XCHRX SWING STUDIO ENTERTAINMENT LTD. v. EXCEL MEDIA TECHNOLOGIES LTD.

HCA 8932/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8932 OF 2000

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REASONS FOR DECISION

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Introduction

1. This is the Defendant's appeal against the Master's Order dated 27 April 2001. By that order, the learned Master dismissed the Defendant's application made on 13 February 2001 pursuant to RHC Order 18 rule 19 to strike out the Plaintiff's pleading and dismiss this action. The grounds set out in the original application were that the action is:-

(a) scandulous, frivolous or vexatious;

(b) otherwise an abuse of the process of court.

The Defendant applied to amend the Notice of Appeal by further alleging that the Statement of Claim discloses no reasonable cause of action. The application for leave was unopposed and leave to do so was accordingly granted at the appeal hearing.

2. The Plaintiff brings this action alleging that:-

(1) it is the manufacturer and distributor of digital video discs ("DVDs") and video compact discs ("VCDs");

(2) the Defendant is a manufacturer of VCDs in Hong Kong;

(3) the Plaintiff is suing as an exclusive licensee to produce a television series called "百年浮沉" in Chinese (translated in the Statement of Claim as "The Rise and Fall of the Century" in English) ("the series") in various formats including DVDs and VCDs for distribution in the Mainland, Hong Kong and Macau;

(4) The Defendant infringed the Plaintiff's copyright in the series in the manufacture, possession and/or offer for sale, sale or supply of VCD copies of the series.

The meaning of the word "produce" in (3) above is unclear. According to a document dated 29 March 2001 (produced by the Plaintiff), it apparently means "distribute". However, the Plaintiff contended at the appeal hearing that it can mean both "distribute" and "manufacture".

3. The Defendant denies the claim and further avers that it has been authorised to duplicate VCD copies of the series by an American Company called "World Video & Supply Inc.", an exclusive licensee of the series for the USA and Canada.

4. At the end of the appeal hearing, the appeal was allowed, the Master's order was set aside and (among other orders) the following order was made:-

"The Plaintiff's Statement of Claim be struck out and this action be dismissed unless by 4:15 pm on Monday, 13 August 2001 the Plaintiff files and serves an Amended Statement of Claim which includes:-

(a) joining the copyright owner as a co-plaintiff or co-defendant to this action;

(b) particulars of the Defendant's alleged act(s) of infringement of the Plaintiff's copyright."

I also awarded the costs of this action up to the date of the appeal hearing (including the costs of the Defendant's application and this appeal) to the Defendant. These are the reasons.

5. The Plaintiff's grounds in opposition to this appeal can be summarized as follows:-

(1) the Plaintiff is the exclusive licensee of the copyright;

(2) the Plaintiff is entitled to continue with this action without joining the copyright owner until the time of final judgment herein;

(3) the particulars of the act(s) of infringement asked for by the Defendant are matters of evidence and need not be pleaded.

Is it plain and obvious that the Plaintiff is not an exclusive licensee?

6. The parties have filed affirmation evidence respectively supporting and refuting this aspect of the Plaintiff's claim. The contemporaneous documents relevant to this point include:-

"(1) a Chinese agreement dated 11 August 1999, the material parts of which read: "... 授權範圍：中國文聯音像出版社及 [the Plaintiff] 將本劇在中國大陸、香港、澳門地區的VCD，DVD ... 權授予 [the Plaintiff]."

(2) a Chinese document dated 29 March 2001 which states:-

"關於 ... 電視連續劇‘百年浮沉’的香港、中國大陸和澳門地區VCD、DVD、CDL 獨家發行版權一事，我社只同 [the plaintiff] 簽署過合同書 ..."

7. The law relevant to this point is section 103(1) of the Copyright Ordinance Cap. 528:

"In this Part an "exclusive licence" ... means a licence in writing signed by or on behalf of the copyright owner authorizing the licensee to the exclusion of all other persons ..." (emphasis supplied).

8. For the purpose of this appeal, no issue is taken by the Defendant as to whether the licence was in writing and (at least arguably) signed by or on behalf of the copyright owner. The only issue taken by the Defendant is whether the licence granted to the Plaintiff was "to the exclusion of all other persons". Having considered the documents dated 11 August 1999 and 29 March 2001, I conclude that it is not plain or obvious that the Plaintiff was not an exclusive licensee of the copyright involved in this action.

Is it plain and obvious that the Copyright Owner should be joined now?

9. The Defendant relied on section 113 of Cap. 528 in support of this part of its arguments. In short, both sections 113(1) and 113(2) thereof provide that an exclusive licensee may not bring or proceed with an action for infringement of copyright without joining the copyright owner unless leave of the Court to do so is granted. Section 113(3) of Cap. 528 provides in effect that the Court shall not grant leave to proceed under section 113(2) without the joinder unless there are exceptional circumstances beyond the control of the exclusive licensee.

10. It is undisputed that:-

(a) this action was commenced on 8 September 2000 (about 10 months before the appeal hearing);

(b) up to the date of the appeal hearing, the (alleged) copyright owner has not been joined as a co-plaintiff or co-defendant;

(c) there is no evidence as to whether, and if so exactly when, the copyright owner will join as a party. It should be mentioned that at the appeal hearing, the Plaintiff's solicitor informed me that a Mr Ma (supposedly the person in charge of the copyright owner and the producer of the series) indicated orally to the Plaintiff (but not to the Plaintiff's solicitors) around the beginning of July 2001 that the copyright owner is willing to join as a co-plaintiff.

