UMG RECORDINGS, INC. AND OTHERS v. PROFIT CHART DEVELOPMENT LTD AND OTHERS

HCA 472/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 472 OF 2010

____________

BETWEEN

	UMG RECORDINGS, INC.	1st Plaintiff
	INTERSCOPE RECORDS	2nd Plaintiff
	POLYDOR LIMITED	3rd Plaintiff
	UNIVERSAL MUSIC LIMITED
	（環球唱片有限公司）	4th Plaintiff
	CINEPOLY RECORDS COMPANY LIMITED	5th Plaintiff
	GO EAST ENTERTAINMENT COMPANY LIMITED	6th Plaintiff
	UNIVERSAL MUSIC LIMITED
	（環球國際唱片股份有限公司）	7th Plaintiff
	UNIVERSAL CITY STUDIOS LLLP	8th Plaintiff
	and
	PROFIT CHART DEVELOPMENT LIMITED	1st Defendant
	CAPITAL MORE COMPANY LIMITED	2nd Defendant
	JADEWAY CORPORATION LIMITED	3rd Defendant
	EASWAY DEVELOPMENT LIMITED	4th Defendant
	NEWAY.COM TECHNOLOGY LIMITED	5th Defendant
	LIONWAY CORPORATION LIMITED	6th Defendant
	HUNDRED ART INVESTMENTS LIMITED	7th Defendant
	STAR BUSINESS LIMITED	8th Defendant
	CENTURY ADVANCE LIMITED	9th Defendant
	SUPERFEEL LIMITED	10th Defendant
	SONG ADVANCE LIMITED	11th Defendant
	FOLLOW HONG KONG LIMITED	12th Defendant
	MODERNLINE LIMITED	13th Defendant
	SILVER BENEFIT LIMITED	14th Defendant
	PACO CORPORATION LIMITED	15th Defendant
	WONDERFUL LIMITED	16th Defendant
	COMEGREAT LIMITED	17th Defendant
	GREENSPARK INTERNATIONAL LIMITED	18th Defendant
	GAINFLEX LIMITED	19th Defendant
	WINFLOW LIMITED	20th Defendant
	SUNWAY CREATION LIMITED	21st Defendant
	GROWSON LIMITED	22nd Defendant
	AUTOFLOW LIMITED	23rd Defendant
	NEWAY KARAOKE BOX LIMITED	24th Defendant
	MUSIC ADVANCE LIMITED	25th Defendant
	CHANCE CORPORATION LIMITED	26th Defendant
	PERFECT GALAXY LIMITED	27th Defendant
	WELL DRAGON LIMITED	28th Defendant
	CHEERWAY LIMITED	29th Defendant
	HAPPY SHOW LIMITED	30th Defendant
	REGAL PIONEER LIMITED	31st Defendant
	WELL POWER PACIFIC LIMITED	32nd Defendant
	LEGEND SUPREME LIMITED	33rd Defendant
	MULTIPRIZE LIMITED	34th Defendant
	NEWAY MUSIC LIMITED	35th Defendant

____________

Before: Hon Chung J in Chambers

Date of Submissions: 8 July 2011

Date of Handing Down Further Decision: 15 July 2011

___________________________

FURTHER DECISION

___________________________

 

Introduction

1.  Written decision on the plaintiffs’ summonses for summary judgment, interlocutory injunction and interim payment, and the defendants’ summons for stay of this action, was handed down on 24 June 2011.

2.  Directions were given in the said decision for further submissions to be made in connection with RHC Ord. 14 r. 6(1), and on the costs of the applications.

Interim Payment

3.  On 8 July 2011 the plaintiffs’ solicitors sent a letter to court.  The relevant part reads:-

“We ... note that in p. 9 paragraph 22 [of the said written decision] remarked that ‘The plaintiffs indicated during the hearing they would not pursue their application for interim payment; no order is made thereon.’

We have checked our records … and were in agreement [with junior counsel and solicitors for both sides] that leading Counsel … did not abandon her position on interim payment, but had only indicated that she had nothing more to add on this point in reply … ”.

