Takmay Industrial Co Ltd v. Wah Sang Industrial Co (A Firm)
Read the full judgment text of CACV 42/1979 on BabelCite. This Court of Appeal judgment was delivered on 23 August 1979.
4. Was there a work in which copyright could subsist?
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CACV000042/1979 (Copyright - equitable ownership of work)
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----------------- Coram: Roberts, C.J., and Cons.J. Date of Judgment: 23 August 1979 ----------------- JUDGMENT ----------------- 1.Introduction This is an appeal by the Takmay Industrial Company Limited, the defendant in the action, against an order of Zimmern J. (dated the 7th June, 1979) under which he continued interlocutory injunctions, which he had granted ex parte on the 23rd January, 1979. The Writ of Summons was issued by the plaintiff, the Wah Sang Industrial Company on the 30th November, 1978. The indorsement on the Writ sought injunctions to restrain -
By a Summons, dated 8th January, 1979, the plaintiff sought injunctions to restrain the defendant from infringing the plaintiff's copyright in -
In addition, the plaintiff sought an injunction to restrain the defendant from passing-off dolls not made by the plaintiff as the dolls of the plaintiff. Zimmern J. granted an interim injunction on the 23rd January in the terms sought. His order was expressed to be an order by consent, with the plaintiff giving an undertaking to abide by any order which the court might make as to damages. By a further summons, dated 10th March, the plaintiff sought an order that the defendant should deliver up to the bailiff of the court -
Zimmern J. made an interim order accordingly on 12th March, pending the hearing of the inter partes summons on the 4th April. The hearing took place on the 4th April and was then adjourned until the 5th June, with the injunctions continuing until the date of the hearing. On the 7th June, Zimmern J. made the order which is the subject of this appeal. 2.Facts These were dealt with fully by Zimmern, J. For the purposes of the appeal it will be sufficient if the relevant parts are summarised as follows. The plaintiff's evidence was that the plaintiff began business in 1968 as a designer and manufacturer of dolls. About 1974 the plaintiff designed and manufactured a musical doll set called "Jane and Jenny". The set consisted of two dolls, in colourful clothes, packed in a distinctive box. The larger doll contained a mechanism which plays a tune when a key is wound. It was agreed by the parties that an Italian company had produced similar sets of dolls some years before the plaintiff. The original drawings for the internal works of the Jane and Jenny doll set were made by Mr. Cheng Tse Bang for a fee of $800. The dress for the bigger doll was designed by Mr. Chan Shing Yan. The defendant's evidence was that he started business in 1971 as a manufacturer of dolls. In 1974, he decided to make moulds for dolls similar to the Italian doll sets. He knew that the Plastic Arts Manufactory was making similar sets. He ordered moulds and produced samples. The judge found that the torso and mechanism of the defendant's doll set was a copy of the plaintiff's "Jane and Jenny" doll set, and was not copied from the Italian or Plastic Arts Manufactory dolls. As was stated above, among the reliefs sought in the indorsement of claim, on the Writ of Summons of 30th November, 1978, were injunctions to restrain -
During the hearing before Zimmern, J., the defendant, through his counsel, gave an undertaking to the court not to pass off the plaintiff's dolls until trial, nor to use packaging or any instructional booklet similar to that of the plaintiff. Therefore no injunction was granted in respect of these matters, which were consequently not in issue at the appeal. The only injunctions which were the subject of the appeal were those referred to as (1), (3) and (4) in the Summons of 8th January, 1979. 3.Amendment of Writ Both before Zimmern, J. and on appeal, the defendant argued that the Statement of Claim, dated 10th April, 1979, seeks relief not claimed in the Indorsement of the Writ of 30th November, 1978 and that the judge was wrong, in the absence of any amendment to the Writ, to grant relief which was not sought in the Writ, even if it was claimed in the Statement of Claim. The differences between the Writ and the Statement of Claim are as follows -
