Konami Marketing (Asia) Ltd v. Rapid Growth Ltd t/a Jumbo Magazine House

DCCJ 967/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 967 OF 2006

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BETWEEN

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Coram  :  Deputy District Judge Levy in Chambers

Dates of Hearing  :  7 August 2006 & 30 August 2006

Date of Handing Down of Judgment  :  27 September 2006

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JUDGMENT

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FACTUAL BACKGROUND

1.The 1^st Plaintiff in this action, a company incorporated in Japan, has been since 2005 the copyright owner of two video game software created in Japan known as “ World Soccer Winning Eleven” and “ Castlevania Curse of Darkness” (collectively known as “the Works”).    The products of the Works all bear the trade names of respectively “ WORLD SOCCER WINNING ELEVEN” and “KONAMI”, both of which marks are registered trade marks in Hong Kong and owned by the 1^st Plaintiff.  The 2^nd Plaintiff is the 1^st Plaintiff’s Hong Kong subsidiary.

2.The Defendant, a retailer of magazines and newspaper, is allegedly to have displayed for sale and sold on 8 December 2005 strategy guide books of the Works which books (“the Books”) bear the said trade marks.  

3.As a result of the said alleged unlawful conduct, the Plaintiffs through their solicitors sent a letter to the Defendant on or about 20 January 2006 to demand the Defendant to sign a Deed of undertaking and pay for compensation for the alleged passing off and infringement of the copyright and registered trade marks.  When the demand was unheeded, the 2^nd Plaintiff issued the writ of this action on 27 February 2006 for the alleged act of passing off and infringement.  This was then followed by a summons issued on 28 March 2006 under O.14 r.1 of the Rules of the District Court  (“the Summons”) for the usual orders of injunction, delivery up and inquiry to damages. 

4.The Plaintiffs’ O.14 application however has taken quite a convoluted path. After the issuance of the Summons, the Plaintiffs then applied for and were granted leave to amend the Writ and the Statement of Claim to add the 1^st Plaintiff as one of the parties to this action on 19 May 2006.  No application however was made to amend the Summons to add the 1^st Plaintiff as one of the applicants of the O.14 application until at the hearing of the Summons on 7 August 2006.

5.After I had granted leave to the Plaintiffs to amend the Summons by adding the 1^st Plaintiff, counsel for the Plaintiffs, Mr. Feng, further informed this court that the Plaintiffs in this application would only ask for an injunction to restrain the Defendant from infringing and passing off the Plaintiffs’ copyright subsisting in the Works and the said registered trade marks and would not pursue any other relief stated in the Summons.

6.After the hearing on 7 August 2006, the court’s attention was drawn to the provisions of Trade Mark Ordinance, Cap.559, which require actions for infringement of a registered trademark and for passing off to be brought in the Court of First Instance. After a brief correspondence passed between this court and the solicitors for the parties, I directed the parties to attend a direction hearing when it was clear that the jurisdictional issue could not de disposed of without a hearing.

7.At the direction hearing on 30 August 2006, the parties were both represented by their solicitors who did not dispute that the District Court- this court - has no jurisdiction to deal with any part of the trademark claim. As the Plaintiffs however wished to keep the action in the District Court rather than applying to transfer it to the Court of First Instance, they elected to abandon the trademark action.  Leave was then sought to re-amend the Summons to reflect the said election.  After I gave leave to the Plaintiffs to re- amend the Summons, the O.14 application which I had to deal with has been substantially truncated.  In the trimmed-down O.14 application (“Application”), the 1^st and 2^nd Plaintiffs seek the following order:

“An injunction to restrain the Defendant, whether acting by itself or by its officers, employees, servants or agents or any of them or otherwise howsoever, from infringing the 1^st Plaintiff’s copyright in the Works specified in the schedule hereto and/or passing off or attempting to pass off, causing procuring, assisting, instigation or enabling others to pass off products not of the 1^st Plaintiff’s manufacture or merchandise.

