Sony Computer Entertainment Inc and Another v. Lik Sang International Ltd and Others
Read the full judgment text of HCA 3583/2002 on BabelCite. This High Court CFI judgment was delivered on 11 April 2003.
1. The Plaintiffs are applying for summary judgment against the Defendants in respect of their claims relating to infringement of copyright and trademark.
Cited by 2 cases
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HCA003583/2002 HCA 3583/2002 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 3583 OF 2002 __________________
__________________ Coram: Recorder J Leong, SC in Chambers Dates of Hearing: 2 & 10 January 2003 Date of Handing Down Judgment: 11 April 2003 ________________ J U D G M E N T _______________ 1.The Plaintiffs are applying for summary judgment against the Defendants in respect of their claims relating to infringement of copyright and trademark. Undisputed facts 2.The Plaintiffs manufacture and sell video games on CD-Roms and DVD format discs ("the Playstation discs"). 3.The Plaintiffs also manufacture and sell consoles ("the consoles") known as Playstation and Playstation 2 ("PS2") upon which the Playstation discs are played. 4.The Plaintiffs own the copyright and trademark in respect of the Playstation discs and the consoles. 5.The 1st Plaintiff owns the following copyright works:-
6.The 1st Plaintiff is the registered proprietor of the following Hong Kong trademark registrations:-
7.The Playstation discs incorporate a copy protection code which must be read by the consoles to enable them to play the Playstation discs. This secures the protection of the Plaintiffs' copyright and prevents the playing of game software other than the Playstation discs on the consoles. The code is also used as a regional identifier. 8.The 2nd and 3rd Defendants are the only directors and shareholders of the 1st Defendant and are actively involved in its business. 9.The 1st Defendant supplied and/or dealt in a variety of products which are capable of modifying the use of the Plaintiffs' products:-
10.The Defendants have via the internet sold a variety of mod chips and modified consoles to others including investigators employed by the Plaintiffs. 11.Mod chips and modified consoles sold by the Defendants allow the playing of unauthorized copies of the Plaintiffs' game software. 12.Consoles which have not been installed with mod chips cannot play unauthorized game software. Plaintiff's case 13.The mod chips and the modified consoles are each in breach of:-
14.The sale of the modified consoles and the hardware accessories constitute an infringement under Sections 27(1)(b) and 28 of the Trade Marks Ordinance, Cap. 43. 15.The PlayStation and PlayStation 2 games are in a form that is copy protected under Section 273(4) of the Copyright Ordinance. The copy protection code restricts the copying of these games by preventing them being played except on genuine Playstation discs. The playing involves copying both in the RAM and on-screen. 16.Mod chips and modified consoles are specifically designed or adapted to circumvent the Plaintiffs' copy protection system by enabling the consoles to play unauthorized copies of the Playstation discs. Consoles without a mod chip are unable to play such unauthorized copies. 17.Mod chips and/or modified consoles facilitate the making of infringing copies in terms of Section 23(2) of the Copyright Ordinance.
18.The Defendants know or have reason to believe that the mod chips or modified consoles will be used to make infringing copies of the Playstation games as required by Section 273(2) of the Copyright Ordinance.
19.The Defendants have sold copying devices in breach of Section 32 of the Copyright Ordinance.
20.The Defendants have sold modified goods bearing the trademarks of which the 1st Plaintiff is the registered proprietor without the Plaintiffs' consent in breach of Section 27(1)(b) of the Trade Marks Ordinance.
21.The Defendants possessed sample hardware accessories bearing the Plaintiffs's trade marks one of which was sold to the Plaintiffs' investigators in breach of Sections 27 and 28 of the Copyright Ordinance. 22.The 2nd and 3rd Defendants are personally liable as directors and shareholders of the 1st Defendant.
Defendants' case 23.Mod chips and modified consoles enable legitimate uses to be made e.g. the playing of multi-region games and DVD movies, self-written games, lawful back-up. 24.The prime purposes of the Plaintiffs' code are as a regional identifier and as playing protection rather than copying protection. 25.Whilst the Plaintiffs code protection prevents the playing of counterfeit discs, it cannot prevent all copying because copying can be achieved by other means e.g. by a computer. 26.Modified consoles may not be necessary to play counterfeit discs because a Japanese magazine has reported a "trick" whereby counterfeit discs can be played on genuine PS2 consoles. 27.The statutory requirement for copying is not shown by the Plaintiffs to be satisfied.
