Top Plus Pty Ltd v K Square Pty Ltd
[2009] FMCA 900
•15 September 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| TOP PLUS PTY LTD & ORS v K SQUARE PTY LTD & ORS | [2009] FMCA 900 |
| COPYRIGHT – Cinematograph film – infringement of copyright in karaoke videos over which applicant claims exclusive licence – where videos commissioned by record companies in Hong Kong and subject to the laws of that country – whether copyright assigned to the record companies purporting to grant exclusive licences – whether Australian law applies – Moçambique rule – whether Australian courts can determine ownership of intellectual property rights originating in another country – whether agreements between applicant and record companies granted exclusive licenses. PRACTICE & PROCEDURE – Injunctions – interlocutory injunction – balance of convenience – delay in initiating proceedings and adequacy of undertakings as to damages considered. |
| Copyright Act 1968 (Cth), ss.86, 98, 115, 119, 126B |
| ABC v O’Neill (2006) 227 CLR 57 Garnett, Davies and Harbottle, Copinger and Skone James on Copyright, 15th ed (2005) |
| First Applicant: | TOP PLUS PTY LTD (ACN 115 594 477) |
| Second Applicant: | GOLD TYPHOON ENTERTAINMENT LTD |
| Third Applicant: | EMPEROR ENTERTAINMENT (HONG KONG) LTD |
| Fourth Applicant: | UNIVERSAL MUSIC HONG KONG LTD |
| Fifth Applicant: | BMA RECORDS LTD |
| First Respondent: | K SQUARE PTY LTD (ACN 102 871 778) |
| Second Respondent: | EAST ASIA MUSIC (HOLDINGS) LTD |
| Third Respondent: | EAST ASIA RECORD PRODUCTION CO LTD |
| File Number: | SYG 1429 of 2009 |
| Judgment of: | Raphael FM |
| Hearing date: | 7 July, 17 – 18 August 2009 |
| Date of Last Submission: | 31 August 2009 |
| Delivered at: | Sydney |
| Delivered on: | 15 September 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr H Bevan |
| Solicitors for the Applicant: | DLA Phillips Fox |
| Counsel for the Respondent: | Ms J Rawlings |
| Solicitors for the Respondent: | Pancific Legal |
ORDERS
Application for interim injunction dismissed.
Parties to bring in short minutes of order reflecting the matters referred to in [44] of these reasons within seven days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1429 of 2009
| TOP PLUS PTY LTD (ACN 115 594 477) |
First Applicant
| GOLD TYPHOON ENTERTAINMENT LTD |
Second Applicant
| EMPEROR ENTERTAINMENT (HONG KONG) LTD |
Third Applicant
| UNIVERSAL MUSIC HONG KONG LTD |
Fourth Applicant
| BMA RECORDS LTD |
Fifth Applicant
And
| K SQUARE PTY LTD (ACN 102 871 778) |
First Respondent
| EAST ASIA MUSIC (HOLDINGS) LTD |
Second Respondent
| EAST ASIA RECORD PRODUCTION CO LTD |
Third Respondent
REASONS FOR JUDGMENT
Introduction
These reasons relate to an application for interim injunctions to restrain the first respondent from making copies of, causing to be seen in public or communicating to the public the whole or substantial parts of certain cinematograph films created for use as karaoke style entertainment. The first applicant claims to be the exclusive licensee in Australia of the copyright in karaoke cinematograph films (“KTVs”) of which the second to fifth applicants and the second and third respondents are the copyright owners. The first respondent is an Australia corporation which operates a karaoke lounge or bar with eighteen singing studios or rooms known as K Square Karaoke situated in Capital Square George Street Sydney. It is alleged that since 1 January 2009 K Square infringed the copyright of the first to fifth applicant and the second and third respondents in certain KTVs by making copies of them, causing them to be seen in public and communicating them to the public when the first respondent declined to renew a sub-licence which it had from the first applicant and which had been granted to it pursuant to the first applicant’s exclusive licence.
The first respondent put in issue the validity of the exclusive licence granted to Top Plus Pty Ltd (“Top Plus”) and the ownership of copyright in the KTVs by the second to fifth applicants and the second and third respondents (the “record companies”).
The application for interim relief occupied three days of hearing before me and after their conclusion the parties provided me with helpful written submissions. For the reasons given below I have come to the conclusion that this is not an appropriate case for an interim injunction but that the position of Top Plus and the record companies should be safeguarded by the requirement for the first respondent to make payments, to keep accounts and for the matter to be given an expedited hearing date. I am also of the view that the matter may well be capable of settlement through mediation and will make orders ensuring that such mediation takes place.
History
Karaoke involves singing along with or independently of a vocalist whose pre-recorded song on its musical backing is heard as the sound track to a screen upon which there appears a film that might be of the original artist or might be of anything. Sometimes the words of the song appear on the screen, sometimes they do not. Individual guests in the karaoke bar or karaoke outlet will take a microphone and sing the words of the song against the background of the film. Karaoke as a form of entertainment is particularly popular with members of the Asian communities living in Australia. The cinematograph films and sound tracks, which are the subject matter of these proceedings, were all created in Hong Kong and generally feature songs sung in the Mandarin or Cantonese language and dialect.
The first respondent (“K Square”), along with several other karaoke outlets in New South Wales, Victoria and Queensland, took licences for the use of the cinematograph films created by the record companies from Top Plus in 2006, 2007 and 2008. By the end of 2008 Top Plus had decided that it should substantially increase the licence fee which it charged to sub-licensees for the utilisation of the KTVs from the record companies. Top Plus had approximately 21 licensees in 2008. It would appear that Top Plus’ intention to increase licence fees became known to the sub-licensees prior to a meeting on 10 December 2008 that was held in a Sydney restaurant. At that meeting Top Plus presented to the attending sub-licensees (including K Square) a document entitled “information kit 2009”. The information kit described the new pricing system and gave details of promotional activities to be organised by Top Plus which would assist the sub-licensees to afford the new rates. The sub-licensees considered that the new rates were approximately nine times the old rates and that the action of Top Plus in introducing such rates was unfair and unreasonable.