Schedule Above referred to

The Works:-

- World Soccer Winning Eleven 9

- Castlevania Curse of  Darkness”

ISSUES

8.The issues - after the Plaintiffs have elected to leave out the trademark claim - as distilled from the evidence adduced in the Application are:

(1)  Whether the 2^nd Plaintiff is the owner of the copyright entitling it to bring this copyright action and the scope of the Works in which the copyright subsists; and

(2)  Whether the Defendant had infringed and/or passed off the

Plaintiffs’ copyright.

9.Before I deal with said issues below, it is perhaps convenient to remind myself at this juncture the undisputed principles of an O. 14 application I should apply in the Application– if a plaintiff’s application is properly constituted, the plaintiff is prima facie entitled to judgment unless the defendant shows cause to the contrary or the application is dismissed.  Thus, before the burden of requiring a defendant to satisfy the court why judgment should not be entered against him, the plaintiff will be required to establish a prima facie case of his claim ( see Hong Kong Civil Procedure 2006 , para.14/4/1).    

10.The application of this principle and an analysis of the issues can only be properly done by firstly considering the evidence of the Application.

THE EVIDENCE

The Copyright Ownership

11.The evidence of the copyright ownership is found in the affirmation filed on or about 28 March 2006 by a Mr. Bamba, a director and general manager of the 2^nd Plaintiff (“Bamba’s 1^st Affirmation”).  In Bamba’s 1^st Affirmation, Mr. Bamba verifies that the 1^st Plaintiff became the copyright owner of the Works since the dates of the first publication of “World Soccer Winning Eleven 9” and “Castlevania Curse of Darkness” respectively on 4 August 2005 and 24 November 2005 – both of which video games were created by Japanese authors and published in Japan.

The alleged infringement and passing off

12.The evidence of the Defendant’s alleged unlawful act is from the Affidavit of Jor Cheuk Wing exhibited to Bamba’s 1^st Affirmation. It is not clear if this Mr. Jor was instructed as an investigator (for the convenience of description, I will refer him as  “the investigator” below).  In his Affidavit, the investigator stated that he was instructed by the 2^nd Plaintiff to pay a visit to the Defendant’sshop at Queensway Plaza on 8 December 2005 and in it, he saw video game strategy guide books with titles of  “World Soccer Winning Eleven 9 Perfect Guide Book” and “ Castlevania Curse of Darkness” being on display.  The investigator bought the Books and paid altogether $86 – which payment was evidenced by a copy of the receipt describing the purchased items as “ story book’ and “magazine” respectively costing $38 and $48 each.

13.The Defendant in the Affirmation of Leung Tat Poon (“Leung’s Affirmation”) denied any sale or display for sale of the infringing articles.  The Defendant stated that the magazines and comic books sold by its shop at that time were supplied by two distributors and it was never in possession of any of the said strategy guide books.

OWNERSHIP OF THE COPYRIGHT AND THE SUBJECT MATTER OF THE WORKS IN WHICH COPYRIGHT SUBSISTS

The subject matter of the copyright

14.According to paragraph 4 of the Amended Statement of Claim, the Plaintiffs describe the subject matter of the works in which copyright subsists as follows:

“At all material times, the 1^st Plaintiff was and is the copyright owner of and the world-renowned manufacturer of, inter alia, video games “World Soccer Winning Eleven 9” “Castlevania Curse of Darkness”(the Works”) which are original artistic works and were made by authors domiciled in Japan at all material times.”

15.From the above, it is clear that the copyright in this action subsists in the artistic works in relation to the said video games created by the authors in Japan and is owned by the 1^st Plaintiff.  The evidence contained in Bamba’s 1^st Affirmation as referred to in paragraph 11         above supports this pleaded case.

