NINTENDO CO., LTD v. CHEN YUAN NING AND OTHERS

HCIP 56/2022

[2026] HKCFI 1448

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO 56 OF 2022

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J U D G M E N T

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Introduction

1.  Nintendo Co Ltd (“P”) brought this action against Chen Yuan Ning (“D1”), Hook Too Industrial Co Ltd (“D2”) and Middle Kingdown Distribution Co., Ltd (“D3”) (collectively “Ds”) on account of their infringement of its copyright. By the order of Mr Justice Lok dated 15 November 2022, default judgment was entered against D2 and D3.

2.  By summons dated 18 October 2024 (“the Default Judgment Summons”), P applied for, among other things, default judgment to be entered against D1 and an assessment of damages against Ds.

3.  This court granted P’s application by the order dated 17 February 2025 (“the Order”). In paragraph 6 of the Order, an assessment of damages was ordered against Ds for their infringing acts.

4.  By an order dated 12 May 2023, Lok J made an order that D2 and D3 do make interim payment in damages to P in the amount of US$1,350,000 (“the Interim Payment Order”) on P’s undertaking to deposit any sum recovered into a bank account in Hong Kong in the name of P or its solicitors (“the Undertaking”). Neither D2 nor D3 has paid P anything pursuant to the Interim Payment Order.

5.  P obtained a garnishee order absolute against D3 on 13 July 2023. As a result, HSBC transferred the balance of USD476,734.01 in the account of D3 to P’s solicitors Messrs Tanner De Witt (“TDW”).

6.  P took out a summons dated 18 August 2025 (“the Release Summons”) for release from the Undertaking.

7.  This is the substantive hearing of the assessment of damages and the Release Summons. Whilst P has duly filed its Points of Claim, none of Ds has ever responded in these proceedings.

8.  P has filed the following evidence to prove the quantum of damages that it should be allowed to recover from Ds:

(1)  Affirmation of Mitsuru Hitomi dated 28 April 2023 (“Hitomi Affirmation”);

(2)  Affidavit of Monique Woo dated 3 August 2022 (“Woo Affidavit”); and

(3)  5^th Affirmation of Douglas Stephen Clark dated 2 April 2025.

9.  Despite valid service of the relevant document effected on them, none of the Ds appears at the hearing.

P’s claim      

10.  P is a household name for video games and hardly requires introduction. D1 is a businessman and was a shareholder and director of D2 and a shareholder and director of D3. Both D2 and D3 are private companies incorporated in Hong Kong.

11.  In simple terms, P’s claim is that Ds has infringed P’s copyright in its game software consisting of original literary work and films by dealing with infringing products which circumvent the technological protection measures (“TPMs”) of P’s game products (“Circumvention Devices”). The Circumvention Devices dealt with by Ds include SX OS/SX Pro, Stargate and Gateway 3DS. With these Circumvention Devices, pirated or unauthorised versions of game software products can be played on P’s game consoles.

12.  The infringing acts of Ds acts include making, importing, exporting, selling, offering or exposing for sale, or distributing devices and products which are promoted, advertised or marketed for the purpose of the circumvention of, have only a limited commercially significant purpose or use other than to circumvent and /or are primarily designed, produced, produced or adapted for the purpose of enabling or facilitating the circumvention of TPMs applied by P’s 3DS console, Nintendo Switch and/or Nintendo Switch Lite and/or any other video game system of P to prevent or restrict unauthorised operating system from being used and/or to prevent or restrict playing of pirated or unauthorised versions of copyright works it issues or makes available to the public and publishing any information, including via the internet, for the said purposes.

13.  From the previous test purchases arranged by P with Ds, P discovered that the Circumvention Devices ordered from various websites overseas were for the most part shipped from Hong Kong.   

14.  P’s claim is made under sections 273A and 273B of the Hong Kong Copyright Ordinance, Cap 528. These provisions provide protection to copyright work to which effective technological measure has been applied against circumvention of such measure. By the Circumvention Devices that Ds dealt with, the copyright in P’s products are infringed.

15.  The damages now claimed by P relate to Ds’ dealings with the following Circumvention Devices:

Circumvention Devices	Period	P’s Console circumvented
SX OS/SX Pro	May 2018 to 19 August 2020	Nintendo Switch
Stargate	August 2017 to 19 August 2020	Nintendo 3DS
Gateway 3DS	June 2013 to 19 August 2020	Nintendo 3DS

16.  P seeks damages under the following heads. First, P claims damages for Ds’ dealing with SX OS and SX Pro which circumvent the TPMs of the Nintendo Switch video game system.

