HKSAR v. MEGA LASER PRODUCTS (HK) LTD. AND OTHERS

CACC 453/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 453 OF 1998

(ON APPEAL FROM DCCC 180/1998)

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J U D G M E N T

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Mayo J.A. (giving the judgment of the Court):

1. The applicants were convicted of three charges laid pursuant to the Copyright Ordinance, Cap. 528. The first was laid under s. 118(1)(a) and s. 119(1) of making for sale or hire infringing copies of five Walt Disney films namely, 'The Lady and the Tramp', '101 Dalmatians', 'Alice in Wonderland', 'Peter Pan' and 'The Sword in the Stone'. It is significant to add that it is accepted that all of these films are in the nature of animated cartoons. The second was laid under s.118(4)(d) and s.119(2) of the Ordinance of being in possession of articles specifically designed or adapted for making copies of a particular copyright work. The articles in question were 10 video compact disc stampers and 9 silk screens which were designed or adapted for the Walt Disney works referred to. The third was laid under s.118(8) and s.119(2) of the Ordinance of being in possession of an article used or intended to be used to make infringing copies of any copyright work and the particulars of the offence contain particulars of the plant and equipment in question which comprised the components of the production line.

2. A2 and A3 are Directors of A1. A3 had the particular responsibility to check copyright matters. They seek leave to appeal against their convictions. The company commenced business in September 1997 and shortly after this officers of the Customs and Excise Department conducted a raid at the company's premises when all of the articles and equipment referred to in the particulars of the charges were seized. A2 and A3 both made cautioned statements which contained admissions including the fact that the copies of the Disney titles were infringing copies which had been made without the authorisation of the copyright owner Disney Enterprises.

3. Indeed a number of facts were admitted pursuant to s.65C of the Criminal Procedure Ordinance, Cap. 221. The only remaining issue being whether the applicants had made sufficient inquiries concerning the copyright in the works.

4. S.118 of the Ordinance is in these terms:

"118. Criminal liability for making or dealing with infringing articles, etc.

(1) A person commits an offence if he, without the licence of the copyright owner-

(a) makes for sale or hire;

(b) imports into Hong Kong otherwise than for his private and domestic use;

(c) exports from Hong Kong otherwise than for his private and domestic use;

(d) possesses for the purpose of trade or business with a view to committing any act infringing the copyright;

(e) for the purpose of trade or business -

(i) sells or lets for hire;

(ii) offers or exposes for sale or hire;

(iii) exhibits in public; or

(iv) distributes; or

(f) distributes otherwise than for the purpose of trade or business to such an extent as to affect prejudicially the owner of the copyright,

an infringing copy of a copyright work.

(2) Subsections (1)(b) and (c) and (4)(b) and (c) do not apply to an article in transit.

(3) It is a defence for the person charged with an offence under subsection (1), to prove that he did not know and had no reason to believe that the copy in question was an infringing copy of the copyright work.

(4) A person commits an offence if he -

(a) makes;

(b) imports into Hong Kong;

(c) exports from Hong Kong;

(d) possesses; or

(e) sells or lets for hire, or offers or exposes for sale or hire,

an article specifically designed or adapted for making copies of a particular copyright work which article is used or intended to be used to make infringing copies of the copyright work for sale or hire or for use for the purpose of trade or business.

(5) It is a defence for the person charged with an offence under subsection (4) to prove that he did not know and had no reason to believe that the article was used or was intended to be used to make the infringing copies for sale or hire or for use for the purpose of trade or business.

(6) For the purpose of subsections (1)(b) and (3), where a person is charged with an offence under subsection (1) in respect of a copy of a copyright work which is an infringing copy by virtue only of section 35(3) and not being excluded under section 35(4), if he proves that -

(a) he had made reasonable enquiries sufficient to satisfy himself that the copy in question was not an infringing copy of the work;

(b) he had reasonable grounds to be satisfied in the circumstances of the case that the copy was not an infringing copy;

(c) there were no other circumstances which would have led him reasonably to suspect that the copy was an infringing copy,

he has proved that he had no reason to believe that the copy in question was an infringing copy of the copyright work.

(7) In determining whether the person charged has proved under subsection (6) that he had no reason to believe that the copy in question was an infringing copy of the work, the court may have regard to, including but not limited to, the following -

(a) whether he had made enquiries with a relevant trade body in respect of that category of work;

(b) whether he had given any notice drawing attention of the copyright owner or exclusive licensee to his interest to import and to sell the copy of the work;

(c) whether he had complied with any code of practice that may exist in respect of the supply of that category of work;

(d) whether the response, if any, to those enquiries made by the defendant was reasonable and timely;

(e) whether he was provided with the name, address and contact details of the copyright owner or exclusive licensee (as the case may be);

(f) whether he was provided with the date of first day of publication of the work;

(g) whether he was provided with proof of any relevant exclusive licence.