If this objection of the defendant is correct, the judge's Order could not stand in its present form and would have to be modified so as to conform with the terms of the Writ. Thus, paragraph 2 of the Order of 7th June (referred to as "the Order") which relates to the prototype doll's dress and the drawings thereof, would have to be erased, leaving the injunction operative only in relation to the "drawings of its dolls". It was not argued before us that the Writ, seeking relief in relation to "drawings of its dolls" was not in sufficiently broad terms to cover that part of the injunction which refers to "drawings of the internal design and components of its dolls", though we are inclined to think that, had we decided in the defendant's favour on this submission, we would have been obliged also to conclude that the Writ would have to be narrowly construed, so that relief could have been granted only in relation to drawings of the doll itself and not of its internal components. What substance is there in the argument that, if the indorsement on a writ claims relief in respect of three matters, and the statement of claim seeks relief in respect of five, a court may only grant relief in respect of the three, unless leave has been given to amend the writ. The reason advanced for this proposition was that the two additional claims would constitute new cause of action. Consequently, leave to add a new cause is required under Order 20 rule 1(3) and Order 20 rule 5(5) and no leave has been sought or granted in this case. However, this Order does not deal with the effect on a writ of the terms of a statement of claim. Order 18 rule 15 permits a statement of claim to contain a claim in respect of a cause of action which was not mentioned in the writ, provided that the new cause arises from facts which are the same as, or include, or form part of, facts giving rise to the cause of action mentioned in the writ. We have no doubt that the facts which gave rise to the additional claims for relief sought in the Statement of Claim included, or formed part of, the facts which gave rise to the claims in the Writ. Order 18 rule 15 adds that, subject to this, a plaintiff may alter, modify or extend any claim made by him in the indorsement of the writ without amending the indorsement. We therefore agree with Zimmern, J. that the plaintiff is not obliged to seek leave to amend the indorsement on the Writ and could properly seek all the forms of relief claimed in the Statement of Claim. Thus we find that the Order was not defective in so far as it gave effect to claims contained in the Statement of Claim but not in the Writ. 4.Was there a work in which copyright could subsist? A plaintiff who seeks relief for the infringement of a copyright must establish -
To decide the first question, i.e. is there a "work" in which copy-right can subsist, it is necessary to consider separately the three subjects of the injunctions, which were -
By section 3(1) of the Copyright Act 1956 ("the Act") which was applied to Hong Kong, with modifications to meet local circumstances, in 1972, copyright subsists in every "original artistic work" which is unpublished. By section 3(1)(a) drawings, irrespective of artistic quality, fall within the definition of an "artistic work". By section 3(1)(c) "works of artistic craftsmanship" also fall within it. The defendant's argument is that the drawings of the works and the drawings of the dress were not "original" and so could not be the subject of copyright. It was submitted that there is not, on the affidavits, an arguable case that the drawings were original. Dolls of this kind, it was said by the defendant, have been on the market for some time, an Italian doll set looking very like the plaintiff's dolls was exhibited, and many other Hong Kong manufacturers have modelled their dolls on Italian prototypes. "Look at the Italian doll", the defendant says. "It is so like the plaintiff's doll that there could have been no originality in the drawings from which the internal components or the dress of the plaintiff's doll were made." The plaintiff's answer is that there is evidence that the drawings were original -
It may be that, at the trial of the action, the judge might find that -
But these are matters which a judge should not be called upon to decide in interlocutory proceedings. If there is, on the evidence proffered by the plaintiff, an arguable case that the drawings were original, as we think there was, the plaintiff has done enough at this stage to establish that copyright could exist in the works in question. 5.Effect of section 9(8) of the Act It was submitted that, even if copyright could prima facie exist in the works, they nevertheless fell within the exception provided by section 9(8) of the Act. By this section, the making of any object in three dimensions shall not infringe copyright in a two dimensional artistic work (e.g. drawing) if the object would not appear to non-experts to be a reproduction of the artistic work. Relating this subsection to the facts of this action, it means that the defendant would not be infringing the plaintiff's copyright in the drawings of the works or the drawings of the dresses by making the components or dress, unless a non-expert, looking at the drawings and the products, would think that the latter were copied from the drawings - i.e. if it is an obvious copy, it is an infringement. The judge does not seem to have considered the effect of this section, as there is no mention of it in his judgment. This would not be surprising, for there is no reference to it in any of the affidavits either. The subsection presents considerable difficulties because its