17.  Second, P claims damages for Ds’ dealing with Gateway 3DS and Stargate which circumvent the TPMs of the Nintendo 3DS video game system.

18.  Lastly, P seeks to recover the expenses incurred in and arising from the Norwich Pharmacal Orders for the purpose of this copyright enforcement action.

19.  P provides the following table in its Points of Claim setting out the damages claimed:

	Category of Claim	Amount (USD)
A	Lost game sales from Ds’ dealing with 51,200 units of SX OX/SX Pro	7,680,000
B	Lost game sales from Ds’ dealing with 25,806 units of Gateway 3DS/ Stargate	1,264,494
C	Legal costs for Norwich Pharmacal applications	66,345
D	Costs of compliance by banks paid by P	10,147
Total		9,020,986

Applicable legal principles

20.  Mr Clark, Solicitor Advocate instructed by TDW, for P, helpfully refers this court to the relevant authorities for an elaboration of general principles relating to an assessment of damages for copyright infringement. The starting point should be the Hong Kong Court of Final Appeal’s decision in Oriental Press Group Ltd v Apple Daily Ltd (1997-1998) 1 HKCFAR 208.

21.  In the judgment of Lord Cooke of Thorndon, with whom Li CJ, Litton PJ, Ching PJ and Bokhary PJ agreed, the following observations are apposite:

“The aim is, as confirmed by Lord Wilberforce in the leading case of General Tire and Rubber Co v Firestone Tyre and Rubber Co. Ltd. [1976] RPC 197 at 212, to find the sum of money which will put the injured party in the same position as he would have been if he had not sustained the wrong. That was a patent case, but the principles applied in it are equally applicable in copyright cases, subject only to any question of additional damages and any problem that may arise in cases where the statutory right to conversion damages still applies. In developing this approach in the General Tire case Lord Wilberforce identified some of the main groups of reported cases as - to summarize his classification very briefly - (1) loss of profitable sales by a manufacturing patentee; (2) loss of royalties by a licensing patentee where there is an established royalty rate; (3) loss of notional royalties where there is no such established rate.”

22.  Mr Clark further highlights that Lord Cooke stated his agreement with Lord Wilberforce’s view that compensatory damages should be liberraly assessed.

23.  Mr Clark next refers to the following summary of general principles in assessing damages in intellectual property cases provided by Deputy High Court Judge David Stone in Original Beauty Technology Co Ltd v G4K Fashion Ltd [2022] F.S.R. 11:

(a)  Damages are compensatory. The general rule is that the measure of damages is to be, as far as possible, that sum of money that will put the claimant in the same position as he would have been if he had not sustained the wrong.

(b)  The claimant can recover loss which was (i) foreseeable; (ii) caused by the wrong; and (iii) not excluded from recovery by public or social policy.

(c)  The burden of proof rests on the claimant. Damages are to be assessed liberally. But the object is to compensate the claimant and not to punish the defendant.

(d)  The assessment of damages for lost profits should take into account the fact that the lost sales are of “extra production” and that only certain specific extra costs (marginal costs) have been incurred in making the additional sales.

(e)  Where damages are difficult to assess with precision, the court should make the best estimate it can, having regard to all the circumstances of the case and dealing with the matter broadly, with common sense and fairness.

(f)  An inquiry will generally require the court to make an assessment of what would have happened had the tort not been committed and to compare that with what actually happened. It may also require the court to make a comparison between, on the one hand, future events that would have been expected to occur had the tort not been committed and, on the other hand, events that are expected to occur, the tort having been committed. Not much in the way of accuracy is to be expected bearing in mind all the uncertainties of quantification.

(g)  Where the claimant has to prove a causal link between an act done by the defendant and the loss sustained by the claimant, the court must determine such causation on the balance of probabilities. If on balance the act caused the loss, the claimant is entitled to be compensated in full for the loss.

(h)  Where quantification of the claimant’s loss depends on future uncertain events, such questions are decided not on the balance of probability but on the court’s assessment, often expressed in percentage terms, of the loss eventuating. This may depend in part on the hypothetical acts of a third party.

24.  This is not a straightforward assessment by reason of the fact that P itself did not trade in any of the Circumvention Devices. There is also no direct evidence as to how many pirated/unauthorised game softwares an ordinanry purchaser of one of the Circumvention Devices purchased instead of P’s game softwares.