(8) A person commits an offence if he has in his possession an article knowing or having reason to believe that it is used or is intended to be used to make infringing copies of any copyright work for sale or hire or for use for the purpose of trade or business.

(9) Sections 115 to 117 (presumptions as to various matters connected with copyright) do not apply to proceedings for an offence under this section.

[cf. 1988 c. 48 s. 107 U.K.]"

5. There was evidence before H.H. Judge Christie the trial Judge that A3 who was D3 below had caused inquiries to be made of the company in Taiwan Cheung Ying Company for whom the goods were being produced. They informed him that copyright expired in respect of any films made before 1965. All of the relevant films were produced before that time. The Judge also accepted that this evidence had a ring of truth to it as Cheung Ying claimed the copyright to the sound track which was in Mandarin. The applicants maintained that the company had no intention whatever to sell its products in Hong Kong.

6. It should be added that D3 obtained from Cheung Ying a document which was described as being an 'Authorisation Agreement' which purported to "guarantee those entrusted products has the same legal copyright, trade mark privilege or are comprehensively authorized, if disputes arise over the infringement of copyright or trade mark of the third party, in the event of the products have contravene any related publication law, copyright law, and has done any act infringing the copyright, Cheung Ying will bear the responsibility and Mega Laser Products shall not be responsible under all the circumstances. (sic)"

7. This document did not contain any recital to the effect that Cheung Ying was the licencee of the copyright to the films.

8. It is also evident on reading the document as a whole that there is nothing to indicate that the agreement had any extraterritorial application. Certainly no attempt is made to confer a licence upon A1 to manufacture the products in question in Hong Kong.

9. It will be noted that offences under s.118(1)(a) and 4(d) are strict liability offences subject to the statutory defences in subsections (3) and (5) respectively, whereas for offences under s.118(8) the prosecution have to prove that the defendant did not know and had no reason to believe that copyright existed in the five Disney films.

10. The first re-amended ground of appeal reads:

"1. THAT the learned judge erred in law in ruling in relation to Charges 1 and 2 that sections 118(3) and (5), Copyright Ordinance, Cap. 528, imposed upon the Appellants a duty to make reasonable inquiries whether the films produced by them infringed copyright in Hong Kong."

11. The first point made by Mr. Marash, S.C. for the applicants related to a passage appearing at p.5 of the appeal bundle from the Judge's Reasons for Verdict:

"Given that D1 (the company) was manufacturing copies of an artistic work in Hong Kong, the reasonable steps which the defendants could have taken was to make enquiries through normal channels in Hong Kong about the state of copyright in Disney titles. In the event, D3 took no such steps, so he did not meet the standards of the statutory defence available in subsections (3) and (5) and as a result, the three defendants will each be convicted of charges 1 and 2."

12. Mr. Marash criticised the reference to 'an artistic work'. He went on to argue that if indeed it was on the basis of the work being an 'artistic' work there was no reason for a lay person such as A3 to consider copyright implications flowing from this.

13. Mr. Turnbull for the prosecution very helpfully took us through the history of this legislation.

14. What is apparent is that under the earlier legislation copyright attaches to the drawings in the cartoons which are deemed to be 'artistic works'. Equally it is clear that by virtue of the provisions contained in s.3 of the second schedule to the Copyright Ordinance, Cap. 528 and the transitional provisions contained in s.191 that copyright does exist in the drawings of the cartoons and that the Judge was correct in referring to the 'artistic work'.

15. We do not accept the validity of Mr. Marash's contention that the Judge erred in holding that a duty was imposed upon the applicants to make reasonable inquiries concerning the copyright of the films.

16. In our view the correct approach to the duty imposed is the one referred to by Bewley, J. at p.730 of R. v. Ng Kwan-pui [1988] HKC 724:

"The other side of the coin, as Mr Dalgleish points out, is that it would be all too easy for a publisher to pass the buck and say that he relied on someone else. He submits that, in order for the defence to succeed, it must establish that the defendant made enquiries somewhere along the line.

In support of this argument, counsel has cited several cases, only one of which I find at all helpful. This is Infabrics Ltd. & Ors. v. Jaytex Ltd. [l980] 1 Ch. 282, an English Court of Appeal decision that was overruled by the House of Lords on another point. At p 295, Buckley L.J. said this:

'It is, in my opinion, incumbent upon anyone who proposes to make use of any artistic work in a way which might infringe copyright, if it subsisted in the work, to make such inquiries and investigation as he reasonably can to satisfy himself that the work is free of copyright. No doubt every case must depend upon its own particular facts, but if no adequate inquiries or investigations are made, it must, it seems to me, be difficult to suppose that the person proposing to use the work has no grounds for suspecting that it may be subject to copyright. In the present case, nothing was said and no inquiries were made about copyright in respect of the "past the post" design, either in England on the occasion when Infabrics' representative visited the defendants, or in Hong Kong on the occasion when he selected the design. In these circumstances, it does not seem to me that the protection of s 17(2) or s 18(2)(a) is available to the defendants.'

