Koninklijke Philips Electronics N.V. v. Gil Media Service Co. Ltd.

HCA004657/1999

HCA 4657/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4657 OF 1999

Coram: Recorder J Leong, SC in Chambers

Dates of Hearing: 4 and 7 August 2000

Date of Judgment: 17 August 2000

Date of Reasons for Judgment: 8 February 2001

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REASONS FOR JUDGMENT

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1. This is an application by the Plaintiff for summary judgment under O.14 RHC against the Defendant. I delivered an oral judgment following the hearing of the application and said that I would give full written reasons later. This I now do.

2. The principles governing O.14 applications are well established.

3. The position was clearly set out by Mortimer JA in Manciple Ltd. v. Char On Man 1995 3 HKC 459 at 466 as follows :-

"Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defend, equally, there is injustice to the plaintiff.

There is a difficulty because the court cannot resolve issues of fact on affidavits. However, there are some cases in which the defendant's own case, although apparently it raises issues which, if found in his favour, would provide him with a defence, are so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that his defence is a sham."

4. The onus upon the defendant created by O.14 r.3 is described thus in Murjani v. Bank of India 1990 1 HKLR 586 :-

"The mere assertion of fact in an affidavit does not necessarily give leave to defend. O.14 r.3 puts an onus upon a defendant. It might be described as a threshold onus to show that there is a triable issue in the case. That onus can only be satisfied on the balance of probabilities.

The Court will test the credibility of an affidavit asserting a triable issue against the conduct of the defendant and contemporary documents"

and expanded by Cons V-P at 597 as follows :-

"..... I am unable to accept a suggestion that a defendant who is refused leave to defend in such proceedings has in some way been condemned unheard. The order does not do that. The defendant has a full opportunity to put before the court as much evidence as he wishes whether from himself or from others. That is normally done as was in the present instance, by affidavit or affirmation. What O.14 does do then, is to say that the defendant shall have no further opportunity unless he satisfies the court by that initial evidence that there is an issue or question in dispute which ought to be tried. It is to be noted that unlike criminal proceedings there is a positive burden thus placed upon the defendant. It is he who has to show that such an issue or question does arise."

5. The court was enjoined by Godfrey JA in Ng Shou Chun v. Hung Chun San 1994 1 HKC 155 at 158 to treat the matter thus :-

"..... I would sound a note of caution about Murjani which has come to be cited in almost every case under O.14 or O.86 to justify the plaintiff in asking the court to embark on a mini trial of the action on affidavit evidence. That is not a proper course for the court to take. It will in future be sufficient for the court to ask itself the simple question : "Is what the defendant says credible ?" If so, he must have leave to defend. If not, the plaintiff is entitled to summary judgment. The issue is not whether the defendant's assertions are to be believed; it is whether those assertions are believable."

6. The Plaintiff is the registered proprietor of two patents, namely :-

United Kingdom Patent No.	Corresponding Hong Kong Deemed Standard Patent No.	Date of Issue in Hong Kong
2076569	274/85("CIRC Patent")	4 April 1985
2083322	987/84 ("EFM Patent")	19 December 1984

The two patents were first registered in Japan on 21 May 1980.

7. The patents relate to the encoding of data on compact discs ("CDs") and CDs include, for the purpose of these proceedings, the full spectrum of what is called the family of CDs including CD-ROMs and VCDs.

8. CIRC is an error correction code. EFM is a channel modulation code. The Plaintiff claims that both are its inventions and they are the subject of the CIRC Patent and the EFM Patent respectively.

9. It is the Plaintiff's case that the inclusion of its CIRC and EFM codes on all data carriers in the family of CDs has become the norm and the industry standard so that all material in the family of CDs can only be played on standard equipment if they contain the patented methods.

