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HCA 1778/2006
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 1778 OF 2006
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| BETWEEN |
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LIAO FU PIN
（廖福彬） |
1st Plaintiff |
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JIMMY S. P. A. CO. LTD.
（墨色國際股份有限公司） |
2nd Plaintiff |
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and |
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AD-MAGNETICS COMPANY LIMITED(formerly known as AD-MAGNETICS CONSULTANTS CO. LTD.) |
1st Defendant |
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TAI LIN RADIO SERVICE LIMITED |
2nd Defendant |
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Before: Mr Recorder A.Ho, SC in Chambers
Date of Hearing: 18 June 2008
Date of Judgment: 11 July 2008
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J U D G M E N T
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1. This is an appeal by the 2nd Defendant against the order of Master J. Wong of 14 March 2008 granting leave to the Plaintiffs to amend their Statement of Claim.
2. The 1st Defendant did not appear at the hearing before the Master nor has it taken any part in the present appeal.
Background
3. The 1st Plaintiff is a Taiwanese cartoonist. He is popularly known by his pseudonym “幾米” (“Jimmy”). This case concerns 5 drawings which the 1st Plaintiff says were original artistic works created by him since about mid 2000. The 2nd Plaintiff claims to be the 1st Plaintiff’s exclusive licensee and authorized to deal with all matters of his copyright, including the right subsisting in the said 5 drawings.
4. The 2nd Defendant is a well known retailer selling electrical appliances in Hong Kong. It engaged the 1st Defendant, an advertising company, to organize its promotional activities or campaigns.
5. The present action was brought by the Plaintiffs against the Defendants for infringement of copyright in the said 5 drawings.
6. According to the Plaintiffs’ pleaded case, the 2nd Plaintiff entered into a licensing agreement with the 1st Defendant in November 2002, whereby the 1st Defendant was licensed to manufacture and/or produce 11 types of premium products, ranging from badges, cup mats, to tea sets and message cushion chairs by the use of 3 of the 5 drawings. The said 3 drawings and the 11 types of premium products were referred to as “the Ex-Licensed Drawings” and “the Ex-Licensed Articles”.
7. The material terms of the licensing agreement are set out in the proposed Amended Statement of Claim. Of particular relevance to the present application are the following terms:
“(a) The 1st Defendant cannot use any drawings other than the Ex-licensed Drawings for its manufacture/production of premium products;
(b) The 1st Defendant cannot use the Ex-licensed Drawings for the manufacture and/or production of any products other than the Ex-licensed Articles;
(c) …..
(d) The Licence would be valid from 1st December 2002 to 31th May 2003 …..”
8. It is alleged that the licensing agreement was made for the purpose of the 2nd Defendant’s promotion campaign between December 2002 and April 2003.
9. The 2nd Defendant’s case is that, for a number of years, it has engaged the 1st Defendant as its advertising agent. The products in question were arranged by the 1st Defendant and sold to the 2nd Defendant. The essence of the 2nd Defendant’s case is that it had no knowledge of the terms of the licensing agreement, nor that any products it distributed infringed the Plaintiffs’ copyright.
Amended Statement of Claim
10. The 2nd Defendant objects to paragraphs 5, 6, 7 and 9 of the proposed amendment of the Statement of Claim. In the course of the argument, it was made clear however, that with respect of some of these paragraphs the objection only relates to certain aspects of the allegations.
11. I will deal with the 2nd Defendant’s objections in turn. References to paragraph numbers below are those in the proposed Amended Statement of Claim, unless otherwise specified.
Paragraph 5
12. Paragraph 5 pleads the licensing agreement. The licensing agreement was written in Chinese.
13. The 2nd Defendant objects to a change from the original plea that under the agreement the 1st Defendant was licensed to “exploit, use and apply” the 3 Ex-Licensed Drawings on the products, to an allegation that the agreement was to license the 1st Defendant to “manufacture and/or produce” the Ex-Licensed Articles by the use of the Ex-Licensed Drawings.
14. It was argued by Mr. Wong on behalf of the 2nd Defendant that as a result of the exchange of the pleadings, there was already a consensus between the 1st Defendant and the Plaintiffs that a literal reading of clause 2 of the agreement should mean that the 1st Defendant was authorized to exploit, use and apply the Ex-Licensed Drawing to the products. However, by referring only to manufacture and production in the proposed amendment, the scope of the license now pleaded had become more restricted. Mr. Wong argued that the amendment amounted to a withdrawal of an admission and ought not to be allowed in the absence of a full explanation on the part of the Plaintiffs, contending that Leung Kin Fook v. Easter Worldwide Co. Ltd. [1991] 1 HKC 55 should apply by analogy.
