UNIVERSAL MUSIC LTD v. NEWAY MUSIC LTD AND OTHERS

HCA 1738/2017

[2019] HKCFI 61

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1738 OF 2017

________________

________________

__________________________

DECISION ON COSTS

__________________________

1.  I gave summary judgment to the plaintiff (“Universal”) on 30 October 2018 for copyright infringement of its karaoke music videos (“KMVs”) by the defendant (“Neway”). I also made a costs order nisi that Neway do pay the costs of this action to Universal to be taxed on indemnity basis with certificate for two counsel. Neway applied on 9 November 2018 to vary the order nisi to costs to be taxed on party-to-party basis with certificate for two counsel or any other order that the court may deem just.

2.  In my judgment of 30 October 2018 (“the summary judgment”), I regarded Neway’s opposition to the action by Universal as an abuse of process.  The reason being that the grounds of defence raised by Neway in this action had all been decided in my earlier decision given on 6 January 2017 against Neway (“the discharge decision”) in HCCT 45/2012 between, among others, Universal and Neway.  Hence, Neway should know where it stood in this action.  I further held that it was unreasonable for Neway to challenge Universal’s copyright ownership in this action.  Hence, I ordered indemnity costs.

Abuse of process

3.  I refer to but without repeating the facts summarized in the summary judgment.  Mr Yan, SC, leading counsel for Neway submitted in the written submissions that I did not give summary judgment to Universal on the ground that the issues raised by Neway had been decided in the discharge decision.  Instead, I proceeded in the summary judgment to consider and interpret s 156(3) and (4) of the Copyright Ordinance; Cap. 528 (“the Ordinance”) which were relied on by Neway in defence of this action. 

4.  In opposition to the application for summary judgment, Mr Yan referred to s 156(3) of the Ordinance and submitted that it gave the Copyright Tribunal (“the tribunal”) jurisdiction to make an order, either confirming or varying a licensing scheme that had been referred to it as it might determine to be reasonable in the circumstances.  He further submitted that such order might be in force indefinitely or for such period as the tribunal might determine under s 156(4). 

5.  I held in §§31 to 35 of the summary judgment:

“31. I refer to §§28 to 29 of the discharge decision as follows:

‘28. Mr Yan emphasised that the Tribunal has exclusive jurisdiction under s. 156(3) to confirm or vary the terms of a licensing scheme and to determine under s. 156(4) that the order should last indefinitely or only for a definite period. Whether the Tribunal should make an order in CT2/2010 that the scheme as referred should remain in force beyond 30 June 2015 when the authorization by the record companies to the plaintiff was terminated is a matter that should be left to the Tribunal and not to be decided by this court in the discharge summons.

29. I think Mr Yan, in making this submission, has misunderstood the meaning of s. 156(4) as he equated the order of the Tribunal to be made under s. 156(4) with the scheme that has been referred to the Tribunal. S. 156(4) merely gives the Tribunal power to provide that the order made under s. 156(3) may be in force indefinitely or for such period as the Tribunal may determine. S. 156(4) empowers the Tribunal to determine the duration of the order and not the longevity of the scheme. Even when the scheme should have lapsed, been superseded, or otherwise terminated, it may still be necessary to have the order in force so as to deal with the aftermath. I do not think the legislature should have given the Tribunal the power under s. 156(4) to dictate that the operator should continue a scheme indefinitely if the operator cannot or does not want to do so.’ (emphasis supplied)

32. Mr Yan does not dispute this conclusion, but he submitted that on a proper reading of the discharge decision, I have not rejected Neway Group’s argument on the interpretation of s 156(3) and (4).  He further submitted in §17 that the order to be made by the tribunal under s 156(4) will not compel HKKLA to perform the terms of the scheme, as the scheme has been terminated (based on the discharge decision).  The effect of the order under s 156(4) will only prevent Neway from being liable for infringement provided that it complies with the terms of the order as per s 160(2).”

33. I do not think the tribunal can make an order under s 156(3) and (4) to allow Neway Group to use Universal’s KMVs in return for its payment to Universal thereof otherwise then in the context of a licence.   I am unable to understand how the tribunal can order that Neway Group can continue using Universal’s copyright works when HKKLA’s scheme had already been put to an end.  I also cannot understand how Neway Group can be immune from Universal’s suit of infringement if its use of Universal’s KMVs is not pursuant to a licence granted either by HKKLA pursuant to its licensing scheme or by Universal.  Neway Group can only lawfully use Universal’s KMVs if it is licensed to do so.  For there to be a licence, there must be a licensor and a licensee.

34. I also agree with Mr Wong that any order to be made under s 156(3) is predicated upon the existence of a scheme under which a licence can be granted.  If there is no scheme, there is nothing for the tribunal to confirm or vary under s 156(3).  Since HKKLA’s scheme had already ended on 30 June 2015, the tribunal cannot make any order under s 156(3) to confirm or vary its terms.

35. I also hold that the tribunal cannot make any order under s 156(4) in the CT2 proceedings that can protect Neway Group from an infringement claim brought by Universal in respect Neway Group’s use of Universal’s KMVs from 1 July 2015 in the absence of any licence from Universal.”

6.  Pursuant to what I said in these paragraphs, I held that Neway had no defence and then gave summary judgment to Universal. 

7.  I agree with Mr Wong, SC, leading counsel for Universal that what I said in the summary judgment by way of interpretation of s 156(3) and (4) was in effect a reiteration of what I had already said in §§28 and 29 of the discharge decision.  There was nothing new in the interpretation made in the summary judgment.  The reason for my reiteration of what I had said about s 156(3) and (4) in the discharge decision was Mr Yan’s repetition of his previous argument on the effect of s 156(3) and (4). 

