STAR TV FILMED ENTERTAINMENT (HK) LTD AND ANOTHER v. GOLDEN PRINCESS AMUSEMENT CO LTD AND ANOTHER

cacv 61/2007

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 61 of 2007

(on appeal from HCMP NO. 1556 of 2006)

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J U D G M E N T

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Hon Rogers VP:

1.  This was an appeal from a judgment of Deputy High Court Judge Muttrie given on 29 January 2007.  By that judgment the judge made three declarations in respect of ownership of rights in and relating to various films listed in the schedule to what has been termed the Short Form Assignments (SFA’s) made by the first defendant in favour of the plaintiffs and as to the effect of a licence agreement between the second plaintiff and the first defendant.  At the conclusion of the hearing of this appeal judgment was reserved which we now give.

Background

2.  The background to this matter has been set out in some detail in the judgment below.  On 16 December 1992 the two defendants entered into an agreement with Media Assets (BVI) Ltd that has been termed the Initial Agreement.  Clause 1 of the Initial Agreement read as follows:

“	1.	Purposes
		(a)	This Agreement (the “Agreement”) sets out the agreement reached between Media Assets (BVI) Limited (“the Purchaser”) (1), Golden Princess Amusement Company Limited (“the Vendor”) (2) and the Majority Shareholder [the second defendant] (3) for:
			(i)	the acquisition by the Purchaser of all rights, title and interests (including without limitation, copyright and other intellectual property rights and all other rights of any nature and now known or hereafter created) in the films and sound recordings owned by the Vendor and/or any Associate (as defined below) or produced by or for the Vendor by any producers or any Associate prior to the date hereof, including but without limitation, to the films (and materials relating thereto) listed in Appendix I (all of the foregoing, “the Films”);
			(ii)	the immediate licensing back to the Vendor (pursuant to a licence as set out in Appendix II) of all rights title and interest in the Films acquired by the Purchaser hereunder in respect of all countries in the world other than the retained Territories (‘the Retained Territories’) listed in Appendix III.”

3.  Pausing there for a moment, it can be observed that Appendix I is a list of some 148 films.  At the heading it was said that they were to be checked and agreed and at the foot of the list it was said:

“

together with all physical materials existing for each of the above films, including without limitation, all original copies of all Underlying Agreements and all items referred to in paragraph 4(c)(3), (v) and (vi), or editors script notes, music scores, scripts, still photographs from the film, unused takes, contractual credit advertising documents, Producers B&O insurance policy covering that film, laboratory access letters, artwork and logo material.”

4.  Appendix III defined the retained territories.  There is no dispute that these included the areas covered by the footprint of Star TV Limited’s satellite broadcasting.  Included in that were South Korea and Hong Kong.

5.  Clause 4(a) of the Initial Agreement provided as follows:

“	4.	Terms of Acquisition
		Upon exercise by the Purchaser of the entitlement under paragraph 3 above:
		(a)	the Purchaser shall thereupon acquire and the Vendor shall, as beneficial owner, assign, convey and transfer to the Purchaser, free from any encumbrance, all right, title and interest and all copyright and other intellectual property rights in and to all Films, together with:
			(i)	the rights in and to any sound-track associated with such films and the benefit of all licenses or other rights granted to third parties in respect of the films;
			(ii)	all music publishing rights;
			(iii)	all rights held in the story or the publication on which the film was based; and
			(iv)	all merchandising rights
			and all other rights whatsoever held by the vendor in the Films throughout the world.”

6.  The draft licence agreement was Appendix II.  In contrast to the body of the Initial Agreement, the definition for “the Films” in the draft licence agreement was as follows:

“

‘the Films’: all audio or visual or audio visual material and all recordings on any medium from which a moving picture image may by any means be produced, together with an associated soundtrack, in which the Licensor has any right title or interest, including without limitation those Films listed in Schedule II;”

7.  “Rights” under the draft licence agreement in Appendix II were defined as:

“	‘Rights’: all the following rights, title and interest in and to the Films other than in the Retained Territories including, without limitation, those rights set out in Clause 2 hereof;”

8.  Clause 2 of the draft licence agreement provided for a grant as follows:

“	2.	Grant
		Subject to the due performance by the Licensee of its obligations hereunder and in consideration of the payment by the Licensee to the Licensor of HK$1 (receipt whereof is hereby acknowledged,) the Licensor hereby grants to the Licensee the exclusive licence to exercise all rights in the Films acquired by the Licensor pursuant to the Acquisition Agreement in all countries other than the Retained Territories.”