15. I do not agree with the argument. First, there is no question of the Plaintiffs having made an admission which is being withdrawn. Paragraph 5 identifies the licensing agreement which was made between the Plaintiffs and the 1st Defendant. It pleads the general effect and the nature of the agreement concerned. It does not refer to clause 2 specifically or indeed any other provision(s) in the agreement. The specific terms of the agreement are pleaded in the following paragraph, that is, paragraph 5A. Therefore, even assuming that the Plaintiffs had, in their Reply, agreed with the 1st Defendant’s literal interpretation of clause 2, it does not follow that there was an admission as to the scope or general effect of the agreement when construed as a whole.
16. In this connection, I should add that having considered the agreement as a whole, and in particular clauses 1 and 2 in the Chinese language, I am satisfied that the proposed amendment in paragraph 5 as to the general nature and effect of the agreement is, at least, arguable. There is therefore no question of disallowing the amendment on the basis that it is hopeless and is bound to fail.
17. Furthermore, whether the licence under the agreement was granted for the purpose of exploiting, using and applying the drawings on the products, or for manufacturing and producing the products, is essentially a matter partly of construction and partly of translation of the Chinese agreement. What the Plaintiffs seek to do by way of the amendment is to re-formulate their contention as to the effect of the agreement, not to withdraw an admission of fact. The considerations in Leung Kin Fook v. Easter Worldwide Co. Ltd. (supra) do not apply.
Paragraph 6
18. It will be convenient to set out the proposed paragraph 6:
“6. Before the issue of the writ herein, the 1st Defendant and/or 2nd Defendant have infringed the 1st Plaintiff’s copyright in the Drawings by, without the license:
(a) Reproducing the Drawings and/or a substantial part thereof in a material form;
(aa) Issuing copies of Drawings to the public;
(ab) Authorizing the said acts; and
(b) Possessing for the purpose of and in the course of its trade and business by the 2nd Defendant and;
(c) Exhibiting in public and/or distributing for the purpose and in the course of its trade and business by the 2nd Defendant articles which were, and which the 2nd Defendant (and also the 1st Defendant) knew or had reason to believe were, infringing copies of the Drawings; and/or
(d) Authorizing any of the aforesaid acts by the 1st Defendant.”
19. The acts of infringement pleaded in 6(a) to (d) above are supplemented by 10 specific matters as Particulars.
20. The first of the 2nd Defendant’s complaints is that paragraph 6 is embarrassing in that it does not plead clearly and distinctly which of the allegations are made against the 1st or the 2nd Defendant, or whether they are allegations against both. This complaint relates specifically to sub-paragraphs (a), (aa) and (ab).
21. As for sub-paragraph (a), Mr. Yee, representing the Plaintiffs, made it clear that the allegation is directed only against the 1st Defendant. Mr. Yee’s clarification should be sufficient to address the 2nd Defendant’s concern. However, I would agree with Mr. Wong that sub-paragraph (a) in the proposed amendment, as presently drafted, are liable to give rise to confusion. I think the 2nd Defendant is justified in insisting that it should be made clear in sub-paragraph (a) that the allegation of reproduction of the Drawings relates only to the 1st Defendant.
22. As for sub-paragraph (ab), Mr. Yee indicated that the allegation is made against both Defendants. It is the Plaintiffs’ case that the 2nd Defendant had authorized the wrongful act of reproducing the Drawings. Sub-paragraph (ab) was opposed by Mr. Wong on the ground that it lacked particulars of how the 2nd Defendant was said to have authorized the acts in (a) and (aa).
23. As Mr. Yee had submitted, it is the Plaintiffs’ case that the 3 Ex-Licensed Drawings had been wrongfully reproduced in the production of unlicensed products; and also that in the production of the ex-licensed premium products 2 other non-licensed drawings had been wrongfully reproduced. The 2nd Defendant acknowledges that the 1st Defendant was engaged as its advertising agent. On the 2nd Defendant’s case, the products were arranged by the 1st Defendant and sold to it for its promotional activities. It is not disputed that the 2nd Defendant was in possession of and had dealt with the alleged offending products. Details of the dealings between the 1st and 2nd Defendants are known only to them and not the Plaintiffs. Mr. Yee further submitted that when an allegation of infringement depends on information and knowledge peculiarly within the possession of the Defendants (as in the present case), it is not objectionable if the extent and manner of such infringement could not be precisely formulated or particularized until after discovery and/or interrogatories in the proceedings.
24. I accept Mr. Yee’s submission. For the reasons set out in the preceding paragraph, I think the circumstances are sufficient to justify an allegation in terms of sub-paragraph (ab).
25. Another of Mr. Wong’s objections relates to sub-paragraph (aa). It has to be noted that among the 10 further paragraphs of Particulars, (a) to (h) are specific instances of the 2nd Defendant having allegedly distributed to the public products which bore the 5 drawings whose use had not been authorized. There is therefore little doubt that sub-paragraph (aa) is directed against the 2nd Defendant.
