CALIFORNIA RED LTD v. GOLD TYPHOON ENTERTAINMENT LTD AND OTHERS

HCA 2684/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2684 OF 2008

_______________________

BETWEEN

_______________________

_______________________

D E C I S I O N

_______________________

1.  This is an application for leave to discontinue High Court Action 2684 of 2008.

2.  The matter has come before me on two occasions in the last two weeks or so. There are two actions. One is 2684 of 2008, and the other is 2735 of 2008. I briefly explained what the actions were in the decision which I gave last Thursday, and there is no need to go through it again.

3.  What is important to note is that these actions were directed to be heard as a speedy trial on 25 February of this year and the parties have worked towards it. They are now ready for trial, or seemingly so. The reason for the application is put on the basis that it saves the parties costs and time. But the plaintiff started the action. Of course the defendants in 2684 have, so to speak, started their own action, which has resulted in a defence and counterclaim which mirrors the claim in 2684.

4.  Last Thursday I came to the conclusion that the issues in 2684 were so important as regards the whole dispute between the parties that, apart from the decision of the Copyright Tribunal, which was a separate matter, the decision in that case would effectively decide the issues that really would fall to this court to decide, since the other matters which were raised in the action would, as in most copyright cases of this nature, not be highly contested.

5.  So we have now a situation where the plaintiff is ready for trial. It has made an application for an adjournment - and this court has said that it should continue - and now it wishes to discontinue. In those circumstances I do not consider that the reasons which have been put forward for discontinuing the action at this stage, when a speedy trial has been ordered, are satisfactory. It is not right to say it is going to save the parties time and costs. It may save the parties’ time and costs in August of 2009. But if the issues can be ventilated on another occasion, for example in the defence and counterclaim in the other action, it does not save anybody any time or costs. What it does is it adds to the time and cost.

6.  So the next matter which I considered is whether or not I should order that the counterclaim in the 2735 of 2008 should be ordered to proceed. When that was raised it was suggested that application would be made to discontinue that. Having given the matter more thought, I think there is a further difficulty that the defence in the 2735 of 2008 incorporates many of the matters in this action, although not it would seem fully pleaded as regards one of the aspects, which is clause 2.7 of the relevant agreement.

7.  I consider that the best solution to the difficulty which is now posed is that I should refuse this application for leave to discontinue. That gives the plaintiff in 2684 of 2008 the option of having the action dismissed either by consent or otherwise. That will then take care of any issues of estoppel or otherwise which might arise and would certainly bind the parties. It would achieve the same result as I would have otherwise achieved simply by granting an order for leave to discontinue, but making it a condition that no further action on the same grounds be made. I think that is probably the neatest way. It gives the plaintiff the option of either continuing now with the action which will be heard on 10 August, or simply abandoning the whole thing, with the consequences which will follow.

8.  So I will refuse the application to discontinue.

HCA 2684/2008
& HCA 2735/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2684 OF 2008

----------------------

----------------------

----------------------

D E C I S I O N

----------------------

1.  This is a pre-trial review.  On the first hearing of this pre-trial review it appeared that there might be a reason for adjourning the trial.  It has to be explained that there are two actions.

2.  There is, first of all, High Court Action 2684 of 2008, which is an action by California Red Limited (“California Red”) against the 1st defendant.  In that action it claims, first of all, that under the joint promotional agreement dated 1 August 2006, specifically under clauses 2.1 and 2.7 thereof, they have the right to use certain karaoke discs and they are asking for specific performance of that agreement.  The second part of that action is they are asking for specific performance of an agreement which was said to have been made orally in March and April 2008 between a Mr Anthony Lock on behalf of the plaintiff and Mr Paco Wong on behalf of the 1st, 3rd and 4th defendants.  Essentially what the plaintiff says, is that it has a permanent licence, an agreement to be able to use all the karaoke discs which are manufactured by the defendants.

3.  The other action is High Court Action 2735 of 2008.  That is an action the other way round.  In that action the producers of the karaoke discs are saying that there has been infringement.  They are asking for declarations that rights previously granted have ceased to apply.  They are also asking in the usual way for relief for infringement of copyright.  It appears to not be in contention that originally the plaintiff in the first action, namely California Red, did have a licence under what has been referred to as the “PPSEAL arrangement”.  That is no need to go into that at this stage.  That expired.  But before the expiry of that California Red applied for a licence before the Copyright Tribunal.  Those proceedings have been heard and the decision is awaited, but Copyright Tribunal proceedings are frequently very complicated and I have to say it is unlikely that a decision will be forthcoming in the immediate future.

4.  The effect of a licence, if it is granted, applied for under s.158 of the Copyright Ordinance, Cap. 528 is set out in s. 160(4).  If a person applying for the licence pays the licence fee which is ordered and complies with the terms of the provisions, he is put in the same position as regards infringement of the copyright as if he had, at all material times, been the holder of a licence granted by the owner of the copyright in question on the terms specified in the order.  It is not for me now to give a definitive ruling as to what that means, but it does seem to me to indicate that if the Copyright Tribunal were to grant a licence and that the terms of the licence were complied with, there would have been no infringement because the licensee would have been put in the position of having had a licence, so there would have been no infringement.  In those circumstances the question would arise whether the court would ever grant any relief, even by way of declaration or otherwise, in respect of the use of that material.  As a practical matter, it seems to me that the real issues in the first action do not impinge on what the Copyright Tribunal has to decide; those can be decided and should be decided as soon as possible.  It would, of course, mean that the California Red would not need a licence if they succeed in that action.

5.  There is a difficulty in proceeding with High Court Action 2735 of 2008 because it seems to me difficult for the court to decide whether there has been infringement or not if there is a possibility that the Copyright Tribunal would make an order which in effect said that there has been no infringement.  Again as a practical matter, it seems to me that the whole matter would resolve itself once the first action were decided one way or another and the Copyright Tribunal had given its decision as to whether a licence would be granted or not.  The whole matter would sort itself out.  I have to say that it would be most unlikely that the existence and validity, so to speak, of the copyright in the karaoke records would ever be challenged.  Things do not normally happen that way.  Quite apart from the ability for a plaintiff in a copyright action to prove its copyright very simply, usually a defendant, unless it has got very sound reasons for challenging the copyright, does not normally challenge it or have any basis for challenging it.

6.  So although Miss Wong SC - who has appeared on behalf of the California Red - has pointed out that it would put her client to a great deal of expense in having to carry on with the action even if a licence were eventually granted by the Copyright Tribunal, I think what the court should do is to hear the first action, that is High Court Action 2684 of 2008, and adjourn the High Court Action 2735 of 2008 until after the Copyright Tribunal has given its decision and any possible appeal from that has taken place or not taken place, as the case may be.

7.  So what I propose to do is to make an order that the first action should go ahead and the second action should be adjourned.  There was an application to amend the statement of claim in the second action.  Subject to anything further that might be said in respect of that, I see no reason why that amendment should not go through at this stage.  It is more of a formality than anything else.