HKSAR v. Elegant Technology Ltd

CACC 448/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CRIMINAL APPEAL NO. 448 OF 2003

(ON APPEAL FROM DCCC 433 of 2003)

____________________

____________________

Before: Hon Stuart-Moore VP, Hartmann and Lugar-Mawson JJ

Date of Hearing:   29 April 2004

Date of Judgment:  6 May 2004

____________________

JUDGMENT

____________________

Stuart-Moore, VP (giving the judgment of the Court):

Background and charges

1.On 7 October 2003, the applicant, Elegant Technology Limited (“Elegant Technology”), a licensed optical disc manufacturing company, was convicted on each of the three charges it faced under the Copyright Ordinance (“the Ordinance”), Cap. 528, following a trial in the District Court before Judge Sweeney.  Financial penalties were imposed amounting to a total of $288,000.

2.Chan Pik-fong (D1) was also convicted on the three charges alleged in the charge sheet.  She held the licence to manufacture optical discs in Hong Kong, pursuant to sections 3 and 5 of the Prevention of Copyright Piracy Ordinance, Cap. 544, on behalf of Elegant Technology.  D1’s application for leave to appeal against conviction was abandoned in February.  A third defendant at trial (D3), one of the two directors of Elegant Technology, was acquitted on all the charges.

3.Elegant Technology sought leave to appeal against its conviction on all charges.  At the conclusion of the hearing we dismissed the application and made an order for costs against Elegant Technology in the sum of $84,000 to be taxed if not agreed.  We now give our reasons for dismissing this application.

4.The first and second charges each alleged the making for sale or hire an infringing copy of a copyright work, contrary to sections 118(1)(a) and 119(1) of the Ordinance.  The first of these charges alleged against the applicant and its co-defendants that they:

“…. on the 21^st day of March 2002, at Flat B & Portion of Flat C, 7/F., Tai Chi Factory Building, 25-29 Kok Cheung Street, Tai Kok Tsui, Kowloon, in Hong Kong, without the licence of the copyright owner, made for sale or hire 80 video compact discs being infringing copies of copyright works, namely films.”

5.The particulars of the second charge related to 2 April 2002 but were otherwise expressed in the same terms save that the VCDs referred to therein were eight in number.

6.The last charge, contrary to sections 118(4)(d) and 119(2) of the Ordinance, alleged the possession, on 18 July 2002, of articles:

“…. namely, 75 stampers which were articles specifically designed or adapted for making copies of particular copyright works, namely films, and which articles were used or intended to be used to make infringing copies of the said copyright works for sale or hire or for use for the purpose of or in the course of any trade or business.”

The facts

7.Although this was a relatively simple case, it is necessary to go into the facts in some detail having regard to the nature of the ground of appeal which was advanced.

8.Customs and Excise officers first raided Elegant Technology’s premises on 21 March 2002 and they did so again on 2 April 2002.  On each occasion, they discovered that episodes of a cartoon film described as “Blue Cat 3000 Questions” (“the cartoon”) were being copied there.  On the first raid, each of the seven optical disc production lines were operating to produce eight VCDs simultaneously, and three printing machines were printing the surface material required for the discs, again with eight VCDs in each machine.

9.The first raid occurred in D1’s absence.  When she eventually arrived at the premises, she showed the Customs and Excise officers two documents which together purported to amount to a valid authorisation for Elegant Technology to produce copies of the cartoon.  The first of these documents (Exh. P3), dated 1 March 2002, purported to be issued by Hunan Electronic & Audio & Visual Publication Corporation (“Hunan Electronic”) to Kai Lok Cultural Media Company Limited (“Kai Lok”) authorising Kai Lok to produce VCDs of fifty episodes of the cartoon.  The second document (Exh. P4) was described as a “certificate for authorisation of processing”, dated 1 March 2002, and was purportedly issued by Kai Lok, authorising Elegant Technology to produce VCDs of the same episodes of the cartoon.  In addition, D1 provided the officers with a document (Exh. P5) showing the placement of orders for 250,000 VCD copies of the cartoon and seven other pages of records (Exh. P6).

