CBS/SONY HONG KONG LTD AND OTHERS v. TELEVISION BROADCASTS LTD AND ANOTHER

1986 No. 3965

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. On the 8th July 1986, the plaintiffs, who are record companies, carrying on business in Hong Kong, instituted proceedings against the defendants for infringement of copyright which it claims to have either as owners or exclusive licensees in a large library of sound recordings. Eight specific allegations of infringement are set out in paragraph 10 of the statement of claim which relate to two recordings of each of the four named plaintiffs. The plaintiffs sue on behalf of themselves and on behalf of and as representing all other members of the International Federation of Phonogram and Videogram Producers (IFPI).

2. On the 8th August, 1986, the defendants filed a summons to strike out those parts of the statement of claim that relate to the plaintiffs' entitlement to sue in a representative capacity and on the 20th August, 1986 the plaintiffs filed a summons for leave to amend the writ and statement of claim by restricting the representative action to proceedings on behalf of the phonogram members of IFPI to distinguish those members from members who are videogram members. After a hearing that lasted four days, I acceded to the application made by the defendants and refused the plaintiffs' application to amend. I said that I would deliver my reasons at a later date and I now proceed to do so.

3. IFPI is an international organisation registered in the Canton of Zurich, Switzerland, representing the recording industry world-wide. In that capacity IFPI is authorised to act on behalf of the members generally with regard to broadcasting and public performance rights of the individual members in sound recordings and also with regard to the re-recording rights of individual members in sound recordings required in connection with broadcasting. There are about 685 phonogram members, including the 2nd defendant.

4. At an Ordinary General meeting of IFPI held in Geneva on the 19th June, 1985, resolutions were passed which purported to give authority to IFPI to take anti-piracy proceedings by way of a representative action in criminal and civil proceedings. With regard to civil actions, it was resolved that each member should provide IFPI with a mandate authorising IFPI to bring civil actions on behalf of each member where possible under the national law of that member in respect of infringements of copyright in recordings owned by or exclusively licensed to such member. The meeting also confirmed a practice of IFPI for moneys and property recovered by action in anti-piracy proceedings to be retained in an anti-piracy fund instead of making a distribution to individual members. The resolutions do not, however, affect the rights of any member to bring an individual anti-piracy action on its own behalf.

5. The 1st defendant (TVB) and the 2nd defendant (HKTVBI) are subsidiary companies of H. K. T. V.B. Limited. TVB has held a licence under the Television Ordinance, Cap. 52 to broadcast television programmes since 1967 in Hong Kong on two channels, the Pearl which broadcasts almost exclusively in English and Jade which broadcasts almost exclusively in Cantonese. In respect of programmes which TVB acquires from third parties, TVB is required to pay organisations such as IFPI royalties for broadcasting and public performance rights. By a written agreement dated the 3rd August, 1983, between IFPI and TVB which was on that date backdated to the 1st January 1981 a licence was granted to TVB until the 31st December 1984 to broadcast the sound recordings of IFPI members. The licence was restricted to the direct broadcasting of the sound recordings of IFPI members by TVB. The agreement provides for sound recording to be given the meaning ascribed to it in Section 12(9) of the Copyright Act 1956. On the 19th September 1983, IFPI granted TVB a re-recording licence for the purpose of inclusion in TVB television broadcasts in Hong Kong all sound recordings which are incorporated in records issued by members of IFPI for the same period as the broadcasting licence. After the expiry of the agreements, it appears that there has been an implied licence for TVB to continue to exercise their rights as TVB has paid licence fees on account to IFPI based upon royalties that were paid in 1984.

6. Towards the end of 1984 and early 1985, IFPI indicated that they wished to negotiate another licence for the future Negotiations continued between TVB and IFPI until the commencement of the present proceedings, but the negotiations have reached an impasse.

