KONINKLIJKE PHILIPS ELECTRONICS N.V. v. WEALTHFUL TECHNOLOGY LTD.

HCA 3307/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3307 OF 2000

____________

____________

_______________

J U D G M E N T

_______________

The Claim

1. The Plaintiff is a well known international producer of consumer electronics. By this action, it sued the Defendant for various reliefs arising from alleged infringements of two United Kingdom Patents which had been registered as Deemed Standard Patents at the Patents Registry in Hong Kong.

2. The first patent, UK Patent No. 2076569, re-registered in Hong Kong as Hong Kong Deemed Standard Patent No. 274 of 1985 is a patent for a data processing method and a data carrier produced by executing such data processing method. The data processing method concerned is an error control code. Data are encoded using the method and recorded onto the data carrier, in this case the Compact Disc, commonly known as CD. Data being retrieved or read from the carrier are decoded under the same code. Errors in the process of recording and reading off are corrected in the decoding process, up to the limit of the error control code. This patent is called the CIRC Patent. CIRC is an acronym for "Cross-Interleaved Reed-Solomon Code."

3. The second patent, UK Patent No. 2083322, re-registered in Hong Kong as Hong Kong Deemed Standard Patent No. 987of 1984 is a patent for a method of coding a sequence of blocks of binary data bits into a sequence of blocks of binary channel bits and essentially a recording medium having a particular structure. It is a method of converting data from the raw information which needs to be recorded, into a stream of derivative information called channel bits. This enables the raw information be recorded more efficiently. This patent is called the EFM Patent. EFM stands for "Eight to Fourteen Modulation".

4. By these two methods of storage and distribution, data can be stored and distributed via a CD which acts as a data carrier. The development of the CD has revolutionised modern data storage and distribution and has since been developed into a whole family of systems with applications extending to CD-ROM, CD-Recordable and Video-CD. Each of these systems is now a world standard.

Application For Summary Judgment

5. On 8 March 2002, the Plaintiff took out a summons for summary judgment seeking the same reliefs as sought in the Statement of Claim.

6. The matter came before me this morning. Mr John Yan, Counsel appearing for the Plaintiff, conceded that since the two UK Patents had expired in May and July 2001 respectively, he would abandon the first two reliefs sought in the summons, namely, an Injunction and Delivery Up order against the Defendant. He would, however, continue to press for judgment against the Defendant for damages for the period up to the respective dates of expiry of the two patents.

Defence

7. By its Defence, the Defendant admitted that the Plaintiff was at all material times the proprietor of the two patents but denied validity of the patents and infringement.

8. By its Particulars of Objections filed on the 25 April 2000, some two years ago, the Defendant contended that the alleged inventions the subject of the patents were not patentable inventions in that they consisted merely of "methods for the presentation of information".

9. No particulars were pleaded as regards the the Defendant's denial on infringement. No evidence of any kind was filed in opposition to the Order 14 summons.

Admissibility

10. The Plaintiff relied on three affidavits. They were deposed by Mr Kerk Chun Lung ("Kerk"), Legal Counsel of the Plaintiff, Mr Engelbertus Petrus Gerardus Maria Kramer ("Kramer"), engineer of the Plaintiff and Mr. Jack Jervis Clode ("Clode"), Managing Director of Kroll Fact Finders Limited, investigators hired by the Plaintiff.

11. The main submission of the Defendant was based on an objection to the evidence of Kramer and Clode. It was contended that the affidavits from these two persons should be excluded and if so, there would be no evidence on which the Plaintiff could rely on in support of its case and the Defendant should be entitled to proceed to trial.

Evidence of Kramer

12. Mr Peter Cheung of Messrs Peter Cheung & Co., appearing for the Defendant strongly argued that Kramer was an expert and an employee of the Plaintiff and thus his evidence was opinion evidence and should not be admitted.

13. I have difficulty in understanding that submission. First, Order 14 Rule 2(2) allows statements of information or belief to be adduced as evidence on affidavit. Order 38 Rule 36(1) places certain restrictions on parties adducing expert evidence but that provision is subject to sub-rule (2) which provides that these restrictions do not apply to evidence which is permitted to be given by affidavit.

14. Secondly, I cannot see why simply because Kramer was an employee of the Plaintiff, that by itself, prevents his evidence from being received by the Court. If there is any allegation of possible bias, that must be a question of weight rather than admissibility.

15. Thirdly, Kramer's affidavit did not consist of opinion evidence only. Opinion evidence, by definition, means any inference from observed facts, and the law on opinion evidence is derived from the general rule that witnesses must speak only to that which was directly observed by them; see Cross & Tapper, 9th edn., p.511.

16. The mere fact that factual evidence is given by someone with expertise in a particular discipline does not transform that evidence into expert or opinion evidence although sometimes the line between factual and opinion evidence may not be immediately apparent. For example, an explanation as to how a computer works may be purely descriptive and factual although it may require some expert training on the part of the person giving that explanation. On the other hand, evidence as to the quality of the work of a computer may be a matter of expert opinion.

17. Furthermore, the Court will often receive evidence of opinion not requiring special knowledge: for example, the recognition of a familiar voice (see e.g., R v Robb (1991) 93 Cr. App. R. 161, C.A.) or a witness' view as to what another would do in certain circumstances.

18. A large part of Kramer's affidavit contains purely descriptive evidence in that he tried to explain how a CD works using the methods which were the subject matter of two patents. Upon the invitation of the Court, Mr Cheung confined his objection to paragraphs 46 to 54 of Kramer's affidavit which essentially dealt with the witness' analysis of the Defendant's discs in experiments carried out by him.