8.  Mr Yan submitted previously that the tribunal had exclusive jurisdiction to confirm or vary under s 156(3) the terms of a licensing scheme and to determine under s 156(4) that such order could last indefinitely so that the scheme would not lapse.  Mr Yan repeated this argument in opposition to summary judgment.  He further submitted that the order that the tribunal makes under s 156(4) would not compel HKKLA to perform the terms of the scheme (as he accepted the termination of the scheme as held in the discharge decision), but would prevent Neway from being liable for infringement provided Neway would comply with the terms of the order as per s 160(2).  But this further submission cannot make an old argument look nascent, because Mr Yan accepted in this argument that Neway had to comply with the terms of the order as per s 160(2); that is to (1) pay to the operator of the scheme any charges payable under the scheme and (2) comply with the other terms applicable to such a licence under the scheme. Hence, his submissions require the extension by the tribunal of the longevities of the scheme and the licence under s 156(4) when I have ruled in the discharge decision that such cannot happen.  It is thus clear that Mr Yan was repeating his previous argument in opposition to summary judgment.

9.  Hence, I said in §40 of the summary judgment that Neway’s defence in this action was an abuse of process as the issues raised had all been decided in the discharge decision. 

10.  I further agree with Mr Wong that Neway not only raised the same point for the second time, it also distorted my discharge decision by saying in §16 of its written submissions for staying this action that I had held that “despite a scheme having ceased for whatever reasons, the tribunal can still make an order under section 156(4) which is to be in force beyond the cessation date of the scheme.”  This submission meant (though not expressly said) that I had decided that the scheme could be lengthened by the order under s 156(4) and is a distortion of what I had decided.  Neway further submitted in §16 of the written submissions to oppose summary judgment that I had not rejected its argument on the interpretation of s 156(3) and 156(4).  This is another distortion.

11.  In fact, I have further held in §§84 to 90 of the discharge decision as follows:

“84. I think Mr Yan’s submission for prolonging the duration of a scheme when a reference is pending in the Tribunal may be more to the point if it is addressed to the reference to the Tribunal of a licence not granted pursuant to a licensing scheme that is open to all as in the case of Candy Rock Recording Ltd v Photographic Performance Ltd. CT 23/95, CT 35/96. For a scheme that is open to all, there are many licensees and Candy Rock is not an appropriate analogy.Candy Rock is also not an appropriate analogy for a reference under s. 156(1) for the further reason that it was concerned about the renewal of a licence granted otherwise than in pursuance of a licensing scheme. It was not a dispute over the terms of a licence granted or to be granted under a licensing scheme or a reference of a licensing scheme to the Tribunal. It was a s. 163 situation.

85. For a licensing scheme pursuant to which a licence should be granted to whoever that may seek it and is willing to abide by its terms, it may not be easy for the scheme operator to frustrate a reference of it to the Tribunal simply by terminating or revoking it after the making of a reference. The scheme is designed not for a particular licencee but for all those who may need to use the copyrighted works and are willing to abide by the scheme terms. Its terms may not allow the operator to put an end to it at any time at his whim. Even if he should be permitted to do so by the terms of the scheme, it is not easy for him to start a new scheme with new terms and to attract all the licensees in the terminated scheme to join the new one. Such an exercise may entail grave financial consequence to the operator that he cannot ignore. I am not convinced that s. 156(2) is to cater for this kind of mischief.

86. I think one of the purposes of s. 156(2) is to prevent a scheme operator from frustrating the reference to the Tribunal by varying the fee levels or other terms and conditions of the scheme after the reference has been made. The variation by the operator would put the Tribunal in difficulty as any order of the Tribunal under s. 156(3) varying the terms of the scheme is supposed to have effect on all licences granted pursuant to this scheme. Any variation of the terms including the fee scale made by the operator (which may affect all existing licences granted under the scheme) when the reference is pending may make the Tribunal’s subsequent order (on the scheme without variation) inappropriate for these licences with varied terms. Hence, it is important that there should not be any change in the scheme terms after a reference is made until the reference is concluded.

87. Furthermore, if the scheme terms should be varied after a reference has been made, the Tribunal may have to deal with the scheme as referred but without the variation and also the scheme as varied. The Tribunal may have difficulty in deciding what to do under s. 156(3) or (4) with the scheme as varied as it is no longer the same as the scheme referred under s. 156(1). Depending on the extent of the variation, the Tribunal may not even have jurisdiction to deal with the varied scheme as it may become a different scheme altogether. Hence, it is important that once a scheme is referred to the Tribunal, it shall remain in operation in the same terms unless it shall for any reason be put to an end. I think that is the purpose of s. 156(2) and the section should be so interpreted.

88. I also agree with Mr Wong’s submissions for Universal that the plaintiff cannot continue to operate the scheme once the record companies withdraw their authorizations for the plaintiff to use and license their copyright works.

89. Mr Wong is also correct in his submission that there is nothing in s. 156 or in the entire Part II Division VIII of the ordinance that requires the record companies to be bound by any order of the Tribunal so that they will be compelled to ensure that the plaintiff can perform the terms of the scheme as may be varied by the Tribunal. The record companies also cannot apply to the Tribunal under s. 156 or s. 157 (which deals with further reference to the Tribunal of a scheme that is subject to an order of the Tribunal made under s. 156). If s. 156(2) shall have the effect as contended by Mr Yan, that will compel the record companies to allow the plaintiff to continue licensing the use of their copyright works to licensees indefinitely once a reference of the scheme is made to the Tribunal. That will deprive the record companies of their contractual and proprietary rights until the conclusion of the reference. I agree with Mr Wong that such interpretation of s. 156 is contrary to the established canons of statutory interpretation. If the intention of the legislature should be as submitted by Mr Yan, clearer wording should be used to spell out such intention.