It is clear from the report of the meeting contained in an affidavit of Ho Bun Chan, a director of K Square, sworn on 16 June 2009, that there was considerable resistance to re-signing sub-licensees licence agreements for the year commencing 1 January 2009. Only two karaoke outlets did renew, one of which was associated with Mr Christopher Chan who is a consultant to Top Plus and who provided a detailed affidavit that sought to establish the continual infringement by K Square. During January 2009 Mr Ho Bun Chan had conversations with Mr Woo from K Square about the licence renewal. K Square had put the matter in the hands of its solicitors but made it clear to Top Plus that it was not happy with the licence fees proposed. I infer from the conversation on 26 January 2009, deposed to by Mr Ho Bun Chan, that K Square was hoping for a united approach from the other sub-licensees so that a counter offer could be put. As it was, no counter offer of a general nature was made and the negotiations between Top Plus and K Square continued into April when K Square changed its solicitors. During that month Mr Wu told Mr Ho Bun Chan that he had removed the karaoke songs that were the subject of the previous sub-licensees licences from the company’s bars.
Mr Ho Bun Chan had discussions with other karaoke bar owners about whether they would take up sub-licensees licences. There was a general reluctance to do so pending the result of threatened litigation by Top Plus against the Sydney outlets.
Top Plus had not been entirely inactive on the legal front. It had, in fact, handed over to its solicitors, DLA Phillips Fox, the responsibility for negotiating and concluding the non exclusive licensing agreements with the previous sub-licensees. On 19 December 2008 Phillips Fox wrote to K Square a letter reproduced below:
“19 December 2008
K Square Pty Ltd
Shop G4, Capitol Square
730-742 George Street
HAYMARKET NSW 2000
By registered mailDear Sirs
Non-Exclusive Licence Agreement between yourself and Top Plus Pty Limited
You have been informed by our client, Top Plus Pty Limited, that we act on its behalf in negotiating and concluding Non-Exclusive Licence Agreements (Agreement(s)) with karaoke outlets in Australia and New Zealand. Our client’s 1 December 2008 letter was sent to you by registered mail on 4 December 2008 with a copy of its information kit 2009 which you have should have received by now.
Your existing licence agreement will expire at midnight on 31 December 2009. As you would have noticed, one of the changes announced by our client is that all new Agreements will be entered into with Top Plus Pty Limited as Licensor.
Should you fail to enter into a new Agreement with our client, you and the individuals involved in your business are exposed to copyright infringement under the Copyright Act, 1968 (Cth). Our client has given us strict instructions that it will under no circumstances tolerate any copyright infringement in respect of its Licensed Content which constitute musical works and for which it holds exclusive licences for Australia and New Zealand. Details of these licences with record companies were given in our client’s information kit 2009 which you have in your possession. Also take note that if you do not take this opportunity to enter into the Agreement with our client, our client reserves the right to refuse granting you a licence in the future.
To avoid potential copyright infringement and the consequences of infringement, and to ensure that you operate under licence with our client, you must enter into our client’s Agreement which sets out the terms and conditions upon which our client is prepared to allow you to use the Licensed Content in question. Your new Agreement will commence on 1 January 2009 and terminate on 31 December 2009. A copy of this Agreement is attached for your completion, signature and return to us. We draw your attention to the following:
1.On the cover page, underneath our client’s name, you should write in your full name and ACN or ABN number.
2.You should do the same in paragraph 1 under the heading ‘Parties’ but in addition also fill in your full business address.
3.In Clause 2.6 on page 3, you need to fill in the number of karaoke rooms currently being operated at your Outlet. In this regard we draw your attention to clause 6.1.2 which makes it clear that each group of 10 seats or part thereof constitute one karaoke room.
4.In clause 23 under the heading ‘Definitions and Interpretations’ on page 10, you should fill in the exact physical address of the Outlet from which you conduct business and in which you intend using the Licensed Content. Separate Agreements must be entered into for each Outlet that you own or operate.
5.Each of the changes made should be initialled by you next to the changed. Alternatively, you can provide us in writing with the outstanding details mentioned above and we will send you an updated copy of the Agreement with all those details included for your signature and return to us.
6.You must complete, sign and return the Agreement in the form as attached to us on or before close of business on 31 December 2008. If you fail to do so, your failure will be accepted by our client as a refusal to enter into a new Agreement and our client will then without further notice take such appropriate steps as it is entitled to in Law, and in particular under the Copyright Act, 1968 (Cth).
We trust that this will not be necessary. If you have any questions or require explanations in relation to the attached Agreement you are welcome to contact either:
Fred Potgieter or Neil Sadler
Special Counsel Consultant
T +61 7 3246 4233 T +61 7 3246 4027
E [email protected] E [email protected]Yours sincerely
Fred Potgieter
Special Counsel
Direct T +61 7 3246 4233
E [email protected]”There was annexed to this letter a copy of the new licence agreement.
Whether sending a letter in this form could be considered conducive to amicable commercial dealings is a matter of conjecture but it would have been clear to K Square that Top Plus had serious concerns about the possibility of an ongoing infringement and that it wanted the sub-licenses to be completed urgently. K Square instructed its own solicitors who wrote to Phillips Fox on 31 December 2008. The letter only came to the writer’s attention at Phillips Fox on 6 January 2009. The faxed letter asked a number of questions seeking to elucidate Top Plus’ grounds for asserting its right to protect the record companies’ copyright and its ability to validly grant the sub-licences.
Between late January and April 2009 Top Plus commissioned Mr Christopher Chan to investigate whether K Square was continuing to show the KTVs that were previously the subject of the sub-licence agreements. Mr Chan did this by deputing a member of his staff, Linda Tang, to:
“Go to K Square and hire a room for a couple of hours. Randomly pick some songs from every single record company. Pick some songs from a list of newly released karaoke music videos, see if there are any new release songs from 2009. Pick some songs from the affidavits as well. Take photos of the songs, mainly with the Top Plus logo with the record company logo.”
In her affidavit sworn on 27 July 2009 Ms Tang deposes that she understood “every single record company” to mean the record companies, she understood the list of new release karaoke music videos to be a reference to the list of karaoke music videos that had been published as new releases over the years from 2005 and when Mr Chan said “from the affidavits” she understood him to mean the Top Plus copies of the lists of karaoke music videos attached to affidavits provided by the record companies in connection with a court case in Queensland. Ms Tang did as she was requested, she also took photographs of the screen of each KTV that she called up:
“I took a photo of the screen that the moment the song title came up. I also took a photo of the screen at the moment that the Top Plus logo and the relevant record company logo appeared.”
