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Copyright and Trade Marks Bill [H.L.]

4.14 p.m.

Lord McNally: My Lords, I beg to move that this Bill be now read a second time.

I congratulate those noble Lords who have put down their names to speak in this debate on their fortitude in waiting while the Europeans have had their day in the sun. I know that a number of noble Lords who would have participated have, because of the length of the previous debate, had to leave for other commitments. The noble Lord, Lord Borrie, slipped me a note to apologise, as have a number of other noble Lords. I have to give a badge of honour to the noble Lord, Lord Lyell. He should have been on the six o' clock plane to Scotland but he now tells me that he is on the midnight plane. Without in any way wishing to contravene the new rules on bribery and corruption, perhaps I may say that there is a dram waiting for him in the bar after the debate, if he cares to collect it.

When Talleyrand died, his old adversary Metternich was shown a telegram announcing the death of the great French statesman. "Now what does he mean by this?", said the old adversary. I can well believe that a number of noble Lords have looked at the Bill and wondered at my motives in bringing forward such legislation. So let me begin by stating clearly that I have no vested interest in bringing forward the Bill. It is skilfully drafted; and for that I am grateful to the Alliance Against Counterfeiting and Piracy and its professional advisers. But I have no commercial or professional interest or connection with either the alliance or any of its professional advisers.

To give a background to the interests which have motivated this attempt at legislation, it may be worth reading into the record the members of the alliance. They are: the Anti-Counterfeiting Group, Anti Copying in Design, the British Association of Record Dealers, the British Brands Group, British Music Rights, the British Phonographic Industry, the British Video Association, the British Software Alliance, the Copyright Licensing Agency, the European Leisure Software Publishers Association, the Federation Against Copyright Theft and the Newspaper Licensing Agency. In general, they may be described as representing the creative industries and our creative talent.

My motivator in bringing forward the Bill is no less a person than the Prime Minister himself. I have been much impressed by his call for Britain to make her way in the world in the new century by adding value, innovating and using our creative talents. I am sure he is right in pointing us in that direction. However, if that is the way ahead, we have to ensure that those who create and innovate are protected from the pirate and the counterfeiter if the full fruits of their talent are not to be stolen.

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My interest in the subject was sparked in the mid-1980s when I was for two years Director-General of the British Retail Consortium. I saw at first hand the value of brands and the need to protect the consumer from the fake and the shoddy. My interest was further stirred during the passing of the Competition Act when I acted in a supporting role to my noble friend Lord Ezra in helping the noble Lord, Lord Simon, see that piece of legislation onto the statute book. In some ways this Bill is the unfinished business from the Competition Act.

I am aware that the Minister may be awaiting the final shape and content of the European legislation in this area on both copyright and e-commerce. What I would say to that is that the European dimension should not be used as an excuse for foot-dragging and delay here at home. Quite frankly, the scale of the problem is too big and the speed of technological change too fast for these issues to chug along inside the department or in the Brussels labyrinth. I am reliably informed that the Minister will dead bat these proposals today. I sincerely hope not. If they are a dead bat, my speech is long enough for him rapidly to rewrite his speech in a more positive tone. A great deal of work has gone into the Bill. I hope that it clears the ground to enable the Government to move forward with speed and decisiveness, in Europe and with domestic legislation.

Time is not on our side if we are to create an environment in which talent and creativity can be properly rewarded and the consumer protected from criminals who see this as an area of easy pickings. I am a little disappointed. Looking across at the Benches opposite, I thought the Minister was sending for an urgent redraft of his speech as a result of my remarks!

I should declare an interest as president of the British Radio and Electronic Equipment Manufacturers' Association (BREMA). I in no way speak on its behalf today, but in separate representations to the Minister, Mr Kim Howells, BREMA made it clear that it wanted to see severe penalties for law breakers which would act as a deterrent to organised and large-scale law breaking. It is concerned, however, that laws should not be so tightly and unenforceably drawn as to pose a threat to otherwise law-abiding consumers. It stresses the need for a balance in legislation between rights holders, consumers and manufacturers.