90. In the light of the above analyses, I am of the following view on the interpretation of s. 156(2). S. 156(1) governs the reference to the Tribunal of a scheme that is “in operation”. The scheme referred is one that is “in operation”. It is not a scheme “proposed to be operated” which is governed by s. 155. Nor is it a scheme that has already been lapsed. Since it is a scheme “in operation”, there is no need to provide for its continuation after the reference is made. However, if for any reason, the scheme cannot continue to operate, then it can come to an end. The reference of it to the Tribunal will only be up to its cessation and not beyond. S. 156(2) does not require the operator to continue its operation if the operator does not desire or is not in a position to do so. If however the scheme, which is in operation when referred to the Tribunal, should continue to operate after the making of the reference, then s. 156(2) requires that it shall remain (or it remains) in operation in the same terms and conditions as and when the reference was made until the conclusion of the reference. The function of s. 156(2) is to preserve the totality of the scheme as referred pending its resolution by the Tribunal.”

12.  Hence, it is wrong for Mr Yan to have submitted that I did not give summary judgment to Universal on the ground that the issues raised by Neway had been decided in the discharge decision.  I did. 

13.  Mr Yan further submitted in §6 of Universal’s reply submissions that nowhere in the entire summary judgment did I ever suggest that interpretation of s 156(3) & (4) was not necessary because that had already been decided in the discharge decision (as contended by P).  The fact is that I did say in §40 of the summary judgment “[t]he issues raised by Neway Group in its defence in this action have all been decided in the discharge decision” and “Neway Group should know where it stands”.  But Mr Yan submitted in §§4 and 5 of his reply submissions that he had already explained in his initial submissions why he disagreed with such “finding” and in §10 that such was wrong in the light of the entire summary judgment.  I do observe that what I said in §40 of the summary judgment as quoted above is not a “finding”.  Furthermore, Mr Yan is at liberty to disagree with me on what I have said.  But he cannot in the same breath assert that I had not said what he disagrees with.

14.  Mr Yan further submitted in the reply submissions that when I gave judgment to Universal in §37 of the summary judgment, I only said “[i]n the light of my interpretation of s 156(3) and (4) above…”.  That shows that it was a fresh interpretation rather than a reiteration of what I had done in the discharge decision.  Mr Yan further submitted that if the interpretation had already been done in the discharge decision, I should have said: In the light of my view that I have already decided the issue in the Discharge Decision…”.  I would only observe that it was not too late for me to say it in §40 though not in the same words that Mr Yan would dictate for me.

15.  The next point is in §§8 and 14(b) of Mr Yan’s reply submissions.  It says that Universal had asked for an order that Neway be “debarred and/or estopped” from raising any argument in relation to the interpretation of s 156(3) and (4), but I did not in the summary judgment even suggest that Neway be “debarred and/or estopped from running such arguments”.  It seems that Mr Yan does not regard the summary judgment against Neway as a final judgment on the interpretation of s 156(3) and (4).

16.  Mr Yan then referred in §9 of his reply submissions to §29 of the summary judgment where I said “I would therefore deal with the interpretation of s 156(3) and (4) and whether the tribunal’s order in the CT2 proceedings can protect Neway Group from infringement claim brought by Universal”.  Mr Yan submitted that this was another good indication that I was interpreting the sub-sections afresh.  But I would say that quibbling with a particular expression in the summary judgment is not as useful as reading the judgment as a whole for understanding what I have decided.  If I had interpreted s 156(3) and (4) in the discharge decision, I could not gainsay that in the summary judgment.  I had indeed interpreted s 156(3) and (4) in §§28 and 29 of the discharge decision and clearly.

17.  Mr Yan then submitted in §13 of the reply submissions that I still have to consider whether on a proper and fair reading of the discharge decision in an objective and reasonable manner, there was absolutely no basis for Neway to contend that I had not decided on the interpretation of s 156(3) & (4) in that decision.  He submitted that the parties could not possibly read what was going through my mind when I wrote the discharge decision.  He raised a few points to show that there was basis for Neway to content that I had not decided on the interpretation of s 156(3) & (4) in that decision.

18.  The first point is in §14(a) of the reply submissions.  He submitted that Neway had been consistent throughout and even before the commencement of this action.  Its position was first stated in a letter dated 3 February 2017 (Exhibit “WKT-18”).  It repeated its position in the Defence (§34).  I do not quite understand this point.  Neway was consistent.  But it was consistent in pursuing an oppressive course in exploiting and infringing Universal’s copyright by raising arguments that had been decided against it in the discharge decision. 

19.  The second point is also in §14(a) of the reply submissions.  Mr Yan submitted that if Universal genuinely believed that Neway’s defence was an abuse of process as the issue had already been decided in the discharge decision, it could and would have naturally applied to strike out the defence (that was in substance Neway’s main, if not sole, defence to Universal’s claims in this action).  Universal did not do so. Instead, it waited for 5 months and then applied for summary judgment.  My immediate observation is that Universal’s course of conduct had nothing to do with what I had decided in the discharge decision.  But if such conduct could reflect on Universal’s “objective” understanding of whether I had decided the interpretation of s 156(34) and (4), then I would say that an application for summary judgment is based the applicant’s understanding that the defendant has no defence to the action.  To knowingly take a previously decided point from the same losing side or flogging a dead horse is no defence.  Universal’s stance was that s 156(3) and (4) had been firmly and clearly decided against Neway in the discharge decision.  Hence, they applied for summary judgment. They also asked for an order that Neway be “debarred and/or estopped” from raising any argument in relation to the interpretation of s 156(3) and (4).  The basis for this is because this has already been done in the discharge decision.