4.  As a result, the court listened to the audio recording of the hearing (which spanned over 8 and 9 June 2011).  The relevant part of the hearing took place on 9 June.  On that day, defence leading counsel carried on with his submissions in opposition from 10am until about 2:37 pm (which included an exchange between court and counsel regarding the interim payment application (from about 12:31 pm until lunch break)).  Leading counsel for the plaintiffs commenced her reply submissions at about 2:37 pm and completed it by about 4:42 pm.

5.  The official transcript shows the following submissions of plaintiffs’ leading counsel (from about 4:34 pm onwards):-

“My Lord, … if my Lord were to order summary judgment in favour of the plaintiff …my Lord would be making an adjudication construing the terms of the K-Net Licence …

On the other hand, my Lord, if my Lord were to say, well, there may be a trade practice issue which deserves trial and my Lord were to give leave to defend, that still does not mean that a stay application ought to be granted …

The interim payment issue I shan’t press, but my Lord, in our respectful submission, there is no case made out on the stay. My Lord, I again refer to my submissions on what the CT [Copyright Tribunal] proceedings were about and how the issues were framed … ” (emphasis supplied).

6.  Because the parties somehow see fit to accept that the interim payment application was still alive (despite the language chosen by leading counsel), I will proceed on the accepted basis.

7.  The defence argument in opposition can be summarized as:-

(a) the plaintiffs’ cause of action is tortuous rather than contractual in nature. In other words, the plaintiffs are claiming damages in tort and not the fees provided for in a licence;

(b) liability is denied. Hence, if the court grants leave to defend (as the court did in the decision of 24 June 2011), there is a serious doubt whether the plaintiffs will be able to establish liability in tort;

(c) insofar as the claim is based on any licence, it becomes a subject-matter falling within s. 163 (reference to the Copyright Tribunal of expiring licence) and/or s. 164 (the Copyright Tribunal may award interim payment and restrict application for interlocutory injunction), Copyright Ordinance (Cap. 528).

The defence also mentioned a letter having been sent to the plaintiffs earlier regarding payment pending the resolution of their dispute, but nothing fruitful came out so far.

8.  The relevant principles are set out in Hong Kong Civil Procedure 2011, Vol. 1:-

“… [the respondent may show cause] on the merits by showing that there is a serious doubt whether the plaintiff will recover anything … The court must be ‘satisfied’ that the plaintiff will obtain judgment for substantial damages or for a substantial sum apart from damages and costs … It should be observed, however, that the test prescribed by [Ord. 29] r. 11(1)(c) and r. 12(c) is whether the court is satisfied that the plaintiff will succeed in his claim against the defendant, rather than whether he is likely to succeed … ” (para. 29/11/1).

9.  Further to para. 7 and 8 above, because the claim is tortuous, it is difficult to ascertain the amount of interim payment based on affirmations filed in interlocutory applications (and which contain at best sketchy evidence on quantum).  Unlike claims for personal injury damages or mesne profits, for example, “comparables” are not readily available in cases of this sort.

10.  Consequently, I agree with the defendants the plaintiffs have not been able to satisfy me the above test has been met.

11.  Further, to a large extent the issues raised in the summary judgment and interim payment applications overlap as regards the defendants’ liability and quantum of damages.  The reasons given earlier for refusing to give summary judgment are thus applicable here and will not be repeated.

12.  For the above reasons, the interim payment application is dismissed.

Claim against D28 to D34

13.  I agree with the defence further submissions to the extent the averments against these defendants in the statement of claim are deficient (see also para. 15 and 22(a), decision dated 24 June 2011).

14.  For this reason, the part of the statement of claim concerning them ought to be struck out.

15.  However, this appears to be a case where the plaintiffs may be able to put forth a proper claim if given an opportunity to do so.  The action against these defendants is thus not dismissed at this stage.

Stay of Proceedings

16.  I also agree with the defence further submissions and disagree with those of the plaintiffs in this regard (see especially para. 8 to 13, 18 and 20 to 21, decision dated 24 June 2011).