10. The Plaintiff claims that the Defendant has infringed parts of the CIRC Patent and the EFM Patent, namely Claims 1, 2, 3, 4, 6, 10 and 11 of the CIRC Patent and Claims 1, 2, 4, 7, 8, 14 and 15 of the EFM Patent by :-

(a) making, offering to make, selling, offering to sell, disposing, offering to dispose of, using, importing and exporting products that infringe the said patents;

(b) using a process or processes that infringe the said patents; and

(c) making, offering to make, selling, offering to sell, disposing, offering to dispose, using, importing and exporting products obtained directly by means of a process or processes that infringe the said patents.

11. The Defendant is an optical disc manufacturer and is a company incorporated and operating in Hong Kong. Its directors and shareholders are Mr Lee Yuk Sang Thomas and his wife.

12. The Defendant denies that it has, with or without knowledge, in any way infringed the CIRC Patent or the EFM Patent.

13. The Plaintiff has invited the Defendant to enter into a licensing agreement in respect of the patents. The Defendant has refused to do so.

14. The Defendant's case is essentially brought under three distinct heads, namely :-

(i) That the patents are invalid;

(ii) That there has been no infringement; and

(iii) That the Plaintiff by its conduct and acquiescence is estopped from relying upon infringement and/or that it has given an implied licence to the Defendant.

Validity

15. The issue of validity was not pleaded in the Defence. The Defendant wished to argue the same before me and undertook to amend the Defence accordingly to plead invalidity. The Plaintiff took no exception to that course and I therefore gave leave for the matter to be argued.

16. The Plaintiff asserts on affidavit, and the Defendant does not deny, that:

(i) The CIRC and EFM Patents have remained in force for about 20 years;

(ii) Patents equivalent to the CIRC and EFM Patents have been registered in about 25 countries;

(iii) Over 150 CD manufacturers and replicators around the world have entered into licence agreements with the Plaintiff in respect of the CIRC and EFM Patents; and

(iv) There have been no successful challenges to the validity of the CIRC and EFM Patents in any jurisdiction.

17. The Plaintiff points to O.103 rr.19(2), 21 and 24(1) RHC in support of its submission that a dispute as to validity must be pleaded and particulars of objections served as well as evidence being specifically given in support of invalidity.

18. The Defendant's case on invalidity is set out in paragraphs 28-32 of Mr Lee's affirmation. It asserts that the patents are not patentable inventions for the following reasons :

(a) Want of novelty i.e. the inventions are not new

(b) Obviousness i.e. the patents involve no inventive step and were obvious to those skilled in the art

19. The basis of the Defendant's argument appears to be that, because the patents are based on the Reed-Solomon Code developed in about 1960, the inventive steps leading to the CIRC and EFM Codes would have been obvious to a person skilled in the art.

20. It is the Plaintiff's case that the evidence in "LYST-1" and "LYST-2" in fact supports the Plaintiff's case that at the time of the development of the Reed-Solomon Code the technology for CDs had not been invented.

21. A party who wishes to attack the validity of a patent under a summary judgment application must adduce evidence of invalidity. It is not sufficient merely to allege invalidity - Konstar Industries Ltd. v. Central World Industries Ltd. HCA 4240/99.

22. The Defendant's evidence of invalidity is stated thus: "According to the preliminary search conducted by the Defendant, there are grounds for the belief that the said patents were not novel." The Defendant then produces copies of 4 documents :-

(1) "LYST-1" an article entitled "Error Correction".

It is not in dispute that this was posted on the web-site of a Mr Michael Fry, a Maths Sciences Professor at Lebanon Valley College in the USA.

(a) In the article, Mr Fry says :

"A multiple error connecting code developed by Irving Reed and Gustav Solomon at MIT in 1960. At the time of development, technology had not reached the point where the Reed Solomon code could actually be used."

(b) Mr Lee asserts that statement in his affirmation.

(c) There is no evidence of how the CIRC system, first patented in 1980 raises the novelty and/or obviousness tests in relation to the Reed-Solomon Code.

(2) "LYST-2" an article entitled "The Ubiquitous Reed-Solomon Codes".