25.  The difficulty in the assessment is exacerbated by the non-cooperation of Ds. Ds have failed to make any discovery. P does not have the full information of Ds’ dealing with the Circumvention Devices. P does not have any trade records and accounting documents of Ds.

26.  Mr Hitomi is Manager in the legal department of P. In Hitomi Affirmation, he explains the basis of P’s claims for damages. According to his evidence, in January 2022, P applied for Norwich Pharmacal relief against D1’s bank account with China Merchants Bank (“the CMB Account”). A follow-on application was made for disclosure from HSBC of related accounts including the accounts of D3 (“the HSBC Accounts”).

27.  From the information of the CMB Account and the HSBC Accounts, Mr Clark made 2 Excel Spreadsheets entitled “Original Disclosure” and “Payments In”.

28.  The former was provided by CMB pertaining to transactions conducted out of the CMB Account. The CMB Account was frozen by the Hong Kong Customs in June 2019.

29.  The latter was created to identify only payments into the CMB Account. It shows the following amounts received in three periods:

(a)  From 4 May 2018 to 4 June 2019: USD1,956,153.82;

(b)  From 20 May 2014 to 3 May 2018: USD2,552,434.13;

(c)  From 20 January 2017 to 27 April 2018: USD 1,063,944.18

Lost game sales from Ds’ dealing with SX OX/SX Pro

30.  Mr Hitomi deposes to the fact that the SX OS and SX Pro were released around May 2018. Based on the limited information, P can only give an estimate of the minimum number of SX OS and SX Pro sold, imported into and exported from Hong Kong from 2018 to 2019 on the basis of the following matters.

31.  Between May 2018 and June 2019, the total amount of payments into the CMB Account was about US$2,000,000. The transferors included individuals and companies with bank accounts in Hong Kong.

32.  P points out that though Ds mainly dealt with Circumvention Devices, Ds might deal with other products which have nothing to do with their infringement of P’s copyright. For present purposes, P accepts that 20% reduction should be made for the sale of such innocent products. This reduction is reasonable in my view.

33.  The unit price of SX Pro was approximately US$25 and SX OS approximately US$15. For present purposes, P accepts the adoption of a unit price of US$25 for all sales of both SX Pro and SX OS. I believe that this is fair.

34.  The test purchases of P show that the Circumvention Devices were shipped to other countries via Hong Kong. Coupled with the proximity of Shenzhen to Hong Kong, P believes that a large number of products would have been shipped through Hong Kong. P estimates that a total 80% of the Circumvention Devices were either sold to or shipped to and shipped through Hong Kong.

35.  I agree with P that this is a fair estimate.

36.  Thus, the total sales through Hong Kong between May 2018 and June 2019 can be estimated as follows:

Item	Amount (USD)/ No. of Units
Total amount received from May 2018 to June 2019	$2,000,000
Less 20% deduction for innocent products	($400,000)
Payments for SX OS or SX Pro devices	$1,600,000
Less 20% deduction for products not sold through or shipped through Hong Kong	($320,000)
Payments for SX OS or SX Pro shipped through Hong Kong	$1,280,000
Unit price of SX OS and SX Pro	$25
No. of SX OS and SX Pro sold or shipped through Hong Kong	($1,280,000/25) = 51,200 units

37.  I would accept for the purpose of this assessment, Ds have dealt with 51,200 units of SX OS and SX Pro in Hong Kong.

38.  Then it has to be ascertained as to how much loss of profit that each one of these 51,200 units of SX OS and SX Pro would cause to P.

39.  In this connection, Mr Hitomi provides a logical calculation. First, it is disclosed that as of the end of December 2022, 122,550,000 units of Switch consoles and 994,300,000 software games had been sold globally. A software to hardware tie ration is:

  994,300,000/122,550,000 = 8.11

40.  This means that a purchaser of one Switch console would also purchase 8.11 software games of P.

41.  Mr Hitomi sets out the top ten software games of P and their respective retail prices as shown I in the table below:

Game Title	Copies sold	Retail price (USD)
Mario Kart 8 Deluxe	52,000,000	59.99
Animal Crossing: New Horizons	41,590,000	59.99
Super Smash Bros	30,440,000	59.99
The Legend of Zelda: Breath of the Wild	29,000,000	59.99
Pokémon Sword/Shield	25,680,000	59.99
Super Mario Odyssey	25,120,000	59.99
Pokémon Scarlet/Pokémon Violet	20,610,000	59.99
Super Mario Party	18,790,000	59.99
Ring Fit Adventure	15,220,000	79.99
Pocket Monster Let’s Go! Pikachu/Let’s Go! Eevee	15,070,000	59.99
Total	273,520,000	619.90

