SOLAR SYSTEM INTERNATIONAL CO LTD v. UNISON-WATCH MANUFACTURING LTD

CACV 3523/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 3523 OF 2001

(ON APPEAL FROM HCA 1/2001)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal in a matter of contempt by the 2nd respondent in an action which was commenced at the beginning of last year. In the action the plaintiff had sued the 1st respondent for infringement of copyright in drawings relating to its watches.

2. The matter had apparently arisen in this way. The plaintiff had had design drawings made for a particular type of watch called a belt watch. The defendant company, which was the 1st respondent, had purchased ten fairly similar watches in Shenzhen. They advertised the watch, amongst many others, in a watch magazine in early 2000.

3. Later in the year, they did two things. In July they made arrangements with the Hong Kong Trade Development Council to advertise their watches in Hong Kong Enterprise. The advertisement was to appear in the September issue of the Hong Kong Enterprise. There were to be a number of watches that were to be included in that advertisement, including the particular watch in question. There was apparently only to be one advertisement, but that had the added attraction that the Trade Development Council would advertise for free for a period of six months 5 photographs of the defendant's products on their internet website.

4. The defendant company also exhibited their watch at a trade fair in September. That attracted the plaintiff's attention. There was some exchange of correspondence as a result. The defendant company asked for a copy of the plaintiff's registration. However, the plaintiff did not have a registered design, it only had copyright drawings.

5. Later in the year, the plaintiff's solicitors arranged for investigators to investigate the defendant company's activities to see whether they were selling watches. Some of those investigations only resulted in conversations where it was said that watches could be supplied but one of the investigator's did succeed in obtaining a watch.

6. As a result, proceedings were started at the beginning of 2001. They quickly resulted in a settlement. The settlement entailed the defendant company submitting to an injunction not to infringe the copyright in the plaintiff's drawings relating to their watch.

7. In the usual way the order also required the defendant to deliver up any remaining watches and to disclose where they obtained the watch and to whom they had sold the watches. There is no dispute that the remaining number of watches, out of the ten which the defendant company had initially bought, were handed over to the plaintiff, save for one, which was unaccounted for.

8. The affidavit on behalf of the defendant also described many of the supplies but failed to mention some of the investigations which had been made which had not resulted in a sale. There was some correspondence that followed. The plaintiff's solicitors indicated that the defendant had not complied with the order. The defendant denied that and the matter resulted in the bringing of contempt proceedings.

9. Contempt was alleged on two grounds. The first basis upon which contempt was alleged was that the defendant company had breached the injunction by infringing the copyright of the plaintiff by offering or exposing for sale, without the plaintiff's consent or authority, watches which were infringing copies at the website of Hong Kong Enterprise Internet (the internet address is given) on dates in April, May and on 1 June 2001.

10. The second ground of alleged contempt was that the defendant had breached the disclosure requirement under the Consent Order by failing or refusing or neglecting to set out all details of inquiries which had been made.

11. In respect of that latter matter, the judge, Deputy Judge Lam, in my view correctly, dismissed that allegation. No more need be said of the matter.

12. In respect of the first allegation of contempt however, the judge held that the defendant company was in contempt and that the 2nd respondent, who appears in person today, was responsible for that contempt as a director of the company. He imposed a fine of $50,000 on the company and ordered the company to pay the plaintiff's indemnity costs. In respect of the 2nd respondent he sentenced the 2nd respondent to 2 weeks' imprisonment and also ordered indemnity costs.

13. It might be observed in relation to the order as to costs that the judge did not make any allowance for the fact that one of the allegations of contempt was dismissed.

14. In relation to the charge which was made in respect of offering and exposing for sale watches, the point immediately arises that a photograph of a watch on an internet website, at least in the circumstances of the present case, is clearly, at best, an advertisement. An advertisement does not constitute an offer for sale or an exposure for sale of a particular product.

15. Infringement of copyright is dealt with in the Copyright Ordinance Cap.528. Infringement by offering for sale and exposure for sale comes under section 31 of the Copyright Ordinance and it is considered to be a secondary infringement. As such, it requires knowledge on the part of the infringer that an infringement has been committed.