20.  The final point on this issue is that I had in the course of the hearing of the application for summary judgment fairly acknowledged that, at the very least, it was not entirely clear from the discharge decision that I had dealt with and interpreted s 156(3) and (4).  In support of this submission, Mr Yan quoted a few utterances of mine from the transcript showing my lament that if I should have produced a clearer and more embracive discharge decision, this action might have been avoided.  These utterances were all made by me in response to Mr Yan’s opening submissions when he used his forensic skills to the utmost to demonstrate the flaws of my discharge decision.  I did not at the time carry all that I have said in the discharge decision in my mind.  Believing that the attacks were all factually accurate and justified, I lamented at my inadequacies which, I then believed, had resulted in yet another expensive litigation (p. 16K, 16O-17D and 18O-R of the transcript). 

21.  The picture was however corrected by Mr Wong, who in his submissions pointed me to §§28, 29, 72 and 83 of the discharge decision which show that my earlier lament was unnecessary and misplaced (p 35D-M of the transcript).

22.  In a nut-shell, Neway had knowingly infringed Universal’s copyright.  It had forced Universal to take out this action.  It also defended this action with vigour when it should not have.  Its game plan was oppressive and attitude hostile.

23.  The parties have no dispute on the applicable law on the award of indemnity costs.  On this ground alone, Neway should pay costs of the action to Universal to be taxed on indemnity basis.

Unreasonable challenge to Universal’scopyright ownership

24.  Neway submitted that it had only admitted in previous proceedings that Universal had the right to grant authorizations to grant licences but not ownership of the copyright works which would enable it to sue for infringement.  Since Universal had not disclosed assignments of the copyright or any other proof of ownership of the rights in the supporting affirmation, Neway was justified to question Universal’s ownership of the copyright in some of the works in question.  Neway also submitted that the ownership put forward by Universal in this action was inconsistent with the case in previous proceedings which inconsistency was only removed by Universal’s reply affirmation.  

25.  Mr Wong disagreed.  He pointed out that Neway had accepted in its defence that Universal was the copyright owner (and not merely having the right to authorize) of the relevant water-marked KMVs.  Neway also treated Universal as the owner of the relevant copyright works in the previous proceedings in which the discharge decision was made.  Neway in the proceedings leading to the discharge decision had repeatedly asserted that Universal was the “copyright owner” of the KMVs bearing the HKKLA watermark and the true operator of the HKKLA licensing scheme.

26.  Neway in the reply submissions submitted that what was relevant in the previous proceedings in HCCT 45/2012 was whether Universal had the right to authorize HKKLA to grant karaoke server licences in respect of works under its labels.  It was not necessary nor had Neway conceded that Universal alone was the owner of the copyright of all such works.  The paragraphs cited from its defence to this action had to be considered in their proper contexts.  By this submission, Neway wants its admissions of Universal’s copyright ownership to mean its admissions of Universal’s right to authorize the grant of licence only.  I am not prepared to take up this suggestion of rewriting Neway’s own words.

27.  I agree with Mr Wong. Neway was indeed oppressive in challenging Universal’s ownership of the copyright in the application for summary judgment.  This is the additional reason for ordering Neway to pay costs on indemnity basis.  However, I reiterate that Neway’s oppressive attitude in infringing Universal’s copyright prior to the commencement of this action and its abuse of process in defending this action are sufficient justifications for indemnity costs.

Decision

28.  In the premises, I dismiss Neway’s application to vary the costs order nisi with costs of the application be to Universal also to be taxed on indemnity basis with certificate for two counsel.

HCA 1738/2017

[2018] HKCFI 2403

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1738 OF 2017

________________

________________

______________

J U D G M E N T

______________

1.  This is an action by the plaintiff, Universal Music Limited (“Universal”) against the defendants (“Neway Group”) for copyright infringement of Universal’s karaoke music videos (“KMVs”).

2.  Universal has taken out an application on 16 March 2018 for summary judgment on liability under RHC Order 14, or alternatively, judgment following the determination of various questions under RHC Order 14A.  Neway Group has taken out a summons on 1 August 2018 under RHC Order 1B r 1(2)(a) for stay of this action including Universal’s application pending the determination of Copyright Tribunal Proceedings CT 2/2010 (“the CT2 proceedings”).

Background

3.  Neway Group have applied in the CT2 proceedings before the Copyright Tribunal (“the tribunal”) for a licence from Hong Kong Karaoke Licensing Alliance Ltd (“HKKLA”) covering the use of back-catalogue KMVs of a number of record companies including Universal.  HKKLA was a copyright licensing body for K-server licences and represented some record companies including Universal, Warner Brothers and Sony.  Neway Group regarded the terms of the licensing scheme operated by HKKLA unreasonable.  It applied under section 156(1) of the Copyright Ordinance; Cap. 528 (“the Ordinance”) as the originator to the tribunal against HKKLA under the CT2 proceedings to seek reliefs under s 156(3) and (4).

4.  The duration of the licence sought by Neway Group under s 156(4) in CT2 proceedings is to commence retrospectively form 1 July 2010 to a date at 6 months from the date of tribunal’s decision in the proceedings.  The proposed licence covers all the KMVs of Universal the subject matter of complaint in this action.

5.  Whilst CT2/2010 was pending, HKKLA applied to this court by originating summons for interim payment or, alternatively, other relief.  I gave judgment on 7 November 2013 and ordered payment into court by Neway Group as security for payment under the licence that may be granted by the tribunal in the CT2 proceedings. 

6.  Part of my judgment as varied on 8 May 2014 required Neway Group to pay a yearly sum of HK$5 million into court no later than 14 July of each year commencing from 2014, unless CT2/2010 should be decided on or before 1 July of that year.  That was the security for the yearly licence for back catalogue KMVs that may be granted by the tribunal commencing from 1 July of the year.  Furthermore, if Neway Group would opt for a licence for new KMVs for any particular scheme year, it should pay into court a further security of HK$15 million for that year.  Only this part of the judgment (“the amended order”) was effective from 8 May 2014.  The rest of the judgment had become spent before that date.