requirement that the judge should attempt to assess the ability of non-experts to identify a three dimensional object as the product of a two dimensional drawing excludes the testimony of those most likely to be of some assistance to him. The average non-expert differs widely in his ability to relate plans to products. Many women, but probably few men, would find it easy to decide whether a dress was based on a drawing - per contra if it were the design of a very simple mechanical part. In George Hensher Ltd. v. Restawile Upholstery (Lancs) Ltd. 1975 R.P.C. 31 (H.L.) at pp.51/2, there was discussion as to how a judge should decide the test imposed by section 9(8). During argument it was said that judges often had to decide the question without evidence, though Lord Reid doubted if a judge was entitled to do so. However, the House of Lords was not called upon to decide the point, which is left in some doubt. In the more recent case of L.B. Plastics Ltd. v. Swish Products Ltd. 1979 F.S.P.L.R. 145 (H.L.) a defence under section 9(8) was put forward. Although it was not pleaded and no evidence was called upon it, the trial judge allowed it to be argued. Lord Wilberforce, at p.152 suggests that it was proper for the judge to put himself in the position of the non-expert, and to reach a finding of fact under section 9(8) - and for this purpose to compare the objects with the drawings. We are satisfied that if the judge had directed his mind to the question of section 9(8), he would probably have come to the conclusion that the objects were reproductions of the working drawings and that consequently the defendant's components and doll dress would amount to an infringement. Also, on the authority of the L.B. Plastics case, it is for the defendant to plead and to establish a defence under section 9(8). This he failed to do and the trial judge would have been entitled to find against him on this ground also. 6.Artistic craftsmanship Somewhat different considerations apply to the prototype dress, to which copyright was claimed under section 3(1)(c) of the Act as an original "work of artistic craftsmanship". The view we have expressed above as to there being an arguable case on the originality of the drawings applies similarly to the dress. This was, according to the evidence, made by Mr. Chan from his own original drawings at the order of the plaintiff. The judge did not, however, direct his attention to the question whether the doll could be said to be a work of artistic craftsmanship in which copyright could subsist. The defendant argued, if we understood correctly, that "a dress is a dress" and that many doll dresses look so alike that copyright cannot exist in any of them. We do not accept this argument, which would remove protection from all model dresses. Even if the defendant were able to produce many dresses with striking similarities to those of the plaintiff, this would not be enough to prevent copyright subsisting in the latter so long as the latter contained a discernible degree of originality. In this case, there was evidence that the doll was made from drawings which the judge held to be original. Consequently, he must have found, had he considered the point, that the dress was itself original. But would he have come to the conclusion that it was a work of artistic craftsmanship? In George Hensher Ltd. v. Restawile Upholstery 1975 R.P.C. 31(H.L.) it was said that the question of artistic craftsmanship has to be determined in the light of the evidence. (In that case there was held to be inadequate evidence to establish that the object in question (a mock-up of furniture) merited the description "artistic craftsmanship".) It is clear from the various opinions delivered in that appeal that their Lordships found it difficult to agree as to the proper interpretation of the phrase. We can only say that we offer our sympathy to anyone who is obliged to decide the question. However, difficult though it may be, their lordships were agreed that it is a matter to be decided upon evidence. Since in this case there was no evidence on the point, and the trial judge did not direct his mind to it, we cannot say, in relation to the dress, that he would, or should, have found that it was a work of artistic craftsmanship. Failure by the plaintiff to adduce any evidence to this effect must mean that he failed to discharge the burden which lies on him to establish that the doll's dress was a work of artistic craftsmanship. We do not say that he could not have done so, only that he did not try, probably because he had not realised that it was incumbent upon him to do so under the Act. Therefore we consider that the judge should not have issued an injunction to restrain the reproduction by the defendant of the prototype dress. 7.Was the plaintiff the owner? The defendant asserts, in relation to the drawings of the works and the drawing of the dress, that the plaintiff has not established that he is entitled to sue for any infringement of copyright in them. He adopts the following reasoning.