It is not disputed that this was published in January 1993 and was posted on the web-site of a staff member of the Computer Science Department of the University of Tennessee.

(a) The paper says inter alia :

(i) (The Reed-Solomon Codes) ..... "introduced ideas that form the core of current error-correcting techniques for everything from computer hard disk drives to CD players."

(ii) "Despite their advantages, Reed-Solomon codes did not go into use immediately - they had to wait for the hardware technology to catch up. In 1960, there was no such thing as fast digital electronics - at least not by today's standards, says McEliece. The Reed-Solomon paper suggested some nice ways to process data, but nobody knew if it was practical or not, and in 1960 it probably wasn't practical."

(iii) "The two authors knew they had a nice result; they didn't know what impact the paper would have. Three decades later, the impact is clear. The vast array of applications, both current and pending, has settled the question of the practicality and significance of Reed-Solomon codes".

(b) Mr Lee says in his affirmation that "The reason why the Reed-Solomon Code did not go into use immediately in 1960 was that there was no such thing as fast digital electronics and the hardware technology still had to catch up with the software advancement then."

(c) There is no evidence of how the 2 patents raise the novelty and/or obviousness tests in relation to the Reed-Solomon Code.

(3) "LYST-3" is a Judgment in Action No.97-1485 in the United States Court of Appeals for the Federal Circuit.

(a) Mr Lee says in his affirmation :

(i) The matter concerned optical information-storage devices.

(ii) The Defendant "does not know whether such patents were concerned with the CIRC and EFM methods or not".

(iii) It may be inferred from the judgment that -

(A) optical information-storage devices such as CDs existed in about 1972

(B) the theory or information of how to make such devices had already been published in about 1972

(C) that the alleged patented methods had already been disclosed or anticipated in about 1972

(iv) But that "whether or not such inferences can be substantiated at the end of the day can only be determined after the parties have adduced all relevant evidence at trial. For the time being, the information disclosed in the judgment is prima facie relevant and merits further investigation."

(b) Mr Jason Chin, in paragraph 26 of his affidavit on behalf of the Plaintiff, said that the patents dealt with in that case concern pits in optical discs and their inter-action with laser beams which are entirely unrelated to the inventions claimed in the CIRC and EFM Patents.

The Defendant has not denied this.

(4) "LYST-4" is a document entitled "DAR Timeline"

It is not in dispute that this was downloaded from the website of he Institute of Electrical and Electronics Engineers Inc. and relates to the history of the development of CD technology.

(a) Mr Lee in his affirmation asserts that CDs and VCDs were known in 1977 and 1978 and thus were not novel at the patent registration dates. In particular, he says that in March 1980 the CD manufacturers decided to adopt the CIRC code for disc error correction system.

(b) Mr Chin in his affidavit says that this is incorrect and points out that the timetable only says that a decision was made in March 1980 to adopt CIRC as the error correction system. He says that it was at about this time that the Plaintiff made such a decision and its first patent for this technology was filed in Japan on 21 May 1980.

(c) The timetable demonstrates that the Plaintiff was involved both alone and with others in evolving major technological creations in the field in 1969, 1973, 1977-78, 1979 and 1979-80.

(5) None of the evidence, assertions or inferences sought to be drawn by the Defendant from 'LYST-1", "LYST-2", "LYST-3" or "LYST-4" deal with the EFM Patent.

23. The evidence adduced by the Defendant alleges grounds of invalidity but does not support those allegations.

24. The Plaintiff submits that the Defendant has had ample time to adduce the necessary evidence in support of invalidity. Almost one and a half years elapsed between the commencement of the action and the hearing. Over a year elapsed between the filing of the Defence and the hearing. Some 3 months elapsed between the service of the application for summary judgment and the hearing.

25. I am not satisfied that the Defendant has met the threshold onus upon it on the issue of validity. There has been no evidence adduced to support the assertions of lack of novelty or obviousness. The Defendant's position appears to be that such evidence may emerge from cross-examination of the Plaintiff's witnesses if they are put to strict proof of every step of the Plaintiff's inventions. That is a misconception of the onus upon the Defendant to adduce evidence of invalidity - see Konstar above.

