Television Broadcasts Ltd v. Hong Kong Cable Television Ltd

HCA 2055/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2055 OF 2004

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BETWEEN

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Before : Hon Reyes J in Chambers

Date of Hearing : 28 June 2005

Date of Decision : 28 June 2005

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D E C I S I O N

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1.The issue is whether HK Cable should make further discovery and (if so) of what documents to TVB.

2.On 29 November 2004 I gave judgment in TVB's favour against HK Cable for breach of copyright.  I ordered that there be an inquiry into the damages incurred by TVB or the profits accruing to HK Cable as a result of that infringement. 

3.For the purposes of such inquiry, I directed by §4 of my Order that HK Cable make discovery on oath of:-

"	all documents relating to ... the extent of its infringing activities in the period from 20th July 2004 to 19th September 2004 including documents relating to the number of subscribers and the number of households to which the retransmission [of TVB's signal] was made".

HK Cable's counsel said at the time that he could live with the wording of §4 of the Order.

4.On 20 December 2004 HK Cable filed an affidavit stating that during the period of infringement the total number of its subscribers went from a high of 684,719 (achieved on 31 July 2004) to a low of 679,773 (as at 30 September 2004).  Of the total subscribers referred to, the number who could receive TVB's signal as re-transmitted by HK Cable declined from a high of 446,467 (on 30 June 2004) to 435,713 (on 30 September 2004).  No document was disclosed in support of the figures quoted.

5.On 2 February 2005 TVB took out an application for a further and better list of documents under §4 of my Order.

6.In response to the application, on 22 February 2005 HK Cable disclosed an edited copy of "Month-to-date Subscriber Statistics (Subscriber Base)".  HK Cable describes these as:-

"	monthly reports showing (1) total number of the subscribers of the Defendant and (2) total number of the Defendant's subscribers that could receive the Plaintiff's Broadcasts as re-transmitted by the Defendant at the material time".

HK Cable has not disclosed any other documents.  Nor has HK Cable explained on affidavit or otherwise how the statistics were compiled.

7.TVB says that HK Cable's discovery is inadequate.  It argues that the discovery is of no help to TVB in assessing whether to elect for damages or an account of profits in respect of HK Cable's breach. 

8.In correspondence with HK Cable, TVB has suggested (by way of helpful example only) the following possible approach to discovery under §4 of my Order:-

"

[O]ne potential approach ... is to calculate the notional licence fee that your client would have been required to pay to our client in order to be permitted to carry out our client's broadcasts in a non-infringing manner.  Inevitably, this involves consideration of your client's viewership, both as to absolute numbers and demographics.  In this regard, it is not sufficient to know simply the numbers of customer accounts maintained by your client for a single customer may licence several decoders serving more than one television and indeed do so at different locations.  The decoders may also operate in a commercial location, with a substantially enlarged potential viewership compared to a typical household."

9.But HK Cable has declined to disclose further documents.  It suggests that the number of documents involved in any exercise along the notional licence lines suggested by TVB would be voluminous.  Given that TVB is a commercial rival, HK Cable would have to edit such documents to protect sensitive information.  That (HK Cable complains) would entail time and cost.  All the effort would be wasted if TVB eventually decided not to proceed with the enquiry.  Finally, HK Cable suggests that TVB's request for more documents of a commercially sensitive nature is "highly suspicious" and should not therefore be entertained.

10.In my view, HK Cable's discovery to date is inadequate and not in compliance with §4 of my Order.

11.It may be that complying with the Order will be costly and time-consuming.  But that is not an excuse for non-compliance.  The Order has been made and there has been no appeal against it. It is too late now to say that §4 should not have been directed in the first place.

12.I add that HK Cable is the infringer.  It has been held to be in the wrong.  The Court should not be overly tender in allowing HK Cable to plead the effort involved in assessing the consequences of its wrongdoing as a reason for not providing relevant information reasonably required by TVB.

13.It can at times be difficult to assess damages incurred or profits lost through infringement of intellectual property rights.  This may be such a difficult situation.  That does not mean that TVB should be deterred from doing so where it reasonably wishes to persist in the exercise.

14.In particular, I do not think that TVB's suggestion of estimating damages by reference to a notional licence fee is unreasonable or far-fetched.  If HK Cable had requested TVB for a licence at the outset, TVB (it seems to me) might justifiably have sought information about the number of actual viewers the re-transmitted signal was likely to reach. 

15.I cannot rule out the possibility that the "demographics" (for example, geographical location) of such viewers would be relevant to TVB's calculation of an appropriate licence fee.  In those circumstances, I do not see why HK Cable should not, in compliance with §4 of my Order, make discovery of documents containing such information as TVB has suggested.

