LOYAL TECHNOLOGY CO LTD v. ARTLIGHT ELECTRICAL MANUFACTURING CO LTD AND ANOTHER

cacv 273/2008

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 273 of 2008

(on appeal from HCA NO. 15596 of 1999)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from a judgment of Deputy High Court Judge Gill given on 19 August 2008.  The judge had before him 2 applications in a copyright action relating to toy walkie-talkie headphones.  The first application was by the defendants to dismiss the action for want of prosecution under Order 34 r. 2.  The second was an application by the plaintiff for leave to file an expert’s report.  The judge came to the conclusion that the defendants had not established that there had been prejudice or that the circumstances existed that it would not be possible to have a fair trial.  For that reason he dismissed the defendants’ application.  The judge allowed the plaintiff’s application to file expert evidence and for an extension of time to set down.

2.  At the conclusion of the hearing of the appeal, this court allowed the defendants’ appeal with reasons to be given in writing and dismissed the action for want of prosecution and made consequential orders as to costs.

Background

3.  In the court below and in this court the plaintiff, in effect, conceded that there had been both inordinate and inexcusable delay in the prosecution of the action.  Nevertheless, the manner in which this action was prosecuted still falls to be commented upon.  As already noted, this action concerned toy walkie-talkie sets.  This court was shown samples of what were said to have been those of the plaintiff and the first defendant’s manufacture.  There can be no doubt that there are obvious and remarkable similarities between the two.

4.  The dispute between the parties appears to have commenced on 11 January 1999 when the plaintiff’s then solicitors wrote to the first defendant complaining of the first defendant’s manufacture of their walkie-talkie head sets and alleged infringement of copyright.  The letter requested the first defendant to cease manufacturing forthwith and to provide the names and addresses of all parties to whom it had supplied or sold products.

5.  I mention the terms of that letter because of the mild form which it took.  In an area of law where applications for interlocutory injunctions are commonplace, a simple cease and desist letter hardly demonstrates excessive concern about the matter.  It is also noteworthy that, although the names and addresses of the person supplied with the products were requested, there was no request, as was almost standard form, for details of quantities and prices of products supplied.  Nor was there any request for payment of damages or profits.  Nevertheless, the first defendant’s solicitors replied on 15 January pointing out that the allegation of subsistence and infringement of copyright was wholly un-particularised.  The first defendant’s solicitors requested an opportunity to inspect any alleged copyright work.  It then took until 8 March for the plaintiff’s solicitors to write indicating that “the artistic works” could be inspected.

6.  The first defendant’s solicitors were clearly prompt in their inspection, which apparently took place on 10 March.  However, in a letter dated 9 April 1999 the first defendant’s solicitors wrote:

“It now transpires that your client is only able to come up with one mechanical drawing with specific measurements of the relevant moulds and tooling of your client’s product.  There cannot be any copyright subsisting in this drawing because this drawing must have been derived from either a prototype, a mock-up or design/sketch drawings which your client has failed to provide for inspection.”

7.  Thus, after 3 months, it would appear that the plaintiff could only produce a mould or tool drawing.  Quite apart from the fact that there is clear difficulty in alleging infringement of copyright in a mould drawing by the manufacture of a product, the absence of other items referred to in the letter, itself, raises questions as to their existence.

8.  The writ in the action was not issued until 30 September 1999.  Far from proceeding with the action with any dispatch, the plaintiff’s solicitors apparently chose to send out at least one letter, if not more, announcing the commencement of this action against the first defendant.  According to the affirmation of Anthony Tat Hay Tong filed on 25 October 1999, one such letter was received by one of the first defendant’s customers.  A copy of the letter dated 11 October 1999 was exhibited to the affirmation.  The affirmation made clear that the first defendant wished to proceed with the action as quickly as possible.  It was pointed out that such letters as were sent out by the plaintiff’s solicitors were causing harm to the first defendant’s reputation.  After a second extension of time to serve a statement of claim the plaintiff’s statement of claim was eventually filed on 23 November 1999.

9.  It thus took the better part of a year for the plaintiff to start its action.  From then on matters went from bad to worse.  Although the defence was filed on 10 January 2000 nothing happened until the summons for directions was issued on 21 September 2000.  By order dated 27 October 2000 the master gave directions.  Those included directions for the exchange of witness statements.

10.  Again nothing happened until March 2002 when the plaintiff served notice of intention to proceed.  On 21 December 2002 the plaintiff issued a summons for leave to amend the writ and the statement of claim, amongst other things, to include the second defendant as the defendant to this action.  Mr Shipp, who appeared for the defendants on this appeal, submitted that the inclusion of the second defendant in the action was simply to add aggravation and a nuisance factor to the action.  The only allegation against the second defendant was that he had been the person with whom the enquiry agent had dealt when the sample of the first defendant’s product was obtained.  There appears to be substance in Mr Shipp’s argument that the inclusion of the second defendant in the action was purely tactical.

11.  When the writ was amended the plaintiff’s legal advisers seemingly forgot to include any prayer for relief against the second defendant.  That was then corrected and the re-amended writ was filed on the 27 February 2003.  It was not until 26 February 2004 that the plaintiff filed the list of documents.  However, another notice of intention to proceed was filed on 3 March 2004.  As long ago as 17 April 2004 the defendants’ solicitors wrote to the plaintiff’s solicitors complaining of the inordinate and inexcusable delay on the part of the plaintiff in prosecuting the action and drawing attention to the fact that their clients had already suffered serious and irreparable prejudice caused by that delay.  Fair warning was given in that letter that the defendants were contemplating an application to strike the action out for want of prosecution.