16.The trademark claim, broadly speaking, is based on the registered trade marks of ‘KONAMI” AND “WORLD SOCCER WINNING ELEVEN”  - which marks are found in “all products of the Works”( See paragraph 4 of the Amended Statement of Claim set out in paragraph 14 above).  Hence, the said trade marks are in relation to the products of the Works.

17.An analysis of the Plaintiffs’ two different heads of claim – the copyright action and the trademark action – is necessary as it shows that there is a clear difference in the subject matters underlying the respective actions. The Plaintiffs’ copyright action is based on the subsistence of the 1^st Plaintiff’s copyright in the said video games, not in the products of the video games. The trademark claim, on the other hand, attaches to any goods or products bearing the 1^st Plaintiff’s said trade marks. 

18.The alleged infringing goods according to the facts of this case are clearly not video games but the Books – products bearing the said trade marks. Accordingly, I am unable to find, on the Plaintiffs’ evidence, that the Books form part of the Works in which the 1^st Plaintiff’s copyright subsist.

Conclusion

19.From the above discussion, I am inclined to conclude that the evidence adduced in the Application shows that the followings are the Plaintiffs’ prima facie case:

(1) The 1^st Plaintiff is the copyright owner of the Works:

(a) The 2^nd Plaintiff -apart from being the wholly-owned subsidiary of the 1^st Plaintiff carrying on similar business as the 1^st Plaintiff – has no connection with the copyright claim.  An action on passing off and infringement of copyright is only actionable by the owner.  It is not asserted by the Plaintiffs that the 2^nd Plaintiff has acquired any of the 1^st Plaintiff’s right in relation to the copyright.  Thus, I agree with the Defendant’s contention that the 2^nd Plaintiff, prima facie, has no remedy in relation to the copyright action.  I am unable to find from the evidence in this Application that there is a prima facie case showing the 2^nd Plaintiff’s right to apply for the remedy sought in the Application.

(2) The 1^st Plaintiff’s copyright subsists in the video games, that is, the “Works” only:

(a)  There is no evidence that the Books are part of the Works.  The Books exhibited by the investigator only show that they bear the said registered trade marks of WORLD SOCCER WINNING ELEVEN and KONAMI.  The Books may arguably be said to have infringed the 1^st Plaintiff’s said trade marks -  which action the Plaintiffs have abandoned for the purpose of this Application -  but not the 1^st Plaintiff’s copyright.    I am therefore unable to find on the evidence that the 1^st Plaintiff’s copyright also subsists in the Books.  The threshold requirement laid down in O.14 r.3 of requiring a Plaintiff to show a prima facie case – on the evidence adduced by the Plaintiffs – cannot be met.  The Plaintiffs therefore should not be entitled to judgment at this stage without proceeding to full trial.

(b)  Hence, having come to the said conclusion regarding the 1^st issue, it is sufficient for me to dispose of this Application by granting unconditional leave to the Defendant to defend. If, however, I am found to be wrong to come to this conclusion, I should consider whether on the evidence there are any triable issues which preclude the Plaintiffs from obtaining the relief sought- a final injunction – the only remedy sought in the Application.  For the purpose of this analysis, I would therefore assume that the Books are part of the Works in which the 1^st Plaintiff’s copyright subsist.

ARE THERE ANY TRIABLE ISSUES OF  THE ALLEGED ACT OF INFRINGEMENT AND PASSING OFF?

Passing off

20.In considering if there is a triable issue in the claim regarding passing off, I should perhaps refer to the three essential elements of the torts of passing off set out in the case of Reckitt & Coleman Products Ltd. V Borden Inc. and Ors. [1990RPC341referred to by Deputy Judge Fung in the case of Creative Technology Ltd v Videocom TechnologyLtd & Ano. [2003] HKEC442.  The three essential elements are as follows:

(a) that the plaintiff enjoys reputation and goodwill in the name mark or indicia which it wishes to prevent the defendant from using;

(b) that the defendant has made the representation which was likely to lead members of the public to believe that his business, goods or services are the business, goods or services of the plaintiff; and

(c) that the plaintiff was suffering and was likely to suffer damage by reason of the erroneous belief engendered by the defendant’s misrepresentation.

