HKSAR v. Yiu Chun Chu and Another

Case No.HCMA 1192/2007

Court

High Court CFI

Date26 Sep 2008

Judge—

Case Document

100%Judiciary

HCMA 1192/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MAGISTRACY APPEAL NO. 1192 OF 2007

(ON APPEAL FROM ESCC 5814/2006 & ESS 34749/2006)

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BETWEEN
	HKSAR	Respondent
	and
	YIU CHUN CHU	1^st Appellant
	EASTEL 33 ENTERPRISES LIMITED	2^nd Appellant

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Before: Deputy High Court Judge E Toh in Court

Date of Hearing: 18 June 2008

Date of Judgment: 26 September 2008

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J U D G M E N T

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1.Both Appellants appeal against their convictions and sentence. The 2^nd Appellant is a company registered in Hong Kong since 1998. It was summoned for the offence of “Exhibiting in public infringing copies of copyright works for the purpose of, or in the course of, any trade or business without the licence of the copyright owner” contrary to section 118(1)(e)(iii) and section 119(1) of the Copyright Ordinance, Cap. 528. The infringing copies referred to in the summons were 8 walkie-talkies, which the 2^nd Appellant had exhibited at an exhibition booth at the Hong Kong Convention and Exhibition Centre on 15 October 2006. The 1^stAppellant, a director and shareholder of the 2^ndAppellant, was at the exhibition booth at the material time. She was charged with the same offence. Both Appellants were convicted after trial and the 1^st Appellant was sentenced to 9 months’ imprisonment, and the 2^ndAppellant was fined HK$64,000.

2.The trial was in Chinese but at the request of counsel, the appeal was conducted in English.

Background

3.The 8 walkie talkies were claimed by the prosecution, to have infringed the copyright design of CP101 which was registered in Hong Kong and that the copyright owners had never given any licence to the Appellants to copy the same. According to the copyright owner, Mr Suen, the subject walkie talkies were very similar to CP101 in appearance, although he agreed that there were minor differences also. Mr Suen, also asserted that in the year 2000, there were no egg shaped walkie talkies in the market. CP101 was the first of its kind.

4.The 1^st Appellant gave evidence that the subject walkie-talkies was given to her in China by a Mainland company for exhibition in Hong Kong. The 1^st Appellant said her company was in the business of manufacturing and supplying telephone products. If there were orders for these walkie-talkies at the exhibition, she would accept the order and transmit these orders to the Mainland company. The Appellant also said that any potential customers could view the subject walkie-talkies and request for any specific changes to be made before manufacturing. The Appellant also pointed out that she had made enquiries in China about the matter of copyright, and she was told that it was difficult to register any copyright in relation to the outer appearance of these walkie-talkies. She said that she was told that the outside shell of the walkie-talkies were made by a plastic factory, so she had no reason to suspect that these were protected by copyright. The Appellant further suggested that in 2001 walkie-talkies of a smaller size were generally available on the market and she had, very often, in the Lo Wu Commercial Centre seen such similar goods and in Hong Kong she had seen egg shaped walkie-talkies in Apliu Street. And to her knowledge, these egg shaped walkie-talkies had already appeared in magazines saying that these are available in Hong Kong.

5.The learned Magistrate after reminding himself of the fact that both of the Appellants had clear records went on to consider the evidence of the prosecution witnesses and came to the conclusion that they were honest and reliable witnesses.

6.The learned Magistrate in considering the evidence of the Appellant found her evidence to be incredible because she never put forward any document to back up her assertion that she had been asked by the Mainland company to exhibit these walkie-talkies in Hong Kong, and this was contrary to good business practice, particularly when the 2^ndAppellant is a rather large company with substantial business. The learned Magistrate said that although the defence did not have the burden of proof, but having considered HKSAR v Tsui Chung Hang1, he considered that the 1^st Appellant had made what is called a “bare assertion”. The learned Magistrate also disbelieved the 1^st Appellant’s assertion that she did not know where to go, in order to find out if the walkie-talkies had been copyrighted in Hong Kong, because the 1^stAppellant being a director of a rather large manufacturing company should have known where to go. The learned Magistrate found as a fact that the 8 walkie-talkies did offend the copyright held by Mr Suen. The learned Magistrate found that there was sufficient similarity between the 8 walkie-talkies and the copyright design held by Mr Suen that these 8 walkie-talkies were infringing copies.