12.  Leave to set the action down for trial within 42 days was granted by the master on 14 September 2005.  Again, nothing happened for a long time.  On 8 January 2007 the plaintiff issued a summons for leave to set the action down for trial out of time and leave to file a supplemental witness statement.  That summons was dismissed by the registrar on 15 January 2007 because the plaintiff had failed to file any supporting affidavit to explain the delay and the necessity for the supplemental statement.  Thereafter, again nothing happened for a long time.  In March 2008 the plaintiff issued yet another notice of intention to proceed.  On 9 April 2008 the plaintiff issued a summons seeking, once again, to set the action down for trial out of time and for leave to file and serve an expert report.

13.  I have set out the conduct of the action in some detail despite the admission that there has been inordinate and inexcusable delay because it demonstrates the half-hearted manner in which this copyright action has proceeded.  Any practitioner familiar with industrial property litigation would have observed clear signs that this was an action where the plaintiff had no real intention of proceeding to trial.

14.  It is clear that in this case there are a number of aspects upon which the defendants intend to defend the claim.  In the first place, originality and ownership of copyright in the relevant drawings is disputed.  I need say no more about that other than that it does not appear that it is simply a paper defence in this regard.  This court was taken through the facts relating to the plaintiff’s claim in some detail by Mr Shipp.  It suffices to say that there appear to be substantial reasons for the defendants’ dispute on this aspect.

15.  In the second place, the defendants are relying in this action on the authenticity of drawings which were made for them by a Mr Li Ping and Mr Luo Wei Ming.  It is the defendants’ case that Mr Li and Mr Luo made original artistic works from which the defendants’ product was made.  This aspect impinges not merely on the question of whether there has been copying but also is very relevant on the issues of originality and ownership of the plaintiff’s works.  Given the difficulty that the first defendant experienced in obtaining sight of the plaintiff’s drawings, the seeming difficulty in the plaintiff being able to identify its drawings for a very lengthy period and the matters alluded to by Mr Shipp in respect of them, clearly originality and ownership is a matter that would be in dispute as well as copying.  Unfortunately Mr Li and Mr Luo are no longer available.  The second defendant has explained in paragraph 7 of the second affirmation what had happened:

“I wish to further explain that shortly after the Writ of Summons herein had been issued on 30^th September 1999, I, together with representatives of Messrs. Robin Bridge and John Liu, attended both Mr Li and Mr Luo in the PRC on 25^th January 2000 to take particulars of their respective commission by the 1^st Defendant to create the copyright works and the creation of the works on behalf the 1^st Defendant.  At that time, both Mr Li and Mr Luo were fully co-operative with the 1^st Defendant and its legal advisers and promised to render further assistance to the 1^st Defendant to defend this action as and when required in the future, in particular, they both agreed to sign witness statements at a later stage and eventually attend the Trial to give oral evidence, if such necessity arose.  Their contact details were taken down and we went away feeling happy and confident about proving the case of independent creation, and fully intended to contact both of them again when witness statements had to be prepared and exchanged.  There was no reason for us to think that we would lose contact with either of them later.”

16.  In my view, that was a perfectly proper approach to the action.  As already indicated, the action had hallmarks of one which would not proceed to trial and in respect of which the plaintiff can hardly be said to have been showing enthusiasm.  The defendants’ solicitors took appropriate steps, interviewed witnesses and satisfied themselves that the matter could proceed.  They could hardly do anything further at the time since the matter was far from ready.

17.  However, the judge appears to have taken a different view.   He said after quoting that at paragraph 35 of the judgment:

“This was prompt indeed, but with respect, hopelessly inadequate without following it up, with co-operation evident and the evidence fresh in everybody’s minds.

36.   But there was no follow up and in fact no further steps were taken; then it was, but not until 2004, that attempts were made to contact Messrs Li and Luo again.  By then they had left their former posts and disappeared.  Tony Law deposed that this was directly because of the dilatoriness of LTC in prosecuting its case.  But it is hard to see how or why that could be, given that the second period of delay did not begin to run until 2005.”

18.  I fail to see how the judge could say that what the defendants’ solicitors had done was hopelessly inadequate.  They had taken immediate steps to investigate their clients’ defence.  They had travelled to the PRC to interview the relevant witnesses.  They had obtained copies of relevant documents including the defendants’ drawings and the receipts and other documents relating to the creation of those drawings.  The time had not come for the preparation of witness statements.  The plaintiff did not file its list of documents until more than 5 years after their letter before action.

19.  The judge divided the plaintiff’s inaction into 2 periods of delay.  He said the first ran from September 2000 until December 2002.  The second period, he said ran from September 2005.  Quite apart from overlooking the fact that the whole conduct of the case had been dilatory from the start, the judge seemingly overlooked the fact that in March 2004 the plaintiff had to issue one of its notices of intention to proceed.  The judge apparently considered that the period prior to that was not a period of delay.  The only thing that the plaintiff seems to have done promptly was to issue the letter before action when seemingly it did not even know what the artistic works were which later formed the basis for its pleaded case.  The plaintiff was quick enough to send at least one letter to a customer of the first defendant which exhibited what is often termed a willing to wound but are afraid to fight sentiment, but had to ask for 2 extensions of time to serve a statement of claim.

20.  In short, I consider that not only has there been inordinate and inexcusable delay in the prosecution of the action by the plaintiff but as a result of the delay the defendants have clearly suffered severe prejudice to the extent that a fair trial of the action would not now be possible.  The judge’s stricture of the defendants’ conduct of their defence in saying that what had been done was hopelessly inadequate was, in my view, misplaced and unjustified.  For these reasons I considered that the appeal should be allowed and the action dismissed.

Hon Le Pichon JA:

21.  I agree.