictions on selling audio and video products would assist the distribution of legitimated audio and video products. He explained that current rules in Shanghai required that, in order to obtain a license to sell audio and video products, a business must have at least 40 square meters of store space. He noted that this requirement was too high for big cities such as Shanghai since the profit in selling legitimate audio and video products was not high and the rent in big cities was relatively more expensive. Comment -------------- ¶9. (SBU) Shanghai's efforts on copyright are similar to efforts in several other cities in China to reallocate responsibility of copyright enforcement, in particular criminal copyright enforcement. As in Beijing, Shanghai Copyright Bureau's authority over copyright infringement matters was virtually eliminated. In addition, Shanghai has established an enforcement "taskforce" similar to that in Beijing. While these changes appear to have little impact on copyright enforcement, they may eventually prove beneficial given Shanghai Copyright Bureau's thin staffing. KJARRETT