FULL RANGE ELECTRONICS CO LTD v. GENERAL-TECHINDUSTRIAL LTD AND ANOTHER

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JUDGMENT

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Rogers, J.

1. This is an appeal from a Decision of the Judge in chambers whereby he allowed in part an appeal from an Order of the Master ordering discovery.

Background

2. In this action, the Plaintiff claims infringement of copyright in drawings relating to its M-16 headphone radio. The drawings, apart from that for one part, are alleged to have been made over a period from about July 1991 to March 1992. In September 1993, the Plaintiff added what is termed a battery plant divider. That seems to be a simple part, made of plastics, that keeps the batteries apart. The Plaintiff's Statement of Claim alleges that its headphone radio was first sold in May 1992. The first radios incorporating the battery plant divider were sold in October 1993.

3. The Plaintiff alleges that the Defendants have infringed the copyright in the drawings by manufacturing or authorising the manufacture of the radio and by selling and otherwise dealing with the same under the reference No. GT-316.

4. The 1st Defendant is a company and the 2nd Defendant is and was a director who is alleged to have been responsible for the acts of the 1st Defendant because it is said that he authorised, directed and procured the acts of the corporate Defendant.

5. The Plaintiff considered that its case was so strong that it commenced proceedings for summary judgement under Order 14. However, the Defendants filed evidence exhibiting a draft amended Defence and as a result there was an agreed order that the matter should proceed to trial.

The Issues to be Determined at Trial

6. The main points of the Amended Defence are that it was allegedly agreed between the Plaintiff and the Defendants in October 1991 and again in 1992 that the Plaintiff and the 1st Defendant would jointly develop and exploit a design of a headphone radio. In the result this was the Plaintiff's M-16 radio. It is the Defendants' case that it was the common intention of the parties and an implied term of the agreements that the Plaintiff and the 1st Defendant would jointly own the interest in any copyright in any drawings relating to the radio.

7. The Defendants allege in their Amended Defence that the Plaintiff supplied some 63 sample headphone radios in the period up to March 1993. Although not specifically referred to as the M-16, the use of nomenclature "Headphone Radio" (with capital letters) in the Amended Defence indicates that it was headphone radios of that type.

8. The Defendants also say in their Amended Defence that in March 1994, the 1st Defendant was given an express licence or permission to produce the headphone radio. Although the Amended Defence contains an admission as to the manufacture of the moulds for what, again by a process of reasoning, can be assumed to be the M-16 (although it is not clear whether or not it includes the battery divider) there is no specific admission of any manufacture of the M-16 headphone radio (whether it is called the GT-316 or otherwise) although there is an admission of dealing. I understand that admission to mean an admission of offering for sale, selling and supplying radios not purchased from the Plaintiff, but that matter is not explicit and again the pleading might perhaps be a little clearer. I would note that even if it were to be said that an admission of manufacture using the Plaintiff's moulds was implicit in the pleading, it is by no means certain that it is an admission that any such manufacture took place in Hong Kong.

9. I note in passing that reproduction in Hong Kong is a Section 4 infringement whereas dealing in infringing goods is an infringement under Section 5 of the Copyright Act 1956, that of course requires proof of knowledge of infringement to constitute an infringement. The difference can be important because there is no infringement under Section 5 unless the Plaintiff proves that the Defendant knew that the item had been made in infringement. Under section 4, there is no need to prove such knowledge.

10. In the light of that it can be said that the major issues at trial are likely to be those of agreement, licence, consent and joint ownership of the equitable title in any copyright. It was stated by the Defendants' Counsel that these will, indeed, be the only issues taken by the Defendants. The Defendants have termed these issues common copyright and estoppel. However, technically on the pleadings it could be said the Plaintiff still has to prove not only existence and ownership of copyright in the relevant drawings but, also, manufacture of the radios in Hong Kong, before what I have termed the major issues are addressed.

11. Important as far as to day is concerned, however, is the question as to the Plaintiff's entitlement to damages under Section 17(3) of the Copyright Act 1956. That reads as follows:

is satisfied that effective relief would not otherwise be available to the plaintiff, the court, in assessing damages for the infringement, shall have power to award such additional damages by virtue of this subsection as the court may consider appropriate in the circumstances."

12. The 2nd Defendant's responsibility and liability can also be expected to be a matter which will also require detailed consideration in view of the decision in Cannon Kabushiki Kaisha v. Green Cartridge Company (Hong Kong) Ltd. [1996] 1 HKLR 69

The Application for Discovery

13. The Plaintiff sought specific discovery of 4 classes of documents. The Master ordered discovery in respect of all 4 classes. On appeal, the Judge did not disturb the order for discovery of documents relating to the manufacture of the moulds. He reduced the time period of the discovery in respect of the category of documents relating to the sale and supply of headphone radios to companies by the name of Alaron Inc. and Alaron Asia who were former customers of Plaintiff.

14. As regards the other categories of documents, although it is implicit in the Judge's decision that he set aside the Order of the Master, the Order as drawn up merely sets out those categories of documents in respect of which discovery should be given but does not, in terms, set aside the Master's Order.

15. There are 2 categories of documents in respect of which the Plaintiff seeks discovery today. The first is documents and materials relating to promotions and advertisements of the headphone radio. The second is "documents relating to the sale or supply and offer for sale or supply of the Headphone Radio, to the Defendants' customers, including those customers identified in the documents in the Defendants' List of Documents filed on the 16th May 1996", then the description goes on to say "including but not limited to correspondence, contracts, purchase orders, proforma invoices, production orders, letters of credit, bills of exchange, bills of lading, airway bills, trust receipts and import and export declarations, etc".