10.On the day following the first raid, Customs and Excise officers were furnished with further documentation (Exh. P8) which purported to show that Hunan Electronic had authorised Kai Lok to produce a further fifty episodes of the cartoon and that Kai Lok had, in turn, authorised Elegant Technology to produce those episodes.

11.On 2 April 2002, during the second raid, Customs and Excise officers seized eight VCDs of the cartoon from a production line which was again manufacturing VCDs of the cartoon.  Copies of exhibits P3 and P4 were produced to justify this activity.

12.Elegant Technology’s premises were raided for a third time on 18 July 2002 when seventy-five stampers of the cartoon were seized together with fifty-three film negatives for printing onto the surface of VCDs of the cartoon and seven mould heads, each bearing a manufacturer’s code.

13.Evidence was provided in due course by Mr Leng Xu-jia (PW2), vice-president of Hunan Sanchen Ku Cartoon Programmes Development Company Limited (“Hunan Sanchen”), the Mainland copyright owner, that he subjected the eighty-eight VCDs of the cartoon, which in total had been seized from Elegant Technology in the two raids, to a detailed examination.  He provided unchallenged illustrations of what he found when determining that the VCDs were infringing copies.  The evidence given by PW2 also included the production and adoption of his affirmation (Exh. P11), made pursuant to section 121 of the Ordinance, which was considerably augmented by his testimony in court.

14.Amongst other things about which PW2 was able to inform the court, he said that the cartoon was the “Oriental Disneyland”, that it went out to a television audience of about 350 million children every week and had qualified for entry in the “Guinness Book of Records” by being the world’s longest cartoon, albeit divided into eight hundred episodes each of fifteen minutes’ duration.  In particular, it was PW2’s responsibility to authorise licensees to produce copies of the cartoon and he denied ever having authorised D1 or Elegant Technology to do this.  He named Royal Century International Limited (“Royal Century”) as the sole authorised licensee in Hong Kong and Macau for this purpose.  He also produced the relevant licence (Exh. P12), the fee for which was US$33,000.

15.Royal Century’s marketing manager (PW6) confirmed that neither D1 nor Elegant Technology had been authorised to reproduce the cartoon.

16.Evidence, summarised in the judge’s Reasons for Verdict, concerning Kai Lok, to which reference was made in the so-called authorisations produced by D1 to show that Elegant Technology was permitted to make copies of the cartoon, revealed that:

“25.    There was no compan(y) or business registration under the name of Kai Lok Cultural Media Company Limited in Hong Kong.

26.    The address of Kai Lok appearing on the letterheads of Exhibits P4 and P9 in fact belonged to the ‘Wah Shing Trademark Factory’ for a number of years, whose owner is Mr Chen Yan-ho (PW4).  He had never heard of Kai Lok, nor had he ever authorised them to use his address on their note paper.

27.    The telephone number of Kai Lok on the letterheads of Exhibits P4 and P9 (2365-6286) in fact has belonged to the subscriber Mr Tam Wing-chung (PW5) for a number of years.  This was confirmed by PCCW by a computer certificate.  Again, this witness had never heard of ‘Kai Lok Cultural Media Company Limited’.”  (Appeal bundle p. 20)

17.Hunan Electronic, which had purportedly authorised Kai Lok to produce copies of the cartoon, if the “authorisations” produced on behalf of Elegant Technology were anything to go by, was represented at trial by Mr Wu Wan-ping (PW3), its vice-president, who stated that no authority had ever been given to Kai Lok or Elegant Technology for this purpose.  PW3 was also able to say that the alleged authorisations (exhibits P3 and P4) were forgeries.

18.The real issue at trial, however, concerned a suggestion which was made to PW6 in cross-examination that Asian Winning Limited, a subsidiary company of Royal Century, had caused a fax to be sent to Elegant Technology which, as the judge expressed it, was supposed to be:

“…. somehow confirmation of either:

(a)    An oral agreement in early March (2002) to allow the defendant company to reproduce ‘Blue Cat 3000 Questions’; or

(b)    A retrospective licence or authorisation to reproduce same.”  (Appeal bundle p. 21)

Miss Chan Wah-ling (PW7), who was the general manager not only of Royal Century but also of Asian Winning Limited, together with her secretary Miss Yu So-ling (PW12), were called to rebut this suggestion.  In so doing, evidence was given that Royal Century’s only function was the purchase and sale of copyright agreements and that Asian Winning Limited was sometimes subcontracted by them to engage outside factories to make copies of materials in which Royal Century either had the full copyright or, alternatively, had the copyright which was limited to Hong Kong and Macau.  Although Elegant Technology had sometimes been engaged as the outside factory to do this work, PW7 had never negotiated, orally or otherwise, with D1 or Elegant Technology for the reproduction of the cartoon prior to 9 April 2002, which was itself almost three weeks after the first raid.