28.The Plaintiffs have failed to prove their case under the Trade Marks Ordinance in that:
29.The Court should follow the interpretation adopted in Kabushiki Kaisha Sony Computer Entertainment v. Stevens 2002 FCA 906 because the Australian legislative provisions on copyright are very similar to those in Hong Kong. 30.The Plaintiffs' claims in respect of the hardware has been settled in that the Defendants offered terms which the Plaintiffs have not specifically rejected. 31.The 2nd and 3rd Defendants have no personal liability because they have not acted knowingly or recklessly:
The test for summary judgment 32.The Court must look at the whole situation and ask itself whether the Defendants have satisfied the Court that there is a fair or reasonable possibility of the Defendants having a real or bona fide defence. 33.There is relatively little in dispute on the facts, and the Plaintiffs invite the Court to accept the Defendants' account of the facts in the event of any differences between the parties. The issues 34.Is the Plaintiffs copy-protection system designed to or capable of preventing counterfeit discs from being played on the Plaintiffs consoles. 35.Are the mod chips and modified consoles devices designed to circumvent copy-protection under Section 273 of the Copyright Ordinance. 36.Did the Defendants provide the means to make infringing copies under Section 32 of the Copyright Ordinance. 37.Do the Defendants' devices infringe the Plaintiffs' copyright by copying pursuant to Section 23 of the Copyright Ordinance. 38.Does the copying infringe the Plaintiffs' copyright under Section 22 of the Copyright Ordinance. 39.Do the Defendants' actions constitute infringement of the Plaintiffs' trade marks under Section 27(1)(b) of the Trade Marks Ordinance. 40.Did the Defendants' actions infringe the Plaintiffs trade marks by deceiving or causing confusion or indicating a connexion to the Plaintiffs' goods under Section 28(2) of the Trade Marks Ordinance. Findings 41.It is not in dispute that the Plaintiffs products contain a copy-protection code - see paragraph 7 above. The Defendants argue that the code operates also as a play-protection cover and that the protection against copying is not a total safeguard against copying which can be achieved on most computers. It is clear that the Plaintiffs' code is a device within the meaning of Section 273(4). 42.The Defendants' devices (mod chips and modified consoles) come within the ambit of a "device or means specifically designed or adapted to circumvent the form of copy-protection employed" by the Plaintiffs under Section 273(2)(a). It is no defence that the devices may also have other innocent functions e.g. as playing protection. It is not a matter of degree and the devices offend under the Ordinance so long as at least one of their uses are infringing Sony Computer Entertainment Inc. v. Paul Owen (supra). 43.The Defendants admit that the devices are capable of performing an infringing function i.e. circumventing the copy-protection code. Their defence is that because the devices have other legitimate uses, they are outside the definition in Section 273(2)(a) of being specifically designed or adapted for circumvention purposes. But there is nothing in the Ordinance that requires the use to be exclusive, and in the Paul Owen case Jacob J. makes exactly that point. That is also accepted in the Australian case of Kabushiki Kaisha Sony Computer Entertainment v. Stevens (supra) upon which the Defendants rely heavily. 44.It is clear from the evidence of the 2nd and 3rd Defendants that they are aware that the mod chips and modified consoles are capable of circumventing the Plaintiffs copy-protection code. This is evident from the 2nd Defendant's 4th Affidavit, the 3rd Defendant's admission to the Plaintiffs' investigators, information posted on their website by the Defendants, and can be inferred from the 3rd Defendant's email communications to Tim Smith and Paul Owen. This is knowledge sufficient to satisfy the requirements of Section 273(2)(a). 45.The parties are in dispute as to whether the Defendants' devices are capable of being used to make infringing copies under Sections 23 and 273(2). 46.The parties agree that a two stage process ensues when counterfeit discs are played on modified consoles:
47.The Plaintiffs say that the copying into the RAM is reproduction in a material form and rely upon Sections 22 and 23 of the Copyright Ordinance, Section 17 of the Copyright Designs and Patents Act 1988 ("the UK Act") and The Modern Law of Copyright and Designs, 2nd Edn. ("the textbook").
48.The Defendants argue that the copying from the disc into the RAM is not in material form as required by the Ordinance in that:
I will deal with these seriatim.