This is persuasive authority that a person in the position of the appellant has a duty to make some enquiry about copyright from his artwork producer, when he is contemplating the production of a cassette containing songs by someone as well-known as Stella Chee."

17. It is appreciated that Bewley, J. in turn placed reliance upon the judgment of Buckley, L.J. in Infabrics Ltd. & Ors. v. Jaytex Ltd. [1980] 1 Ch. 282 and that the English legislation is not an exact replica of our Ordinance. In the English Act reference is made to there being no grounds for suspecting that there may have been an infringement. Our Ordinance does not refer to suspicion.

18. This being the case it is possible that the requirements may be more demanding here than in the U.K.

19. This is not however a question which really arises in the present case. As will become apparent later in this judgment it would appear from the evidence which was before the Judge that the extent of the inquiries undertaken by the applicants was minimal so far as the situation in Hong Kong was concerned.

20. Certainly the applicants come nowhere near meeting the test referred to by Buckley, L.J. The first ground cannot succeed.

21. It is complained in the second ground that:

"2. THAT the learned trial judge erred in finding that:

(a) an inquiry by the defendants, which failed to take into account the law of Hong Kong, could never be reasonable - see: Reasons for Verdict p. 5 J to K;

(b) the inquiry made by the Appellants was not reasonable in all the circumstances - see: Reasons for Verdict p. 5 M to Q;

(c) in relation to Charge 3, the Appellants made a mistake in law in inquiring into the copyright position in Taiwan rather than in Hong Kong - see:

(i) Reasons for Verdict at p. 6 B to C;

(ii) Criminal Law, 2nd Edition at pp. 280 - 284 - Peter Gillies; and

(iii) Iannella v. French (1968) 119 C.L.R. 84

(d) the very fact that the five films, which were the subject of Charge 3, were artistic works did, on any objective assessment, give rise to a reason to believe that they were protected by copyright - see Reasons for Verdict at p 6 E to F;

(e) the Appellants had reason to believe that articles possessed by them were used or intended to be used to make infringing copies of works in which copyright subsisted - see Reasons for Verdict p. 6 J to L."

22. No satisfactory reason was given by Mr. Marash as to why the inquiries which appear to have been made in Taiwan should have assisted the applicants in complying with the law in Hong Kong.

23. As has already been noted the applicants were manufacturing copies of an artistic work in Hong Kong. It was undoubtedly necessary for the applicants to comply with the law of Hong Kong.

24. It is manifest from the record that A3 who was responsible for this area of activity never sensibly addressed himself to this problem. Nor did he follow up any logical train of inquiries to satisfy himself that the activities of A1 would not constitute an infringement of Hong Kong copyright law.

25. This passage appears at p. 106 to 108 of the appeal bundle:

"Q. Mr LAO, I think it's clear from your evidence that you gave this morning that you are well aware of the piracy problems that we have in Hong Kong in optical discs.

A. Yes.

Q. You'd no doubt agree that a responsible director of a VCD production line needs to be acutely aware of these copyright issues to avoid contributing to the problem.

A. Yes.

Q. Would you agree that it is the copyright owner who has the sole right to authorise copying of his works?

A. I disagree.

Q. What do you think the position is in that case?

A. If the other companies have authorisation from the copyright owner these companies have the right to manufacture as well.

Q. Would that not depend upon whether the authorisation permits further sub-licensing?

A. Agree.

Q. So would you agree that it is vital to find out who the copyright owner is and to seek his permission before copying or to check whether somebody asking you to copy is so authorised by the copyright owner?

A. Yes.

Q. Would you also agree that it would be important to find out what avenues are available for copyright verification in Hong Kong?

A. Yes.

Q. Do you agree with the evidence given by the 2nd defendant that prior to commencing business you did not seek any legal advice on copyright issues from a lawyer in Hong Kong?

A. I disagree.

Q. Outline then what legal advice you did receive prior to commencing business.

A. Can you be more specific in asking the question?

Q. My first question was to ask you whether you agreed with the evidence given by the 2nd defendant that before commencing your business operations he said that you did not -- or that he did not seek any legal advice on copyright issues from a lawyer in Hong Kong, and your answer was that you disagreed with that proposition. So I then asked you could you tell the court what steps you took to obtain legal advice on copyright issues.

A. The legal advice I got was that if the authorisation is a genuine one I do not have to bear any responsibility.

Q. Was that advice that you received from a practising lawyer in Hong Kong?

A. I got the piece of information from a friend who worked in a solicitor's firm. I personally had not approached any lawyer for that issue.