19.There then followed important evidence concerned with events on 9 April 2002 and thereafter given by PW7 which was summarised by the judge in the following terms:

“38.    On 9 April 2002, (PW7) had been requested by a Mr Cheung Ka-leung of the defendant company to come along to discuss copyright matters concerning ‘Blue Cat 3000 Questions’.  By this time, she was aware from rumours in the trade that the defendants had been raided a couple of weeks earlier and that ‘Blue Cat 3000 Questions’ VCDs had been seized from their factory.  However, she did not yet know what action, if any, Customs & Excise would take over those seizures.

39.    The meeting took place at the coffee shop of the City Garden Hotel with Mr Cheung (D3), a Miss Lee and Mr Peter Cheung (who is in fact the solicitor for the defendants in this trial) present on behalf of the defendants’ company.  During the course of this meeting, Miss Chan (PW7) was offered money ‘between $100,000 and $200,000’ to backdate a letter of authorisation to the defendant company to reproduce ‘Blue Cat 3000 Questions’.  At one point, at the request of the solicitor Mr Peter Cheung, she had returned to her office to pick up the copyright documents to show them that her company did in fact have such authority.  It seems she then believed that a deal was imminent because she instructed her secretary, Miss Yu (PW12), to prepare a draft letter of authorisation (Exhibit P17).  (I note here that that letter has a commencement date of ‘25 March 2002’ – i.e. four days after Customs & Excise’s first raid, so it would have been of no use to the defendant company to stave off this prosecution.  This clearly shows that Miss Chan (PW7) had not come to any concluded agreement with the defendants’ representatives as she had not discussed this date in detail.)

40.    Miss Chan (PW7) then returned to the coffee shop meeting bringing along her copyright documentation, but no agreement was concluded with the defendant company’s representatives.  She then went back to her office and told Miss Yu (PW12) that the deal was off, to be told, ‘Oh, but I faxed over the draft to them already.’  As it was just a draft and no money had changed hands, Miss Chan (PW7) then forgot about the whole episode until confronted by the defendants’ copy of the fax last week.

41.    When questioned on the purpose of this coffee shop meeting, she testified that the granting of a retrospective licence was ‘an exceptional request that would require an exceptional price’.  At the time, she foresaw two possible consequences of the difficulties the defendant company faced: either (a), it would become a criminal matter, in which case a retrospective authorisation could be construed as ‘a forged document’ and she did not want to take part; or (b), it would become a civil matter and ‘I didn’t want to have to retain a lawyer to argue with them.  To me, I could accept compensation instead.’

42.    In the event, she did not reach any agreement, retrospective or otherwise, with the defendant company’s representatives.  Her secretary, Miss Yu (PW12), confirmed that she had only been asked on the afternoon of 9 April to prepare a ‘draft authorisation letter’ and had faxed it to the defendants’ company by mistake.”  (Appeal bundle pp. 22-23)

20.It is not without significance that PW6, on behalf of Royal Century, the copyright owner’s authorised licensee in Hong Kong, was at no stage cross-examined about Kai Lok which was, of course, the company stated in exhibits P3 and P4 to have authorised or licensed Elegant Technology to reproduce the cartoon.

Defence case

21.The case for the defence consisted almost entirely of an attempt to show that something in the form of a retrospective licence from Asian Winning Limited had been granted to Elegant Technology to reproduce the cartoon.  Alternatively, it was suggested that the prosecution had failed to produce an unbroken chain of evidence amounting to satisfactory proof of the charges.

22.No witnesses testified for the defence.