26. Mr. Wong submitted that sub-paragraph (aa) was to open to another objection. The allegation of infringement by way of issuing of copies to the public is governed by section 24 of the Copyright Ordinance. “Issuing copies to the public” has a defined meaning in section 24, namely, “the act of putting into circulation copies not previously put into circulation, in Hong Kong or elsewhere, by or with the consent of the copyright owner”: section 24(2). Where there is a chain of distribution of an infringing product, the act of “issuing to the public” is committed only by the one at the head of the chain who is responsible for putting the infringing product into circulation in Hong Kong for the first time: Lee Yuen Housewares Co. Ltd. v. Mok Wing Kun Stephen (HCA No. 1560 of 2005, para. 26). Mr. Wong submitted that sub-paragraph (ab) was objectionable because even the instances set out in the Particulars made no reference as to how it was alleged that the 2nd Defendant had put the infringing products into circulation, for instance, by importing it into or releasing it in Hong Kong or otherwise. The lack of such further information is fatal to the proposed amendment, citing the well-known observations of Fuad JA in Perak Pioneer Limited v. Carrian Holdings Limited (CACV No. 59 of 1985, at p.5).
27. I do not agree with Mr. Wong’s objection. The plea in sub-paragraph (aa) is an allegation of primary infringement based on section 22(1)(b). I accept as correct that the allegation attracts the application of section 24 which gives the phrase “issue of copies to the public” a statutory definition. I would also accept that where the infringing products have previously been put into circulation in Hong Kong or elsewhere, the plea will be defeated. However, it is the 2nd Defendant own case that the premium products concerned were procured from the 1st Defendant in connection with its promotional activities. Some of the items actually bore the trademark of the 2nd Defendant (as could be seen in two of the photographs in the bundle). The circumstances are certainly capable (and I need not put it any higher) of supporting an inference that these give-away items were made to the 2nd Defendant’s order. They are also capable of giving rise to an inference that when the 2nd Defendant distributed the items to the public thus put the infringing copies of the Drawings into circulation, such items had not previously been put into circulation anywhere in the world.
28. In this connection, I do not agree that the plea in sub-paragraph (aa) together with the Particulars is deficient as it stands. The Plaintiffs have given particulars of the overt acts as to the 2nd Defendant’s distribution of the infringing items to the public on various occasions. The Plaintiffs, by pleading that the 2nd Defendant has “issued copies of the Drawing to the public” must be taken to have impliedly alleged, as a matter of law, that the infringing products had not previously been put into circulation whether in Hong Kong or anywhere else before. As to how the Plaintiffs will make good that allegation is a matter of evidence as well as inferences from evidence. In my view it is not fatal for the Plaintiffs not to have pleaded more than they did in order to support the plea in sub-paragraph (aa).
Paragraph 7
29. It will be necessary to set out paragraph 7:
“7. At all material times, the 1st Defendant knew and the 2nd Defendants knew or had reason to know that the Infringing Articles are infringing copies of the Drawings
Particulars of Knowledge
(a) The 1st Defendant must know and the 2nd Defendant should know the terms of the Licence and hence the fact that:
(i) the 1st Plaintiff was and is the owner of the copyright in the Drawings;
(ii) after its expiry on 31st May 2003, any manufacture/ production of the Ex-Licensed Drawings was not authorized by the Plaintiffs;
(iii) the 1st Defendant was never authorized and/or licenced to reproduce the Non-Licensed Drawings or any substantial parts thereof in any material form;
(iv) the 1st Defendant was never authorized and/or licenced to reproduce the Ex-Licenced Drawings or any substantial parts thereof to manufacture/produce carrying bags, door mats and table/placing mats.
(b) By its letter dated 12th November 2003, the 1st Defendant admitted to the Plaintiffs having manufactured/produced 500 cup mats bearing the Non-Licensed Drawings and 300 carrying bags without the authorization, consent and/or licence of the Plaintiffs.
(c) By their 2 letters dated 6th November 2003 and 31st December 2003, the Plaintiffs’ Taiwanese lawyers of the North Star Copyright Law Office duly asserted the copyright claim of the Plaintiffs in respect of those Infringing Articles with which the 2nd Defendant had dealt as at the dates of the said letters.
(d) By their 2 letters both dated 20th April 2006 of the Plaintiffs’ solicitors separately issued to the 1st and 2nd Defendants, the Plaintiffs’ solicitors duly asserted the copyright claim of the Plaintiffs in respect of the Infringing Articles.”
30. This paragraph should be considered together with the specific instances set out under paragraph 6 which identified the different occasions when the 2nd Defendant allegedly distributed the infringing products to the public.