The plaintiff, who was criticized for the fact that there was no evidence of any assignment of interest to the defendant before the assignments were signed on 3rd April, countered that he had relied on the presumption in section 20(1)(b) of the Act, whereby if the existence of copyright is proved, the plaintiff is presumed to be the owner of the copyright if he claims to be so and the defendant does not put in issue the question of the ownership thereof. The defendant put the matter in issue by virtue of pargraph 24 of the affidavit of Mr. Wong Wai-chung, the director of the defendant company, which was affirmed on 23rd March. This seems to us to be a fair contention, and to weaken any suggestion that the assignments of 3rd April were fabricated for the purposes of the action, assuming that the prior oral agreements referred to therein were in fact entered into, as to which we express no view. The plaintiff argued that -
In support of these propositions, the plaintiff drew our attention to a passage in paragraph 333 of the Eleventh Edition of Copinger and Skone James on Copyright, which reads -
No authority is quoted in support of this passage, which suggests that the copyright in the drawings would have vested intially in the authors and that a subsequent assignment was necessary to give the prospective owner sufficient title to sue. However the Performing Right Society v London Theatre of Varieties 1924 AC 1 decided that an equitable assignment of copyright is possible and that such an assignment will enable the equitable owner of the copyright to obtain interlocutory relief, though the legal owner would have to be joined as a party before the court could grant a permanent injunction. In Merchant Adventurers v Crew & Co. 1972 1 Ch. 242, the plaintiff paid the legal owner, an independent contractor, for a drawing. This was held to make the plaintiff the owner in equity of the copyright in the drawing and therefore entitled him to obtain an interlocutory injunction to restrain infringement. In Roban Jig & Tool Co., Ltd., v Taylor, 1979 F.S.R. 130 (Ch. D.) at p.135, Whitford J. accepts the Performing Right Society Case as establishing the right of the owner of an equitable interest in copyright to start an action, even though the legal owner will have to be made a party to the proceedings at some stage. In equity, an assignment of an expectancy, so long as it is made for valuable consideration, has been treated as a contract to assign. On the creation of the subject matter, the legal ownership would vest in the assignor, with the beneficial interest and equitable ownership passing to the assignee. The Performing Right Case makes it clear that this general principle applies to copyright. However, at the time of the Performing Right Case in 1924, there was no statutory provision in the Copyright Act 1911, equivalent to section 37 of the 1956 Act. Has the equitable rule been replaced by a statutory provision which must be held to be exclusive and to oust the right of an equitable owner to sue. Section 37 provides that "Where by an agreement made in relation to any future copyright and signed by or on behalf of the prospective owner, the prospective owner purports to assign the future copyright" the copyright vests in the assignee by virtue of the subsection, without further assurance. The Roban Jig Case puts it beyond doubt that, where the plaintiffs claim to sue rests on "an assignment", the combined effect of section 36 of the Act and section 53(1)(c) of the Law of Property Act 1925 (in the same terms as section 6(1)(c) of Cap. 23) is that such an assignment, whether of the legal or equitable interest must be in writing. So the plaintiffs can only succeed if they can establish that section 37 of the Act is not exclusive and does not apply to the creation by oral agreement of an equitable interest. Without directly deciding the point, both the Roban Jig and Merchant Adventurers Cases suggested that the equitable rights of an owner are not ousted by the Act, since both contemplate interlocutory proceedings being taken by such an owner, and neither refer to section 37 as limiting his right to seek relief. The language of section 37 can be interpreted as implying that the section is not intended to be exclusive, but only to deal with the type of agreement mentioned therein. The phrase "where by any agreement made in relation to future copyright and signed ..." could be said to refer only to written agreements, leaving other agreements to be dealt with in accordance with such rules of equity as are applicable. We think that there is force in the argument that, where two interpretations of a reforming Act are possible, that interpretation which preserves a previous right in equity should be adopted, unless the equitable right is abolished in clear terms, since equity should not be abolished by stealth but by clear words. Therefore, we conclude that the plaintiff has established that he was the equitable owner of the copyright in the drawings when they came into existence, and thus on 30th November, 1978 when the Writ was issued, and that he became the legal owner on 3rd April, 1979, when the assignments were signed by the authors. This means that, although he is entitled to interlocutory relief, the plaintiff cannot obtain a final order unless either he joins those who were the legal owners on 30th November, 1978, in this action, or discontinues the present action and seeks permanent relief as the present legal owner. 