I share the view that legislation should not seek to make outlaws of individual consumers, or for that matter innocent landowners. But we must not shut our eyes to large-scale organised crime, which is doing great damage to our creative industries. What is the point of having ideas, if some crook can just wait for a designer or entrepreneur to put in all the work and investment and then copy what people do and rip them off?

The Bill seeks to modernise, strengthen and bring consistency to existing laws in the area of copyright, trade marks and intellectual property. It seeks to ensure that those whose creativity will drive forward

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the UK economy in the 21st century will have sufficient protection to defend their ideas and sufficient incentive to innovate.

Many consumers still believe that buying a dodgy CD from a car boot sale or a street market is a victimless crime; and they see Parliament's inertia on the issue as an implicit green light to go ahead. Yet counterfeiting and piracy are not victimless, and their cost to the UK economy in social as well as monetary terms climbs every day. A survey last year undertaken by the Alliance Against Counterfeiting and Piracy revealed the true financial cost of bootlegging and counterfeiting. In 1998-99 British industry lost £6.42 billion to the pirates. Moreover, the Exchequer lost £1.08 billion in taxes which would have been paid by industry but which was not paid by the bootleggers. That money could have been spent on health or education, but instead lines the pockets of organised criminal gangs.

It is clear that organised crime is behind many of the counterfeiting and bootlegging operations in the UK. The image of the sole market trader, the Del Trotter or the Arthur Daley, selling a few fake designer T-shirts out of a suitcase in the high street is, sadly, wide of the mark. Investigations by the police, Customs and Excise, trading standards officers and the industry's own enforcement operations have established links time after time with criminal gangs involved with drugs and pornography, and even with terrorist groups.

Anything and everything can be, and is, copied and counterfeited, often putting the consumer in great danger. Counterfeit "Teletubby" bean-bags sold by a market trader in Chepstow were potential killers. Marked "non-flammable", in tests the bags were engulfed in flame within 90 seconds. Even worse, following reports of a meningitis epidemic in Niger, the international community responded by sending vaccine. One such shipment comprising 68,000 doses was sent to Niger via the World Health Organisation. There, it appears to have been exchanged for counterfeits. Later, tests by the manufacturer confirmed that the substitute "vaccine" had no active ingredient. Three-thousand deaths are thought to have resulted. It is no coincidence that the two most successful economies in the world, the US and Japan, adopt a zero tolerance approach to the theft of intellectual property.

I welcome the consultation exercise that is now under way and hope that the Minister views today's debate as part of that exercise. I urge Ministers to bear in mind the strength of feeling on this issue throughout the creative industries and to respond accordingly. The Bill that I present to your Lordships today is the product of extensive consultation and work within the industry. It seeks to bring coherence and consistency to existing laws, some of which date back to the 18th century and are founded only on common law. It also seeks to give the police, customs and trading standards officers the weapons that they require to take on criminal gangs who are based firmly in the 21st century.

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Part I of the Bill covers sales, such as car boot sales and markets, and seeks to bring a greater sense of responsibility to those who profit directly from the sale of counterfeit goods on their land. Clause 1 imposes civil and criminal liabilities on landowners and local authorities who knowingly--I stress that word--allow the sale of counterfeit or pirated goods on their land, for example from market stalls or car boot sales. The organisers of such sales would also face liability.

Clause 2 seeks to impose the same liability for offences related to the unauthorised use of trade marks and amends the Trade Marks Act 1994. Your Lordships may believe that the measure is too draconian. However, the clause is not aimed at the local Women's Institute car boot sale or the impoverished farmer who holds a small sale on his land to gain a little more income. Surely, neither of these examples would be happy to fund organised crime. I have in mind primarily the large-scale, highly organised car boot sales which have become a major outlet for bootleggers and counterfeiters and are often controlled by criminal gangs.

I refer your Lordships to an excellent article by Colin Freeman in the London Evening Standard on Friday 21st January in which he describes a visit to the weekly car boot sale at Hackney Wick dog track in London:

    "The Del Boys of this market have plenty of competition. To the left is a stall selling fake Levis and Tommy Hilfiger shirts, to the right is one touting fake perfume and more copied music CDs. Further down a man is selling cross-channel whisky and vodka, and tucked away in a corner a woman touts hardcore porn."