21.On the evidence adduced in the Application, the Defendant - subject to its denial of the allegation of the said unlawful activity - has not taken any issue of whether the Books amount to passing off in accordance with the said elements.  The parties also made no submissions on this issue.  In the circumstances, I do not find it appropriate or necessary for me to make any determination in respect of this issue. 

Infringement

22.Does the alleged conduct of the Defendant constitute infringement?  In Halsbury’s Laws of Hong Kong- Intellectual Property:Trade Marks, Copyright and Plant Varieties Rights, Vol.15(3) (para.225-844) it contains a very succinct passage on what constitutes infringement:

“ Copyright in a work is infringed by a person who without the license of the copyright owner does, or authorises another to do, any of the acts restricted by the copyright.  References to the doing of an act restricted by the copyright in a work are to the doing of it:

(1)    in relation to the work as a whole or any substantial part of it; and

(2)    either directly or indirectly…”

23.In this case, it is not in dispute that the Defendant did not have any license or authority by the 1^st Plaintiff to sell or offer to sell any strategy guide books or the Books. Thus the evidence on the issue of whether the Defendant had or had not committed the alleged unlawful act needs to be considered.

24.The Defendant opposes the Application by adducing evidence to show that it had never taken any supplies of any of the alleged infringing articles. In Leung’s Affirmation, Mr. Leung of the Defendant deposed that the Defendant’s supplies of the books and magazines came from only two distributors, namely, “Ng Hing Kee Book & Newspaper Agency” and a “Tung Tak Hing Book & Newspaper Company Limited” (transliteration).  Copies of invoices issued by these two distributors to the Defendant for the month of December 2005 – which invoices do not show any of video game strategy guide books having been supplied to the Defendant – were exhibited to Leung’s Affirmation.

25.The Plaintiffs – with a view to undermine the credibility of the Defendant – exhibited to Bamba’s 2^nd Affirmation two declarations in Chinese from representatives of two magazine houses that the said Ng Hing Kee had supplied to these houses similar strategy guide books bearing the said trade marks. 

26.The evidence of the parties therefore comprise of both direct and indirect evidence.  The direct evidence of the Plaintiffs is the evidence of the investigator and that of the Defendant’s, the evidence of Mr. Leung himself.  The indirect evidence will be the distributors’ invoices issued to the Defendant and the Chinese declarations produced by the Plaintiffs. When looked at all the evidence in the round, I am inclined to take the view that the Defendant’s evidence cannot be said to be unbelievable.  In coming to this view, I have of course borne in mind the principle governing an O. 14 application - that the onus is on a defendant to show it has a defence or a triable issue by credible evidence and that a court is not encouraged to embark on a mini-trial on the affidavit evidence. (See Ng Shou Chun v Hung Chun San [1994]1HKC155). 

27.In the circumstances, In order to decide if the Defendant’s assertions are believable, I consider that I cannot properly come to any view without also taking into consideration of all the circumstances of the case including the nature of the evidence adduced by the Plaintiffs. In the Plaintiffs’ evidence, the evidence of the Defendant’s alleged wrongdoing only comes from one single source, that is, the investigator’s affidavit. According to his evidence, during the alleged visit to the Defendant’s shop, he only purchased two copies of the strategy guide books – the Books.  I find it little bit surprising that there is a complete lack of evidence as to approximately how many strategy guide books he found in the Defendant’s shop.  This information should be, in my view, within the investigator’s knowledge.  The lack of particularity can be found in paragraph 2 of his Affidavit:

“I noticed that the subject infringing video game strategy guide books, namely World Soccer Winning Eleven 9 Perfect Guide Book and Castlevania Curse of Darkness were displayed for sale at HK$4.8 and HK$3.8 respectively at the subject stall.”