9.  One thing that would appear clear is that, as already noted, the definition of “the Films” was different in the body of the Initial Agreement and in the draft licence.  It was suggested in the course of argument that the “Grant” in the draft licence referred to the exercise of all rights in the Films acquired by the Licensor pursuant to the acquisition agreement (if executed).  The argument went on that the Licensor would acquire the additional rights over and above the rights in the Films; those rights would include the rights in the stories or the publications on which a particular Film was based because those rights were acquired by the Licensor by reason of clause 4(a)(iii) and the footnote to the list of Films.  Thus the implication would be that the Grant in the licence would include such rights.  However, even under the draft licence any implication of the transfer of rights would have been difficult in view of clause 7.4 which, if the draft licence had been executed would have read:

“	All rights not specifically granted herein to the Licensee are hereby expressly reserved to the Licensor.”

10.  However, there never was an Acquisition Agreement as had been envisaged might be the case under clause 2 of the Initial Agreement.  Some 9 months after the Initial Agreement there were executed 4 documents namely 2 SFA’s, a licence agreement and a Completion Memorandum.  One SFA was in respect of the territory of Hong Kong in favour of the second plaintiff and the other in respect of the rest of the world except for Hong Kong in favour of the first plaintiff.  It is quite clear on perusing the SFA’s that the assignments included not only the copyright in the Films but included their contents and the right to make future adaptations and versions.  As was pointed out by Mr Liao SC, who appeared on behalf of the respondents to this appeal, those rights would not be included within the copyright of the Films under the Copyright Act 1956 and the copyright in the Films would not be infringed by the making of a new version under the provisions of that Act which applied in Hong Kong at the time.  What might have been infringed by a new version of one of the Films might have been the copyright in an underlying work such as a book or a script on which the original Film had been based.  For completeness I set out the material parts of the SFA relating to everywhere except Hong Kong:

“	For valuable consideration the sufficiency and receipt of which is hereby acknowledged, the undersigned Golden Princess Amusement Company Ltd for itself and on behalf of the Owners, does hereby sell, grant, aside and set over unto Irvine Services Ltd (‘Purchaser’) and its successors, licensees and assigns forever, throughout the universe except for Hong Kong, in perpetuity, all rights of every kind and nature, whether now known or hereafter devised, including but not limited to, the sole and exclusive theatrical rights (silent, sound, talking), television rights of every type now known or hereafter invented including without limitation free, pay or subscription, pay per view, terrestrial, cable, satellite, CATV, MMDS, SMATV or other whatsoever, video rights (all formats, including without limitation, video cassettes and video discs), radio broadcasting rights, publishing rights, merchandising and all allied and incidental rights on/in and to the those certain films entitled as follows:-
	Titles: See Schedule I attached
	including all contents thereof, all present and future adaptations and versions thereof, and the theme, title and characters thereof, and in and to the copyright thereof for the full period of copyright and all renewals reversions and extensions of such copyright.”

11.  In contrast the licence agreement that was executed between the first plaintiff and the first defendant defines “the Films” strictly in terms of what was regarded as a film under the Copyright Act 1956.  The definition in the licence agreement was:

“

‘the Films’: all audio or visual or audiovisual material and all recordings on any media and from which are moving picture image made by any means be produced, together with an associated soundtrack, in which the Licensor has any right title or interest, including without limitation those Films listed in Schedule II:”

12.  When it came to the “Rights” which were granted they were defined with reference to “the Films”.  Although the rights which were granted included the theatrical rights, the television rights, the video rights, the radio broadcasting rights, the publishing rights, the merchandising rights and all allied and incidental rights those were only expressed to be in relation to the Films; the licence agreement made no reference to the contents of the Films, still less to any present or future adaptations or versions.  Again, for completeness, I set out the definition of “Rights” in the licence agreement:

“

‘Rights’: all rights of every kind and nature, whether now known or hereafter devised, including but not limited to, the sole and exclusive theatrical rights (silent, sound, talking), television rights of every type no known or hereafter invented including without limitation free, pay or subscription, pay-per-view, terrestrial, cable, satellite, CATV, MMDS, SMATV or other whatsoever, video rights (all formats, including without limitation, video cassettes and video discs), radio broadcasting rights, publishing rights, merchandising and all allied and incidental rights on/in and to the Films in all parts of the world.”