16. Infringement on an internet site is, if at all, dealt with under section 26 of the Copyright Ordinance which reads as follows:

"26(1) The making available of copies of the work to the public is an act restricted by copyright in every description of copyright work.

(2) References in this part to the making available of copies of the work by wire or wireless means in such a way that members of the public in Hong Kong or elsewhere may access the work from a place and at a time individually chosen by them, such as the making available of copies of works through the service commonly known as 'the INTERNET'."

16. If one turns then to the notice of motion alleging contempt, that provision would not fit well with what is alleged because the allegation in the notice of motion is that watches are offered or exposed for sale. The most that might possibly be argued in this case is that a photograph of the defendant's watch, which has some dissimilarities to the plaintiff's watch, might be alleged to be a reproduction of the artist's drawing from which the plaintiff's watch was said to have been made. But that is the limit of the matter.

17. In those circumstances, it is plain, in my view, that the charge made in the notice of motion (offering and exposing watches for sale) is not supported by the facts indicated in the notice of motion, namely the presence on the Hong Kong Enterprise website of a photograph, nor by the interminably repetitious evidence of print-outs from the website, almost on a daily basis, which were exhibits in the plaintiff's affidavits.

18. In those circumstances the finding of contempt must have been clearly wrong. The defendant company has withdrawn its appeal but Mr Wong has appealed against the sentence of imprisonment. Since consideration of the offence committed is part and parcel of the consideration of the sentence of imprisonment, this matter inevitably had to be considered by this court. At the court's encouragement, Mr Wong has applied to appeal against the finding of contempt.

19. That would conclude the matter, but it is necessary in this case to say something further about the sentence of imprisonment itself. The judge drew inferences from the terms and conditions upon which the Hong Kong Trade Development Council arranged for advertisements that the defendant company must have renewed its advertisement on the website in December 2000. He did so on the basis that, had they not done so the advertisement would no longer have been on the website following six months from September of 2000. The judge drew those inferences despite the 2nd respondent's evidence that only one payment was made to the Hong Kong Trade Development Council.

20. I doubt myself that those were proper inferences to draw particularly in contempt proceedings where the standard of proof is high. No attempt had been made to obtain evidence from the Hong Kong Trade Development Council as to their normal practice when the 6 month period had elapsed, still less to show that the defendant company had in fact paid any sums in December of 2000.

21. When one bears in mind the fact that the maintenance of a website is not, in some respects, dissimilar from any other advertisement perhaps on a hoarding, it will be appreciated that it would have taken a conscious effort on behalf of the Trade Development Council to remove that advertisement from its website. It is equally likely that it would have left the advertisement on its website until it was sure that the defendant company was not going to renew it at some stage in the future, or even simply, that it was easier to do nothing than to take the advertisement off the website.

22. Be that as it may, the Deputy Judge below still treated the 2nd respondent's conduct as being not deliberate. At paragraph 31 of his ruling in respect of contempt he said:

"Whilst giving the 2nd contemnor the benefit of doubt, I have to deal with the case on the basis that he did not deliberately disobey the order..."

23. When it came to his reasons for sentence he said, in paragraph 2:

"I reiterated that breach of an injunction is a serious matter, even if it is not a deliberate breach..."

24. In my view it was wrong, in principle, for the judge to have ordered a sentence of imprisonment against the 2nd respondent." Once the court has reached the conclusion that a contempt was not deliberate or not contemptuous, it would be in very rare circumstances that a sentence of imprisonment would be appropriate.

25. In this case the culpability, even if one assumes that leaving the advertisement on the internet website were a contempt, is minimal. In the circumstances of this case, I doubt that even if there had been a contempt, anything more than the payment of costs would have been appropriate. As it was, the deputy judge ordered the payment of costs on a full indemnity basis even though he had dismissed half the allegations against the 2nd respondent. That, in itself, raises a question.

26. In the circumstances, this appeal should be allowed. The finding of contempt should be set aside. The order of the imprisonment has to be discharged and the order of costs below has to be set aside.

Le Pichon JA:

I agree.

Sakhrani J:

I also agree.