7. Although IFPI had been aware for some time of certain isolated infringements of copyright alleged to have been committed by the defendants with regard to the sale of video tapes of some of their broadcast programmes, these were limited to theme songs for television series so no formal steps were taken to prevent infringement. However, in about February 1986, the licensee of the defendants in Singapore approached IFPI stating that they wished IFPI to take action to prevent the piracy of video tapes which the agent was exploiting there. A list of sound recordings contained in some of the video tapes in question was handed by the agent to IFPI which contained recordings of programmes broadcast by TVB which appeared to have been distributed by either TVB or HKTVBI or both of them. The plaintiffs contend that the defendants have no licence or authorisation for the reproduction of the original programmes containing the members' sound recordings and the distribution of the reproductions.

8. TVB is one of the largest producers of Chinese films broadcast on television in the world whilst HKTVBI has a substantial business in the distribution outside Hong Kong of video cassette tapes for domestic rental and the supply of programmes to overseas television stations. TVB does business with almost every record company in Hong Kong and does not differentiate between members of IFPI and non-members. About 30% of TVB programmes are supplied to foreign television stations and represent a significant proportion of overseas sales whilst the remainder are supplied under licence by HKTVBI for domestic video cassette rental. TVB programmes on video cassette or on television can be seen it over 30 countries throughout the world, mostly in the Asia-Pacific region, North America and Europe. HKTVBI is TVB's exclusive licensee and agent for the exploitation abroad of TVB programmes in which TVB has acquired rights. When HKTVBI acts as TVB's exclusive licensee, it grants by way of sub-licence in particular territories outside Hong Kong, the right to duplicate master tapes of TVB programmes for video cassette rental of the broadcast or diffusion on television. HKTVBI supplies approximately 1200 hours of TVB programmes to its foreign licensees each year. When HKTVBI acts as TVB's exclusive agent, it negotiates with third parties to broadcast programmes in which TVB has acquired a right to permit broadcasts abroad, invariably by way of television broadcasts on independent television stations in South East Asian countries. The licensing operations of TVB programmes are the most substantial part of the business of HKTVBI. The TVB programmes which are licensed abroad by HKTVBI come under four categories. The first are drama serials. The second are music or variety programmes in particular "Jade Solid Gold" and "Enjoy Yourself Tonight". The third are specials such as “Miss Hong Kong Pageant", singing or talent contests and concerts and the fourth are current affairs, documentary and magazine programmes. of the four categories, the drama serials form the bulk of programmes supplied abroad by HKTVBI and those series are the most popular is Hong Kong.

9. The procedure for producing a drama series is to film each episode and then record it onto high quality video tape after which it is edited. The sound track is then prepared, consisting of the dialogue track, effects track and a musical sound track which are mixed and synchronised to the pictures. No episode of a drama series is ever broadcast live, but is broadcast from pre-recorded video tape. Part of the sound track of most drama series include a "theme" song which is heard at the beginning and end of the programme whilst during the film, mood music, adapted from the theme song is synchronised at suitable moments. There is one theme song for each drama series. Each theme song, and mood music is intended to be original and is commissioned by TVB on that basis. Except for one occasion TVB has never used an existing sound recording for a theme song.

10. A Talent Administration Committee within TVB as part of its duties, commissions outside record companies in Hong Kong to produce the music sound track as TVB does not have the facilities for this purpose. However, the Committee will select the artiste who will sing the theme song, the composer and the lyricist. The composer and the lyricist are normally employed by TVB whilst the artiste chosen must be under contract to TVB although the artiste may also be under contract to a record company. The composer arranges for the hire of musicians and will supervise the production of the sound track at the record company. The melody, lyrics and score if relevant are giver. to the record company for the purpose of producing a tape of the musical sound track. The musical sound track consists of the theme song and mood music.

11. The record company will provide TVB with two 1/4" open reel tapes which are of a type to enable the sound to be synchronised to the film. The dubbing director of the series will then synchronise the tapes to the drama along with the dialogue track and the sound effects track as he considers to be appropriate. Although the record company is responsible for the cost of producing the musical sound track including the fees of the artiste, composer and lyricist, it is contended by TVB that the record company will receive the benefit of the promotion which the drama series will give to the theme song and the artiste's career. No charges have at any time been made by the record companies for the provision of the musical sound track.