7.The learned Magistrate considered the law and found that only section 35(3) of the Ordinance was relevant to the present case, but not section 35(4). The learned Magistrate then considered the statutory defence in section 118(6) and found that on a balance of probabilities, the defence had failed to prove the statutory defence.

Appeal against conviction

8.The grounds of appeal are:

(1)    The learned Magistrate in determining that the walkie-talkies (Exh. P.2) were “infringing copies of copyright works” committed the following factual and legal errors:

(a) As the learned Magistrate had stated many times in his ex tempore verdict (See Page 176C) and in his Statement of Findings (paragraph 8, page 23, paragraph 21, page 27) that the 1^st Appellant was not an honest and a reliable witness and that no weight should be given to her testimony hence he had rejected her version that Exh. P.2 were manufactured by a third party in Mainland China and were then brought into Hong Kong by her, he erred in ruling that the provisions of section 35(5) of the Copyright Ordinance, Cap. 528 (“the Ordinance”) were applicable to the fact of the present case (paragraph 18, page 26);

(b)   Alternatively, if the learned Magistrate was not rejecting the version of the 1^st Appellant that Exh. P.2 were manufactured by a third party in Mainland China and was then brought into Hong Kong by her, he erred in ruling that the provisions of section 35(4) of the Ordinance were not applicable to the fact of the present case (paragraph 19, page 26);

(c)   The learned Magistrate erred in ruling that the provisions of section 35(4) of the Ordinance were negative averments, and that the Appellants had the burden of proving them (175R-176C; paragraph 19, page 26);

(d)   The learned Magistrate’s ruling in (c) above was inconsistent with his observations at paragraph 8, page 23 of the Statement of Findings;

(e) The prosecution had failed to adduce any evidence to discharge the burden of proving that the facts of the present case fell outside the provisions of section 35(4) of the Ordinance, the learned Magistrate erred in ruling that Exh. P.2 were “infringing copies of copyright works”.

(2)    the learned Magistrate in holding that the Appellants had not successfully relied on the statutory defence in section 118 of the Ordinance committed the following factual and legal errors:

(a)    If the learned Magistrate had rejected the version of the 1^st Appellant that Exh. P.2 were manufactured by a third party in Mainland China, and then brought by her into Hong Kong, then he should not have considered the statutory defence in section 118(6) of the Ordinance (paragraph 22, page 27: 176D);

(b)    The learned Magistrate has not provided any sufficient reasons why he considered that the 1^st Appellant was not an honest or a reliable witness.

(3)    In the circumstances of the case, the conviction was unsafe and unsatisfactory.

9.The Ordinance defines “infringing copy” of the copyright work in section 35. Section 35(1) to (4) reads as follows:

“S.35(1) In this Part “infringing copy” (侵犯版權複製品), in relation to a copyright work, is to be construed in accordance with this section.

S.35(2) A copy of a work is an infringing copy if its making constituted an infringement of the copyright in the work in question.

S.35(3) Except as otherwise provided and section 35A, a copy of a work other than a copy of an accessory work is also an infringing copy if –

(a)    it has been or is proposed to be imported into Hong Kong; and

(b)    its making in Hong Kong would have contributed and an infringement of the copyright in the work in question, or a breach of an exclusive licence agreement relating to that work.