Infringement

26. The Plaintiff relies upon Section 7 of the Patents Ordinance, Cap.514 in respect of the infringing acts. Section 73 provides that :-

"73. Prevention of direct use of invention

A patent while it is in force shall confer on its proprietor the right to prevent all third parties not having his consent from doing in Hong Kong all or any of the following -

(a) in relation to any product which is the subject-matter of the patent -

(i) making, putting on the market, using or importing the product; or

(ii) stocking the product, whether for the purpose of putting it on the market (in Hong Kong or elsewhere) or otherwise;

(b) in relation to any process which is the subject-matter of the patent -

(i) using the process; or

(ii) offering the process for use in Hong Kong when the third party knows, or it is obvious to a reasonable person in the circumstances, that the use of the process is prohibited without the consent of the proprietor of the patent;

(c) where the invention is a process, then in relation to any

(i) product obtained directly by means of that process - putting on the market, using or importing the product; or

(ii) stocking the product, whether for the purpose of putting it on the market (in Hong Kong or elsewhere) or otherwise."

27. The Plaintiff relies also upon Section 76(1)(b) and (3) as to the extent of the inventions and Section 157(2) as to the acts of infringement.

28. There is an onus upon the Plaintiff to prove a prima facie case on infringement whereupon the onus shifts to the Defendant to answer the claim.

29. The Plaintiff's case on infringement is set out in the affidavits of Mr Yntema and Mr Kerk. The Defendant relies on its sole deponent, Mr Lee.

30. The patents each cover 2 aspects - the method claim and the process claim.

31. According to Mr Yntema, the CIRC Patent is for a date processing method and a data carrier produced by executing such data processing method. The data processing method is an error control code. The method is used to record encoded data onto the data carrier i.e. the CD. Errors are corrected in the decoding process and are connected up to the limit of the error correction code. He explains the method and process in some detail. His evidence is that Claims 1, 2, 3, 4 and 6 of the CIRC Patent are the method claims and Claims 10 and 11 are the process or product claims.

32. Mr Yntema then explains that the EFM Patent is for a method of coding to convert data from the raw information into a stream which can be recorded more efficiently. The coding is decoded when played on a CD or VCD player which otherwise would play with significantly degraded quality. His evidence is that Claims 1, 2, 4, 7 and 8 of the EFM Patent are the method claims and Claims 14 and 15 are the process or product claims.

33. The Plaintiff's evidence, which was not challenged by the Defendant, is that the methods claimed under the CIRC and EFM Patents have become part of the international industry standard and that it is not possible to manufacture a CD or VCD that can be played on standard equipment without using the inventions the subject of those 2 patents.

34. In so far as the Defendant's case on estoppel and implied licence is concerned, it seems to advance as part of its case that the industry in fact uses and relies upon the patented inventions which it then says the Plaintiff is not entitled to enforce.

35. Mr Yntema's evidence is that he has successfully played the VCDs produced on a standard player. He says that is itself conclusive proof that the VCDs have been manufactured using the patented methods.

36. Mr Yntema's evidence is that he then tested the VCDs concerned and concludes from his analysis that :

(a) The CIRC encoding was used using the method in claims 1, 2, 3, 4 and 6 of the CIRC Patent (method claims).

(b) The VCDs are CIRC data carriers in accordance with claims 10 and 11 of the CIRC Patent (product claims).

(c) The EFM coding method was used using the method in claims 1, 2, 4, 7 and 8 of the EFM Patent (method claims).

(d) The VCDs are EFM data carriers in accordance with claims 14 and 15 of the EFM Patent (product claims).