12. The second category of TVB programmes relates to "Jade Solid Gold" programmes which have been made and broadcast by TVB for the past five years and are also distributed abroad by HKTVBI. This is a very successful programme in which record companies are constantly requesting TVB to include their records or their artistes' performances on the programme.

13. With regard to the complaints by the plaintiffs on the issue of infringement of copyright, TVB aver that any video tape in a programme containing material, the subject of copyright, will be a pirated version that was probably taped illegally off air during a broadcast in Hong Kong or is a legitimate Jade Solid Gold tape that may have been illegally copied. TVB maintains that sound recordings which have been used by them in the Jade Solid Gold programmes have in fact been given or donated by the record companies.

14. With regard to the eight specific recordings set out in the statement of claim, TVB asserts that apart from the 2nd plaintiff's recording made by Frances Yip, each of the others was commissioned by TVB, of which four are alleged to have been pirated. TVB contends that they gained no financial advantage, from Frances Yip's record, but that the 2nd plaintiff derived substantial profits as it was a very successful theme song.

15. The defendants deny that any of the video cassettes referred to in the statement of claim were made by them nor have they given permission to any one to reproduce the material on those cassettes in Hong Kong.

16. For the purposes of this judgment, it is unnecessary for me to refer to the two other categories, the specials and the current affairs programmes.

17. Before the institution of the present action, there were two disputes between IFPI and the defendants. The first concerned the alleged preference accorded by the defendants to Capital Artists Limited, a music publisher and record producer. which is a subsidiary of HK TVB Limited. The second relates to the royalties to be paid in respect of the renewal of the broadcasting licence. At the end of 1985 IFPI (South-East Asia) Limited lodged a complaint with the Commissioner of Television. about the preferential treatment given to Capital Artists Limited, but the Commissioner declined to hear the dispute. However, upon an application by IFPI (South East Asia) Limited for a judicial review, Deputy Judge O'Dea made an order of certiorari on the 21st of February 1986 to quash the decision of the Commissioner. As a result, the Television Advisory Board (TVAB) is now in the course of conducting a hearing into the disputes.

18. The application to strike out is made under the provisions of 0.15, r. 12(1) of the Rules of the Supreme Court which, where relevant, reads:

"Where numerous persons have the same interest in any proceedings,................, the proceedings may be begun, and, unless the Court otherwise orders, continued, by or against any one or more of them as representing all or as representing all except one or more of them,"

19. In Markt & Co. Ltd. v. Knit Steamship Co. Ltd.⁽¹⁾ which was referred to me by Mr Rogers, counsel for the defendants, Fletcher Moulton L. J. explained the necessary ingredients for a representative action at 1039 and quoted words of Lord Macnaghten in the case of Duke of Bedford v Ellis ⁽²⁾:

"The essential condition of a representative action is that the persons who are to be represented have the same interests as the plaintiff in one and the same cause or matter. There must therefore be a common interest alike in the sense that its subject and its relation to that subject must be the same. As I have already stated, Lord Macnaghten phrases it thus : "Given a common interest and a common grievance, a representative suit is in order if the relief sought is in its nature beneficial to all whom the plaintiff proposes to represent". "

In that case, the plaintiffs shipped goods on a ship of the defendants for a voyage from New York to Japan. Before the ship arrived, it was sunk by a Russian cruiser on the grounds that she was carrying contraband, and both ship and the cargo were lost. The plaintiffs in writs issued in the proceedings, sued on behalf of themselves and other owners of the cargo on the ship and claims were made for damages for breach of contract and duty in respect of the carriage of goods by sea. It was held that as the writs stood, the plaintiffs and those whom they purported to represent were not persons having the same interest in one cause or matter and the plaintiffs were not entitled to bring representative actions.