Mr Freeman continues by quoting a local trading standards officer:

    "When markets are inspected regularly, word gets around and counterfeiters know there's not much point in going there."

However, when Mr Freeman spoke to the organiser of the Hackney Wick car boot sale he was told that counterfeiting was not his problem and that the police and trading standards officers should take responsibility. Nevertheless, he is happy to make money out of the problem and should, I believe, be held responsible, as should the organisers of other similar car boot sales. It is those cases where the market organiser has been informed of the trade in counterfeit goods but takes no action which provide the focus for these clauses.

Clause 3 seeks to tighten up the currently weak laws on competitive imitation. It is intended to prevent business from dressing up products so as to resemble competing goods, thereby taking unfair advantage of the original's reputation for quality and safety and investment in innovation and marketing. Such legislation is necessary because the imitation is designed deliberately to mislead consumers by stealing the identity and reputation of the rival product. When I was at the Retail Consortium I noted that it was not only the back-street trader who indulged in such copycat retailing. I believe that to steal a brand image is unfair to the initiator who over decades may have made an investment to win customer confidence in a particular product.

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At the moment, imitation is governed by passing-off law that dates from the 18th and 19th centuries. It is very vague and has proved ineffective in providing protection to rights owners. The required standard of proof under passing-off law is extreme and gives copycats immense freedom to copy designs in a way that misleads consumers. It is unrealistic to ask industry to fight legal actions and to lose just to prove a point. The lack of legal cases demonstrates the difficulty in bringing actions. I am proposing that courts are in the best position to decide what constitutes imitation. The Bill also gives the wronged party a chance to seek damages in cases where imitation is proven. The present laws, like so many others in this area, present a barrier to innovation by industry and consumers continue to be deceived.

Clauses 4, 5 and 6 epitomise much of the Bill in that they modernise the existing legal framework. The law at present is inconsistent and confusing, with anomalies that confound rational explanation.

Clause 4 tidies up the law to enable prosecuting authorities to obtain search warrants where copyright infringement is suspected. At present a loophole in the law means that warrants can be obtained for one category of copyright offence but not another. For example, if the courts have evidence that a person is selling, letting for hire or offering for sale in the course of business an article that infringes copyright the court cannot grant a search warrant. However, the court can grant a search warrant if that same person distributes the same infringing article in the course of the same business. These anomalies cannot be explained, let alone justified, and they constitute a loophole that has long needed closing.

Clause 5 removes restrictions on the rights to seize counterfeit goods. Seizure is currently allowed from temporary but not permanent places of business. The intention is to allow goods to be seized directly from the man in the dodgy shades who trades out of a suitcase up and down the high street. The current legislation recognises that more disruption would be caused in high street shops and so seizure is not allowed in these circumstances.

Unfortunately, the definitions of "permanent" and "temporary" in present legislation are highly ambiguous. At present it can be argued that market stalls, temporary shops, even vehicles are "permanent". Even the man trading out of a suitcase is claiming permanency by standing in the same place each week on the high street. This is clearly not the intention of the current law. The loophole needs closing.

Clause 6 provides the same rights of seizure and forfeiture of products under the copyright legislation as under trade mark legislation. It will bring a level of consistency to the law that is missing at the moment. This section demonstrates the disorganised and anomalous nature of the various pieces of legislation currently on the statute book. Why should the legislation for trade marks be different from legislation for copyright? The only explanation I can offer is that copyright law was dealt with by the Copyright, Design and Patents Act 1988, whereas trade mark law is more

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recent. The main piece of legislation is the Trade Marks Act 1994. I am seeking to iron out the anomalies between the two and introduce much needed consistency.

Clause 7 increases the penalties available to the courts for offences committed under this Bill. The maximum sentence for making or dealing with infringing articles, including those offences listed in Part I, would be increased from two to seven years.