37. The Defendant says that the evidence of Mr Yntema as to testing and his conclusions ought not to be accepted or relied upon because they have not been tested by cross-examination. For that reason the Defendant says the matter must proceed to trial to put the Plaintiff to strict proof. The Defendant has however adduced no evidence at all in relation testing or the performance of the VCDs concerned despite have had ample opportunity to do so. It has submitted that the VCDs may have been produced otherwise than by using the patented methods, but again there is not an iota of evidence in support. It has made no attempt to approach the threshold onus by adducing evidence of a triable issue. There is simply no evidence in that regard.

38. The Plaintiff acknowledges that it may be possible to produce optical discs without using the patented methods but says these would then not meet the international industry standard and could not be played on a standard player all of which are compatible only with the Plaintiff's patented methods and processes. The Defendant however makes no claim to have produced such discs and its evidence on estoppel points the other way. The Plaintiff says that such discs would play with such inferior quality that they would not be marketable unless players compatible with them were also produced and available on the market. The Defendant says that this may not be so but has produced no evidence on way or the other. It is to be noted that the VCD exhibited all carry the logo "Compact Disc Digital Video" which indicates that the VCD complies with the international industry standard.

39. The Defendant's case on infringement of the method claims under the CIRC and EFM patents is that the patented methods were used during the pre-mastering and mastering stages but not during the replication stage. The Defendant then says that the pre-mastering and mastering were carried out by someone else and that the Defendant never used the patented methods in the replication process.

40. The Defendant has adduced no evidence in support of its bare assertion although such verification evidence ought to be available. The Defendant has also twice contradicted its stated position. The first contradiction is its Memo dated 1st February 1999 ("TYC-5") in which it asserted that it does "all the pre-replication work such as translation/ sub-title editing/ compression/ stamper/ films etc." The Defendant now says this was a false representation intended only as a commercial bluff. The second contradiction is in paragraph 12 of Mr Lee's affirmation where he says :

"The finished VCD itself is produced by the injection moulding process and the repetitive mechanical act of pressing and stamping the "sons" or "stampers", which in turn are reproduced from the "mothers", which in turn are reproduced from the "father", which in turn is reproduced from the glass master, which in turn is reproduced from the original source master or CDR at the top of the chain."

41. This statement on affirmation by Mr Lee and the argument that there is a change or loss of identity at each stage of production cannot be reconciled. The various stages of production could not be a chain leading to the final VCD product if the product changes at each stage. In that situation a different product with different properties would be produced at each stage. That so defies common sense and logic as to be "so incredible or so contradicted by contemporaneous documents or circumstances that it becomes dear that his defence is a sham" - per Mortimer JA in Manciple supra.

42. In any event, it is difficult to see how the various stages or production and the image produced at each stage are relevant. The method claims involve the use of a code as a method in production, not a physical process. Usage of the method, including the replication stage which the Defendant says it undertook would be an infringement. The fact that someone else carried out the patented method does not absolve the Defendant from liability for use of the patented method in replication.

43. Section 73 of the Patents Ordinance makes it an infringement to use any infringing product or to use any infringing process or to use any product obtained directly by using an infringing process.

44. It is the Defendant's case that the patented methods are used only in the pre-mastering and mastering stages. As data carriers produced by the patented method, the pre-master and master would infringe the product claims under the CIRC and EFM patents. Thus the use by the Defendant of infringing products in the replication stage which it undertakes would also be an infringement. The Defendant has not dealt with that aspect at all in its evidence.

45. The product claims are covered by claims 10 and 11 of the CIRC Patent, and claims 14 and 15 of the EFM Patent. Any medium that uses the patented methods is a data carrier covered by the product claims. That must include the VCD produced by replication which the Defendant claims to do and thus is covered by Section 73(b). It must also cover the pre-masters and masters that the Defendant says it uses for replication. This is covered by Section 73(a) and (c).

46. I am unable to see the logic of the Defendant's argument that VCDs are not encoders, modulators, decoders or demodulators since these are covered by other claims in the patents. It would appear to be irrelevant to the issues at hand.