Ms Tang repeated her visits on 25 March and 1 April 2009. After each visit she downloaded the photographs onto her computer and then assisted Mr Chan to identify the KTVs that appeared in the photograph by title, artist and record company. She also identified where the KTVs clearly had imbedded in them the “Top Plus” watermark.
Ms Tang returned to K Square on 24 May 2009. This was after
K Square had told Mr Ho Bun Chan that all offending KTVs had been excised. She deposes to recognising behind Tab 46 of Exhibit “CC-1” the photographs which she took on 24 May 2009.
There are several hundred KTVs which Ms Tang saw and photographed. They were later identified by Mr Chan with some assistance from Ms Tang. They are all listed in Mr Chan’s exhibit “CC-1”. It is fair to say that the majority appear to be KTVs in which the record companies assert original copyright and in respect of which Top Plus asserts the right to enforce by virtue of it being the exclusive licensee in Australia. There are, however, a significant number of KTVs which cannot readily be identified as being associated with one of the parties to the proceedings. I explained to Ms Rawlings, counsel for K Square, that the existence of some KTVs which were not readily identifiable did not go to the validity of any of the applicants’ copyright or right to enforce in respect of those KTVs which did. It might well be necessary during the substantive hearing to identify accurately the KTVs which were the subject of copyright that could be protected in this Court so that proper damages could be assessed. But at this stage, considering only the question of an injunction, the problem was not acute. The Court would not grant Top Plus an injunction in respect of any KTV for which it was not the exclusive licensee.
The evidence of Ms Tang and Mr Chan did indicate to me that a prima facie case could be made that K Square had been allowing the performance of KTVs that were the subject of earlier licences to it by Top Plus but which were no longer licensed to it as a result of K Square’s refusal to renew the licence on 1 January 2009. If K Square could establish that it was the sole licensee then it would have under s.119 Copyright Act 1968 (the “Act”), the same rights of action and remedies by virtue of s.115 as if the licence had been an assignment. Any rights of enforcement held by Top Plus were subject to its establishing the validity of the claimed exclusive licence and to the validity of the copyright claimed by the record companies as licensors.
The documentary evidence and the evidence of the record companies
Top Plus produced copies of its agreement with each of the record companies and although they have similarities it is necessary to consider each in turn.
Gold Typhoon Agreement
The current agreement with Gold Typhoon is dated 1 September 2007. Gold Typhoon is a company incorporated in Hong Kong. It is described as the “record company”. In the recitals to the agreement it states:
“TOP thereby desires to enter into an agreement with the record company pursuant to which the record company shall grant to TOP an exclusive license to use certain karaoke version of music videos as owned and/or controlled by the Record Company and to collect relevant payments on the terms and conditions of this Agreement.”
There is then a definition of “licensed contents” which means:
“The karaoke version of the music videos as owned and/or controlled by the record company …”
Section 2 of the agreement is headed “Scope of rights granted”. The rights are expressed to be exclusive. Clause 2(a) is in the following form:
“… In sum the Record Company grants to TOP exclusively the right to publicly perform, display, copy, reproduce (including switching media), synchronize and commercially exploit any and all the copyrighted songs, images or video which are included in the licence contents in the computerised karaoke system.”
These rights are limited by section 3(a) to the:
“Exclusive use of the licensed content in the manner expressly described in section 2.”
The agreement goes on to provide a representation from the record company that it owns or controls the entire copyright in and to the licensed contents for the purposes of granting the rights under the agreement.
The agreement was accompanied by an authorisation letter indicating that Gold Typhoon (or Gold Label as it was then known) had authorised Top Plus as its exclusive licensee and granted it the necessary rights to collect royalties. It continued:
“We hope that responsible companies and individuals in Australia and New Zealand will take advantage of the opportunity to legally use the material in there outlets. We intend to aggressively protect the copyright rights of the record company in these materials in Australia and New Zealand and will seek the maximum damages available under the law against any person or corporation involved [in] infringement or piracy of these materials.”
Emperor Entertainment Agreement
The current agreement between Top Plus and Emperor is dated 9 July 2007. The Recitals note that:
“Top Plus thereby desires to enter into an agreement with the Record Company pursuant to which the record company shall grant to TOP PLUS an exclusive licence to use the Licensed Contents and collect relevant payments on the terms and conditions of this agreement.
Licensed Contents is defined as:
“The karaoke version of 150 music videos (including the eight titles stipulated in schedule 1 receipt of which Top Plus hereby acknowledge as owned and/or controlled by the Record Company during the term.”
Under the scope of rights granted Top Plus is granted the exclusive right:
(a) The right to reproduce and use or authorise reproduction and usage of the Licenced Contents (and copies thereof) in the outlets via the karaoke system therein.”
In paragraph 2(a)(ii) the same “in sum” rights as are contained in the Gold Typhoon agreement are referred to. In a supplementary agreement dated 1 January 2009 the Licenced Contents are described as:
“The karaoke version of the music videos (mainly performed in Mandarin and Cantonese) as owned and/or controlled by the Record Company and to be delivered to TOP PLUS by the Record Company in Hong Kong as determined by the record company from time to time throughout the extended period and:
(ii) The karaoke version of the back catalogue music video as owned and/or controlled by the Record Company.
Universal Music Agreement
The current agreement is dated 1 January 2009. It follows the form of the Gold Typhoon agreement.
BMA Records Agreement
In this document dated 1 December 2007 the Recitals are described as “background”. They state:
“AThe Licensor owns or controls the copyright in certain music videos and has agreed to licence the exploitation of such music videos to the licensee subject to the terms and conditions herein.
BThe Licensee has agreed to accept the licence for the music video subject to the terms and conditions herein.
The definition of KTV means:
“All the back copyright and the New Released Karaoke version music videos as owned/or controlled by the record company where the vocal performance of the artiste featured in the Music Video and the background music are recorded on separate sound tracks. The volume of each sound track may be adjusted independently when the KTV is played.
The licence is expressed to be:
“The Licensor hereby grants an exclusive licence to the Licensee the right to use and distribute the KTVs to Karaoke outlets in the karaoke system throughout the term with the right to sub licence its rights to third parties in the territory only.”