7.  HKKLA took out a summons on 4 June 2015 for discharge of the amended order (“the discharge summons”).  The ground of the application is that some of the record companies which own the copyright works licensed by HKKLA in its scheme had withdrawn their authorization from HKKLA and the authorization by these record companies ceased on 30 June 2015.  The record companies wanted to license their copyright works themselves.  HKKLA had notified Neway Group of the cessation of its authorization by letter on 31 March 2015.

8.  Neway Group opposes the discharge summons.  It argued that once a scheme has been referred to the Tribunal under s 156(1), it shall remain in operation pursuant to s 156(2) of the ordinance until the proceedings on the reference are concluded. 

9.  After hearing arguments on both sides, I gave a decision on the discharge summons on 6 January 2017 against Neway Group (“the discharge decision”).  I in particular held in §90 of the decision as follows:

“90. In the light of the above analyses, I am of the following view on the interpretation of s. 156(2). S. 156(1) governs the reference to the Tribunal of a scheme that is “in operation”. The scheme referred is one that is “in operation”. It is not a scheme “proposed to be operated” which is governed by s. 155. Nor is it a scheme that has already been lapsed. Since it is a scheme “in operation”, there is no need to provide for its continuation after the reference is made. However, if for any reason, the scheme cannot continue to operate, then it can come to an end. The reference of it to the Tribunal will only be up to its cessation and not beyond. S. 156(2) does not require the operator to continue its operation if the operator does not desire or is not in a position to do so. If however the scheme, which is in operation when referred to the Tribunal, should continue to operate after the making of the reference, then s. 156(2) requires that it shall remain (or it remains) in operation in the same terms and conditions as and when the reference was made until the conclusion of the reference. The function of s. 156(2) is to preserve the totality of the scheme as referred pending its resolution by the Tribunal.”

10.  I also decided in §93 of the decision that HKKLA’s scheme could not have continued beyond 30 June 2015.  I therefore discharged the amended order from 30 June 2015 onwards.

11.  After the expiration of the scheme on 30 June 2015, Neway Group entered into licences with Warner Brothers and Sony for use of their KMVs.  They are two of the major record companies which had authorized HKKLA to use their KMVs in the expired scheme.  But no licence has been entered between Universal and Neway Group for the latter’s use of the former’s KMVs.

12.  Universal claims in this action that Neway Group has since 1 July 2015 been infringing its copyright in its KMVs or “the Plaintiff’s Copyright Works” as defined in §§25 and 26 of the statement of claim.  Neway Group has admitted in this action that it had been using Universal’s KMVs from 1 July 2015 to 2 October 2018 and stopped the usage on 3 October 2018.

13.  Since sections 156(1) to (4) and 160(1) and (2) have been and will be referred to and are important for this decision, I set them out in full as follows:

“156. (1) If while a licensing scheme is in operation a dispute arises between the operator of the scheme and-

(a) a person claiming that he requires a licence in a case of a description to which the scheme applies; or

(b) an organization claiming to be representative of such persons,

that person or organization may refer the scheme to the Copyright Tribunal in so far as it relates to cases of that description.

(2) A scheme which has been referred to the Tribunal under this section remains in operation until proceedings on the reference are concluded.

(3) The Tribunal shall consider the matter in dispute and make such order, either confirming or varying the scheme so far as it relates to cases of the description to which the reference relates, as the Tribunal may determine to be reasonable in the circumstances.

(4) The order may be made so as to be in force indefinitely or for such period as the Tribunal may determine.

…

160. (1) A licensing scheme which has been confirmed or varied by the Copyright Tribunal—

…; or

(b) under section 156 or 157 (reference of existing scheme to Tribunal),

is in force or, as the case may be, remains in operation, so far as it relates to the description of case in respect of which the order was made, so long as the order remains in force.

(2) While the order is in force a person who in a case of a class to which the order applies—

(a) pays to the operator of the scheme any charges payable under the scheme in respect of a licence covering the case in question or, if the amount cannot be ascertained, gives an undertaking to the operator to pay them when ascertained; and

(b) complies with the other terms applicable to such a licence under the scheme,

is in the same position as regards infringement of copyright as if he had at all material times been the holder of a licence granted by the owner of the copyright in question in accordance with the scheme.”

Neway Group’s submissions for the application for stay

14.  Mr Yan, SC, leading counsel for Neway Group referred to s 156(3) and submitted that the tribunal has jurisdiction under it to make an order, either confirming or varying the referred scheme so far as it relates to cases of the description to which the reference relates, as the tribunal may determine to be reasonable in the circumstances.  He further submitted that such order may be in force indefinitely or for such period as the tribunal may determine under s 156(4). 

15.  Mr Yan further submitted that if the tribunal should grant the order in terms as sought by Neway Group in the CT2 proceedings pursuant to s 156(3) for the duration of 6 months after the decision as requested by Neway Group under s 156(4), and Neway Group complies with such order, Neway Group will be regarded as at all material times the holder of a licence granted by the owner of the copyright in question under s 160(2).  The reason being that under s 160(2), 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.  There would have been no infringement as claimed by Universal in this action.

16.  In seeking the stay, Mr Yan submitted that in an infringement action where the defendant is applying for a licence before the tribunal and such licence, once granted, would absolve him from liability, the infringement action should be stayed or adjourned pending the determination by the tribunal.  He relies on California Red Limited v Gold Typhoon Entertainment Limited & Ors HCA 2684/2008 & HCA 2735/2008, 23 July 2009, at §§3-4 (per Hon Rogers VP) and Phonographic Performance Ltd v Raine [2014] EWHC 1398 at §§15-18.  