31. Paragraph 7 is relevant to the Plaintiffs’ case of secondary infringement against the 2nd Defendant for having possessed as well as exhibiting and distributing the infringing products for the purpose or in the course of its trade and business. It is the Plaintiffs’ case in this regard that the 2nd Defendant had actual knowledge, or alternatively had reason to know that the drawings appearing on the products were infringing copies of the 1st Plaintiff’s Drawings: see section 31.
32. In his objection to paragraph 7, Mr. Wong argued that paragraph (a) of the Particulars merely asserts that the 2nd Defendant should know the scope and terms of the licensing agreement, and therefore does not amount to giving particulars of the 2nd Defendant’s knowledge. Paragraph (b) does not concern the 2nd Defendant. As for paragraphs (c) and (d), the references to the letters in those paragraphs do not support a general allegation that the 2nd Defendant had had the requisite knowledge “at all material times”. Insofar as the alleged knowledge is intended to extend to any period before the 2 letters from the Plaintiffs’ Taiwanese lawyers (in paragraph (c) of the Particulars), there is no basis to support such allegation.
33. Mr. Yee, on the other hand, invited me to take note of the matters pleaded in the Reply to the Amended Defence of the 2nd Defendant, in particular paragraph 5 thereof. This paragraph in the Reply was a specific response to the 2nd Defendant’s denial of knowledge as to the content of the licensing agreement. I should mention that Mr. Yee has indicated at the hearing that he would not rely on the reference to the payment of fees and/or loyalty pleaded in paragraph 5(d) of the Reply.
34. While it may be said that the matters pleaded in the Reply, at least for the parts relevant to the question of knowledge, should have been included in the proposed Statement of Claim. That, however, should not preclude me from having regard to the matters pleaded in the Reply in considering whether the 2nd Defendant’s objection is valid.
35. Considering everything as a whole, I am satisfied that the proposed amendment to paragraph 7 should be allowed. The give-away products were procured by the 2nd Defendant for the purpose of its promotional activity. The 1st Defendant was engaged to make the necessary arrangement. It is not disputed that the 2nd Defendant was aware that a licence would be required to reproduce the drawings. Indeed, it is the 2nd Defendant’s case that it was informed by the 1st Defendant that a licensing agreement was entered into so as to authorize the use of the drawings on the products. What Mr. Wong argued was that there was nothing in pleadings to suggest that the 2nd Defendant was aware of the terms of the licensing agreement, in particular, the 3 essential aspects as to the duration of the licence; the fact that the licence only authorized the use of the 3 Ex-Licensed Drawings; and that the licence applied only to 11 products.
36. I accept in this regard Mr. Yee’s submission that the question as to the relevant knowledge of the 2nd Defendant (actual or constructive) is a matter to be determined on the evidence, both direct and circumstantial, and inferences to be drawn therefrom. At this stage, a plea of such knowledge is justified based on an overall view of the circumstances, including the relationship of the 1st and 2nd Defendants; the purpose for which the products were procured (namely, for the 2nd Defendant’s promotional activity for the period from December 2002 to April 2003); and the inference (at least arguably) that the products were made to the 2nd Defendant’s order for that purpose. Inference is also capable of being drawn (at least, arguably at this stage) from the fact that the 1st Defendant, having concluded an agreement which provided quite specifically as to a list of 11 Ex-Licensed Articles and the duration of the licence, would have informed the 2nd Defendant of these aspects. I also accept Mr. Yee’s submission that in addition to the circumstantial matters mentioned above, discovery may throw more light on the issue. Viewed in its entirety, it cannot be said that there is not an arguable case that the 2nd Defendant had the requisite knowledge for secondary infringement as pleaded in the proposed amendment.
Paragraph 9
37. This paragraph relates to the Plaintiffs’ claim for additional damages pursuant to section 108(2) of the Ordinance. The Plaintiffs repeat paragraph 7 as particulars of the flagrancy of the Defendants’ infringement.
38. Mr. Wong argued that since paragraph 7 was defective, the reliance here on paragraph 7 should be disallowed.
39. As I have allowed the proposed paragraph 7, the objection to paragraph 9 falls away.
Conclusion
40. Subject to the Plaintiffs stating explicitly in the proposed amendment that the allegation in paragraph 6(a) is directed only against the 1st Defendant, I would uphold the Master’s decision in granting leave to the Plaintiffs to amend the Statement of Claim. The Amended Statement of Claim should be served and filed within 7 days from the date hereof. I need not deal with consequential filing of subsequent pleadings as, I am informed, such directions have already been given.
41. The 2nd Defendant’s appeal is otherwise dismissed.
42. I would make an order nisi that the Plaintiffs should have the costs of the appeal, to be taxed if not agreed
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(Ambrose Ho, SC)
Recorder of the Court of First Instance
High Court |
Mr Kent Yee, instructed by Messrs Christine M.Koo & Ip, for the Plaintiffs
Mr Stewart K M Wong, instructed by Messrs Baker & McKenzie, for the 2nd Defendant
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