13.  This case arose because the defendants took exception to the plaintiffs advertising the fact that they had the rights in the underlying works in relation to the Films including the stories in the publications relating to and on which the Films were based and the rights in any adaptation and to re-make the Films.  It arose in the context of the re-making of a trilogy of the Films “A Better Tomorrow” and the other two films in the sequence.

14.  In my view the plaintiffs were entitled to make the claim which they did.  They had taken assignments of those rights and the licence agreement that was executed did not license those rights to the first defendant.  It was argued by Miss Tam SC, who appeared on behalf of the defendants on this appeal, that the word “Films” as used in the definition of “Rights” in the licence agreement should be construed in accordance with the Initial Agreement.  Simply as a matter of construction that cannot be so because the licence agreement contains its own definition of “the Films”.  Furthermore the documentation that was executed on 6 August 1993 was clearly specifically drafted and there were marked variations from the Initial Agreement.  I would add that I do not consider that it makes any difference to my conclusion that it can be said that the judge overlooked the definition of ‘Films’ in the Initial Agreement.

15.  It was also argued that the definition of “Rights” in the licence agreement implied that there was some licence of the underlying rights in the Films because of the use of the word “merchandising”.  In my view that cannot be so.  The definition of “Rights” has to be construed as a whole and the merchandising and all allied and incidental rights relate to the Films as defined in the licence agreement.  There is a marked distinction between the definition of the “Rights” in the licence agreement and the terms of the SFA.  Specifically the final paragraph of the SFA was not included in the licence agreement.  That can have been no accident.

16.  In summary I consider that the judge was entitled to make the declarations sought namely:

“	(1)	A declaration that on a true construction of the Initial Agreement dated 16 December 1992 between (1) Media Assets (BVI) Ltd (subsequently renamed as Fortune Star Entertainment Ltd), and (2) the Defendants, Golden Princess Amusement Company Limited (“Golden Princess”) and Kowloon Development Company Limited and the two Short Form Assignments of Copyright dated 6 August 1993 between Golden Princess and the 2nd Plaintiff, Star TV Filmed Entertainment (HK) Limited (formerly known as Penda Jaded Limited) respectively, the defendants have transferred or confirmed the transfer of all rights, interest and title in the whole world of every kind and nature, whether now known or hereafter devised, in relation to the films listed in the Short Form Assignments (“Films”), including all contents thereof, all present and future adaptations and versions thereof, and the theme, title and characters thereof, and in and to the copyright thereof for the full period of copyright and all renewals reversions and extensions of such copyright.
	(2)	Upon the true construction of the licence agreement dated 6 August 1993 between the 2nd Plaintiff, Irvine Services Ltd (subsequently renamed as Star TV Filmed Entertainment Limited) and Golden Princess (the “Licence”), the plaintiffs have the exclusive rights, interest and title to the underlying works to the Films, including without limitation, the copyright and all other rights in the scripts, theme, story and characters.
	(3)	Upon the true construction of the Licence, the exclusive rights to the Films licensed to the 1st defendant are limited to the distribution of the cinematographic work of the licensed films in the format and media of theatre, television (including free, pay or subscription, pay-per view, terrestrial, cable, satellite, CATV, MMDS, SMATV), video, radio broadcasts, publishing, and merchandising in the jurisdiction specified in the Licence and that the term “all allied and incidental rights” should be construed by reference to the aforesaid and such rights are limited to the cinematographic work of the Films licensed to the 1st defendant.”

17.  I would therefore dismiss this appeal with an order nisi that the costs of this appeal be to the plaintiffs.

Hon Le Pichon JA:

18.  I agree.

Hon Stone J:

19.  I agree with the judgment of the Vice-President.