17.  In Phonographic Performance Ltd v Raine [2014] EWHC 1398, the plaintiff, a collecting society, claimed the defendant for copyright infringement.  The defendant operated a number of nightclubs in the UK.  He had previously obtained licences to use the relevant copyright works from the plaintiff, and had further applied to the Copyright tribunal for further licences to use the same.  When dealing with the plaintiff’s application for summary judgment and the defendant’s cross application for a stay of proceedings, the learned Judge, in exercising his discretion to grant the stay, stated at §§15 and 18 as follows: -

“15. Nonetheless, it is clear that the intention is to ask the tribunal not only to declare that the company is entitled to a licence but also to declare that it was entitled to a licence as from 3 August 2013, and if that were right and the tribunal acceded to the application and made a declaration or, even better for the company, granted a licence from that date or directed that one be granted, then it would follow that none of the companies could be found to have acted in breach of copyright after that date. And if that were right, then there would be no foundation for an injunction against Mr Raine based on the fact that he had authorised or procured a breach of copyright by either or both of those companies after that date.

...

18. … a judge in a position such as the one I am placed in would have jurisdiction to and could properly stay an action on terms in the event of a relevant issue being referred to the tribunal and counsel for PPL had so conceded (and properly conceded) that it would be proper for a judge to take that course if he saw fit.”

18.  It is Neway Group’s case that despite the expiration of the scheme on 30 June 2015, the tribunal can still order under s 156(4) that Neway Group can make lawful use of Universal’s KMVs beyond 30 June 2015 and Universal cannot sue Neway Group for infringement of its copyrights by reason of such use.

19.  Mr Yan further submitted that a stay of proceedings will not prejudice Universal to any significant degree.  The CT2 proceedings are close to being determined.  The parties have already filed and exchanged their closing submissions on 2 October 2018 and will file their supplemental closing submissions on 12 November 2018.  A hearing has been fixed on 14 to 15 March 2019 for the tribunal to raise questions arising out of the parties’ written submissions.  Accordingly, it is likely that the tribunal will give its decision sometime in mid-2019. 

20.  Furthermore, Neway Group has stopped using any of Universal’s KMVs from 3 October 2018 and no copy of such KMVs remains in the Neway Group’s karaoke servers and systems.  Neway Group has also on 12 October 2018 returned and delivered up to HKKLA the hard disks containing the watermarked copies of the said KMVs which were furnished and delivered to Neway Group as pleaded in §25 of the statement of claim.  Neway Group is also prepared to file and serve affidavit(s) to confirm these matters and undertake not to restore or reinstate any of the Universal’s KMVs.

Universal’s submissions to oppose the application for stay

21.  Mr Wong, SC, leading counsel for Universal, submitted that I have already decided in the discharge decision that the tribunal in the CT2 proceedings cannot determine the duration of the scheme operated by HKKLA to run beyond 30 June 2015 as HKKLA ceased to be authorized by the record companies (including Universal) to use their KMVs after this date.  Hence, the order in the CT2 proceedings cannot affect Universal’s rights after this date and cannot be an answer to Universal’s claim in the present action which only count from 1 July 2015.

22.  The discharge decision also decided that Universal is not a party to the CT2 proceedings and HKKLA was not the agent of Universal or the other record companies in operating its scheme (see §103 of the discharge decision).  Hence, the order to be made by the tribunal in the CT2 proceedings cannot bind Universal and cannot be an answer to Neway Group’s infringement of Universal’s rights. 

23.  For either of the above two reasons, the CT2 proceedings and this action are wholly different and do not overlap.  A decision in this action will not pre-empt the tribunal’s decision in the CT2 proceedings.  Hence, there is no basis to stay this action pending the outcome of the CT2 proceedings.

24.  Mr Wong further submitted that the stay application must be rejected in the light of the legal principles set out by Ma J (as he then was) in Linfield Ltd v Taoho Design Architects Ltd [2002] 2 HKC 204 at §§13 to 14:

(1)  The stay must not cause injustice to the plaintiff in the action.

(2)  The applicant for a stay must satisfy the court that the continuance of the proceedings would be oppressive or vexatious to him or an abuse of the process of the court.

(3)  Where a plaintiff institutes proceedings as of right, he is not to be deprived of carrying on those proceedings unless very good reasons exist to the contrary (and only in “rare and compelling circumstances”: see Poon Ka Man Jason v Cheng Wai Tao[2018] HKCFI 771 (unrep., HCA 304/2011, 13 April 2018) per Au Yeung J at §37).

25.  Mr Wong also submitted that there is no question of wastage of time and resources for the court or the parties for the court to proceed to hear and decide the Order 14/14A application as this action is different from the CT2 proceedings.  There is also no certainty as to when the ruling in the CT2 proceedings will be available.

26.  The main argument in the stay application is whether the tribunal’s determination under s 156(4) in the CT2 proceedings can allow Neway Group to enjoy the benefits under the scheme licensed by HKKLA or make use of Universal’s KMVs beyond 30 June 2015 and hence be a complete answer to Universal’s claim in this action.  This is also the main argument in Neway Group’s opposition to Universal’s application under Order 14/14A. I therefore deal with both matters together.

Universal’s summons and the issues raised therein

27.  Universal took out a summons on 16^th day of March 2018 for summary judgment under Order 14 or alternatively judgment following the summary determination of several questions under Order 14A.  The questions raised for determination under Order 14A are:

(1)  Whether by the discharge decision, the court has finally and conclusively adjudged as between Universal and the 1^st defendant (acting as agent for all other defendants) all relevant factual and legal issues considered therein, so that Neway Group in these proceedings are debarred and/or estopped from denying the correctness of the discharge decision on those factual and legal issues or from raising any argument on those issues which have been specifically rejected in the discharge decision.  The relevant factual and legal issues include:

(a)  That upon its proper interpretation, s 156(2) of the ordinance does not mandate a licence scheme which has been referred to the tribunal to continue to operate until the conclusion of the reference.