S.35(4) For the purposes of section 118 to 133 (criminal provisions) “infringing copy” (侵犯版權複製品) does not include a copy of a work –

(a) that was lawfully made in the country, territory or area where it was made;

(b) that has been or is propose to be imported into Hong Kong at any time after the expiration of 15 months beginning on the first day of publication of the work in Hong Kong or elsewhere; and

(c) its making in Hong Kong would have constituted an infringement of the copyright of the work in question, or a breach of an exclusive licence agreement relating to that work, or a copy of an accessory work –

(i)    that was lawfully made in the country, territory or area where it was made;

(ii)   that has been or is proposed to be imported into Hong Kong; and

(iii) its making in Hong Kong would have constituted an infringement of the copyright in the work in question, or a breach of an exclusive licence agreement relating to that work.”

10.Mr Tse argued that the learned Magistrate, in finding that section 35(3) is applicable to this case, must have accepted the evidence of the 1^st Appellant that these infringing copies were made outside of Hong Kong, and then imported into Hong Kong for the exhibition. Then Mr Tse says, in that case section 35(4) would be relevant to the present case, because that section stated specifically that it is for the “purposes of sections 118 to 133 (criminal provisions),” and therefore the learned Magistrate was wrong in finding that section 35(4) did not apply in this case. In reading all the above quoted sections together, Mr Tse submitted that a piece of work made outside of Hong Kong, but imported into Hong Kong where there is copyright protection in a certain specific situation might be an infringing copy for the purposes of civil proceedings due to section 35(3), but not an infringing copy for the purposes of criminal proceedings due to section 35(4). Mr Tse further argues that it is a question of statutory interpretation whether these provisions are negative averments. He prays in aid the case of Tong Yiu-wah v the HKSAR2 where the court in dealing with section 94A of the Criminal Procedure Ordinance, Cap. 221 had this to say:

“22. The effect is s.94A of the CPO is this: Where the statutory provision creating an offence contains an exception, exemption or qualification, it is not necessary for the prosecution to negative this in the indictment or charge laid against the defendant; it is for the defendant to prove such an exception, exemption or qualification; and this applies to the sort of exception, exemption or qualification set out in subsection (4).

23. In my view, s.94A of the CPO is not relevant in the construction of a statutory provision for the purpose of ascertaining in the ingredient of the offence created by the statutory provision in question; s.94A is invoked only after it has been ascertained that the statutory provision has created not only an offence but also an exception, exemption or qualification to the offence. The presence in a statutory provision of a phrase similar to those set out in s.94A(4) (such as “without reasonable cause” in the present case) does not necessarily make it a true exception falling within s.94A of the CPO or the type of exception anticipated in R v Edwards. The reverse onus provided for in s.94A(2) does not apply unless it is a s.94A(1) situation.”

11.Mr Tse submitted, therefore, that the present offences are created by section 118 and “infringing copy” is an element of the offence. The prosecution therefore has to prove that the work in question is an infringing copy. He cited as example the importation into Hong Kong of what is commonly called “parallel goods” (水貨), namely, genuine products made under a foreign licence, as opposed to pirated products, 15 months after its first publication, even though there is copyright protection or an exclusive licence in Hong Kong. Therefore, Mr Tse argues, the intention of the legislature behind section 35(4) was not to provide a defence to an accused.

12.Mr Tse submitted that it is not difficult for the prosecution to prove the matters in section 35(4), as in the present case the 1^st Appellant had already in her record of interview (Exh. P.2) said that these infringing copies were made in Mainland China and imported into Hong Kong, therefore all the prosecution needed to do was to ask the copyright owner to confirm that he had never given any licence to anyone in Mainland China to manufacture the same.

13.Mr Tse says that it is obvious that the legislature intended for the prosecution to prove the provisions set out in section 35(4), because it would not make sense that the defence would need to prove under subsection(c)(iii) that the importation of the works would have infringed in Hong Kong some copyright rights, or breach an exclusive licence in Hong Kong.

14.Finally, Mr Tse submitted that had the learned Magistrate not been in error as to where the burden of proof lay, he would have held, at the end of the trial, that the prosecution had failed to prove that these were “infringing copy” and that section 35(4) applied to this case.