47. I am not satisfied that the Defendant has put forward evidence of a triable issue. Its case consists principally of bare unsubstantiated assertions. Those assertions must also be viewed in the context of the time that has been available for it to adduce evidence if it so wished and of the knowledge which the Defendant had or ought, as a reasonable person, to have had.

48. I am not satisfied that the Defendant has crossed the threshold onus placed upon it on infringement.

Estoppel/Implied/Licence

49. The issues of estoppel and/or licence were not pleaded in the Defence. However the Plaintiff did not object to this being raised in Mr Lee's affirmation or in submissions and the matter was therefore argued.

50. The Defendant's case on estoppel/licence is set out in paragraphs 20-27 of Mr Lee's affirmation. Those against whom the Plaintiff is estopped and the licensees are described as "the factories", "traders in the optical disc manufacturing industry" and "the optical disc manufacturers". There is no assertion that the Defendant is included in any of the same or that it has been affected in any way.

51. The Defendant says that the estoppel/licence has arisen in this way :-

(a) Since 1980 equipment for CD and VCD manufacturing and replication has been made and supplied by ODME by or with the consent of the Plaintiff;

(b) ODME was a subsidiary of the Plaintiff until 1992 when it became independent of the Plaintiff although the two still do business together;

(c) Such equipment, including that at the Defendant's factory, was only fit for stamping and pressing CDs and VCDs;

(d) Such equipment was supplied to "the factories" by ODME with the Plaintiff's knowledge that the same would be used for pressing and stamping;

(e) Neither ODME nor the Plaintiff informed "the factories" or users of such equipment that a prior licence from the Plaintiff was required;

(f) The Plaintiff knew that "the factories" and users of such equipment were unaware of any licence requirements;

(g) The Plaintiff knowingly allowed "traders in the optical disc manufacturing industry" to operate for years on that basis;

(h) The Plaintiff encouraged "the traders" to continue in such mistaken belief by either itself or by ODME supplying such equipment without any requirements as to licence;

(i) The Plaintiff, by reason of its knowledge that the patented methods had become the international industry standard, approved the issue of the said patented methods by "the optical disc manufacturers";

(j) The Plaintiff knew that the ISO/IEC had not made known the existence of the Plaintiff's proprietory rights or licence requirements. In the alternative, it was a natural and probable consequence of the application of the international standard that "the optical manufacturers" would use the patented methods without being aware of the licence requirements;

(k) The Plaintiff misled "the optical disc manufacturers" by acquiescing in the incorporation of the patented methods into the international standard;

(l) The Plaintiff is inequitable and unethical by causing "the optical disc manufacturers" to be trapped into investing in the manufacture of optical discs and using the patented methods before bringing proceedings for infringement;

(m) By reason of the Plaintiff's acquiescence in the use of the patented methods by "the optical disc manufacturers" the Plaintiff is estopped from asserting its patent rights; and

(n) Further or in the alternative the Plaintiff has, by its conduct, granted an implied licence to "the optical disc manufacturers" to use the patented methods.

52. The evidence of the Plaintiff in answer to Mr Lee's affirmation is in paragraphs 16-22 of the affidavit of Mr Jason Kwan. The evidence covers 2 main heads, namely :-

(1) ODME

(i) ODME is not and was never a subsidiary of the Plaintiff or associated with it.

(ii) In 1991 the Plaintiff had a subsidiary called ODM which was involved in laser beam recorders.

(iii) In July 1991 the Plaintiff sold ODM to an unconnected company called OD&ME. After that acquisition OD&ME changed its name to ODME.

(iv) The Plaintiff had no further connection with ODM after July 1991. The Defendant's case is that its factory was established in October 1998.

(v) The Defendant has not produced any evidence that it purchased any equipment from ODME or had any transactions with ODME.

(vi) The Plaintiff denies the allegations of the Defendant, in particular that the Plaintiff knew of or encouraged traders to act upon any mistaken belief by using equipment from ODME without a licence.

(2) Acquiescence

(i) The Plaintiff relies on the affidavit evidence of Mr Yntema that the inventions have become the industry standard.