On 24 February 2009 an addendum to the licence agreement was signed. In that addendum the scope of rights granted was differently expressed “as the right to reproduce and use or authorise reproduction and usage of the KTVs (and copies thereof) in the outlets via the karaoke system therein” including … the same “in sum” phraseology used in the Universal Music document.
East Asia Music (Holdings) Agreement
This agreement is dated 1 September 2007 but contains an addendum dated 26 February 2009. The licence is expressed in the Recitals also described as background in the following way:
“A.The Licensor owns or controls the copyright in certain music videos and has agreed to licence the exploitation of such music videos to the Licensee subject to the terms and conditions herein contained.
B.The Licensee has agreed to accept the licence for the music videos subject to the terms and conditions herein contained.
The Licence is contained in clause 2 as follows:
“2.1The Licensor hereby grants an exclusive licence to the Licensee throughout the territory during the term:
i)Use and authorise usage of the delivered KTVs in the Karaoke Outlets via the karaoke systems therein and;
ii.collect fees relating to Karaoke Performances and relevant licence fees from the Karaoke Outlets which respect to the usage and/or exploitation of the Delivered KTV via the Karaoke System therein.”
This agreement does not contain the “in sum” phraseology but does have in clause 4 a right of reproduction (as opposed to a right to copy).
East Asia Record Production Co Agreement
This agreement is in the same form as that of the East Asia Music (Holdings).
Each of the record companies provided Top Plus with an authorisation letter along the lines of that already extracted. Each of the second to fifth applicants and the second and third respondents provided an affidavit (with the exception of Duncan Wong of Universal Music) in the following form:
“I, Andy Lai, of Unit 608, 6/F Tsim Sha Tsui Centre, 66 Mody Road, Tsim Sha Tsui East, Kowloon, Hong Kong, General Manager, solemnly and sincerely affirms and declares:
1.I am the General Manager of Gold Typhoon Entertainment Limited (formerly known as Gold Label Entertainment Limited) (the “Company”), a company registered in Hong Kong Special Administrative Region, with its registered office at 608, 6/F Tsim Sha Tsui Centre, 66 Mody Road, Tsim Sha Tsui East, Kowloon, Hong, SAR, China.
2.The Company produces sound recordings and audiovisual recordings including karaoke music videos.
3.Annexed hereto and marked Exhibit AL-1 .is a schedule of karaoke music video recordings (the “Recordings”) produced by the Company, including the names of the artists involved in the Recordings.
4.The Company was the producer of each of the Recordings. The Company was also the employer of the principal directors of the films included in the Recordings. To the extent that any of the Recordings include computer-generated music or artistic works, the Company undertook the arrangements necessary for the creation of the computer-generated music or artistic works.
5.To the extent that any of the artists had any ownership of copyright in any sounds, vocals or images used in the Recordings, the Company acquired ownership of that copyright in respect of the Recordings listed in column one from the artists listed in column town, on or about the date in column three of Exhibit AL-1. The year and place of the creation of each of the Recordings is listed in column four of Exhibit AL-1.
6.The Company is a member of the international Federation of the Phonographic Industry (Hong Kong Group) Limited (“IFPI HKG Limited”)
7.IFPI HKG Limited is an industry organisation with whom copyright in sound recordings and audiovisual recordings, including karaoke videos, which are made available to the public in reasonable quantities, can be registered.
8.Each of the Recordings is registered by the Company with IFPI HKG Limited, as being subject to the copyright owned by the Company.
9.The Company may grant licenses to other persons, companies and overseas entities to use the works.
10.By a written agreement dated 1st September 2005 and 1st September 2007, the Company granted an exclusive license to Top Plus Pty Limited, to reproduce and use each of the recordings.”
Mr Wong’s affidavit is in the following form:
“I, Duncan Wong, of 28/F, Millennium City, 392 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong SAR, China, Senior Vice President, solemnly and sincerely affirms and declares:
1.I am the Senior Vice President of Universal Music Limited (the “company”), a company registered in Hong Kong, with its registered office at 28/F, Millennium City, 392 Kwun Tong Road, Kwun Tong, Kowloon, Hong Kong SAR, China.
2.The Company produces sound recordings and audiovisual recordings including karaoke music videos.
3.Annexed hereto and marked Exhibit DW-1 and DW-2 are the schedule of karaoke music video recordings (the “recordings”) produced by the company, including the names of the artists involved in the Recordings.
4.The company was the producer of each of the recordings. The company was also the employer of the principal directors of the films included in the recordings. To the extent that any of the recordings include computer-generated music or artistic works, the company undertook the arrangements necessary for the creation of the computer-generated music or artistic works.
5.To the extent that any of the artists had any ownership of copyright in any music, lyrics or images used in the recordings, by written agreement, the company acquired ownership of that copyright in respect of the recordings listed in column one from the artists listed in column town, on or about the date in column three of Exhibit DW-1 and DW-2. The year and place of the creation of each of the works is listed in column four of Exhibit DW-1 and DW-2.
6.The company may grant licenses to other persons, companies and overseas entities to use the recordings.
7.By a written agreement dated 10 March 2006, 2 August 2007 and 1 January 2009 the company granted an exclusive license to Top Plus Pty Limited, to reproduce and use each of the recordings. Annexed hereto and marked Exhibit DW-3 is a true and correct copy of the agreement dated 10 March 2006, 2 August 2007 and 1 January 2009 between the company and Top Plus Pty Ltd.”
The respondents required all the deponents of these affidavits to attend for cross examination at the telephone. Mr Lai, General Manager of Gold Typhoon attended, as did Mr Duncan Wong, Senior Vice President of Universal Music, Mr Alvin Wang of East Asia Record Production Company Limited and Mr Tony Yap of East Asia Music (Holdings) Limited. The gravamen of all their evidence was the same. It was that the record companies when deciding to make KTVs contracted with independent directors in Hong Kong. These independent directors created the film which was then handed to the record company. An invoice would be issued for the film and paid. There was very rarely any assignment of copyright from the director to the record company. The general practice in the industry was that the record companies considered that copyright had been assigned to them by virtue of the submission of the film and payment of the invoice.
