The Queen v. Megabyte Magnetic Industrial Co Ltd. and Another

HCMA000216/1996

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

MAGISTRACY APPEAL NO. 216/96

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Coram : The Hon. Mr Justice Gall in Court

Date of Hearing: 7th of June 1996

Date of Judgment : 26th of June 1996

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JUDGMENT

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1. Each of the Appellants was convicted on the 19th of January 1996 of one charge of possession of, for the purpose of trade or business, 4850 copies of compact discs containing songs in which copyright subsisted, contrary to section 5(1) of the Copyright Ord. Cap 39 and one charge of possession for the purpose of trade or business of 2497 CD-ROM discs containing Microsoft DOS Version 6.21 in which copyright subsisted contrary to section 5(1) of the Copyright Ord. Cap 39.

2. The case for the Prosecution was agreed under Section 65(C) of the Criminal Procedure Ord. On the 12th of July 1994 Customs officers seized from a lorry coming from China to Hong Kong at the Lok Ma Chau checkpoint 4850 copies of a compact disc containing 17 songs 2 of which infringed copyright and 2797 CD-ROM discs which used as the disc operating system a programme which infringed copyright. The consignee of the goods was the 1st Appellant and the 2nd Appellant is a director of that company. The Appellants admitted their possession of the infringing copies for the purpose of trade or business.

3. It is obvious from the findings of the Magistrate that she accepted the factual evidence given by the 2nd Appellant on behalf of both Appellants but found on the balance that evidence did not satisfy the statutory defence to the section under which the Appellants were charged.

4. That section reads :-

5. The 2nd Appellant was to all intents and purposes the 1st Appellant. The Appellants dealt mainly with the import and export of floppy discs from its formation in March 1994 on the foundation of an existing business name trading as Megabyte Magnetic Industrial Company which had been set up by the 2nd Appellant in January 1993. In November 1993 an approach was made to the Appellants by a Belgian company which resulted eventually in an order for 5000 Compact Discs and 2500 CD-ROM discs in about June 1994. This was the first time the Appellants had dealt in this merchandise and the value of the contract to the Appellants was US$ 7350.

6. It is clear from the evidence of the 2nd Appellant, as the Magistrate found, that he was well aware that he had to satisfy himself that the fulfilling of the order did not involve the infringement of copyright. The method by which all the discs were to be produced was as follows. The company in Belgium was to supply to the Appellants the master or stamper disc from which the copy discs were to be made and the Appellants were to find a company to produce copies from these master discs and return the masters with the copy discs to fill the order.

7. The sole issue before the Magistrate was the statutory defence and the onus was on the Appellants to satisfy the Magistrate on the balance of probabilities that either they did not know or had no reason to believe the copies infringed copyright. It is interesting to contrast the duty placed upon the Appellants under section 5(1) of this ordinance with the far higher duty imposed by the legislature in the defence provided in section 6A(5) of the Import and Export Ord Cap. 60 :-

"It is a defence to a charge under subsection (4)(b) for the person charged to prove that he made all reasonable enquiries....... and satisfied himself...."

In that section to invoke the statutory defence a person charged must show on the balance he actively pursued information. A lesser standard was set by section 5(1) and I adopt the test set out by Bewley J. in The Queen v Ng Kwan pui Magistracy Appeal No. 223 Of 1988 where he said in approval of the words of Buckley C J in Infrafabrics Ltd. and others v Jeytex Ltd. (1980) 1 Ch. 282 :-

"This is a persuasive authority that a person in the position of the appellant has a duty to make some enquiry about copyright from his artwork producer when he is contemplating the production of a cassette containing songs by someone as well known as Stella Chee."

The important words are of course " ..has a duty to make some enquiry about copyright."

8. The Magistrate accepted that the 2nd Appellant first went to what appeared to him to be a reputable company in southern China whose business it was to produce compact discs and CD-ROMS. He did so on the recommendation of a friend and upon a person inspection of its premises in Shenzhen. It was not contested that company was set up as a joint venture with an internationally known and respected manufacturer from Holland. There was nothing there to put him on guard. As a result of discussions with that company he was made aware that before the copies were made he would have to undertake that the company placing the order with him had the legal right to copy the works and to authorise the company in Shenzhen to make copies.

9. The 2nd Appellant set about enquiring as to how he could satisfy the requirements. He visited the Intellectual Property Department of the Hong Kong Government who could not assist him but who referred him to the Customs and Exise Department and received no assistance from them. He wrote to the Belgian company requesting from them a letter in the form of a copyright license setting out their right to the copyright and authorising the Appellants to make copies of the works. He did not receive from that company the detailed response he requested. What he received was a letter from the company in Belgium headed "COPYRIGHT AUTHORITY LETTER" purporting to licence the Appellants to copy the disc and accepting responsibility for the intellectual property copyright. The 2nd Appellant forwarded a copy of that letter to the company in Shenzhen who agreed to accept it as confirmation that the company in Belgium had the right to copy the material on the stampers and authorised the Appellants to make copies.

10. The Appellants were satisfied by that acceptance and the production of the discs went ahead. The Magistrate found that the Appellants had failed to satisfy the burden placed upon them for two reasons. Firstly because the letter received by the 2nd Appellant fell short of the specific details requested by him and secondly because he relied upon the opinion of the Shenzhen company that the letters from the Belgian company amounted verification of copyright proprietorship. She was of the view that by accepting a letter which fell short of the details he had requested the 2nd Appellant was shutting his eyes to the real situation. I am of the view that the Magistrate placed the factual hurdle for the Appellants too high. The 2nd Appellant on behalf of himself and the company did make enquiries as to what was required. He made a request for confirmation of the right to the intellectual property of the works in the hands of the Belgian Company. Whilst he did not receive a reply setting out the specific assurances he had requested he did receive letters headed with the words "copyright authority letter" licensing the Appellants to copy the works and stating "we will be responsible for the intellectual property, copyright." In my view he was entitled in the particular circumstances of this case to accept, in the absence of any circumstance that ought to have made him wary, a letter which on the face of it represents that the Belgian company had the right to licence the copying of the material and took responsibility for the intellectual property and copyright matters.

11. Given the enquiries made by the Appellants, the undertakings received from the company in Belgium and the acceptance of those undertakings by another company in the business, the company in Shenzhen, which company was a joint venture with a large European company which itself produces music compact discs I am satisfied the Appellants had established on the balance that they did not know and by their endeavours had no reason to believe that the material infringed copyright.

12. Mr. McCoy referred me also the recent case of The Queen v Aziz and others decided by the House of Lords in April 1995 which held that a defendant who did not have any relevant previous convictions and who had testified or made pre - trial statements or statements containing admissions as well as self - exculpatory explanations was prima facie entitled to a good character direction going both to credibility and propensity. He argues here that the Magistrate failed to give that direction. The Magistrate fills the function of both judge and jury and it is not necessary that in every reason for the findings made by a Magistrate he should recite each statement of the law upon which he relied. Here the Magistrate accepted the factual nature of the evidence of the 2nd Appellant but did not accept the conclusions he drew from those facts. In these circumstances no specific direction by a Magistrate was needed.

13. The appeals against conviction are allowed, the convictions are quashed and the fines set aside.

Representation:

Mr. K.S. Kripes S.C.C for the Crown

Mr. G.J.X. McCoy inst'd by Messrs Ruby Yeung & Lau for the Appellants