The clause goes to the very heart of the Bill by bringing into line the penalties for the theft of intellectual property with those for the theft of physical property. It is the strong contention of the supporters of this Bill that the value of any product is derived as much, if not more, from the ideas which lead to its conception, design and marketing than from the product's physical manufacture. Indeed, this view is borne out by the way in which companies and markets reward inventors, designers and "creatives". Companies know that these are the functions that will give them the edge over their competitors. Surely, therefore, the value of these functions must be reflected by the law in the way that it punishes subversion.

The principle behind the clause is simple: steal the idea behind the product and it is the same as stealing the product itself. The clause ensures that the punishment for intellectual property theft will in future fit the crime. Clause 8 is designed to stop pirates from manufacturing or adapting technology intended for the sole purpose of circumventing copyright protection. It targets pirates and counterfeiters, not consumers who might purchase such goods. Since such devices have only one use and are clearly made with the purpose of breaking copyright protection, I can see no reason why they should not be outlawed.

Clause 9 deals with the granting of a copyright licence and shifts the burden of proof to the accused person to demonstrate that he has a copyright licence or the permission of the copyright owner to copy a piece of work, rather than the current situation where it is left to the owner to prove that the accused did not have copyright permission.

That seems perfectly straightforward to me, but in this Alice in Wonderland world in which we find ourselves, perhaps I may give an example. A case was heard in Swansea one Monday morning in the recent past. A man appeared in court accused of bootlegging a Bob Dylan record. In his defence he claimed that he had the permission of Bob Dylan, the owner of the copyright. The onus was on Mr Dylan to prove that he had not granted a licence to the accused person. Mr Dylan was asked to come over from the USA to Swansea to give evidence. Not surprisingly, he was unable to get to court, at which point the case collapsed.

That is only one example of the spurious legal arguments which counterfeiters are currently able to make. At the core of the problem, however, is the fact that they are able to make them at the public expense, and it is easy for defendants in copyright and trademark cases to obtain legal aid. I know of one local

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authority trading standards office which was forced to spend an entire year's legal budget on a single case because the defendants were happy to run up legal aid costs.

The Bill would reverse the onus of proof. Just as a driver of a car has to prove, when asked, that he has a driving licence, so someone making copies of a copyrighted work would have to prove that he had a licence to make those copies.

The remaining sections of the Bill are largely common sense measures designed to bring clarification and consistency to existing legislation. The Bill also includes protection for whistleblowers who inform rights holders about illegal copying but who do not want their names to be revealed.

There is a section which introduces corporate responsibility to copyright and trademark infringement. Directors who "consent or connive" with their companies to break copyright law are already personally liable for the infringement. This clause requires them actively to ensure that their companies do not infringe copyright by making them personally responsible if their negligence or neglect leads directly to the infringement of copyright by their businesses.

Finally, there is a new statutory duty on trading standards authorities to enforce the protection of copyright.

I view the Bill as an important weapon in the fight against organised crime and the protection of intellectual property. Many of its provisions close loopholes or remove inconsistencies or anomalies in existing legislation which are expertly exploited by counterfeiters and bootleggers.

If we wish to defend the industrial and artistic creativity that has brought wealth and success to our country, our courts and law enforcement agencies must be given the legal tools for the job. I welcome the Government's moves in this area, but progress is sluggish and the need for legislation is urgent.

The Government have asked for response to their consultative document by 3rd April, which is a welcome sign of urgency. The Bill is brought before the House today and I am pleased that noble Lords who are to speak have experience of the issues. I am only a front man for an organisation which, as your Lordships can gather from my remarks, has put a great deal of work into the preparation of the Bill. It has made its expertise available to the department and to the Minister.

I hope that the Bill is a spur to action and a pointer to the Government on what kind of legislation could meet the needs of the creative industries and consumers alike. In that spirit, I commend it to the House.

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Moved, That the Bill be now read a second time.--(Lord McNally.)

4.39 p.m.