28.After having paid for the Books, the investigator however was not able to obtain a receipt containing detailed description of the Books.  The receipt the investigator exhibited in his affidavit refers the purchased items respectively as “book” and “magazine”.  The receipt seems to be a computer-generated receipt.  I accept that it is not uncommon these days for a newspaper and magazine store such as the Defendant’s to issue receipts without specifying the titles of the books or magazines purchased by customers.  However, the investigator was not just an ordinary customer - he was sent especially for an “evidence-colleting mission” to gather unlawful evidence against the Defendant.  Armed with such a specific instruction, the investigator- as expected in such a situation  -would be least contented with just an ordinary, non-specific receipt printed out by a computer. He would ask for more – something with proof that the items he purchased were indeed the infringing articles.  This in my view does not seem to be logical. 

29.Thus, when all the evidence is considered, I am unable to say that the Defendant’s assertions are unbelievable.  Whether the Defendant’s assertions can ultimately be borne out would have to be dependent on the rigour of a trial process rather than on the assessment of the credibility of witnesses on the affidavit evidence.

30.For this reason, I find that there are factual issues in dispute.

31.If however I am wrong to come to this view and that there is no triable issue, I would still have to consider if I should exercise my discretion to grant an injunction against the Defendant.

INJUNCTION- A DISCRETIONARY REMEDY

32.The only remedy that is now sought by the Plaintiffs in this Application is injunction – the Plaintiffs having elected to leave out the other remedies pleaded in their claim and the Summons.  There is no dispute that even if the Plaintiffs are able to show that the Defendant had infringed and/or passed off the 1^st Plaintiff’s copyright,  there remains a residual discretion of this court whether to grant a final injunction to restrain the Defendant.   The tests as distilled in Creative Technology Ltd (ibid.) for the grant or refusal of an injunction are as follows:

(1)   The threat of future infringement;

(2)   Whether the infringement was malicious or intentional;

(3)   Where a defendant has infringed, the court will assume it is not a one-off activity and will grant an injunction to stop repetition.

33.The principles governing the exercise of discretion in this sort of case are settled and I will therefore apply them in this case.  However,  in view of  the Defendant’s complete denial, it would not be possible for the Defendant to adduce evidence on whether it had any malicious intention or any intention and whether it would repeat the unlawful act. 

34.I further recognize the principle that in an O.14 application, “once infringement was found, the plaintiff was prima facie entitled to an injunction to protect his right, it is then upon the defendant to show that the infringement was either innocent, one-off, and where there was no threat or possibility of future infringement and it is not necessary for the injunction to be granted” (Creative Technology Ltd (ibid.) at para. 44). 

35.In this case, in view of a defence of complete denial, it is therefore purely academic to strictly apply the assumption without examining all the evidence to see if there is sufficient evidence for the court to apply the assumption by drawing of an inference from the available evidence.

36.After having examined the evidence in its entirely, I am not satisfied that the nature of the evidence is such that I can draw any such inference of the existence of an intention or threat of future infringement and I therefore do not think it is appropriate to strictly apply the assumption. I would not therefore be disposed to, if I need to,  exercise my discretion in favour of the Plaintiffs.

CONCLUSION

37.For the reasons above, I am satisfied that there are issues in dispute in both law and facts, which make it inappropriate for me to accede to the Application.  I therefore grant an order that the Defendant be given unconditional leave to defend.  I further make a costs order nisi that costs, including all the previous costs reserved in the Application (if any), be in the cause of this action, which costs are to be taxed if not agreed.    

Mr. Lin Feng instructed by Messrs. William Lam & Co. for the Plaintiff (for the hearing on 7 August 2006).

Mr. William Lam of Messrs. William Lam & Co. for the Plaintiff (for the hearing on 30 August 2006).

Mr. Lee Chi Wai ofMessrs. Peter K. H. Wong & Co. for the Defendant.