Chinese 'broke promise to sink the CD pirates'

TERESA POOLE

Peking

All but one of China's CD factories are again churning out pirated discs, seven months after Peking pledged to crack down on intellectual property rights abuse.

Representatives of the United States music, film and computer software industries said yesterday that China had reneged on an agreement with Washington to shut pirate disc manufacturers and open its market to overseas companies.

Eric Smith, president of the US-based International Intellectual Property Alliance, said that after the Sino-US piracy pact was agreed in February, illicit production in China briefly declined. But by mid-summer at least 27 plants were again making pirated CDs, CD videos, CD-Roms and laser discs at a rate of 45 million a year.

"Everybody knows where they are. Everybody knows who owns them," Mr Smith said in Peking. Paul Ewing of Warner Music added: "The situation is almost back to where it was last year." The only marked difference has been a shift in output from cheap music CDs to higher-value CD-Roms, costing the copyright owners even more in lost sales.

When the 11th-hour accord was signed, narrowly averting a $1bn trade war, the top US negotiator, Charlene Barshefsky, said: "There is no question that the key to this agreement will be implementation." As part of the deal, China must provide data every three months on the number of establishments raided, products seized and criminals prosecuted. A six-month "special enforcement period" was designated for investigating factories producing pirated CDs, laser discs and CD-Roms. The US assistant trade representative, Lee Sands, is in Peking this week for discussions with Chinese officials over the limited progress in carrying out the piracy accord. Mr Sands said that the Chinese do not appear to be pursuing offenders with "any seriousness".

Clifford Borg-Marks, of the Business Software Alliance, said a CD-Rom containing 200 pieces of software with a legal retail price of $25,000 (pounds 16,000) had been bought on the streets of Shenzhen, in southern China, for 40 yuan (pounds 3). Microsoft's Windows 95 was on sale within "a couple of days", he said, and had even been found in a Cyrillic version being smuggled from China into Russia. The delegation showed off a selection of Chinese-manufactured discs purchased in Hong Kong, including an Adobe desktop publishing programme which should retail for $1,500, but sold for $8. However, only one Chinese wholesaler had been prosecuted since February, the delegation said.

Mr Smith said US manufacturers were well aware of the links between pirate factory owners and local governments. Raids and seizures from retailers had increased, but the fines and penalties were too low to act as a deterrent. Robin Rolfe, executive director of the International Trademark Association, said the fines were little more than a "small business tax on profits" for the pirates.

An estimated 98 per cent of computer software in use in China is pirated. Under the Sino-US pact, government ministries were supposed to start purchasing legitimate software, but there has been no significant increase in sales. Chinese officials had been "fairly ambiguous" this week on improved market access for foreign films, videos, books and music, even though this had been part of the anti-piracy agreement.

Meanwhile, on the streets near the Independent office, the pirate disc hawkers offering CDs and CD-Roms were out in force yesterday, operating out of a small Chinese supermarket, right under the nose of local police patrols.

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