Q. Would you agree with the evidence given by the 2nd defendant that you did not check the legal position in Hong Kong of your making the Disney titles in Hong Kong?

A. Agree.

Q. Would you agree that the enquiries that you did make simply were directed at confirming that copyright had expired in Taiwan for the Disney titles?

A. Yes.

Q. Would you also agree that as things have transpired, as far as the Disney titles are concerned, you made all the wrong enquiries?

A. I don't agree.

Q. Would you agree with me that the relevant law covering the activities of making copyright works in Hong Kong is the law that pertains in Hong Kong?

A. Agree.

Q. And that if you were making the videos in Taiwan of course it would be the Taiwan law that would be relevant.

A. Yes.

Q. But by directing your enquiries to whether copyright had expired in Taiwan bore no relationship to whether you were committing an offence in Hong Kong in making them.

A. I disagree.

Q. You told us that you have not taken legal advice in Hong Kong as to what your legal position would be in making these titles in Hong Kong, that's correct, isn't it?

A. No, I did.

Q I'm sorry, I understood you to have answered the question that you agreed with the evidence of the 2nd defendant that you did not check the legal position in Hong Kong regarding making the Disney titles in Hong Kong.

A. Agree.

Q. On what basis therefore are you saying that the law in Taiwan is relevant to whether you're committing an offence in Hong Kong?

A. Our company did not take the role of a distributor in Hong Kong so I didn't bother about the law.

Q. Yes, I'm not suggesting that your company did take the role of the distributor in Hong Kong. I'm saying that your company took the role of the maker of a copyright work in Hong Kong.

INTERPRETER: So the question is the previous question.

Q. It's really asking you on what basis did you disagree with my proposition?

A. I had not considered this legal position.

Q. Mr LAO, were you aware of the existence in Hong Kong of the Motion Picture Association?

A. No.

Q. Had you made any enquiries as to what copyright verification avenues are available in Hong Kong?

A. Yes.

Q. What enquiries did you make?

A. Say, for example, the Movie Association of Hong Kong and Kowloon.

Q. Were you able to contact them to enquire about who the copyright owner may have been in respect of any movie that you proposed to make?

A. No.

Q. So you may not have made an enquiry of them but you're aware that they were available to make enquiry from should the situation arise, was that the position?

A. Correct.

Q. But to your knowledge that is the only organisation that you're aware of.

A. About movie, yes."

26. From these exchanges it will be appreciated that minimal efforts were made to ensure compliance with the requirements of the law in Hong Kong.

27. Mr. Marash has attempted to contend that the Judge was in error when he proceeded upon the basis that the applicants had made a mistake in law when they had directed their inquiries into the copyright position in Taiwan rather than in Hong Kong.

28. He placed considerable reliance upon the case of Iannella v. French [1968] 119 CLR 84. In that case the defendant had been under the mistaken impression that the legislation that he had fallen foul of had been repealed. Indeed he had reasonably convincing reasons for his belief. Although Barwick, C.J. and Windeyer, J. were both sympathetic to the dilemma the defendant found himself in, the majority of Taylor, Owen and McTiernan, JJ held that the defendant was not exculpated by his mistaken belief.

29. It is very clear in the present case that it was necessary for the applicants to satisfy themselves on the Hong Kong Law of Copyright prior to their manufacturing activities. The position in Taiwan was separate and distinct and no comfort can be derived from advice received in Taiwan which was obviously directed to the legal position there.

30. There is no merit whatever in the suggestion the applicants had no reason to believe that the artistic works may be protected by copyright. Walt Disney is a world famous name and it is absurd to suggest that the works may not have been protected by copyright.

31. The whole of second ground must fail.

32. The third ground is:

"THAT the learned judge erred in finding that the inquiries of the 3rd Appellant revealed to him that copyright in films expired in Taiwan if they were made before 1965 and that Taiwan was a special case - see: Reasons for Verdict p.6 G - H and Transcript pp. 94 - 111 (evidence of Lao Su-san)."

33. There is very little in this point. It is not entirely clear from the transcript that the Judge was attributing these words to A3. Even proceeding on the assumption that he was it makes little difference to the overall situation. There are likely to be significant differences in the laws relating to copyright in almost every jurisdiction. Whether the differences are such as to justify a description that the country is a 'special case' is neither here nor there. The critical question in this application is not whether Taiwan was a 'special case'. The law in Taiwan is not the same as the law in Hong Kong and there was no justification for assuming that it was. This ground also fails.

34. The fourth ground is:

"4. THAT the learned trial judge erred in law in failing to consider the defence of mistake of fact in relation to Charges 1 and 2 - see: Archbold 1997 Edition at paragraph 17-10."

35. Having regard to the observations made earlier in this judgment this ground must also fail.

36. These convictions were in no way unsafe or unsatisfactory and the applications must be dismissed.