The involvement of the record companies in the proceedings
Although four of the record companies were applicants in the substantive proceedings they were not parties to the application for interim relief. The second and third respondent record companies had been joined by the first applicant and did not seek relief in the proceedings. At the end of the third day of hearing the second and fourth applicants indicated, through the first applicant’s counsel, that they were offering the usual undertakings as to damages and were thus applying for interlocutory injunctions against the first respondent. The third applicant also sought to become a party to the request for interim relief but it was only prepared to do so on the basis that its undertaking was capped at $80,000.00. The second and third respondents have not sought to become applicants in the proceedings.
Discussion
I have been greatly assisted in this matter by the helpful written submissions of counsel appearing on behalf of the parties. It is important that a decision on an interlocutory matter be delivered as soon as possible so, rather than rephrase matters in submissions which are clearly unarguable statements of the law, I would propose to set them out as they appear. The statutory framework under which this Court is permitted to consider the current application was set out by counsel for the applicant in his outline of submissions dated 17 August 2009:
“C. STATUTORY FRAMEWORK
12. This Court has jurisdiction under s 131D of the Act.
13.The term “cinematograph film” is defined in s 10 of the Act, relevantly, as the aggregate of the visual images in an article or thing so as to be capable by the use of that article or thing of being shown as a moving picture and includes the aggregate of the sound embodied in a sound-track associated with such visual images.
14.Section 13(1) relevantly provides that a reference in the Act to an act comprised in the copyright in other subject-matter shall be read as a reference to any act that, under the Act, the owner of the copyright has the exclusive right to do.
15.Part 1V of the Act deals with copyright in subject-matter other than works. Div 2 of Pt 1V deals with the nature of copyright. By s 86, copyright in relation to a cinematograph film is the exclusive right to do all or any of the following:
· to make a copy of the film;
· to cause the film to be seen or heard in public;
· to communicate the film to the public.
16.By s 101, relevantly, copyright in a cinematograph film is infringed by a person who, not being the owners of the copyright, and without the licence of the owner of the copyright, does in Australia, or authorises the doing in Australia of, any act comprised in the copyright.
17.The owner of copyright may bring an action for infringement of the copyright: s 115(1). By s 119, the exclusive licensee has the same rights of action and remedies by virtue of s 115 as “if the licence had been an assignment”. The expression “if the licence had been an assignment” is further defined in s 117.
18.The term “exclusive licence” is relevantly defined in s 10 as a licence in writing, signed by or on behalf of the owner of copyright, authorizing the licensee, to the exclusion of all other persons, to do an act that, by virtue of this Act, the owner of the copyright would, but for the license, have the exclusive right to do. The term “exclusive licensee” has a corresponding meaning.”
In the same submissions are found the principles for the grant of interlocutory relief which I am satisfied are also not controversial:
D. PRINCIPLES FOR GRANT OF INTERLOCUTORY RELIEF
19.The principles relevant to the grant of interlocutory relief are not in dispute. Top Plus must show that:
· There is a serious question to be tried;
· It will suffer an irreparable injury for which damages will be an inadequate remedy;
· The balance of convenience favours the granting of an injunction.
See Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at 81 [65] and 83 [71] per Gummow and Hayne JJ; with whom Gleeson CJ and Crennan J agreed (at 68 [19]); see also Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 217 [13] per Gleeson CJ, citing Mason A-CJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153.”
K Square mounts a substantial defence against the application. In its outline of argument, produced by counsel, there was included a table intending to show that the licences granted to Top Plus did not meet the requirements of s.86 and it is best that I deal with each of the agreements separately. I would say that to my mind the “in sum” expression of rights found in clause 2 of the Gold Typhoon agreement and extracted at [15] of these reasons, sufficiently identifies the rights found in s.86 of the Act for me to find that there is a serious question to be tried in relation to the rights of Top Plus and that prima facie those rights would permit it to bring proceedings pursuant to s.119. I am satisfied from the terms of clause 2 of the agreement that the rights granted are exclusive. The Emperor Entertainment Agreement also contains the “in sum” clause and the rights granted in clause 2 are said to be exclusive. In regard to the Gold Typhoon document, whilst there is no express term in the agreement relating to the right to grant sub-licences, that right is referred to in the authorisation letter and I am satisfied that there is an arguable case that read as a whole the intent of the exclusive licence is to allow the grant of the sub-licenses. The Emperor licence contains a specific right to sub-licence. The Universal Music licence is an exclusive licence, it contains the “in sum” phraseology and a right to sub-licence. The Addendum to the BMA Records Limited Agreement contains the “in sum” phraseology and in clause 2 of the 2007 agreement the licence is expressed to be exclusive. The scope of rights includes a right to reproduce and authorise reproduction of the KTVs in what is described as “the outlets” which are defined to mean “commercial premises where a large number of KTVs are available for selection by patrons”. I am satisfied that this agreement is arguably one to which s.119 of the Act would apply. In the East Asia Music (Holdings) Limited document is an exclusive licence and a sub-licensing right. The licence is claimed to permit the licensee to “use and authorise usage of the delivered KTVs karaoke outlets”. There is also contained in paragraph 4 a right to reproduce the delivered KTVs. This agreement does not in terms touch on the matters referred to in s.86. East Asia Music (Holdings) Limited is not an applicant in these proceedings. Having considered the agreement as a whole I have come to the view that there is a sufficiently arguable case that when read purposefully the licence would cover those matters referred to in s.86 and constitute an agreement that can be enforced by an exclusive licensee. The East Asia Record Production Company Limited licence is in the same form as the East Asia Music (Holdings) Limited licence and I would make the same finding in respect of that document. It is also not an applicant.
The effect of the findings above is that I would reject K Square’s argument that the record companies have not granted the applicant effective exclusive licence agreements that would enable the applicant to commence these proceedings to the extent that I am required to make such a finding for the purposes of an interlocutory application. I have had regard to the views expressed by Gummow and Hayne JJ in ABC v O’Neill (2006) 227 CLR 57 at [81 – 82] where their Honours elucidate the requirements of a “prima facie case”.
I am not as sanguine, however, about the record companies’ claims to be the copyright owners of the KTVs. It is to be recalled that, although this was put in issue by K Square, the Court only heard from four responsible officers of four record companies and each of them described a practice whereby the KTVs were made by independent production companies. There was exhibited at a late stage in the proceedings a Deed of Confirmatory Assignment between one director and Gold Typhoon, a bundle of documents entitled “Copyright Declaration” between a series of producers and East Asia Music (Holdings) and some invoices between production houses and Universal Music Limited. In each case the relevant KTVs were only identified in the Chinese script and at the close of the case I had not been provided with any schedule in English which would enable me to have made clear injunctive orders identifying the KTVs that were to be the subject matter of those orders.