Costs

17.  Finally, subject to the paragraph below, I agree with the defence submissions on costs and disagree with those of the plaintiffs.

18.  In relation to D28 to D34, whether a claim brought against them is proper has to await the filing of the amended statement of claim (if any).

Conclusion

19.  By reason of the matters above, the following directions are appropriate:-

(1) the statement of claim against D28 to D34 be struck out and this action against them be dismissed with costs unless by 4:00 pm on 5 August 2011 the plaintiffs file and serve an amended statement of claim setting out their claim against the said defendants;

(2) the claim against D1 to D27 and D35 (and, in the event the plaintiffs comply with sub-para. (1) above, this action) be stayed pending the determination of the on-going CT applications or until further order;

(3) liberty to apply for further directions upon the removal of the above stay.

20.  The appropriate costs orders are:-

(a) the costs of the summary judgment application against D1 to 27 and D35 be to the defendants to be taxed if not agreed;

(b) in the event the plaintiffs comply with para. 19(1) above, the costs of the summary judgment application against D28 to D34 be to the defendants to be taxed if not agreed;

(c) in the event the plaintiffs comply with para. 19(1) above, the costs of this action against D28 to D34 up to the amendment of the statement of claim be to those defendants to be taxed if not agreed;

(d) in the event the plaintiffs should fail to comply with para. 19(1) above, the costs of this action (including those of the summary judgment application) against D28 to D34 be taxed on an indemnity basis if not agreed.

There be a certificate for the attendance of two counsel at the hearing on 8 and 9 June 2011 in respect of the above costs (Ord. 62 r. 32, 1^st Schedule, Part II, para. 2(3)).

(Andrew Chung) Judge of the Court of First Instance High Court

Messrs Wilkinson & Grist, for the Plaintiffs

Messrs Tony Au & Partners, for the Defendants

Please refer to CACV262/2012 for the relevant appeal(s) to the Court of Appeal.

HCA 472/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 472 OF 2010

____________

BETWEEN
	UMG RECORDINGS, INC.	1st Plaintiff
	INTERSCOPE RECORDS	2nd Plaintiff
	POLYDOR LIMITED	3rd Plaintiff
	UNIVERSAL MUSIC LIMITED （環球唱片有限公司）	4th Plaintiff
	CINEPOLY RECORDS COMPANY LIMITED	5th Plaintiff
	GO EAST ENTERTAINMENT COMPANY LIMITED	6th Plaintiff
	UNIVERSAL MUSIC LIMITED （環球國際唱片股份有限公司）	7th Plaintiff
	UNIVERSAL CITY STUDIOS LLLP	8th Plaintiff
and
	PROFIT CHART DEVELOPMENT LIMITED	1st Defendant
	CAPITAL MORE COMPANY LIMITED	2nd Defendant
	JADEWAY CORPORATION LIMITED	3rd Defendant
	EASWAY DEVELOPMENT LIMITED	4th Defendant
	NEWAY.COM TECHNOLOGY LIMITED	5th Defendant
	LIONWAY CORPORATION LIMITED	6th Defendant
	HUNDRED ART INVESTMENTS LIMITED	7th Defendant
	STAR BUSINESS LIMITED	8th Defendant
	CENTURY ADVANCE LIMITED	9th Defendant
	SUPERFEEL LIMITED	10th Defendant
	SONG ADVANCE LIMITED	11th Defendant
	FOLLOW HONG KONG LIMITED	12th Defendant
	MODERNLINE LIMITED	13th Defendant
	SILVER BENEFIT LIMITED	14th Defendant
	PACO CORPORATION LIMITED	15th Defendant
	WONDERFUL LIMITED	16th Defendant
	COMEGREAT LIMITED	17th Defendant
	GREENSPARK INTERNATIONAL LIMITED	18th Defendant
	GAINFLEX LIMITED	19th Defendant
	WINFLOW LIMITED	20th Defendant
	SUNWAY CREATION LIMITED	21st Defendant
	GROWSON LIMITED	22nd Defendant
	AUTOFLOW LIMITED	23rd Defendant
	NEWAY KARAOKE BOX LIMITED	24th Defendant
	MUSIC ADVANCE LIMITED	25th Defendant
	CHANCE CORPORATION LIMITED	26th Defendant
	PERFECT GALAXY LIMITED	27th Defendant
	WELL DRAGON LIMITED	28th Defendant
	CHEERWAY LIMITED	29th Defendant
	HAPPY SHOW LIMITED	30th Defendant
	REGAL PIONEER LIMITED	31st Defendant
	WELL POWER PACIFIC LIMITED	32nd Defendant
	LEGEND SUPREME LIMITED	33rd Defendant
	MULTIPRIZE LIMITED	34th Defendant
	NEWAY MUSIC LIMITED	35th Defendant
____________