(ii) There is no separate and distinct ISO/IEC standard for VCDs.

(iii) The standard for VCDs is contained the White Book which was published in 1995 by the Plaintiff in co-operation with the Japanese companies Matsushita, Sony and Victor.

(iv) The White Book contains a specific notice as follows :

"LICENSING

Application of the VIDEO CD SPECIFICATION in both disk and equipment products requires a separate licence from Philips".

(v) The Plaintiff had therefore made it clear that a licence is required for the application of VCD specifications which include the subject patents.

(vi) The Plaintiff therefore denies misleading VCD manufacturers or lulling them into any false belief.

(vii) Numerous CD manufacturers and replicators in many countries around the world have obtained licences from the Plaintiff in relation to the patents.

53. The Defendant has not produced any evidence to dispute the Plaintiff's evidence.

54. The Defendant relies upon its assertion that ODME is a subsidiary of the Plaintiff and that either individually or together they led disc manufacturers to infringe the Plaintiff's patents.

55. There is no evidence at all from the Defendant that it has purchased any goods or material from ODME or indeed that it has had any contact or dealings with ODME. Even if ODME were connected to the Plaintiff, there is therefore no evidence that the Defendant acted upon or was in any way influenced or affected by anything that ODME may have done or failed to do. It is difficult therefore to see how ODME may be relevant to the Defendant's case.

56. There is specific evidence from the Plaintiff as to ODME and the Plaintiff. The Defendant does not deal with that evidence save to assert that ODME was a subsidiary of the Plaintiff until 1992. No evidence has been adduced in support of that assertion.

57. The Plaintiff's evidence as to the international standard for CDs is contained in paragraphs 24-26 of Mr Yntema's affidavit. It has not been denied or contradicted by the Defendant. The evidence is that:-

(a) The standard for audio-CDs is the Red Book.

(b) The standard for CD-ROMs is the Yellow Book. This has been adopted as the International Standard (ISO/IEC) for CD-ROMs which is in fact the Yellow Book written in the ISO/IEC format.

(c) The VCD is an adaptation of the CD-ROM which is itself an adaptation of the audio-CD. The VCD uses the same error control system as the CD-ROM and the audio-CD.

(d) The standard for VCDs is the White Book which is based upon the Yellow Book and the ISO/IEC.

58. The Defendant's case on estoppel/implied licence is based upon the accepted fact that optical disc manufacturers have made goods in accordance with the ISO/IEC standard and the Plaintiff's patented methods.

59. The Defendant's evidence is that it commenced business in October 1998. In the absence of evidence to the contrary, it is reasonable to infer that any machinery or equipment that it purchased for its business could not have purchased before that. By a letter dated 14 October 1998 exhibited at "KCL-3" to the affidavit of Mr Kerk, the Plaintiff gave the Defendant notice of the existence of its patents and the requirements for a licence. That is not denied by the Defendant.

60. In all the circumstances I was not able to accept the Defendant's arguments on estoppel/implied licence. I am not satisfied that the Defendant has discharged the positive burden upon him referred to in Murjani v. Bank of India.

61. The whole tenor of the Defendant's case on this application has been that it hopes by cross-examination at trial to elicit some material that may advance its case and provide the evidence it seeks to support its contentions.

62. This is not the purpose of O.14 proceedings. The authorities are quite clear on the onus and responsibilities of the respective parties to adduce evidence and put their case.

63. In my view the Defendant has failed to meet the requirements as to evidence in support of its bare assertions. The Plaintiff's evidence of knowledge, actual or implied, on the part of the Defendant is clear but has not been dealt with by the Defendant at all.

64. In all the circumstances I am satisfied that the Plaintiff's application should be allowed.

Representation:

Mr John Yan, instructed by Messrs Baker & McKenzie, for the Plaintiff

Mr Paul Wu and Gary Kwan, instructed by Messrs C K Mok & Co., for the Defendant