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

HCA 472/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 472 OF 2010

____________

______________

D E C I S I O N

______________

Introduction

1.  This is the plaintiffs’ applications for:-

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

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

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

Background

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

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

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

(2)  public performance licences for playing the KMVs;

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

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

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

Copyright Infringement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

16.  It is trite law:-

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

Trade Mark Infringement

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

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

Interlocutory Injunction Application

19.  The defendants’ contentions are in short:-

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

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

Conclusion

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

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

22.  Accordingly,

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

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

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

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

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

Costs

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