49.The Defendants have admitted the requisite knowledge under Sections 273 and 32 of the Copyright Ordinance - see paragraphs 18 and 19 above. The evidence of the Plaintiffs of the other factual elements to be proved under those sections has not been denied. 50.The main issue of whether the Plaintiffs' trade marks have been infringed under Sections 27 and 28 of the Trade Marks Ordinance turns on whether the use of the mark is likely to cause confusion under Sections 27 and 28 of the Trade Marks Ordinance. 51.The modified consoles offered and sold by the Defendants each bear the Plaintiffs registered trade marks. To that extent, the Plaintiffs' exclusive use of the mark has been infringed because the goods clearly carry and are intended to convey a connexion to the Plaintiffs. Such usage is an infringement of the Plaintiffs' rights under Section 27(1). 52.Even if purchasers are aware of the unauthorized modification by the Defendants (which the Defendants say, and I accept, would be known to customers whom they would alert as to loss of warranty), the fact that the item continues to bear the Plaintiffs' mark is an infringement under Section 28. 53.The samples in the Defendants' possession, one of which was sold to the Plaintiffs' investigator, bear the Plaintiffs' mark. The offer for sale by sample carrying the mark is a clear use of the mark in the course of trade and is an infringement under Sections 27 and 28. 54.There is no substance in the Defendants' assertion that the Plaintiffs are estopped from proceeding against them in respect of the hardware accessories. It is not in dispute that the parties entered into negotiations in relation to the accessories. It is not in dispute that the Defendants made an offer of acceptance which the Plaintiffs did not respond to. It cannot follow that because the Plaintiffs, having considered the offer, chose to ignore it that somehow their failure to actually accept or reject the offer could or should be somehow inferred to be an acceptance. 55.The 2nd and 3rd Defendant held controlling managerial positions in the 1st Defendant and were knowingly and directly involved in important aspects of the activities the subject of these proceedings. They are therefore personally liable both for their own activities and for the relevant acts of the 1st Defendant. 56.The Defendants have not raised any arguable or credible case and have failed to show a bona fide defence to the Plaintiffs' claims. There are no issues of fact between the parties, the Plaintiffs having urged the Court to accept the Defendants' case on the factual issues. It is therefore a case where summary judgment should be entered in favour of the Plaintiffs with damages to be assessed. Interim payment 57.The Plaintiffs seek interim payment of HK$8 million on account of damages to be assessed following judgment under Order 29 rule 10. 58.The only factual evidence as to quantum comes from the Plaintiffs' evidence of the quantity of goods seized in the Defendants' premises and the Defendants' evidence as to their sales turnover. There is at present no evidence as to actual net profit from the Defendants' sales of the infringing products. The Plaintiffs have tried to rationalize a figure based upon their potential loss of profit. 59.The Defendants say that interim payment should not be ordered until assessment of damages has been carried out. But that would negate the purpose and use of interim payment because final damages would then be known. Order 29 rule 10 makes it clear that interim payment can be sought at any time after the writ has been served. 60.Order 29 rule 11(1) provides that any sum of interim payment should be just and in reasonable proportion to the likely damages recoverable. 61.The Plaintiffs submit that their estimated loss of gross sales calculated upon the Defendants' stock of infringing goods amounts to about HK$192 million. But they provide no figures for gross or net profit that would have been derived therefrom. There is therefore no evidence from either side as to the actual loss suffered by either. 62.Any amount of interim payment is, to an extent, an educated guess which, if wrong, can be corrected by adjustment at the assessment stage. However the amount should be sufficient to provide some interim relief to the Plaintiffs whilst not being so high as to cripple or ruin the Defendants financially. It is to be remembered that the Defendants are engaged also in business other than dealing in the infringing goods. 63.The Plaintiffs have not demonstrated any identifiable significance between the figure of HK$8 million which they seek and the loss of sales that has been deposed to. They say simply that their figure is not unreasonable. The Defendants say that the sum of HK$8 million is too high and would ruin them financially. 64.In the circumstances of this case, an interim payment by the Defendants would be appropriate. But in my view an amount of HK$5 million would adequately meet the situation. Order 65.There will be an order in terms of paragraphs 1-9 and 11 of the Plaintiffs's summons issued on 10 October 2002. 66.The Defendants shall make to the Plaintiffs an interim payment of HK$5 million on account of damages. Dated this 31st day of March 2003.
Representation: Miss Winnie Tam, instructed by Messrs Lovells, for the Plaintiffs Mr Simon S.M. Yip, instructed by Messrs George Tung, Jimmy Ng & Valent Tse, for the Defendants |