20. Mr Rogers also cited J. Bollinger S.A. v Goldwell Ltd., H.P. Bulmer Ltd. v J. Bollinger S.A.⁽³⁾ where Megarry J. decided that it was not appropriate to bring a representative action unless the whole of the action is appropriate. In other words, where various matters have to be disposed of, it would be most inconvenient to proceed to hear all matters in dispute unless they car be dealt with by a final judgment. The plaintiffs must therefore comply with the threefold test of establishing that there is a common interest, a common grievance and a remedy which is beneficial to all the plaintiffs. In Prudential Assurance Co. Ltd. v Newman Industries Ltd. and Others⁽⁴⁾ Vinelott J. held, inter alia, that the court, in a representative action cannot make an order for damages although a plaintiff, in its own non-representative capacity, is entitled to make such a claim. However, in EMI Records Ltd. v Riley and Others⁽⁵⁾ upon which case, Kr Maxwell-Lewis who appeared for the plaintiffs, placed great reliance. Dillon J. ordered an enquiry to be held into damages. In that case, the plaintiffs were members of BPI whose members were all involved in the business of producing, manufacturing and distributing sound recordings. The defendant was a market trader. In 1978 the plaintiffs commenced an action against the defendant who they believed to be involved in the manufacture and sale of pirate records made directly or indirectly from sound recordings in which BPI members owned the copyright. The defendant admitted the sale of pirate records. On the plaintiffs' application for judgment on admissions, it was held that since the defendant had admitted the sale of the pirate records, the plaintiffs were entitled on their own behalf and on behalf of all BPI members to an injunction. The court also held that since nearly all recordings in the country were produced by members of BPI and the defendant had admitted that most of the pirate records had been recordings of disc records and tapes produced, made and distributed by members of BPI, the plaintiffs suing in a representative capacity in which they could claim an injunction, could also recover damages suffered as a result of any infringement of the members' copyright and therefore avoid the unnecessary complications of establishing what damage had been suffered individually by members if the court required each member to commence proceedings on his own behalf.

21. Mr Rogers put the defendants' case on three grounds. First, the defendants' own the copyright in the musical sound track or part of the sound track; secondly, the defendants have commissioned the sound recordings and have agreed to pay for them in moneys worth and thirdly, the proceedings are an abuse of the process of the court inasmuch as the real dispute between the parties is with regard to the renewal of the broadcasting licence.

22. In respect of the first ground, Mr Rogers relies upon the provisions of section 12(9) of the Copyright Act 1956 which provides:

"In this Act "sound recording" means the aggregate of the sounds embodied in, and capable of being reproduced by means of, a record of any description, other than a sound-track associated with a cinematograph film; and "publication", in relation to a sound recording, means the issue to the public of records embodying the recording or any part thereof. "

and section 13(9) which reads:

"For the purposes of this Act a cinematograph film shall be taken to include the sounds embodied in any sound-track associated with the film, and references to a copy of a cinematograph film shall be construed accordingly:

 

Provided that where those sounds are also embodied in a record, other than such a sound-track or a record derived (directly or indirectly) from such a sound-track, the copyright in the film is not infringed by any use made of that record"

Having regard to these provisions which appear to be complementary, the defendants have, in my judgment, a good arguable case that they do in fact own the copyright in the sound recordings in respect of which the plaintiffs allege infringement of copyright. On the second ground, there is also upon the evidence filed by the defendants a good arguable case that the plaintiffs have received good consideration for the musical sound recordings chat were produced at the request of the defendants. The plaintiffs dispute the defendants' entitlement to copyright on the grounds that they have paid for the actual sound recording. However, by section 12(4) of the Copyright Act 1956 where a person commissions the making of a sound recording and pays or agrees to pay for it in money or money's worth, and the recording is made in pursuance of that commission, that person, in the absence of any agreement to the contrary, shall be entitled to any copyright subsisting in the recording by virtue of the section.

