[Congressional Record Volume 140, Number 47 (Tuesday, April 26, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: April 26, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                        COUNTERFEIT VIDEO GAMES

 Mr. GORTON. Mr. President, the U.S. video game industry is 
being severely injured by the foreign manufacture of counterfeit video 
games, particularly in China and Taiwan. Not only has counterfeiting 
saturated that domestic market in China, and, to a lesser extent, 
Taiwan, but counterfeiters in those countries also export huge 
quantities of their counterfeit products to countries throughout the 
world.
  Counterfeiting caused losses of $2.5 to $3 billion in 1993 to 
Nintendo of America, Inc., Redmond, WA, a leading video game company 
located in my State, to the over 170 independent U.S. companies, which 
create and sell Nintendo video games, and to the more than 300 
companies, such as a movie studio that license properties for use in 
Nintendo video games.
  In February 1994, Nintendo and other United States video game 
companies filed a special 301 comment with the United States Trade 
representative in which it sought action against China and Taiwan. The 
special 301 comment also describes serious video game counterfeiting 
problems in Venezuela, Argentina, Panama, and Paraguay.
  The primary focus of the special 301 comment was China and Taiwan 
because they are the primary manufacturers of counterfeit video game 
products. In 1992, both China and Taiwan executed trade agreements with 
the United States in which they agreed to improve copyright 
enforcement. Since that time, Taiwan has taken steps to improve its 
practices, but has not yet fully complied with the 1992 agreement. 
China's practices appear to have worsened.
  The Chinese market is saturated with counterfeit video game products. 
In fact, the high tariffs on authentic video game products permit 
counterfeit video games to thrive in China. People's Republic of China 
video game counterfeiting is dominated by State-owned enterprises. One 
of the largest People's Republic of China counterfeiters is Tianjin New 
Star Electronics Co., which is controlled by the People's Republic of 
China Government's Ministry of Electronics and Machinery. The Ministry 
receives 20 percent of New Star's profits. Little Bawang is another 
State-owned enterprise that sells infringing Nintendo video games. 
Little Bawang advertises as the largest producer of video games in 
China.
  Several weeks ago, Senator Murray, Representative Cantwell, and I met 
with the Chinese Ambassador to stress the seriousness of this problem. 
While the Ambassador agreed to convey our concerns to his Government 
and to advise us of his Government's response, we have not yet received 
a response.
  Due to Taiwan's history of counterfeit trade, the United States Trade 
Representative designated Taiwan as a ``Priority Foreign Country'' in 
1992. In response, Taiwan entered into an understanding in 1992 in 
which it agreed to establish an export monitoring system that would 
prevent the export of infringing software products, including video 
games, from Taiwan. Unfortunately, Taiwan's export monitoring system 
has not been successful in preventing the export of counterfeit 
Nintendo video game products including semiconductor chips which 
contain copyrighted video games. Many of the counterfeit video games 
assembled in China contain infringing semiconductor chips that were 
imported from Taiwan.
  Taiwan counterfeiters openly advertise their infringing video game 
products in magazines in utter disregard of the export monitoring 
system. There are at least 25 such companies that boldly advertise 
their infringing video game products in a magazine with wide 
circulation. One of these companies is NTDEC, a Taiwan infringer, 
against which a United States court entered a judgment for $24 million. 
The Taiwan Government revoked NTDEC's import and export privileges in 
December 1993, but today, NTDEC continues to operate at its old address 
under the NTDEC name and another name as well. NTDEC infringing 
products continue to be found outside of Taiwan. In its advertisement, 
NTDEC states it is a manufacturer of video game products and displays 
among other things a Nintendo video game which it passes off as its 
own, NDTEC is only one of many examples that highlight the failure of 
the Taiwan Government to effectively implement the promised export 
monitoring system.
  Mr. President, I believe China should be designated as a ``Priority 
Foreign Country'' due to its lack of a copyright enforcement system and 
that Taiwan should be placed on the priority watch list based on the 
continued ineffectiveness of its export monitoring system for 
copyrighted software.

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