Lord Jenkin of Roding: My Lords, I am sure that we all wish to congratulate the noble Lord, Lord McNally, on bringing this Bill before the House. He has embarked upon the hard road of getting a Private Member's Bill onto the statute book. In particular, he has the problem of getting it through another place if it is not successful in the ballot. However, he may always fall back on the subsidiary aim of persuading Ministers that the substance of the Bill is sufficiently important and right for the need, eventually, for government legislation.

The noble Lord, Lord McNally, set out the objectives of the Bill, and they are extremely clear. I believe that it should be supported by all right-thinking people. He pointed out that there is already much legislation on the statute book and mentioned the 1988 and 1994 Acts. However, those Acts are not working as they should. They are not effective in dealing with the huge flood of counterfeit goods which afflict this country at the moment. They are not effective in covering breach of copyright and trade marks, as they should. Above all, they are not effective in providing sufficient penalties and procedures to catch and deter the villains who engage in this trade.

One of the earliest lessons that I learnt as a law student (if I am allowed to quote it) was the Latin maxim Ubi remedium, ibi jus--"where there is a remedy that is where the law is"; or it could be interpreted loosely as saying that there is no use having a law against something unless the law is both enforceable and enforced. Manifestly, that is not the case with the matters with which we are dealing this evening.

I, too, read the fascinating article in the Evening Standard of 21st January. It was headed, "The bootleggers' enterprise zone". I pass Hackney Wick fairly frequently on my way in and out of London, but I have never been there on a Sunday because I gather that it might be difficult. However, it appears that the local authority has largely given up. It is reported that:

    "Hackney council is well aware of the problems at the market, but councillors decided last year that because of lack of money, efforts should focus on manufacturers ... rather than vendors".

It goes on:

    "Raids have been carried out ... and prosecutions brought, but the cost of such operations is large and the penalties too lenient to provide much deterrent. Smaller offenders invariably escape with a fine, while more serious players tend to count their sentences in months rather than years".

As the noble Lord, Lord McNally, said, part of the purpose of the Bill is to provide significantly heavier penalties, to shift the burden of proof on questions of copyright and licences, and to give new powers to trading standards officers. We must all be aware of just how disheartening it is to be a trading standards officer

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and to enforce a law that has such flaws in it. There are to be new powers of forfeiture and, above all, new provisions to extend the law to catch the organisers and the landowners if they,

    "knew or had reason to believe that",

sales would infringe copyright, etc. All that appears to be admirable and worthy of support.

I devote the rest of my remarks to Clause 3 regarding copycat sales. My experience of this matter comes purely from being an ordinary employee of a company many years ago. I used to work for the Distillers company, which had the most marvellous Aladdin's cave of lookalike products collected from all over the world. There was a bottle on the shelf that looked like a bottle of White Horse whisky. It was not until one got quite close to it that one realised that it was not a horse but an elephant. It was called "White Elephant" whisky. It was asked, "What is wrong with that? It's not a white horse at all". However, it was meant to look like it. No doubt some people on the other side of a bar, far enough away and perhaps with poor eyesight, would believe that that was what they were getting. There was another bottle bearing a large "Scotland", so that it looked as though it was made in Scotland. It was not until one got very close that one saw from the tiny print that it was "Label printed in SCOTLAND". There were hundreds and hundreds of examples. I find this fascinating.

That company devoted much effort to catching the look-alikes, the copycat sales and the breaches of copyright. It is right for the British Brands Group to describe such activity as commercial piracy, because that is what it is. It is a thousand miles removed from Hackney Wick, from the shady characters wielding suitcases or at car boot sales. As the noble Lord, Lord McNally, said, some of the most respected firms in the country are not averse to putting look-alikes on the retailer's shelves if they think they can get away with it.

The British Brands Group has spelt out the case for change, and I should like to read a sentence or two from its argument:

    "Look-alikes are products which establish their credibility and achieve sales by deliberately mimicking the packaging of successful brands. This confuses consumers over the nature and source of the product...

    Look-alikes are predominantly produced by retailers, but are also produced by foreign and domestic manufacturers"--

there are a couple of pictures showing what the group means--

    "The courts currently have inadequate means of tackling the problem, and a law of unfair competition is badly needed".