42.  From these sale figures, Mr Hitomi maintains that the average price of the above top 10 titles is US$61.99.

43.  As regards the profit margin of each game software, he exhibited to Hitomi Affirmation a copy of P’s Consolidated Results for the Years Ended March 31, 2019 and 2020 and the operating profit margin shown therein covers the sale of both game softwares and consoles. For the year ended March 31, 2019, P’s operating profit margin was 39.1% and for the year ended March 31, 2020, it was 30%.

44.  Mr Hitomi makes two points. First, P’s operating profit margin is lower than its gross profit margin but the latter is not published. Second, in the video games industry, the profit on software is usually higher than the profit on hardware.

45.  For the purposes of this assessment, P is contented with a conservative profit margin of 30%.

46.  Based on all these figures, Mr Hitomi’s calculation of the amount that P would receive from a user of a non-hacked console, i.e. one without the Circumvention Device is:

US$61.99 x 30% x 8.11 = US$150.82 rounded down to US$150.

47.  It is estimated that each user of one single SX OS or SX Pro plays 8.11 pirated or unauthorised game softwarse on P’s consoles. The estimated total loss of profits caused by the sales of Ds’ SXOS and SX Pro through Hong Kong, therefore, is:

51,200 units x US$150 = US$7,680,000.

48.  For completeness, I should indicate my disagreement with P’s reference to the evidence emanated in the criminal proceedings against D1 in respect of his dealing with other circumvention devices. Such evidence is irrelevant and of no probative value.

Lost game sales from Ds’ dealing with Stargate/Gateway 3DS

49.  Mr Hitomi’s unchallenged evidence is that Gateway, which was designed to circumvent the TPMs of the Nintendo 3DS was placed on the market in August 2013. China Distrib which is a company incorporated in the Seychelles was the worldwide wholesaler of Gateway 3DS. In Woo Affidavit, there is an invoice exhibited and it showed that a purchaser of Gateway 3DS was required to make payment to the CMB Account in 2014.

50.  From the Payment In Spreadsheet, between 20 May 2014 and 3 May 2018, the total amount of payments made into the CMB Account was about US$2,500,000. This was the period in which Ds dealt in Stargate and Gateway 3DS through their website.

51.  There is a limitation issue concerning P’s claim in respect of the infringing acts of Ds from 20 May 2014 to 26 July 2016, given the Writ herein was issued on 27 July 2022. On the evidence of P, Ds’ sale of the Circumvention Devices was open and their availability was even announced on the internet. There is nothing in P’s evidence that suggests that the 6-year limitation period should be disapplied. Hence, in all fairness, P’s claim for damages arising from Ds’ dealing with Stargate and Gateway 3DS during the said period should be time-barred.

52.  I am aware that this limitation issue was not canvassed at the hearing. However, in my view, it is very much a live issue and those payments received in the total amount of US$1,167,927.87 during the said period according to the Payment In Spreadsheet should be excluded.

53.  P allows a discount of 20% as an estimate of Ds’ dealing in their products other than the Circumvention Devices. This is a fair discount.

54.  P further allows a discount of 20% to take into account products that were not sold to Hong Kong customers or shipped via Hong Kong. This is again a generous discount.

55.  Ds cannot be heard to complain about these estimations. They should have complied with the disclosure orders so as to facilitate an accurate assessment of damages.

56.  The unchallenged evidence is that the unit price of Gateway 3DS was approximately US$53 and that of Stargate was approximately US$62 during the material period. P accept a unit price of US$62 for all sales.

57.  The number of Stargate and Gateway 3DS dealt with by Ds from 26 July 2016 onwards is estimated to be:

Item	Amount (USD)/ No. of Units
Total amount received from 27 July 2016 to April 2018	$(2,500,000 – 1,167,927) = $1,332,073 rounded down to $1,332,000
Less 20% deduction for innocent products	($266,400)
Payments for Stargate or Gateway 3DS	$1,065,600
Less 20% deduction for products not sold through or shipped through Hong Kong	($213,120)
Payments for Stargate or Gateway 3DS shipped through Hong Kong	$852,480
Unit price of Stargate or Gateway 3DS	$62
No. of Stargate or Gateway 3DS sold or shipped through Hong Kong	($852,480/62) = 13,750 units

58.  According to the information published on the website of P, at the end of December 2022, for every Nintendo 3DS console sold, 5.14 game software were sold.