23. On the ground of abuse, TVB assert that IFPI want to stop TVB, but at the same time wish greater use to be made of its members' material to promote record sales in South East Asia. Reference was made to a passage of the evidence of Mr B. N. Garnett who is the Regional Director of IFPI for the Asia Pacific region and a director of IFPI (Southeast Asia) Limited which he gave in the enquiry before TVAB which reads:-

"My point is this. Our members here in Hong Kong are not simply restricting their sales to Hong Kong. They are also seeking to sell their recordings in other Chinese communities throughout the world, particularly in Southeast Asia. And one of the most direct forms of making their recordings available to potential purchasers in those territories is having them included as theme songs in the television drama serials which are being made by TVB and other television recordings in those communities. ”

Reliance is also placed by the defendants upon paragraph 7 of Mr Garnett's affidavit filed in these proceedings that was sworn on the 22nd August 1986 which reads:-

"In my respectful submission the real and only reason for non-payment of the royalties aforesaid can be found in the letter dated 22nd April 1986 from Mr Page to Mr Garnett exhibited as part of "LRKP-9". In effect the 2nd defendant is refusing to pay the fees for a new licence required by the members of IFPI, unless IFPI grants to the 2nd defendant a licence which the 2nd defendant knows it cannot have. It was only after TVB were repeatedly advised of the position coupled with their intransigence over payment that we issued proceedings. Thereafter, the defendants sought to create a defence. "

24. The plaintiffs no longer rely on the mandates, but it is evident from a perusal of some that were produced that they are not universally common to all the members for they do not give IFPI unrestricted authority to issue proceedings without recourse to the members. Although the plaintiffs rely upon the ordinary resolution made in Geneva, there was no evidence of Swiss law as to the effect of this document and it does not appear to be a document that can, in any event, bind all the members of IFPI.

25. Where infringement is alleged, it will be necessary for the plaintiffs to establish that they are entitled to copyright in respect of each individual sound recording. A bare assertion that a large library of sound recordings has been infringed without any further particulars is embarrassing and cannot be sustained. The statement of claim is also defective for details of the infringement of the 8 specific recordings which are likely to be different for each plaintiff have not been set out, whilst the defences available to the defendants may not be the same for the claim of each plaintiff, such as delay, laches and estoppel.

26. I accept the argument submitted on behalf of the defendants that there can be no common interest by all the members of IFPI in the outcome of the present proceedings. Such interest must be restricted to those members where an infringement of copyright has occurred in this action. Indeed during the hearing, the plaintiffs were reduced to a submission that only sixteen members had a common interest in these proceedings. Quite clearly, all the members of IFPI in various countries in the world cannot possibly have any interest in the result of the present action whilst they can have no common grievance. The only interest between the members of IFPI is as to their common membership of the Federation whereas the test to adopt from the authorities is a common interest in the litigation. The members are no doubt interested to prevent piracy, but this view would be generally held by all right thinking persons.

27. Although it was held in EMI Records Limited v Riley and Others⁽⁵⁾ that damages can be awarded in a representative action, that case was decided upon the basis of the admissions made by the defendant and is distinguishable from Prudential Assurance Co. Ltd v Newman Industries Ltd. and Others⁽⁴⁾. The issue of damages in this case is resisted with the result. that, in my judgment, it is inappropriate to award damages to a plaintiff who is suing in a representative capacity.

28. Further having regard to the testimony of Mr Garnett to which I have referred, there is prima facie evidence to support the defendants allegation that the proceedings have been instituted for an ulterior purpose.

29. I am quite satisfied that the proceedings instituted by the plaintiffs are wholly inappropriate to be continued as a representative action on the grounds that the threefold test has not been satisfied. However, if I am wrong, I exercise my discretion to disallow the action to be continued in its present form as it is both inconvenient and unfair to the defendants. In particular, a representative action will deprive the defendants of their right to make an application for security for costs and to apply for an order of discovery. Accordingly, I made an order to strike out those parts of the statement of claim that related to the representative nature of the action and dismissed the plaintiffs summons to amend with costs to the defendants and a certificate for 2 counsel.

(1)    [1910] 2 K.B. 1021
(2)    [1901] A. C. 1, 8
(3)    [1971] R.P.C. 412
(4)    [1981] 1 Ch. 229
(5)    [1981] 1 W. L. R. 923