11. The Plaintiff submitted that it is not obliged to join the copyright owner until final judgment is entered herein; relying on Copinger & Skone James on Copyright (1999) 14th Ed., pages 306 - 307 (relating to the right of an equitable owner to bring proceedings). It is doubtful whether those passages are applicable to an exclusive licensee: see Copinger, page 318, note 34. But even assuming they are applicable, I still conclude that it is plain and obvious that as at the time of the appeal hearing, there is no proper basis for concluding that the copyright owner will join as a party herein. This is because:

(1) as stated above, no joinder has been made up to now;

(2) there is no evidence that there will be a joinder;

(3) the inference which can be made against the Plaintiff as a result of (1) and (2) above is particularly strong in view that:

(a) a striking out application was taken out in February 2001 and since at least then the Plaintiff should be well aware that the Defendant is relying on the lack of a joinder of the copyright owner;

(b) counsel for the Plaintiff sought (and was granted) an adjournment on 31 May 2001 specifically for the purpose of an enabling the copyright owner to be joined.

12. The Plaintiff indicated (as stated above) that the copyright owner had now agreed to join as a party. Despite my earlier conclusion that it is plain and obvious that there will not be a joinder of the copyright owner, I am prepared to give a last chance to the Plaintiff to do so on the strength of the Plaintiff's solicitors' indication that this can be done in 28 days' time.

13. On the other hand, the Defendant submitted that as a matter of law, the copyright owner should be joined at the commencement of an action: Atkin's Court Forms (1996) 2nd ed. Vol. 12(2), p. 220. Hence, it is now too late for the copyright owner to be joined even if the Court is satisfied that this will be done within a short time. With respect, I disagree. There is no authority in support of such submission. The rationale behind the requirement for a joinder is essentially to avoid a litigant from being sued by the copyright owner or exclusive licensee (as the case may be) in a separate legal action.

14. It is desirable that the joinder should be made as soon as practicable and its absence often justifies a dismissal of the action as being incompetently constituted. I am however prepared to give the Plaintiff a last chance (instead of dismissing this action forthwith) taking into account the history of these proceedings. Up to the time of the striking out application, substantial preparatory steps have already been undertaken by the parties herein: for example, further and better particulars have been given and lists of documents have been filed and served. It is accordingly more time and costs efficient for the Plaintiff to be given a last chance to continue with this action instead of dismissing it (so that it has to commence a fresh action).

Particulars of the Defendant's alleaged act(s) of infringement

15. Apart from the said deficiency in the Plaintiff's claim, paragraph 5 of the Statement of Claim pleads:-

"The Defendant, prior to the issue of the writ in this action, has infringed the said copyright of the Plaintiff in the Series by the manufacture, possession for sale, offer sale [sic], sale or supply of the infringing VCD copies without the Plaintiff's consent."

16. Nothing has been mentioned as to the date(s), mode or other details of the alleged infringing act(s) of the Defendant. Despite repeated requests for further and better particulars of this paragraph, the Plaintiff has refused to provide them on the ground that they are evidence and need not be pleaded. The averment in the Statement of Claim is denied by the Defendant: see paragraph 6 of the Defence. The Plaintiff's averment is made even more embarrassing now by virtue of the document from the copyright owner dated 29 March 2001 (see above). Arguably at least, the Plaintiff's licence is limited to the distribution of the series. Because of the lack of particulars, it is unknown whether paragraph 5 of the Statement of Claim is alleging that the Defendant has wrongfully distributed the copyright work or committed other alleges infringing act(s) as well. Merely stating a number of the possible modes of infringement is inadequate.

17. This part of the Plaintiff's case is therefore so embarrassing (in view of the ample opportunity given by the Defendant for the Plaintiff to mend it) that it justifies the Defendant's complaint that this action is frivolous and vexatious or otherwise an abuse of the process of Court.

Other matters

18. The Plaintiff's skeleton argument also asserts that the Plaintiff is arguably the owner of the copyright. This is inconsistent with:

(1) the Plaintiff's pleadings;

(2) the Plaintiff's affirmation evidence;

(3) the 2 documents respectably dated 11 August 1999 and 29 March 2001 produced by the Plaintiff;

(4) the reasons given by the Plaintiff to Court (set out above) to apply for an adjournment of the hearing on 31 May 2001.

The Plaintiff (correctly) indicated at the appeal hearing that this point would no longer be pursued.

Conclusion

19. In view of the above matters, I conclude that it is appropriate to make the order referred to earlier (together with other consequential orders).

Costs

20. The Plaintiff (again correctly) did not oppose that the costs of this action up to 16 July 2001 including the costs of the striking out application and this appeal be to the Defendant to be taxed if not agreed. The alternative relief which could have been granted in the Defendant's favour in this appeal would be for the action to be dismissed forthwith. In such event, the Plaintiff would have to pay the Defendant the costs of the action. I do not find that any valid distinction can be made regarding costs even though the Plaintiff had been given a last chance to continue with this action by reason of the order made on 16 July 2001.