15.Ms Ho, for the Respondent argued that section 35(4) is a negative averment, and therefore the burden of proof is on the defence to establish the provision relied upon in section 35(4).

16.As Ms Ho pointed out, a reading of section 35(4) requires that all three provisions under that subsection must be satisfied, because of the presence of the word “and” at the end of sub-paragraph (b). This then appears to give weight to Mr Tse’s submission that it would not make sense for the legislature to have intended that the defence needed to prove the provision of sub-paragraph (c)(iii) that the making of the copy would have constituted an infringement of the work in question in Hong Kong or a breach of an exclusive licence agreement relating to that work. Therefore, since all three provisions under section 35(4) had to be proved, the burden would lie on the prosecution.

17.I agree that the provisions of section 35(4) would cover “parallel import”. However, the question is whether section 35(4) is a negative averment. Mr Tse has made an attractive argument that these provisions in section 35(4) cannot be negative averments if one considers the wording of section 35(4)(c)(iii). However, it would not make sense for the legislature to have intended that the prosecution would have the burden of proving section 35(4)(a) and (b) either. Thus, I consider that in a proper reading of section 35(4), the only reasonable conclusion is that the provisions in that section create exceptions or exemptions from the offence and thus the burden is on the defence to prove such an exception, exemption or qualification.

18.Furthermore, where proceedings are brought under section 118 of the Ordinance, the prosecution would have called evidence to establish section 34(c) ie that the making in Hong Kong of such infringing copy would have infringed the copyright in the work in question or a breach of an exclusive licence agreement relating to that work in Hong Kong. Therefore, realistically, the defence would only need to prove the provisions in 35(4)(a) and (b) and for (c) they would rely on the evidence produced by the prosecution. In this case, Mr Suen had already testified to the fact that he being the owner of the copyright had never authorised anyone in Hong Kong to make the infringing copies nor had he given anyone any licence to.

Ground 2

19.Section 118(3) states:

“(3) it is a defence for the person charged with an offence under subsection 1 or 2A to prove that he did not know and had no reason to believe that the copy in question was an infringing copy of the copyright work.”

20.Section 118(6) reads as follow:

“(6) for the purpose of subsection (1)(b) and (3), where a person is charged with an offence under subsection (1) in respect of a copy of the copyright work which is an infringing copy by virtue only of section 35(3) and not being excluded under section 35(4), and which is lawfully made in the country, territory or area where was made, if he proves that –

(a) he had made reasonable enquiries sufficient to satisfy himself that the copy in question was not an infringing copy of the work;

(b) he had reasonable grounds to be satisfied in the circumstances of the case that the copy was not an infringing copy;

(c) there were no other circumstances which would have led him reasonably to suspect that the copy was an infringing copy, he has proved that he had no reason to believe that the copy in question was an infringing copy of the copyright work.”

21.Mr Tse submitted that the learned Magistrate was inconsistent and contradictory in his findings, because the learned Magistrate having rejected the evidence of the 1^st Appellant and what was said in Exh. P.2, the provisions of section 118(6) would not arise because he was no longer dealing with a case of foreign goods being imported into Hong Kong. That the learned Magistrate had fallen into error in ruling that the Appellant had not successfully relied on section 118(6). Furthermore, Mr Tse submitted that the reason for the learned Magistrate’s rejection of the 1^st Appellant’s evidence was fundamentally flawed. The learned Magistrate had cited as the principal reason for refusing to accept the Appellant’s evidence was the lack of supporting documents, e.g. contracts between the Appellant and the company in Mainland China supplying the walkie-talkies, etc.. Mr Tse made the valid point that the Appellant was never questioned about the lack of these supporting documents. Mr Tse cited, the learned words of Lord Halsbury in Browne v Dunn (1894) 6 R 67:

“To my mind nothing would be more absolutely unjust than not to cross-examine witnesses upon evidence which they have given, so as to give them notice, and to give them an opportunity of explanation, and an opportunity very often to defend their own character, and, not having given them such an opportunity, to ask the jury afterwards to disbelieve what they have said, although not one question has been directed wither to their credit or to the accuracy of the facts they have deposed to.”