Documents Relating to the Sale and Supply of Headphone Radios to Alaron Inc. and Alaron Asia

16. The Judge limited the discovery in respect of these documents to the period between May 1992 and the end of June 1995. He said that he did so because the Plaintiff's case was that its radio had been first sold in May 1992 and the end of June 1995 was 6 months after the Alaron transaction particularised by the Plaintiff in the Statement of Claim.

17. The documents of which discovery is sought are in respect of sale and supply and offer for sale and supply. The request does not relate to manufacture of the radios. The Judge attempted to limit discovery. It is important to limit discovery to what is necessary. There are many documents which might be relevant but are not necessary for fairly disposing of the case or saving costs.

18. In the present instance, I find it difficult to imagine the existence of documents prior to May 1992, when the Plaintiff's radio was first sold. I can find no criticism of the Judge's attempt to limit discovery. It may, as I have indicated, be unnecessary to do so because there may be no documents to discover prior to May 1992. It might be therefore that another court might not have been over concerned to impose such a limitation but for my part, I would not disturb the exercise of the Judge's discretion to limit discovery to what he considered was necessary for the case.

19. The Plaintiff's counsel, Miss Wong, has strenuously argued today that the documents are relevant for the Court's consideration of the question of flagrancy.

20. In my view, as far as this case is concerned, it is probably unnecessary, given the nature of the case and given Mr. Yiu's concession in the course of argument that the only relevant issues to be tried would be the questions of what was termed common copyright and estoppel. It appears to me that it is hardly a step which the Judge would fail to do namely to direct the Master that when considering the question of damages, he should consider whether damages should also be awarded under Section 17(3).

21. No determination can, of course, be made as to whether damages would be awarded until the Master has determined what the normal damages for infringement would be. Section 17(3) itself makes clear that the question of the additional damages is something which has to be decided when the Court actually assesses damages. The cases which Miss Wong has drawn to our attention do show that in some instances the Court will indicate that there has been no flagrancy and therefore there should be no assessment of additional damages, and in other cases, that there has been flagrancy and the Master could take that into account.

22. In my view, given the circumstances of this case, I do not consider there is a realistic possibility that if the defence of common copyright and estoppel fails, the question of flagrancy would not be left to the Master to consider on the assessment of damages.

Documents and Materials Relating to Promotions and Advertisements of the headphone Radio

23. The next category of documents are documents and materials relating to promotions and advertisements of the headphone radio. The Judge refused this category because he did not see the need for this category of documents over and above the documents which already had to be provided. Again although it does not emerge from the judgement of the Judge below that the matter of flagrancy was uppermost in his mind, in my view, even taking that into consideration, it is not necessary in the circumstances of this case that these documents should be discovered.

Documents Relating to Sale or Supply of Headphone Radios to Other Customers

24. The same applies to the fourth category of documents, namely documents relating to the sale or supply and offer for sale or supply of the headphone radio to customers of the Defendants, other than Alaron Inc. and Alaron Asia.

25. The Judge regarded these documents as relating to matters of quantum and fishing for further instances of infringement. In view of the broad categories of documents which I have already recited which are part of the request in this respect, I have a great deal of sympathy with the Judge for considering that the documents requested did relate to quantum. It seems to me that many of those documents would be absolutely unnecessary in relation to the question of liability or the issue of flagrancy.

26. In my view, these documents are not necessary for fairly conducting the trial and I would not disturb the exercise of the Judge's discretion.

Godfrey, J.A.

27. I agree with Rogers, J.

28. This is what has come to be known as "satellite" litigation. It raises questions as to the extent of specific discovery to be ordered against an alleged infringer in a copyright action, whose only defence appears to be that the Plaintiff expressly or impliedly authorised him to do what he did. These questions have now been ventilated before a master, a judge and now before this court. Each of us in this court has been provided with an appeal bundle of no less than 342 pages. The cost of this sort of "satellite" litigation is enormous, out of all proportion to the minuscule importance of the questions raised.

29. The judge imposed limitations on the specific discovery for which the Plaintiff had asked. Was he entitled to do so?

30. Under Order 24 rule 8 of the Rules of the Supreme Court, the judge was required to refuse the specific discovery for which the Plaintiff had asked in so far as he was of the opinion that that discovery was not necessary either for disposing fairly of the action or for saving costs.

31. Although the judge did not specifically refer to 0.24 r.8, I take it that he must have accepted that, to the extent to which he disallowed the specific discovery for which the Plaintiff had asked, that discovery was not necessary either for disposing fairly of the action or for saving costs.

32. I am not disposed to disagree with the judge. I too would dismiss this appeal.

Nazareth V-P

33. I also agree and would only add the following.

34. It is not disputed that discovery should not be ordered unless the documents sought to be discovered are not only relevant in The Peruvian Guano Company sense but that their discovery is necessary for fairly disposing of the cause or matter. Certainly the matter of flagrancy of breaches of copyright, upon which Miss Wong places much emphasis, should become sufficiently clear from the documents already ordered to be discovered; additional documents should not be necessary for that purpose.

35. I see no good reason for interfering with the exercise of the judge's discretion.