Judge’s assessment

23.The judge, in a concise assessment of the evidence, accepted the testimony given by the witnesses from Royal Century and Asian Winning Limited concluding, so far as D1 and Elegant Technology were concerned, that:

“…. this was an ‘open and shut case’, with overwhelming evidence that the defendant company was producing massive amounts of ‘Blue Cat 3000 Questions’ VCDs on 21 March 2002 and, to a lesser extent, on 2 April 2002 without the licence of the copyright holder.  The fact that D1 presented forged letters of authorisation to try to justify such production only goes to reinforce the prosecution’s case.  If they had a genuine licence, why go to all of this trouble to produce a forged one?

48.    Similarly, if they had a licence from ‘Asian Winning’ at the relevant time, why attempt to bribe Miss Chan (PW7) into producing a retrospective one on 9 April 2002?”  (Appeal bundle p. 24)

24.It is not surprising, therefore, that the judge had little difficulty in rejecting the case advanced on behalf of the defence.

The application

25.Mr Gary Plowman, SC, on behalf of Elegant Technology, advanced a single and lengthy ground of appeal, which in reality amounted to two separate and distinct grounds, when submitting that the applicant’s conviction on each charge was unsafe or unsatisfactory.  The ground, as drafted, reads as follows:

“The prosecution failed to discharge the burden of proving that the video compact discs and stampers seized from the premises of the 2^nd Applicant on the occasions in question were infringing copies or were used or intended to be used to make infringing copies, in that:

(i)    The Affirmation of (Leng) Xu Jia (PW2) (Exh. P.11) was wrongly admitted into evidence as it failed to comply with the requirements of Section 121(1) of the Copyright Ordinance, Cap. 528, in the following respects:

(a)    it failed to state the date that the work was made or first published (column 4) as required by Section 121(1)(a);

(b)    it failed to state the residence or right of abode of the ‘producer’ (column 6) and ‘principal director’ (column  5) of the work as required by Section 121(1)(b);

(ii)    The oral evidence of PW2 (Leng) Xu Jia (in which he adopted the contents of his affirmation) failed to prove beyond reasonable doubt the issues of subsistence and ownership of the copyright of the works in question, for the following reasons:

(a)    in his affirmation he stated that manufacturing took place between 1999 and May 2002, yet he further testified orally that the copyright owner was Hunan Sanchen which company was not incorporated until 6^th January 2000.

(b)    he failed to testify as to who owned the copyright for the works created prior to 6^th January 2000, and whether or not:

(1)    any of the video compact discs seized and which he examined, purported to be copies of works created prior to that date, and

(2)    any of the stampers seized and which he examined were used or intended to be used to make works created prior to that date.

(c)    he gave conflicting evidence as to how it was that Hunan Sanchen acquired the copyright in the works, in that:

(1)    in column 6 of his affirmation he stated that the copyright belonged to Hunan Sanchen by virtue of the employment contract of the producer Mao Heng Xin, whereas

(2)    in his oral evidence he stated that Mao Heng Xin was not an employee of Hunan Sanchen and

(3)    in his oral evidence he stated that the film was produced by Hunan Sanchen.”

26.The complaint raised in this ground under (i), that PW2’s affirmation had been wrongly admitted in evidence because of the two technical failures set out in (a) and (b) were, as Mr Plowman, who did not appear in the court below, readily and candidly accepted, never raised at trial.  His point was simply that because the affirmation did not comply with the provisions of section 121 of the Ordinance, which allow evidence to be given by way of affidavit (or affirmation) by or on behalf of a copyright owner, it was, for that reason alone, inadmissible.

27.The basis of this argument arises from the judgment of the Court of Final Appeal in Tse Mui-chun v HKSAR [2004] 1 HKLRD 351, which was given after the present case had ended.  In Tse Mui-chun, where the offences were the same as those with which we are presently concerned, the court had first to decide whether, on a true construction of section 121 of the Ordinance, hearsay evidence was permitted.  Secondly, if it was, whether section 121 was constitutional.  Both questions were decided in favour of the respondent.