59.  Further, Mr Hitomi sets out the following top 10 titles during the relevant period:

Game Title	Copies sold	Retail price (USD)
Mario Kart 7	18,970,000	29.99
Pokémon X/ Pokémon Y	16,650,000	39.99
Pokémon Sun/ Pokémon  Moon	16,290,000	39.99
Pokémon Omega Ruby/ Pokémon Alpha Sapphire	14,530,000	39.99
New Super Mario Bros.2	13,410,000	29.99
Animal Crossing: New Leaf	13,020,000	19.99
SUPER MARIO 3D Land	12,860,000	19.99
Super Smash Bros. for Nintendo 3DS	9,640,000	39.99
Pokémon Ultra Sun/ Pokémon Ultra Moon	9,120,000	39.99
Tomodachi Life	6,710,000	19.99
Total	131,200,000	31.99

60.  The average price of these top 10 titles is US$31.99. On the other hand, the operating profit margin of P is estimated at 30%.       

61.  Given these figures, for each of the users of P’s 3DS consoles who does not use Ds’ Circumvention Devices, P should be able to make the following amount out of software sales:

US$31.99 x 30% x 5.14 = US$49.33 rounded down to US$49.

62.  On the basis that every user of Ds’ Stargate/Gateway 3DS would be able to play approximately 5.14 pirated or unauthorised game softwares, the resultant loss of P could be assessed at:

US$49 x 13,750 = US$673,750

63.  Mr Hitomi fairly points out that D3 was only incorporated on 20 January 2017 and it could not be possibly held liable for the infringing activities taking place prior to its date of corporation. Hence, there should be apportionment of such damages payable to P.

64.  From the Payment In Spreadsheet, it can be seen that D1 received US$308,221.48 from 27 July 2016 to 20 January 2017. This represents approximately 25% of the total amount received from 27 July 2016 to April 2018 ($308,221.48/1,332,073). Thus, D3 should be jointly liable with D1 and D2 for 75% of the loss of P only (US$505,312.50) whereas D1 and D2 should be jointly liable for 25% of the loss of P (US$168,437.50).   

Legal costs for Norwich Pharmacal applications

65.  P has made Norwich Pharmacal applications against CMB (HCMP 2076 of 2021) and HSBC (HCMP 1317 of 2022) for the purpose of this assessment. Without the information disclosed by the banks pursuant to the Norwich Pharmacal orders, this assessment would have been meaningless.

66.  According to Mr Hitomi, P has incurred the following legal expenses:

Item	Expenses
Legal costs seeking and obtaining Norwich Pharmacal relief against CMB	US$41,025
Legal costs seeking and obtaining Norwich Pharmacal relief against HSBC	US$25,320
Total	US$66,345

Costs of compliance by CMB	HK$64,300
Costs of compliance by HSBC	HK$14,850
Total	HK$79,150 or US$10,147

67.  I have studied the relevant invoices for the foregoing legal expenses and the requests for payment made by CMB and HSBC. I am satisfied that such legal costs have actually been incurred and settled by P. I am convinced that P should be compensated by Ds for such legal costs.

68.  Finally, I turn to the Release Summons. With the completion of the assessment, P should be released from the Undertaking. I grant the application accordingly.

Conclusion and orders

69.  In summary, my assessment of the quantum of damages recoverable by P from Ds is as follows:

	Category of Claim	Amount (USD)
A	Lost game sales from Ds’ dealing with 51,200 units of SX OX/SX Pro	$7,680,000
B	Lost game sales from Ds’ dealing with 13,750 units of Gateway 3DS/ Stargate	$673,750
C	Legal costs for Norwich Pharmacal applications	$66,345
D	Costs of compliance by banks paid by P	$10,147
Total		$8,430,242

70.  For the total amount of US$673,750 under the head of lost game sales arising from Ds’ dealing with Stargate/Gateway 3DS, D3 is only liable to pay US$505,312.50 jointly with D1 and D2. D1 and D2 is jointly liable to pay the balance.

71.  For the Release Summons, I accede to P’s application and make an order in terms thereof. Ds should pay P its costs of the Release Summons, to be taxed if not agreed.

72.  Costs should follow the event. Ds should pay P’s costs of and incidental to this assessment, to be taxed if not agreed.

73.  Last but not least, I thank Mr Clark for his able assistance.