If the films had been made in this country and the arrangements between the record companies and the exclusive licensee were expressed to be subject to the laws of Australia I would be satisfied, at least in the case of the four companies whose officers gave evidence, that there was a prima facie case that those record companies owned the copyright. But all the agreements between the record companies and Top Plus are expressed to be subject to the laws of Hong Kong, the KTVs were made in Hong Kong and any arrangements between the production companies and the record companies would, by inference, also be subject to the laws of Hong Kong as there was no evidence that these production houses were anything but Hong Kong based and managed.
There was evidence from the record companies that the KTVs had been registered with the International Federation of the Phonographic Industry (Hong Kong) Group Limited which is an industry body. That registration might have raised a presumption relating to the ownership of copyright under s.126B(3). None of the certificates were tendered in evidence nor was the registration relied upon in the Statement of Claim to establish the chain of copyright. The applicants argue that:
“Each of the agreements is governed by the law of Hong Kong. Nevertheless, in the absence of any evidence to the contrary, the law of Hong Kong is presumed to be the same as Australian law; Neilson v Overseas Projects Corporation of Victoria Limited (2005) 223 CLR 331.”
Under s.98 of the Australian Copyright Act the copyright in the commissioned film belongs to the person commissioning the film:
“Ownership of copyright in cinematograph films
(1) This section has effect subject to Parts VII and X.
(2) Subject to the next succeeding subsection, the maker of a cinematograph film is the owner of any copyright subsisting in the film by virtue of this Part.
(3) Where:
(a) a person makes, for valuable consideration, an agreement with another person for the making of a cinematograph film by the other person; and
(b) the film is made in pursuance of the agreement;
the first‑mentioned person is, in the absence of any agreement to the contrary, the owner of any copyright subsisting in the film by virtue of this Part.
(4) …
(5) …
(6) …”
The application of s.98 would provide a neat rebuttal to the doubts thrown up as a result of the cross examination of the representatives of the record companies. But it cannot be said that the assumption considered in Neilson is quite as hard and fast as the applicants would wish it. Counsel for the first respondent has referred me to the views expressed by the Full Federal Court in Tisand Pty Ltd v Owners of Ship MV “Cape Moreton”(Ex “Freya”) [2005] 219 ALR 48 at [150]:
Since no foreign law has been proved, the issue of the operation of the so-called presumption that foreign law is the same as the law of the forum arises. The plaintiffs submitted that, in the absence of proof of Liberian or other foreign law, the SR Act should be read as applying, mutatis mutandis, to a Liberian registered ship. No detailed argument took place on this issue. It may be doubted whether an Australian statute in terms directed only to Australian-owned ships is properly the subject of the presumption in these circumstances. In Damberg v Damberg[2001] 52 NSWLR 492 at 505-518 [118]-[147] Heydon JA (as his Honour then was) examined the authorities on the so-called presumption. That analysis reveals the difficulties of, and disparities in approach to, its application. Some authorities limit the presumption to non-statutory law. Some extend the presumption to statutes. Some, whilst accepting the presumption as extending to statute law, require that the statute law not be peculiar to local situations or linked to local conditions or to establishing regulatory requirements. Thus, to the extent that statute law can be seen as part of the `general law' of the law of the forum, it will form part of the presumption. See, in particular, the different approaches in Purdom v Pavey & Co (1896) 26 SCR 412; Hellens v Densmore [1957] SCR 768, 780; Gray v Kerslake [1958] SCR 3; The Ship `Mercury Bell' v Amosin (1986) 27 DLR (4th) 641; and Schnaider v Jaffe [1916] CPD 696, all referred to by Heydon JA in Damberg v Damberg.”
I was also referred to the views expressed by Heydon JA as his Honour then was in Damberg v Damberg [2001] 52 NSWLR 492 at [162] where his Honour said:
“To state exhaustively when a court will not assume that the unproved provisions of foreign law are identical with those of the lex fori would be a difficult task. It is not necessary to perform it in this case.”
The presumption of similarity was considered by Graham J in National Auto Glass Supplies (Australia) Pty Limited v Nielsen and Moller Autoglass (NSW) Pty Limited (No 8) [2007] FCA 1625 and stated at [41]:
“As I understand the relevant authorities, the general presumption that, in the absence of evidence to the contrary, foreign law is the same as Australian law is not inflexible. Where the law of the forum is governed by a statute and the law within Australia is itself lacking in uniformity, I doubt whether it could be presumed that the defamation law in China, including the Special Administrative Region of Hong Kong, is the same as it is in New South Wales.”
There could well be a strong argument made that, whilst it would not be reasonable to assume that the statutes or ordinances of the Republic of China would be the same as some common law authority in any one of the many states of Australia or that the taxation law of the German Federal Republic would be the same as the taxation law of the Commonwealth of Australia, there might be more reason to make that assumption in respect of the Copyright Ordinance of Hong Kong and the Copyright Act of Australia. Both countries have a common history in relation to their intellectual property legislation of adaptation from the English law. Both countries are common law countries (I accept that Hong Kong is now an administrative region of the Peoples Republic of China and use the word “country” loosely). Both countries are members of the WTO and have adopted the TRIPS Convention. To my mind the real question here is who bears the onus of establishing what the law is. It is the applicants who are asserting that they own the copyright in the KTVs. They must establish it. I do not think they can do this by ignoring the lex fori and relying upon the assumption to do the work for them. That is effectively passing the onus to the respondent. It is he who must then go out and establish exactly what the law in Hong Kong is when he has made no allegation of similarity. In fact K Square has discovered what the law is and attempted to tender it together with a case from the Hong Kong Court of Appeal that it considers relevant. The extracts from the Ordinance would appear to indicate that the law is not the same but the applicants rejected the tender which was made through written submissions and I do not propose, at this interlocutory stage, to admit it because, as I have said, I think proof of the law is the responsibility of the applicants. Thus the situation in which I find myself is that no law as to ownership of copyright has been established, the applicants merely assert it, save in respect of those assignments to which I have previously referred.