(b)  That upon proper interpretation of s 156(2) of the ordinance, HKKLA’s licensing scheme, which has been referred to the tribunal in CT2/2010, can come to end despite its having been referred to the tribunal under s. 156(1) and before the determination of the CT2 proceedings by the tribunal.

(c)  That, upon the undisputed withdrawal bythe relevant record companies including Universal of HKKLA’s authority to license their copyrighted works, HKKLA could not continue to operate its licensing scheme which accordingly could not have continued beyond 30June 2015, even though the tribunal is yet to make a determination of the CT2 proceedings.

(d)  That s 156(2) does not have the effect (as contended by the 1^st Defendant) that will compel the record companies including Universal to allow HKKLA to continue licensing the use of their copyright works to licensees indefinitely once a reference of the scheme is made to the tribunal.

(e)  That s 156(2) does not require the operator of the scheme to continue its operation if the operator does not desire or is not in a position to do so.  The reference of the scheme to the tribunal will only be up to its cessation and not beyond.

(f)  That s 156(4) of the ordinance which deals with the duration of the order made under s 156(3) does not (as contended by the 1^st Defendant) empower the tribunal to determine the longevity of the licence scheme, and that s 156(4) of the ordinance does not give the tribunal the power to dictate that the operator of the scheme should continue a scheme indefinitely if the operator cannot or does not want to do so.

(g)  That HKKLA is and was not an agent of Universal.

(h)  That the 1^st Defendant is not entitled, pursuant to the Interim Measures (as defined in paragraph 23 of the statement of claim), to a licence of “back catalogue KMVs” up to 30 June 2016.

(2)  Alternatively, the questions of law identified in (1)(a) to (h) above be determined summarily as between Universal and Neway Group.

(3)  Further, whether ss 156(4) and 160 of the ordinance empower the tribunal to make any order which could have an effect of putting Neway Group in the same position as regarding copyright infringement as if they have since 1 July 2015 been the holder of a licence granted by universal in respect of the Plaintiff’s Copyright Works.

28.  The questions in (1)(a) to (h) in a nut-shell raised three issues; namely:

(1)  whether the reference of HKKLA’s licensing scheme to the tribunal would have invoked s 156(2) which mandated the continuation of scheme until the conclusion of the reference or HKKLA’s scheme had already come to an end on 30 June 2015 and s 156(2) does not mandate HKKLA or the record companies to grant licence under the scheme or otherwise for use of their copyright works from 1 July 2015 because of the withdrawal by the record companies of HKKLA’s authority to licence their copyright works from 1 July 2015 regardless of the fact that the scheme had been referred to the tribunal under s 156(1);

(2)  whether the tribunal can under s 156(4) determine the longevity of a licensing scheme and dictate that a scheme shall continue indefinitely even if the scheme operator cannot or does not want to do so; and

(3)  Whether there is an agency relationship between Universal and HKKLA.

29.  I think Mr Yan accepts that I have decided the 1^st issue in the discharge decision against him as I held that the licensing scheme could be terminated before the conclusion of the CT2 proceedings (§§10 - 11 of Neway Group’s skeleton submissions on summary judgment).  Mr Yan has not submitted any argument against this part of the discharge decision in his skeleton submissions on summary judgment.  He only argued the 2^nd issue with vigour.  Regarding the 3^rd issue of agency, Mr Yan did not touch on it in his skeleton submissions.  But he did submit in §17 that the order of the tribunal in the CT2 proceedings (Universal not being a party) could prevent Neway Group from being liable (to Universal or HKKLA?) for infringement without stating the basis.  I would therefore deal with the interpretation of s 156(3) and (4) and whether the tribunal’s order in the CT2 proceedings can protect Neway Group from infringement claim brought by Universal. 

Universal’s submissions under Order 14 or 14A

30.  Regarding Neway Group’s contention that the tribunal can determine under s 156(4) that the duration in which a licensee can enjoy the rights in a licence can go beyond the expiration of the license scheme, Mr Wong submitted that the discharge decision has already rejected this contention conclusively. 

31.  I referred to §§28 to 29 of the discharge decision as follows:

“28. Mr Yan emphasised that the Tribunal has exclusive jurisdiction under s. 156(3) to confirm or vary the terms of a licensing scheme and to determine under s. 156(4) that the order should last indefinitely or only for a definite period. Whether the Tribunal should make an order in CT2/2010 that the scheme as referred should remain in force beyond 30 June 2015 when the authorization by the record companies to the plaintiff was terminated is a matter that should be left to the Tribunal and not to be decided by this court in the discharge summons.

29. I think Mr Yan, in making this submission, has misunderstood the meaning of s. 156(4) as he equated the order of the Tribunal to be made under s. 156(4) with the scheme that has been referred to the Tribunal. S. 156(4) merely gives the Tribunal power to provide that the order made under s. 156(3) may be in force indefinitely or for such period as the Tribunal may determine. S. 156(4) empowers the Tribunal to determine the duration of the order and not the longevity of the scheme. Even when the scheme should have lapsed, been superseded, or otherwise terminated, it may still be necessary to have the order in force so as to deal with the aftermath. I do not think the legislature should have given the Tribunal the power under s. 156(4) to dictate that the operator should continue a scheme indefinitely if the operator cannot or does not want to do so.” (emphasis supplied)

32.  Mr Yan does not dispute this conclusion, but he submitted that on a proper reading of the discharge decision, I have not rejected Neway Group’s argument on the interpretation of s 156(3) and (4).  He further submitted in §17 that the order to be made by the tribunal under s 156(4) will not compel HKKLA to perform the terms of the scheme, as the scheme has been terminated (based on the discharge decision).  The effect of the order under s 156(4) will only prevent Neway from being liable for infringement provided that it complies with the terms of the order as per s 160(2). 