Before: Hon Chung J in Chambers

Dates of Hearing: 8 and 9 June 2011

Date of Handing Down Decision: 24 June 2011

______________

D E C I S I O N

______________

 

Introduction

1.  This is the plaintiffs’ applications for:-

(a)  summary judgment to be entered against the defendants (together with ancillary relief and interim payment);

(b)  alternatively, interlocutory injunction (and ancillary relief).

2.  The 8 plaintiffs are in gist some of the major record labels and sue as the copyright and trade mark owners of various karaoke music video products.  The 35 defendants are in effect a major local chain of karaoke box lounges.  The plaintiffs allege the defendants to have infringed their copyright and trade marks during the period from December 2009 to April 2010.

Background

3.  The nature of the defendants’ business requires the playing of music materials (usually in the form of karaoke music videos (“KMVs”)).

4.  The plaintiffs have been issuing various licences to the karaoke trade:-

(1)  server licences for the reproduction of KMVs via the computer servers;

(2)  public performance licences for playing the KMVs;

(3)  premiere KMV licences for playing new songs (defined as songs within the first 6 months of their first release).

5.  Similar to some of the other local karaoke establishments, the defendants have been paying fees to the plaintiffs (or the plaintiffs’ former agents).  Disputes developed between them regarding the licensing arrangements.  By the time of the hearing of these applications, the defendants have already ceased paying licence fees to the plaintiffs.

6.  There are on-going applications in the Copyright Tribunal (“the on-going CT applications”).  They will be referred to again below.  In brief, it is the defendants’ contention this action should be stayed pending the determination of the on-going CT applications.

Copyright Infringement

7.  The plaintiffs’ claim involves a total of 121 song titles.  Of these song titles:-

(a) 39 song titles were “modified versions of the plaintiffs’ music videos (“MVs”)”;

(b) 2 song titles were “modified versions of the plaintiffs’ KMVs”;

(c) 4 song titles were either modified versions or unlicensed copies of the plaintiffs’ works

(total 45 song titles).  The song titles referred to in sub-para. (a) above will be called “the mod MVs” and those in sub-para. (b) above “the mod KMVs” (collectively “the mod versions”).

8.  In relation to the 76 song titles (121-45) not referred to in para. 7(a) to (c) above, the defendants submit that they should fall within the ambit of the on-going CT applications.  In this connection, they rely on the decision in California Red Ltd. v. Gold Typhoon Entertainment Ltd. and Others, HCA 2684 and 2735/2008 (23 July 2009).

9.  The California Red decision involved two actions.  One of them was brought by the copyright owners against the karaoke establishment for copyright infringement.  By the time of the pre-trial review hearing, the defendants have already applied to the Copyright Tribunal for a continuation of licence.  The court adjourned the trial of that action to await the Tribunal’s decision.

10.  In relation to the modified versions, the parties’ dispute is whether they are infringing copies (as the plaintiffs contend) or copies obtained in accordance with the common practice in the karaoke trade (as the defendants contend).

11.  The matters below provide an example of what the defendants rely on as showing a triable issue regarding the said common practice.  The defendants have adduced evidence that:-

(1)  during the period when the licences were granted by the plaintiffs’ former agents, there were instances where, despite the grant of licences, physical copies of the plaintiffs’ works were not provided, and the karaoke establishments have to source for the materials themselves;

(2)  similar mod versions could be found in karaoke establishments installed with servers provided by the plaintiffs’ authorized server providers.