8.Has the plaintiff established a sufficient case? Counsel for the defendant submitted that an interlocutory injunction should not be granted, even if all the other issues were decided in favour of the plaintiff, since, on the evidence before the judge, the plaintiff had failed to establish a sufficient case. He drew our attention to the judgment of Huggins, J. in J.C. Renney Company and another v Renneys Limited and another 1975 H.K.L.R. 598, in which the judge considered the effect of the House of Lords case in American Cyanamid Co. v Ethicon Ltd. 1975 2 W.L.R. 316 as summarized by Sir John Pennycuick in Fellowes & Son v Fisher, 1975 3 W.L.R. 184. This judgment sets out the following principles to be applied by the court when dealing with an application for an interlocutory injunction -
We are satisfied that there are serious questions to be tried, for example -
One is an issue of fact, the other an issue of law. Therefore the second principle enunciated above does not apply. 9.Exercise of discretion Having come to the conclusion that the plaintiff has established that there is a serious case to be tried in relation to the drawings of the works and the drawings of the dress, we have to consider whether the judge was correct in exercising his discretion to grant an interlocutory injunction against the defendants. At this stage, in accordance with the general principles of the American Cyanamid Co. Case the judge must decide whether the "balance of convenience" lies in favour of granting or refusing the interlocutory relief sought. The governing principle is that if the recoverable damages would be an adequate remedy, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appears to be at the interlocutory stage. But if this is not the case, then, if the recoverable damages under the plaintiffs' undertaking would be an adequate remedy for the defendants and the plaintiffs are in a financial position to pay them, there is no reason to refuse the plaintiffs an interlocutory injunction. The trial judge considered the evidence available to him on this matter and, at page 36 of the record, concluded that, on the facts of the case, the plaintiff would not be adequately compensated by damages, if he were found to be correct. The judge reasoned that the plaintiff had spent time and money in developing his dolls for four years and had built up a reputation for "Jane and Jenny" dolls. He rejected the view that, if the defendant was restrained from infringing the copyrights till trial, he would suffer irreparable damage or, indeed, any damage at all. The decision by the judge to grant an interlocutory injunction is essentially an exercise by him of a discretion. An appellate court should not interfere with the exercise of a discretion of this nature unless it can be shown that there were no grounds upon which it could have reasonably decided as it did or that, in exercising that discretion, it had either left pertinent factors out of account or given weight to factors to which it should not have paid attention. In this case, in essence, the judge found that, on the evidence before him, the plaintiff had been manufacturing the dolls in question in large quantities for a substantial period. The defendant, on the other hand, had only just begun to manufacture dolls which, in the view of the judge, were indistinguishable from those of the plaintiff. In these circumstances, it was surely reasonable for him to conclude that the damage which would be caused to the plaintiff, by an infringement of his copyright, must far exceed the damage which might be caused to the defendant by granting the injunction. It was argued before us that the interlocutory injunction deprived the defendant of the opportunity of entering the market and that an extension of the injunction would do so again. The judge's view, with which we cannot disagree, is that this is not a market which the defendant ought to be able to enter, by the methods which he is seeking to employ. We see no reason to interfere with the judge's exercise of his discretion in the granting of the injunction. 10.Conclusion Our conclusion is that the plaintiff has established an arguable case that there has been a breach of copyright owned by him in the drawings of the works and the drawings of the dress. We are not satisfied that the plaintiff has established that he has an arguable case in relation to the prototype doll's dress. We see no reason to interfere with the judge's discretion. The appeal therefore is dismissed, and the Order of Mr. Justice Zimmern of 7th June is confirmed, save that in paragraph 2 thereof the following words should be deleted: "its artistic work, namely the original prototype of a doll's dress being MC-10 exhibited to the affidavit of Manson Chong filed herein on the 10th of January 1979 and". Costs of the appeal to be paid by the appellant. Representation: H. Litton, Q.C. & R. Tong (W.S. Lo & Co.) for appellant C. Ching, Q.C. & A. Liao (J.S.M.) for Respondent |