17 Apr 2015

IP Newsletter

Cannot Sing Along!
Gold Typhoon Entertainment Limited v Legend World Asia Group Limited (Phonographic Performance (South East Asia) Limited as Third Party) HCA1931/2012 – Court of First Instance

The plaintiff, Gold Typhoon Entertainment Limited, is the owner of the copyrights of karaoke music videos (“KMVs”) of local popular songs in Hong Kong. The defendant is operating a karaoke pub known as Vegas Club in which karaoke music videos are performed.

From 2005 and until January 2008, the plaintiff authorized Phonographic Performance (South East Asia) Limited (“PPSEAL”) to grant on its behalf both the necessary K-Server licence and the required Public Performance licence (“PP licence”) of its KMVs to karaoke establishments.

Since January 2008, the plaintiff ceased to authorize PPSEAL to grant K-Server licence but continued authorizing PPSEAL to grant PP licence. Thereafter, the plaintiff authorized other licensing bodies, namely Music Link Limited (“Music Link”) and Music and Video Copyright Management (HK) Limited (“MVCM”), to grant its K-Server licence.

At present, the plaintiff does not authorize any licensing bodies for granting its K-Server licence.

In or about September 2009, the defendant obtained the K-Server licence of the plaintiff’s KMVs through Music Link. The defendant paid quarterly to Music Link a royalty fee of $3,500 per month for the K-Server licence.

Since 1 January 2010, as MVCM has replaced Music Link as the licensing body, the defendant obtained the K-Server licence from MVCM but the royalty fee has been increased to $5,100 per month. The K-Server licence granted by MVCM expired in January 2011 and there has since then been no renewal of the K-Server licence of the plaintiff’s KMVs to the defendant.

The plaintiff claimed that the defendant played the plaintiff’s KMV in its premises through a computer system without proper licence. The plaintiff also claimed that the defendant should obtain a K-Server licence for its business because a PP licence is not enough for reproducing KMVs through a computer system.

The defendant raised the following defences:
(1) The K-Server licence granted to the defendant in respect of the plaintiff’s KMVs is a permanent licence, covering also the payment of the monthly licence for KMV’s songs;
(2) The right to play the plaintiff’s KMVs by the defendant is covered by the PP licence obtained from PPSEAL;
(3) The plaintiff is put to strict proof of its ownership and subsistence of the copyrights of the relevant KMVs; and
(4) The plaintiff’s KMVs do not constitute “work” within the meaning of the Copyright Ordinance, Cap 528 (“CO”).

For the first defence, the court found that there is no dispute that the K-Server licence would expire and it is undisputable that the defendant has had, upon the expiry of the K-Server licence previously granted to it, applied for and secured another term of the same licence. On the face of it, this is contrary to the suggestion that the K-Server licence is of a permanent nature. The argument that the fee paid by the defendant is for the downloading of new songs into the computer systems is rejected. Further, the defendant did not seek to uphold its rights under the permanent licence it has alleged, but immediately deleted all works of the plaintiff from its computer system. This conduct of the defendant is totally contradictory to what he suggested as the terms of the licence agreement.

The second defence was also rejected as whatever licence granted by PPSEAL to the defendant after 2008 should not cover the same rights as conferred under a K-Server licence.

For the third defence, the court found that as the defendant has been holding both K-Server licence and PP licence granted by the plaintiff’s licensing agents from September 2009 to January 2011, it has therefore been recognizing as the plaintiff’s intellectual property rights in the subject KMVs for many years. The defence was therefore rejected even if there were a number of technical defects in the plaintiff’s statutory declaration.

Lastly, the defendant relied on section 65 of the Copyright Ordinance, which says:-
“Notwithstanding section 23, copyright in a work is not infringed by the making of a transient and incidental copy which is technically required for the reviewing or listening of the work by a member of the public to whom a copy of the work is made available.”

Nevertheless, the defendant could not be a member of the public to whom a copy of the work is made available and therefore section 65 could not be applied.

A permanent injunction is then granted to the plaintiff. And as the conduct of the defendant does not amount to flagrant misconduct in that it has been consistently paying various royalty to licensing bodies in running its karaoke business. No additional damages was awarded to the plaintiff.

Please contact Mr. Angus Forsyth and Ms. Lai Lam for any enquiries or further information about this update.