22.It is clear from a reading of the transcript that the prosecution’s evidence was directed to the lack of documents pertaining to the copyright of the work in China rather than the lack of documents testifying to the fact that the Appellant had been asked by the Mainland company to exhibit these 8 walkie-talkies in Hong Kong.

23.After a reading of the learned Magistrate’s Statement of Findings and his Ex tempore judgment, I am inclined to disagree with Mr Tse’s submission that the learned Magistrate appeared to be inconsistent in his findings. The only evidence that these 8 walkie-talkies were imported from China emanated only from the evidence of the Appellant and her record of interview. Once the learned Magistrate had totally rejected the truth of her evidence, although not specifically mentioning Exh. P.2, he must have also rejected what was said by the Appellant in Exh. P.2. Then if that is the case there is no evidence whatsoever to prove that these 8 walkie-talkies had come from China and were imported into Hong Kong.

24.Ms Ho pointed out that if section 118(1) is made out, then it is for the Defence to move on a balance of probabilities that they did not know and had no reason to believe that there were infringing copies. Thus the Appellants should have made proper inquiries and investigation “as he reasonably can to satisfy himself that the work is free of copyright”. (See Infabrics Ltd & Others v Faytex Ltd3 and R v Ng Kwan Pui4 ). The Court of Appeal in HKSAR v Tan Say Say5 held that the consideration in the case of Infabrics Ltd & Others v Faytex should prevail but that each case must be considered according to its own facts.

25.I agree with Ms Ho’s argument that the learned Magistrate in determining whether the Appellants could successfully rely on the statutory defence in section 118(3) was entitled to consider section 118(6) to find that the 1^st Appellant had failed to prove that reasonably sufficient enquiries or investigation had been made.

26.I, therefore, find that there are no grounds to interfere with the learned Magistrate’s findings. The appeal against conviction is therefore dismissed.

Appeal against sentence

27.Mr Tse submitted that the sentences imposed on both Appellants were manifestly excessive and in the case of the 1^st Appellant wrong in principle.

28.In the case of the 1^st Appellant, she has a clear record and there is no evidence that she committed the offence with full knowledge that these were infringing copies. The evidence, at its highest, would show that the 1^st Appellant was careless or negligent and had failed to make proper enquiries and investigation, or did not want to know by turning a blind eye to it.

29.The learned Magistrate was wrong to say that the usual sentences are to be 18 months because the prosecuting counsel at the bail pending appeal hearing on 27 December 2007 had informed the court that the usual penalty for cases of this nature is a financial one. This was confirmed by Miss Ho.

30.I agree with Mr Tse, I think the learned Magistrate had in mind the sentences usually imposed for pirated discs.

31.I consider, in this case, that the Appellant’s transgression was one of failure to make proper enquiries.

32.In these circumstances, the sentence on the 1^st Appellant was manifestly excessive.

33.Having considered all the circumstances in this case, I find that a reasonable sentence would be one of a fine.

34.I therefore allow the appeal against sentence of the 1^st Appellant and set aside the 9 months’ imprisonment imposed on her. I order the 1^st Appellant to pay a fine of $30,000, and she is to pay this sum within 1 week of this judgment.

35.As for the 2^nd Appellant, seeing that this is its first offence and the facts only at most prove that the company and its directors had failed to make sufficient enquiries and the offending works are only 8 in number, I consider the fine of $64,000 manifestly excessive in these circumstances.

36.I set aside that $64,000 fine and I order that the 2^nd Appellant pay a fine of $40,000 again to pay that fine within 1 week from day of this judgment.

37.Therefore the appeals against sentence are allowed.