16.HK Cable submits that knowing the number of subscribers or their demographics cannot ultimately help TVB to assess damages or profits, because TVB's broadcasts are free.  At present, I cannot say that such conclusion inevitably follows. 

17.For instance, at the summary judgment hearing, it was part of HK Cable's argument, that subscribers would find it convenient to be able to use one remote control device to access both cable and free-to-air broadcasts.  It is plausible that a subscriber would be prepared to pay something for that convenience.  There could therefore be economic value in a retransmission service which could form the basis for calculating a notional licence fee.

18.Possibly mindful that disclosure of statistics without indication of how the same were compiled was inadequate even on its own premises, HK Cable has offered to have its figures audited by independent accountants in lieu of further discovery. The accountants are apparently also to determine "whether there is any profit (if any) derived by the Defendant attributable to its re-transmission of the Plaintiff's Broadcast".

19.I do not see how the suggested audit will place TVB in an informed position to make an election in the present case.

20.TVB's entitlement is to be provided with reasonable information to form a view whether to go for damages or an account of profit.  The licence fee method proposed by TVB is predicated on TVB obtaining material to assess what fee it would have charged Cable and what damage it has suffered by reason of non-payment of such fee.   I do not see how the proposed audit addresses that question of damages (as opposed to profit).

21.Further, if, on the basis of material disclosed by HK Cable, TVB decides to opt for an account of profits, it will then be for the Court (and not accountants) to determine on evidence whether there has been a profit as a matter of law.

22.HK Cable has referred to authorities to the effect that discovery should not be oppressive. 

23.The majority of cases cited by HK Cable (Canon Kabushiki Kaisha v. Green Cartridge (Hong Kong) Limited HCA 7844 of 1993 (Rogers J), 15 July 1994; Auto-Treasure Limited v. Noble Diamond Ltd. CACV 184 of 1991 (Cons VP, Liu and Godfrey JJA), 22 May 1992; Worldtrade Entertainment Limited and Mandarin Films Distribution Company v. Starway Technology Ltd. and Chan Ching Wing HCA 450/2000 (Deputy High Court Judge S. Kwan), 19 May 2000) relate to discovery on quantum before liability for intellectual property infringement has been assessed.  That is different from the situation here where HK Cable has been found to be an infringer.

24.Of the cases cited, only Brugger v. Medicaid [1996] FSR 362 involved discovery after a finding of infringement.  In Brugger, Jacob J said (at 363):-

"	In Island Records [v. Tring International Plc [1995] FSR 560] Lightman J took the view that people should be able to make an informed election rather than simply a 'stab in the dark'.  Prior to that decision, the position was people had to elect between an account o[f] profits or damages when they had no idea whatever of the profits which the defendant might have made.
	The question before me is how much information should the defendants have to compile before the plaintiff have to make their election.  An extreme view would be that the defendant should in effect provide all the information necessary for the account.  That would involve not only ascertaining the precise number of infringing devices sold and the precise prices they were sold at, but would involve what could well be in many cases complicated questions of costing.  Anyone who has been concerned with either an inquiry as to damages or an account of profits realises that these days modern accountants can move numbers about in a way which would make our Victorian forebears boggle.  Whether businesses can be run any better is open to question.
	What the plaintiffs sought here was an audited schedule setting forth the number of nebulizers made and sold and the sums received or receivable.  They also sought an audited schedule as to the cost incurred by the defendant.  That could potentially involve a substantial amount of work and I do not believe that was what was envisaged in the Island Records case.  It seems to me that it is sufficient for an informed election to be made that the defendants should supply an affidavit setting forth the numbers of infringing devices made and sold, the sums received or receivable and an approximate estimate of the costs incurred, that approximate estimate to include a statement as to how the estimate was made."

25.Plainly, the Court should not order discovery where it is oppressive.  But what is or is not "oppressive" depends on the circumstances of each case.  In Brugger, Jacob J set out what he believed would be adequate in the context of that case.  That does not mean that a like direction would apply in every instance of intellectual property infringement.

26.Here, for the reasons given above, I do not believe that TVB's application for a further and better list is unreasonable or oppressive.  The information disclosed thus far by HK Cable is minimal.  TVB can do no more at the moment than take a "stab in the dark".

27.Lastly, on HK Cable's allegation that TVB is acting from malicious motives or in bad faith, it seems to me that there is simply no evidence to support the claim.  There is merely speculation and assertion on the part of HK Cable.

28.I accordingly allow TVB's application.

Miss Blanche Koo of Messrs Herbert Smith, for the Plaintiff

Mr Lewis Ho of Messrs Lovells, for the Defendant