K Square raises an additional difficulty. It says that this Court is being invited to rule on the question of whether the second, third and fourth applicants have good title to the copyright in the cinematograph films. Those films were made in Hong Kong and are presumed to be subject to Hong Kong law. This it argues is contrary to what is known as the “Moçambique” rule; British South Africa Co v Companhia de Moçambique [1893] AC 602. The scope of that rule was considered most recently in TS Production LLC v Drew Pictures Pty Limited [2009] 252 ALR 1 by a Full Bench of the Federal Court Finkelstein, Stone and Gordon JJ. That was a case involving claims to the copyright in a cinematograph film entitled “The Secret” which was being litigated both in the United States District Court in Illinois and in the Federal Court of Australia. Finkelstein J confirmed the existence of the Moçambique rule and stated at [16]:
“There are cases that have extended the Moçambique rule to actions for the infringement of foreign intellectual property rights: see for example Atkinson Footwear Ltd v Hodgskin International Services Ltd (1994) 31 IPR 186 (copyright); Tyburn Productions Ltd v Conan Doyle (1990) 19 IPR 455 (patent, copyright and trade mark); Tritech Technology Pty Ltd v Gordon (2000) 48 IPR 52 (patent). But in Pearce v Ove Arup Partnership Ltd [2000] Ch 403 the Court of Appeal drew a distinction between actions involving the title to intellectual property and infringement actions, holding that the Moçambique rule only applied to the former.”
The Pearce case bears close examination because it contains an erudite review of the authorities including the Australian authority. The Court of Appeal accepted that copyright rights were similar to patent rights for the purposes of its consideration. In particular the Court considered the decision of the High Court in Potter v Broken Hill Proprietary Company Limited (1906) 3 CLR 479 and expressed approval of the conclusions of O’Connor J at [515-6]:
“… I am of opinion that the Supreme Court of Victoria could not try this case without inquiring into the validity of the patent grant, and could not make that inquiry without violating a fundamental principle of the comity of nations which is binding upon the Victorian Courts in the absence of any Victorian law authorizing them to make such inquiry.”
Perhaps a more relevant case is Def Lepp Music v Stuart Brown [1986] RPC 273 discussed in Pearce:
“As Mr Justice Lloyd himself observed, there was no allegation of infringement of foreign copyright in the Def Lepp case. The plaintiffs claimed to be the owners of the United Kingdom copyright in a tape recording. It was alleged that the sixth and eighth defendants had infringed the plaintiffs’ United Kingdom copyright by transactions which had taken place in Luxembourg and Holland. The sixth and eighth defendants applied to the English court to set aside leave granted to serve them with the proceedings outside the jurisdiction, on the ground that the material relied upon by the plaintiffs disclosed no cause of action against them. Sir Nicholas Browne-Wilkinson V-C upheld that contention. After analysing the relevant provisions of the Copyright Act 1956 he said this, at page 275, line 45:
It is therefore clear that copyright under the English Act is strictly defined in terms of territory. The intangible right which is copyright is merely a right to do certain acts exclusively in the United Kingdom: only acts in the United Kingdom constitute infringement either direct or indirect of such a right.
The Vice-Chancellor went on to consider, and reject, an argument advanced by the plaintiffs on the scope and effect of the double-actionability rule. We shall return to that part of his judgment in due course. He concluded, at page 276 line 50:
In my judgment, therefore, a successful action cannot be brought in England for alleged infringement of United Kingdom copyright by acts done outside the United Kingdom. I am fortified in this view by the fact that it accords not only with the views of the traditional textbooks but also with two decisions in the Australian courts in the analogous field of patents which are also intangible rights in a limited and defined territory: see Potter v Broken Hill Proprietary Co Ltd [1905] VLR 612; (1906) 3 CLR 479: Norbert Steinhardt & Son Ltd v Meth (1960) 105 CLR 440.
We doubt whether the Potter case, at least in the High Court of Australia, can properly be regarded as authority for the proposition that an action cannot be brought in England for the infringement of United Kingdom copyright by acts done outside the United Kingdom. In the Potter case the question was whether an action could be brought in the state of Victoria for an injunction and damages in respect of the alleged infringement in New South Wales of the plaintiff’s New South Wales patent. But we do not doubt the proposition itself; nor that it is supported by the Norbert Steinhardt case. An action cannot be brought in England for the infringement of United Kingdom copyright by acts done outside the United Kingdom because, as the Vice-Chancellor pointed out in the earlier passage of his judgment to which we have referred, the rights conferred by United Kingdom copyright are territorial; and acts done outside the United Kingdom cannot infringe those rights. But, that said, the proposition is of no assistance in the present case. In the present case the question is not whether an action can be brought in England for the infringement of United Kingdom copyright by acts done outside the United Kingdom; rather, the question is whether an action can be brought in England for the infringement of Dutch copyright by acts done in Holland. That is, of course, closely analogous to the question in the Potter case; but it is not analogous to the question in the Def Lepp case. On this aspect of the present case the respondents can gain no assistance from the Def Lepp case.”
In Tyburn Productions Ltd v Conan Doyle (“Tyburn”) [1991] Ch 75 Vinelott J had to decide whether to make a declaration that the defendant had no rights under the copyright, unfair competition or trademark laws of the United States which would be infringed by what the plaintiff was proposing to do. His Honour held that the question whether a defendant had any copyright in the United States so as to be able to prevent the distribution of the claimant’s film was not justiciable in England. It seems that Pearce has limited the decision in Tyburn to cases where subsistence or title are in issue. Accordingly, the question whether an infringement claim of this type would be justiciable where subsistence or validity are not in issue seems to be an open one. In the instant case, the subsistence of copyright in the KTVs is clearly in issue. It has been suggested at page 1045 of “Copinger and Skone James on Copyright” (2005) that, as a result of the decision in Pearce, the position regarding jurisdiction over foreign rights in matters where subsistence or validity is in issue is also unclear. Although the Court of Appeal in Pearce approved of the decision in Tyburn, it did so on the basis that the Judge was right to regard the relief sought as “an exercise in futility” as there was no evidence that the English court’s decision would be treated as binding in the United States. At para.2-118 of Copinger it is said that:
“[a]t least in the Court of Appeal, therefore, there is certainly scope for argument that an English court may rule on questions of title to foreign rights equivalent to copyright, provided it can be shown that such an order would have some practical effect.”