28.However, in the course of argument, in the proceedings before the court, it emerged, quite independently, that there were defects in the two affirmations which had been produced as proof of the copyright ownership on the part of the two owners.  This led the court to allow the appeal because, as the respondent had taken a “statutory shortcut” under section 121(1) as it was aptly described, its conditions had to be strictly observed.  As they had not been, due to a technical defect in the drafting of one of the paragraphs in the affirmations, there was held to be no admissible evidence from the copyright owners.

29.So it was that Mr Plowman, in these proceedings, drew our attention to the passage in Tse Mui-chun at p. 367 which reads:

“41.    We now come to the point that emerged in the course of the hearing of this appeal.  It is a technical point but, nonetheless, a point of substance.  A s.121 affidavit or affirmation is not admissible in evidence unless it states the matters required to be stated by paras.(a) to (e) of sub-s.(1).  Each of these paragraphs must be complied with.  If any is not complied with, the affidavit or affirmation is not admissible.  Mr McCoy (for the respondent) rightly accepted that this was so.”

Such technicalities in that case were as immaterial to the issues at trial as they are in this present case but, as the point had met with success in the Court of Final Appeal, Mr Plowman submitted that he was entitled to rely on the same point in these proceedings however unmeritorious it might sound.

30.To this limited extent he was entirely right.  The Court of Final Appeal has ruled that if the “statutory shortcut” route is taken in proving the ownership of copyright which is only permitted because of the potential difficulties which would be involved if such a course was not possible, strict compliance with the provisions of section 121(1) is required, failing which the affirmation in question will not meet the test of admissibility.

31.Section 121 of the Ordinance provides that:

“(1)    An affidavit which purports to have been made by or on behalf of the owner of a copyright work and which states-

(a)    the date and place that the work was made or first published;

(b)    the name, domicile, residence or right of abode of the author of the work;

(c)    the name of the owner of the work;

(d)    that copyright subsists in the work; and

(e)    that a copy of the work exhibited to the affidavit is a true copy of the work,

shall, subject to the conditions contained in subsection (4), be admitted without further proof in any proceedings under this Ordinance.”

32.Dealing with Mr Plowman’s first contention that the prosecution had failed to prove that the VCDs and stampers taken from Elegant Technology were infringing copies or were used or intended to be used to make such copies, his particular complaints were directed at the failure of PW2 to state in his affirmation “the date that the work was made or first published” and “the residence or right of abode of the ‘producer’ and ‘principal director’ of the work”.  (Although section 121(1)(b) of the Ordinance makes no reference to “producer” or “principal director”, by virtue of section 11(1) and (2)(b) of the Ordinance these persons are taken to be the persons who created the work and are therefore to be regarded as the “authors”).

33.With regard, firstly, to the suggestion that the affirmation had failed to comply with the requirement to provide the author’s residence or right of abode, a glance at the provisions of section 121(1)(b) of the Ordinance reveals that “the name, domicile, residence or right of abode of the author of the work” must be stated.

34.In our opinion, although Mr Simon Kwan for the respondent argued that the plain understanding from these words was that the domicile, residence or right of abode were all alternatives, and that because the affirmation provided the author’s name and his domicile, it complied with the terms of the provision, Mr Plowman’s submission that each had to be stated was in our opinion correct.  The provision was not in terms of “name or domicile, residence or right of abode”, but “name, domicile, residence or right of abode”.

35.Accordingly, as the places of residence of the authors in the sense of the state or territory in which they resided and not, as Mr Plowman sought to argue, their postal addresses, were omitted from the affirmation, it was defective, highly technical though this defect may have been.

36.The second shortcoming alleged by Mr Plowman to appear in the affirmation was the statement in paragraph 4(d) that “the date and place of making of the said film are set out in column 4 (of the schedule)” which reads:

“From 1999 to May 2002 Changsha City, Hunan Province, China.”

37.Mr Plowman’s point was that that the cartoon episodes which were the subject of this case were only a small proportion of the eight hundred episodes of the cartoon as a whole.  As such, he contended, the affirmation was technically at fault in that it failed to state when these particular episodes were “made or first published” as required by section 121(1)(a) of the Ordinance.  Mr Plowman submitted that a “span of dates” was inappropriate for this purpose.  He placed reliance on a passage taken from Copinger and Skone James on Copyright (14^th ed. 1999) at para. 3-120, p. 127, where the learned authors were commenting on the effect of English legislation, in relation to when a film is to be regarded as having been made (see: section 181 of the Hong Kong Ordinance).  It was suggested that such works should be treated as “made …. when their making is complete”.  Again, we feel compelled to accept this argument albeit that on any view, which includes Mr Plowman’s, the defect in the affirmation was technical and without relevance to any issue at trial.