This is real. Shoppers are misled. In 1997 National Opinion Polls carried out a survey and found that 17 per cent of shoppers had bought a look-alike in error during the previous six months. That means that nearly one in five had been misled by the appearance of a product on the shelf.

As the noble Lord said, it is not only a matter of deceiving shoppers; it acts as a severe disincentive to business. A big investment is needed to build up confidence in a brand name to convince the market that one's products with that brand have consistency,

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quality and value on which the consumer can rely. It often costs millions of pounds. The most famous brand names are built up over decades or even over centuries.

Of course, if a company with a look-alike tried to use the brand name it could be caught at once, because that is clearly a breach of copyright or trade mark, which is an offence. I return to the word "mimic". The ill arises when such a company produces a package or product that mimics the well-known brand image. I shall not go into it, because the noble Lord dealt with it, but the matter was originally dealt with under common law, through the passing off provisions, as part of the tort of passing off. But that is extremely difficult to establish. If one is dealing with relatively cheap products, it is simply not worth the time, effort and cost.

What are we to do? The matter is covered by international conventions. This country is under an obligation to legislate to deal with this kind of unfair competition. It comes notably under the Paris Convention for the Protection of Intellectual Property. That convention goes right back to 1867, but the critical article is 10 bis, inserted by the Stockholm Convention of 14th July 1967. I was able, with the help of the Library and the Internet, to get hold of a copy of that article, which reads:

    "The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition... The following in particular shall be prohibited: 1. all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor".

That is a perfect description of a look-alike--creating confusion. That article on unfair competition underpins later treaties, notably the Agreement on Trade-Related Aspects of Intellectual Property Rights, signed in Marrakesh on 15th April 1994. That article refers back to Article 10 bis at several points.

What do we find out about that obligation on member countries to implement Article 10 bis of the Stockholm Convention? It has been implemented in a great many other countries but it has not been implemented here. One is entitled to ask why that is so. One might say that it is truly astonishing because it is a law which is supposed to apply to us and is an obligation on us and yet that is not actually what happens.

I shall no doubt be asked, "Well, you had 17 or 18 years in government. Why did your party not do something about it?" I accept that. Something should have been done. But the present Government cannot escape like that. I have here--and I have given the noble Lord, Lord McIntosh, notice of this point--their own White Paper on international development entitled Eliminating World Poverty, which was launched with a justifiable amount of "hoop-la" back in the first six months of their time in office. It contains this provision:

    "We will work with multilateral institutions, such as the World Intellectual Property Organization (WIPO), WTO and UNCTAD, to help developing countries restructure their

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    intellectual property rights systems, and implement the WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement",

which I waved just a few moments ago,

    "in order to support domestic investment and attract foreign investment".

So what do the Government say? I believe that we are owed an explanation. Paragraph 3.34 states:

    "We are committed to rules on intellectual property rights which will facilitate the transfer of technology, and provide incentives for investment".

Does that really mean that it applies only to other people and not to us; or is it a case of doing one thing and saying another, something with which we have become, regrettably, all too familiar? So it is left to the noble Lord, Lord McNally, a Private Member, to do the job for them and Clause 3 of his Bill does just that.

I have no doubt that the noble Lord, Lord McIntosh, will give us a long list of reasons why the Government will not smile on this Bill and help it on its way. But in the course of his response I hope that he will be able to give the House a clear statement that the Government recognise their obligation not merely to help developing countries but to legislate in this country under Article 10 bis to outlaw look-alikes and that they will legislate as soon as they can.

I venture to suggest to the Front Bench opposite that that may prove to be extremely popular. I suspect that Ministers would like that popularity at the present time. In the meantime, I hope that the House will give this Bill a Second Reading.

4.53 p.m.

Baroness Dean of Thornton-le-Fylde: My Lords, I, too, welcome the general aims of this Bill introduced by the noble Lord, Lord McNally. Towards the end of his contribution, he said that he was a front man for a number of organisations and that there had been consultation on the Bill. I hope that the consultation has included consumers and not just the business world. I see that he is nodding in agreement. I am pleased about that. This is a two-pronged approach.

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