In the instant case persons purporting to be the actual copyright owners of Hong Kong copyrights are attempting to sue for infringement outside Hong Kong and in Australia. The validity of those copyrights has been placed in issue. By virtue of the Australian Copyright Act the first applicant sues as if it had taken an assignment of the Hong Kong copyrights, although that was done under agreements which have as their governing law the law of Hong Kong. The “assignment” is only as effective as the original right. If the assignors did not hold the copyright there was nothing to give to their assignee. The question of whether the Australian courts can consider these proceedings is difficult. It would be argued that a declaration by the Australian court that the record companies’ copyright is invalid under Hong Kong law would not be accepted as binding the Hong Kong courts. It would therefore be argued that such a finding would have no utility and thus the proceeding would not be justiciable here. Against that an argument would be made that the finding is only relevant in respect of the particular alleged infringements which occurred in Australia and that such an action should be justiciable here. The appropriate place to answer these difficult questions is the final hearing, not on an application for interlocutory relief. The very existence of these problems and their difficulty would tend to encourage a finding that the balance of convenience does not lie with the grant of an injunction especially where, as is the case here, reasonable protective orders can be made and an early hearing date granted.
The applicants argue that the balance of convenience lies with them and that an interim injunction is the appropriate remedy for copyright infringement. They argues that damages are not adequate; Commonwealth of Australia v John Fairfax & Sons Limited (1980) 147 CLR 39 at [58] per Mason J. In ordinary circumstances I would be in full agreement with this submission. The infringement of copyright is the unlawful use of someone else’s property. A court should be most reluctant to allow this to continue pending a final hearing. I accept that there is no doubt that in this case the first respondent is permitting cinematograph films to be played in its establishments to which it does not have rights. But by the same token there are very clearly substantial issues as to whether the persons who have brought these proceedings have themselves the right to do so.
K Square argues that the applicants should be prevented from obtaining an injunction because their of their laches. It points to the fact that Top Plus was aware of its rights to take injunctive proceedings prior to the end of the previous licence period and made that clear to K Square and the other persons who attended the meeting in December. I would also note that the letter from DLA Phillips Fox indicates that sanctions will be applied if the KTVs were used without the licence being renewed. Although Top Plus took steps to establish infringement in the early part of 2009 it took no proceedings until June of this year. It is argued that even if one ignores the period before March on the grounds that the parties were still negotiating and notes the assertion by K Square that offending material had been removed, there is still a significant delay between April and June. K Square also points to the delay in joining the application for an interim injunction by the record companies. The current position is that the second, third and fourth applicants have now joined in the interim application (on 18 August) although being aware of the proceedings for some considerable time. The fifth applicant is not a party to the interim application and the third applicant has indicated that it seeks to cap its undertaking as to damages in the sum of $80,000.00. I have been provided with no authority that would suggest that an applicant for an injunction can place a limit on his liability under the undertaking which is given to the Court and it seems to me to be a strange proposition. I have received absolutely no evidence of what losses K Square might suffer if the injunction was wrongly granted but it would certainly involve an extensive loss of business for them. I would be disinclined to grant an injunction in favour of the third applicant upon those terms. There was some suggestion by K Square that Top Plus might not be able to meet any order arising out of the undertaking as to damages. I am not satisfied that this is the case from the evidence put forward, which seems to indicate that the company does have some cash in hand. However, I appreciate that its business of sub-licensing the KTVs is suffering badly as a result of the refusal of other karaoke bars to renew the IP licences. On the other hand, the evidence is that K Square and the other karaoke bars felt that the licence fees proposed to be charged by Top Plus were excessive.
Given the concerns which I have about the validity of the record companies’ copyright and therefore those companies’ ability to grant an exclusive licence to the applicant, about the justiciability of the issues before me, about the delay in commencing the proceedings and the unsatisfactory nature of the undertaking as to damages offered by the third applicant, I take the view that the balance of convenience lies against the granting of an injunction provided appropriate safeguards can be put in place. I would also have considerable difficulty in determining exactly which KTVs would be the subject of any injunction given the different attitudes of each of the applicants to the interim relief claim and the difference in the state of the evidence about assignments of copyright. I note that in its written submissions at [51] K Square has made offers to keep accounts and to pay an amount equivalent to the previous year’s licence fees for the use of the KTVs until trial and decision. I note that I have informed the parties that I would be prepared to hear this matter over a week commencing on 7 December 2009 and that I will be ordering that prior thereto they attended a mediation by a registrar of this Court.
In all these circumstances I would propose to dismiss the application for an interim injunction but require the parties within seven days to bring in short minutes of order that will provide for:
1)The first respondent to keep accounts of the utilisation of its premises in the manner described in the proposed 2009 licence agreement from 1 January 2009 until judgment.
2)The first respondent within 14 days to pay into a trust account, to be held by the first applicant’s solicitors, a sum equal to the licence fee that would have been payable to the first applicant under the 2008 licence agreement from 1 January 2009 to date and monthly thereafter on the 1st of each month until judgment. Such monies not to be disbursed otherwise than by agreement or an order of this Court.
3)In default of compliance with order 2, the first applicant be at liberty to apply for orders dismissing the first respondent’s defence.
4)The parties attend a mediation undertaken by a registrar of this Court or other person agreed to by the parties. Such mediation to be completed prior to 13 November 2009.
5)Parties to provide a set of directions for the future conduct of the case and the preparation of the matter for hearing for five days commencing 7 December 2009. Such directions to commence with the filing of an amended statement of claim and defence if required, provide for discovery and inspection, provide for witness statements by affidavit and for bundles of tendered documents. There should also be a direction that the applicants file with my associate and serve upon the respondents an outline of case and list of authorities on or before 25 November 2009 and the first respondent to file and serve its outline and list on or before 30 November 2009.
K Square has succeeded in its defence of the interim application but at no time has it suggested that it is not utilising in its premises KTVs that have previously been licensed to it which are clearly not its own copyright. In place of the injunction, it has been made the subject of restrictive orders. Whilst I am prepared to hear the parties on costs, I would indicate that I am presently minded to make an order that the costs of the interim application be the first respondent’s costs in the cause. If that is agreed to, it can form part of the short minutes of order that I have ordered be brought in.
I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 15 September 2009
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