Interpretation of s 156(3) and (4) and decision on Universal’s summons

33.  I do not think the tribunal can make an order under s 156(3) and (4) to allow Neway Group to use Universal’s KMVs in return for its payment to Universal thereof otherwise then in the context of a licence.   I am unable to understand how the tribunal can order that Neway Group can continue using Universal’s copyright works when HKKLA’s scheme had already been put to an end.  I also cannot understand how Neway Group can be immune from Universal’s suit of infringement if its use of Universal’s KMVs is not pursuant to a licence granted either by HKKLA pursuant to its licensing scheme or by Universal.  Neway Group can only lawfully use Universal’s KMVs if it is licensed to do so.  For there to be a licence, there must be a licensor and a licensee.    

34.  I also agree with Mr Wong that any order to be made under s 156(3) is predicated upon the existence of a scheme under which a licence can be granted.  If there is no scheme, there is nothing for the tribunal to confirm or vary under s 156(3).  Since HKKLA’s scheme had already ended on 30 June 2015, the tribunal cannot make any order under s 156(3) to confirm or vary its terms.

35.  I also hold that the tribunal cannot make any order under s 156(4) in the CT2 proceedings that can protect Neway Group from an infringement claim brought by Universal in respect Neway Group’s use of Universal’s KMVs from 1 July 2015 in the absence of any licence from Universal.

36.  Mr Yan has also referred to me the legal principles governing application for summary judgment which are well-established: -

(a)  Factually, it has to be determined what the defendant says is believable, rather than whether its version of events is to be believed. 

(b)  As a matter of law, even if what the defendant says is believable, it has to be determined whether it amounts to an arguable defence in law.

(Schindler Lifts (Hong Kong) Ltd v Ocean Joy Investments Ltd [2003] 1 HKC 438, at 442 (§10) (per Ma J, as he then was.))

37.  In the light of my interpretation of s 156(3) and (4) above, I have answered the 2^nd issue raised under Order 14A in favour of Universal.  I also hold that Neway Group has no arguable defence in law to this action.

38.  If Neway Group has no defence to this action, then it is futile to stay the action pending the tribunal’s decision in the CT2 proceedings.  Furthermore, this action deals with Universal’s claim from 1 July 2015 whilst the CT2 proceedings only deal with the grant of a licence under the HKKLA scheme that that ended on 30 June 2015.  They do not overlap.  The order to be made in the CT2 proceedings will also not affect Universal as it is not a party to those proceedings and HKKLA was not its agent in operating the expired scheme.  To allow the action to proceed will also not result in wastage in time and costs as there is no overlap between this action and the CT2 proceedings.  It will also cause injustice to Universal if this action is stayed.  I therefore dismiss Neway Group’s summons to stay proceedings.

Judgment

39.  Since I have held that Neway Group has no defence to this action, Universal should be given judgment of this action.  Mr Yan has objected to an order for Universal to inspect Neway Group’s karaoke servers.  I think that objection is valid and I omit that from the orders I make.  I order: -

(1)  against the 1^st Defendant for: -

(a)  an order for removal, and procuring the removal of all original and infringing copies of the Plaintiff’s Copyright Works as defined in paragraphs 25 and 26 of the statement of claim dated 1 September 2017 (“the SOC”) from the Defendants’ karaoke server and system without retaining any copy thereof within 7 days after service upon of them of this order;

(b)  an order for delivery up upon oath and procuring the delivery up upon oath of all original or infringing copies of the Plaintiff’s Copyright Works previously provided by HKKLA to the 1^st Defendant without retaining any copy thereof within 7 days after service upon of them of this order;

(2)  against all the Defendants for: -

(a)  a declaration that the Defendants have infringed the Plaintiff’s copyright in the Plaintiff’s Copyright Works;

(b)  an order that each of the Defendants, whether acting by itself or its related directors, officers, servants, contractors, employees, agents or any of them or otherwise howsoever, be restrained from: -

(i) infringing the Plaintiff’s copyright in the Plaintiff’s Copyright Works or any of them by making, using, copying, possessing, dealing in or with, transmitting and/or distributing infringing copies of the same without the consent or licence of the Plaintiff; and

(ii) directing, procuring, causing, enabling or assisting others to do so.

(c)  an order for delivery up or destruction upon oath of all infringing copies, goods, articles and materials in the custody, power or control of the Defendants or any of them which would offend against the foregoing orders and injunctions; or, at the option of the Plaintiff, permanent deletion of all digital or electronic copies in the possession, power, custody or control of the Defendants or any of them (if they are remaining) within 14 days after service upon them of this order;

(d)  an order that there be an inquiry as to damages (including statutory additional damages), or at the Plaintiff’s option, an account of profits in respect of the Defendants’ infringement of the Plaintiff’s Copyright Works;

(e)  an order that the Defendants do pay all sums found due to the Plaintiff by the Defendants upon taking such inquiry or account together with interest thereon at 2½% above the prime rate of the Hong Kong Bank from the issuance of the writ herein; and

(f)  an order that the Defendants do pay the Plaintiff the costs of this action including this application forthwith, to be taxed if not agreed.

40.  I also make a costs order nisi that Neway Group do pay the costs of this action including the costs of the two summonses to Universal to be taxed on the indemnity basis with certificate for two counsel.  I order indemnity costs because I regard this opposition by Neway Group as an abuse of process.  The issues raised by Neway Group in its defence in this action have all been decided in the discharge decision.  Neway Group should know where it stands.  Furthermore, it is also unreasonable in challenging Universal’s copyright ownership.  There is also the dispute of delay made by each side against the other.  I do not think there is enough material for me to decide this dispute against either or both of them.