38.It follows, therefore, to the extent that the information required by section 121(1) was in two respects defective, the affirmation produced by the prosecution was inadmissible.

39.However, the matter did not rest there.  PW2, whose affirmation it was, gave evidence himself adopting, as the ground of appeal accepts, the contents of the affirmation.  Despite this, Mr Plowman contended that PW2, whose company, Hunan Sanchen, owned the copyright, had “failed to prove copyright, ownership and subsistence of the cartoon”.

40.This, again, was never once suggested at trial and PW2 was not asked a single question in cross-examination which suggested Hunan Sanchen was not the owner of the copyright relating to the cartoon.  Indeed, none of PW2’s evidence on this entirely formal aspect of the case was disputed at all.  On the contrary, at trial it was the case for the defence that Elegant Technology had been authorised by Asian Winning Limited, a subsidiary of Royal Century which was Hunan Sanchen’s properly authorised licensee in Hong Kong and Macau, to reproduce the cartoon on VCDs.

41.Mr Plowman’s point in these proceedings, unsupported as he accepted by authority, was that it was not enough for a copyright owner merely to claim copyright ownership because all the stages leading to its acquisition had to be established.  This is not what the Ordinance requires and whilst, no doubt, much will depend on what, if anything, is disputed by the defence at trial as to the lengths to which the owner must go to in order to establish his copyright, in the present case, it is abundantly plain that there was no dispute whatever that PW2 was the owner.  In fact the defence case at trial was based around a positive assertion that Hunan Sanchen owned the copyright in the cartoon.

42.It is not surprising, therefore, that this was not an issue which the judge addressed in his Reasons for Verdict.  It follows from this that the complaint that this amounted to an omission on the judge’s part, and that discrepancies in PW2’s evidence were material to an issue in the case, were without foundation.  In this context, it is appropriate to cite a passage from Tse Mui-chun at p. 364 where the court said:

“30.   The scheme of s.121 is obviously predicated on the premise that in most cases copyright subsistence and ownership, even if not actually admitted, would not be genuinely in issue.  Experience has shown that this premise is rooted in reality.  Of course there can be cases in which copyright subsistence or ownership is genuinely in issue.  Thus a court before which a s.121 affidavit or affirmation is placed may require the deponent to attend before it and give evidence.  It may exercise this power either of its own motion or because the defendant satisfies it that copyright subsistence or ownership is genuinely in issue.  Naturally the trial court will be vigilant to ensure that justice is not defeated, or even delayed, through spurious contentions about copyright subsistence or ownership.  Such contentions should receive short shrift.  But in cases, which we think are likely to be rare, where the trial court is satisfied that copyright subsistence or ownership is genuinely in issue, it will of course address that issue…..”

43.It is difficult to discern from the judgment in Tse Mui-chun why copyright subsistence or ownership was genuinely in issue in the proceedings before the Court of Final Appeal.  Certainly in this application, the issues raised at trial have been departed from altogether.  The court below was almost exclusively concerned with the suggestion that Elegant Technology had been given genuine authority to make copies of the cartoon.  All the evidence powerfully pointed to the contrary.

44.We concluded that this was a prime example, to adopt the words of the Court of Final Appeal, of a spurious contention which has treated the law as a game to be played without reference to any of the issues involved in the court below.  Whilst technicalities in a vacuum and lacking even the slightest merit, may on occasion be argued with success, here the respondent was plainly able to rely on PW2’s evidence to support the conviction despite the inadmissibility of his affirmation.

Conclusion

45.For these reasons, this application was dismissed and costs were awarded to the respondent.

Mr Simon Kwan, SGC, of the Department of Justice, for the Respondent.

Mr Gary Plowman, SC and Mr Joseph Tse, instructed by Messrs Pang, Wan & Choi, for the Applicant.