A hundred warning letters have been sent to copyright infringers, threatening them with legal action if the illegal downloads continue.

Hong Kong's once vibrant film industry has been in decline for some years.

Once the world's third-largest producer behind India's Bollywood and Hollywood, it has seen its contribution to world cinema dwindle from more than 300 films a year in the 1980s to just 64 in 2004.

Faced with increasing illegal downloading of movies from the Internet, the film industry formed a contingency group to examine and block the infringements.

Last month, the industry hired a team of private IT detectives to monitor the downloads of two copyrighted movies - House of Fury and The Eye 10.

The detectives found that, up to April 26, House of Fury was downloaded more than a million times and The Eye 10 more than 80,000 times.

Nearly 6,000 local users were involved.

With the assistance of Internet service providers, the group has identified the IP addresses of the users and will send warning letters to the 100 most blatant infringers.

``If their activities continue, they might face legal action for compensation and legal costs,'' said Gordon Chan, convenor of the Hong Kong Film Industry.

``We understand that we may not be able to apprehend all infringers ... the cost involved will be astronomical for us, but we will not give up the legal option as we believe this will remain a powerful deterrence.''

The Hong Kong Film Industry said it has raised more than HK$500,000 for future lawsuits. ``The industry realizes that, to protect our own intellectual property, we cannot depend solely on the government,'' Chan said.

Online infringements caused revenue losses of up to HK$400 million last year - nearly as much as legitimate box-office earnings of HK$445 million.

In 1997, Hong Kong-made films generated HK$700 million in revenues, but by 2004 this had plummeted to HK$380 million, mainly due to piracy.

According to an earlier survey commissioned by the film-makers, 10 percent of 1,500 respondents admitted that they had downloaded movies illegally through the Internet or file-sharing software over the past year.

More than 80 percent knew that they were breaking laws protecting intellectual property, the survey found.

The Copyright Ordinance prohibits unlicensed distribution of copyrighted works.

The maximum penalty is a fine of HK$50,000 per infringing copy and four years' jail.

Last December, the government issued a public consultation paper to review the ordinance.

The film-makers want a thorough review of the copyright laws to clamp down on illegal downloads of copyrighted movies.

They said end-users should be punished, and urged the government to examine the liability of network service providers and Web sites or newsgroup hosts.

Former chief executive Tung Chee Hwa's last policy address promised measures to prop up creative industries including design, architecture, advertising, film and digital entertainment.

These industries were all forecast to become major growth areas if, among other factors, intellectual property rights are protected.

``Hong Kong is well positioned to develop cultural and creative industries,'' Tung said in January.

``We have a rich variety of cultural activities and lifestyles conducive to inspiring creativity.

``Cultural and creative industries account for only about 4 percent of our [gross domestic product], compared with 8 percent in the United Kingdom. Obviously, there is still scope for growth.''

chester.yung@singtaonewscorp.com