12.  In answer to para. 11(2) above, the plaintiffs produced two statutory declarations from the server providers.  In essence, both state that unlicensed KMVs have never been loaded onto the servers (whether by the provider themselves or as directed by the plaintiffs).  It is the plaintiffs’ case the mod versions found in the other karaoke establishments were also infringing copies.

13.  The defendants point to an announcement of the plaintiffs dated 8 January 2009 to show that the servers provided by the authorized server providers were encrypted servers which could prevent unlawful use and other abuse (including the unlawful tempering of the servers).  They argue that the statutory declarations should not be accepted on face value.

14.  Apart from the above, the defendants point to matters which they say cast doubt on the plaintiffs’ case:-

(a)  parts of the plaintiffs’ claim that KMVs have not been published in Hong Kong has been shown to be possibly inaccurate;

(b)  parts of the plaintiffs’ skeleton submissions are different from the contents of their pleading and/or affidavit evidence.

15.  Further to the matters set out above, the defendants point out that the statement of claim has not put forth a proper claim against the 28^th to 34^th defendants.  The verifying affidavit has not referred to them either.  The application against them should be dismissed for that reason alone.

16.  It is trite law:-

“the statement of claim must be complete and good in itself; any defect or omission … cannot be corrected or supplemented by the plaintiff’s affidavit … If the defect is one of substance, the application for summary judgment will be dismissed”: Hong Kong Civil Procedure 2011, Vol. 1, para. 14/1/5.

Trade Mark Infringement

17.  The plaintiffs’ case is that the plaintiffs’ trade marks and logo appear on the screen of the defendants’ karaoke boxes even though the music videos were not their authorized works.

18.  The defendants’ case is that the above is nothing more than another facet of the parties’ copyright dispute.  The alleged unauthorized works were those referred to in para. 7 to 13 above.  Consequently, this aspect should be determined together with the plaintiffs’ copyright claim.

Interlocutory Injunction Application

19.  The defendants’ contentions are in short:-

(1)  the plaintiffs say the infringing acts were discovered as early as December 2009 but the application for an interlocutory injunction was only taken out in December 2010 (a time lapse of about a year) (the writ was issued in April 2010.  The plaintiffs are therefore guilty of inordinate delay; they fail to show the requisite urgency);

(2)  subject to the outcome of the on-going CT applications, the defendants have always been willing to pay reasonable licence fees to the plaintiffs.  This is a case where a monetary award can be an adequate remedy.

Conclusion

20.  Very briefly, I agree with the defendants’ arguments set out above.

21.  I also agree with them the High Court and the Tribunal appears to share a concurrent jurisdiction for determining the existence or otherwise of the common practice contended for by the defendants.

22.  Accordingly,

(a)  the plaintiffs’ application for summary judgment against the 28^th to 34^th defendants is dismissed;

(b)  the 1^st to 27^th and 35^th defendants are to have unconditional leave to defend this action;

(c)  the plaintiffs’ application for interlocutory injunction is refused.

The plaintiffs indicated during the hearing they would not pursue their application for interim payment; no order is made thereon.

23.  I will invite the parties’ submissions in writing (within 14 days from the date of this decision) regarding any directions to be given, pursuant to Ord. 14 r. 6(1)(a).  Because the defendants’ application for the stay of this action may be relevant to this aspect, I will withhold my decision on the application until after sight of the written submissions.

Costs

24.  I also invite the parties’ submissions in writing (within 14 days from the date of this decision) regarding the costs of the applications.

 

 

(Andrew Chung) Judge of the Court of First Instance High Court

Ms Winnie Tam, SC leading Mr Norman Hui and Mr William Cheng, instructed by Messrs Wilkinson & Grist, for the Plaintiffs

Mr John M Y Yan, SC leading Mr Philips B F Wong, instructed by Messrs Tony Au & Partners, for the Defendants

Please refer to CACV262/2012 for the relevant appeal(s) to the Court of Appeal.