Evidence of Infringement

19. Insofar as evidence of infringement is concerned, there is, of course, no need for the Plaintiff to rely on these paragraphs. There is the incontrovertible evidence from both Kerk and Kramer (from the earlier part of the latter's affidavit) that the mere fact that the CDs produced by the Defendant were CDs or VCDs which bore the "Compact Disc Digital Audio" logo and were playable in ordinary CD or VCD players is sufficient evidence of infringement since it is practically not possible to manufacture a CD which can be played on standard CD players without using the patented instructions. If the data on the CDs were not encoded by using the Plaintiff's patents, it would not be possible to play it back on a machine which complied with the Plaintiff's patented encoding system. This is almost common knowledge.

20. The Defendant, on the other hand, filed no evidence as to why it said there was no infringement. It certainly did not say that the CDs manufactured by it were encoded with a different system and not with the Plaintiff's patented methods.

21. There is also evidence that over a period of about 8 months, the parties had been negotiating for various licensing agreements to be signed by the Defendant. Throughout this time, and indeed up to the date of the Defence filed a year later, the Defendant never once denied the CDs it produced were infringement CDs.

Evidence of Clode

22. I have similar difficulty with Mr Cheung's submission relating to the evidence of Clode. It was submitted that Clode chose not to reveal the identities of the two investigators without explanation. But that was precisely what he did in paragraph 2 of his affidavit. In any event, the identities of the investigators were, as in all cases of this nature, recorded in a sealed envelope and before the Court.

23. Furthermore, I cannot see the significance of the true identities of these investigators. First, they certainly did not reveal their true identities to the Defendant when they posed as potential customers of the Defendant.

24. Secondly, the Defendant never once contended that the CDs obtained by these investigators were not its. Nor did it file evidence to dispute the circumstances under which these CDs were obtained from its premises.

Proof of Infringement

25. In these circumstances, I hold that there is admissible prima facie evidence of infringement before me. The Defendant did not file any evidence in answer to these allegations. It had not even begun to discharge its threshold onus of raising a triable issue: see Tandy/Rank Video v. Yee Hing Cassette Factory Ltd [1991] 1 HKC 136, C.A.; Koninklijke Philips Electronics N.V. v. Gil Media Service Company Limited, HCA No. 4657 of 1999.

26. For these reasons, I find there is no triable issue raised as to infringement.

Patentability

27. The Defendant objected to the Plaintiff's claim on the basis that the alleged inventions were merely "methods for the presentation of information" and hence not patentable. The Defendant, however, filed no evidence in support of this assertion.

28. The statute, of course, does not say methods for the presentation of information are not patentable. Section 93 of the Patents Ordinance, Cap. 514 is in these terms:

"(1) An invention is patentable if it is susceptible of industrial application, is new and involves an inventive step.

(2) The following in particular shall not be regarded as inventions within the meaning of subsection (1) -

(a) a discovery, scientific theory or mathematical method;

(b) an aesthetic creation;

(c) a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer;

(d) the presentation of information.

(3) Subsection (2) shall exclude patentability of subject-matter or activities referred to in that subsection only to the extent to which a patent application relates to such subject-matter or activities as such" (emphasis added)

29. It will be noted that the legislature could easily have said "method of presentation of information" in sub-paragraph (d) but it did not. Section 93 is based on section 1 of the 1977 Act. Its predecessor was section 101 of the 1949 Act. In Rhodes' Application [1973] RPC 243, a decision of the Patents Appeal Tribunal under the 1949 Act, it was held that an invention laid not in the information presented but in the idea of presenting such information and in the way in which they could be done was patentable. Graham and Whitford J.J. said (at p.247 line 5):-

"It is, we think, plain that a patent cannot be sustained on the basis of novelty in information, for example, artistic or literary content, alone. It seems to us on general principles that a method of presenting information, if novel, or an article by which information can be presented, if novel, ought, on the definition in the Patents Act 1949 to which we have referred, to be patentable."

30. This is entirely in line with the case of BBC EPO Decision T163/85; [1990] EPOR 599, cited and relied on by Mr Yan. There, it was held that the generation of a colour television signal was more than a mere presentation of information "as such". In fact, the signal inherently comprised the technical features of the television system in which it was being used. As such, it could not be solely characterised as information per se and consequently did not fall within the exclusion.

Failure to Raise Issue

31. If it is necessary for me to decide the question of patentability, I would not hesitate to rule in favour of the Plaintiff; but it is not. The Defendant has not adduced any evidence as to why it says the Plaintiff's inventions were a mere method for the presentation of information or indeed a mere presentation of information.

32. Mr Cheung complained that the Plaintiff had waited two years before applying for summary judgment. He said if the matter were to go to trial, the Defendant probably would be able to obtain some expert evidence on the issue.

33. This is to put the matter on its head. What is being complained is not that the Defendant had been unfairly prejudiced. I cannot see how the Defendant can say it had been unfairly prejudiced when it was given ample time to consider its case and gather evidence to substantiate its defence, if there is one. What is being said, is that since the Plaintiff had waited for two years, it could wait another year or so. That is not a principle under which summary judgment applications are being dealt with. The question here is: is the case fit to go to trial? The onus is on the Defendant to particularise its defence and show that it has a bona fide defence. In my view, the Defendant simply has not discharged its threshold onus of raising a triable issue. There are no facts on which the alleged objection can be made and I cannot allow the matter to proceed to trial on a speculation that evidence in favour of the Defendant may or may not be uncovered in the future.

34. For these reasons, I grant judgment in favour of the Plaintiff in terms of the summons save and except paragraphs 1 and 2 thereof.