Oriental Press Group Ltd v Apple Daily Ltd

Cited as:(1997-1998) 1 HKCFAR 208; [1998] 2 HKLRD 976
Court:Court of Final Appeal (Hong Kong)
Judgement Number:FACV6/1998
Judgment Date:28 Sep 1998
FACV000006/1998 ORIENTAL PRESS GROUP LTD v. APPLE DAILY LTD

FACV000006/1998

FACV No. 6 of 1998

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 6 OF 1998 (CIVIL)

(ON APPEAL FROM CACV No. 104 OF 1997)

_____________________

Between:

ORIENTAL PRESS GROUP LIMITED Appellant
AND
APPLE DAILY LIMITED Respondent

AND BETWEEN

ORIENTAL SUNDAY PUBLISHER LIMITED Appellant
AND
APPLE DAILY LIMITED Respondent

_____________________

Court:

Chief Justice Li, Mr Justice Litton PJ, Mr Justice Ching PJ, Mr Justice Bokhary PJ and Lord Cooke of Thorndon NPJ

Date of Hearing: 14 and 15 September 1998

Date of Judgment: 28 September 1998

____________________

J U D G M E N T

____________________

Chief Justice Li :

1. I have read the judgment of Lord Cooke and agree with it. For the reasons which he gives, I would allow the appeal and make the orders he proposes in his conclusion including the orders as to costs. I also agree with the observations made by Mr Justice Litton PJ and Mr Justice Bokhary PJ.

Mr Justice Litton PJ:

2. I agree with Lord Cooke's judgment, and with Mr Justice Bokhary PJ's observations concerning the award of damages under s17(1) of the Copyright Act 1956 on the basis of a notional licence fee.

3. Damages under this head are compensatory: The award is intended to put the injured party in the same position as if the wrong had not occurred. Copyright gives to the owner the exclusive right to control and exploit the subject-matter, and use by the tortfeasor without licence represents an invasion of those rights. Where such invasion is by a rival in business - one who competes in the same market - the consequences are obviously more serious and damages should, as a matter of common-sense, be liberally assessed. But, once the criterion taken for assessment is that of the willing licensor and licensee, then the fact that the owner would not normally (acting not unreasonably) have given a licence to the tortfeasor is simply one of the factors to be taken into account: The fact that the subject-matter represents a 'scoop' for the owner is another: These are all within the context of notionally willing parties acting reasonably.

4. It is worth emphasizing that, in this case, it was common ground throughout that the basis of assessment is that of the willing licensor and licensee. But, as was pointed out in the course of argument, there could be situations where an owner of the copyright, acting reasonably, would not have licensed the tortfeasor at any price; in such a situation an assessment based upon a notionally willing licensor and licensee would have been inappropriate. In this regard the case in the Federal Court of Australia cited in the course of argument, Autodesk Australia Pty Ltd. v. Cheung [1990] 17 IPR 69, provides an interesting example. There the copyright related to computer software and the tortfeasor supplied pirated reproductions free of charge to his own customers as an inducement to buy personal computers from him. The evidence indicated that because of the small size of his sales, and the fact that he indiscriminately gave away copies of various programmes without inquiry as to the needs of purchasers, he would probably not have copied the work if forced to obtain a licence. There the judge treated the damages as being "at large" and made his award as if he were a jury. The assumption of a notional willing licensee was, in the circumstances of that case, inappropriate.

5. I see no reason why, in a similar case in Hong Kong, the court's approach in Autodesk Australia should not be adopted.

6. I agree with the orders proposed in Lord Cooke's judgment.

Mr Justice Ching PJ :

7. For the reasons given by Lord Cooke of Thorndon and Litton and Bokhary, PJJ. I agree that this appeal should be allowed to the extent therein stated.

Mr Justice Bokhary PJ:

8. I concur in the reasoning and the result embodied in Lord Cooke of Thorndon's judgment. What little I propose to add is simply by way of expanding upon such concurrence, and pertains to the two Hong Kong decisions each of which proceeded upon a "premium" approach, which approach this Court respectfully but unanimously feels unable to support. Those two decisions are: that of the Court of Appeal in PBI Publications (Hong Kong) Ltd v. Marks Hundred Co. Ltd [1987] 2 HKC 157; and that of the District Court in Kemp v. Sing Pao Newspaper & Publications Ltd [1994] 3 HKC 244. Both involve damages for copyright infringement awarded on the basis of a notional licence fee. It is unnecessary to consider whether their results could have been reached even upon a proper approach free from the concept of a premium.

9. The background to the PBI case may be taken from the opening paragraph of its headnote, which paragraph reads:

" The appellant was the owner and publisher of a magazine known as Playboy. It owned the copyright in a collection of artistic photographs of a female model. The respondent reproduced one of these photographs in an issue of its magazine. The appellant claimed damages for both infringement of copyright and for conversion, and sought an account of profits against the respondent. It alleged that the quality of the respondent's reproduction of the photograph was poor."

10.At p.161 H - I Macdougall J said this in the course of giving the judgment of the court:

"... it is tolerably clear to us that although the appellant would have been reluctant to sell the photograph to the respondent on payment of a normal commercial fee due to the fact that it regarded the respondent's magazine as being a down market publication that sold at a much lower price than its own magazine, it would nevertheless have done so on payment of a premium."

11.Later, at p.162 E, this was said:

"... while there was no specific evidence as to what amount the appellant would have charged the respondent by way of premium over and above a normal licence fee for the use of the photograph, we have come to the conclusion that an overall award of $7,500 would meet the justice of this case."

12.The flaw in that approach lies of course in its resort to a premium. In the PBI case there was unchallenged evidence that the plaintiff had once sold a similar photograph for $5,000. That enabled the Court of Appeal to discover - or at least to think that it could discover - what it called the "normal licence fee". And that, I suspect, is what tempted the Court of Appeal into following the course of simply adding a premium to that sum of $5,000 in order to cater for the plaintiff's reluctance to permit the publication in a down market magazine of a photograph which had appeared in its own magazine. But it must be remembered that (as Lord Wilberforce said in General Tire & Rubber Co. v. Firestone Tyre & Rubber Co. Ltd [1976] RPC 197 at 214) "the true principle ... covers both cases where there have been licences, and those where there have not".

13. Where damages for copyright infringement are awarded on the basis of a notional licence fee or royalty, the court begins of course by looking at what the defendant actually did. Then the court moves on from the actual to the notional. It asks itself what the parties would have agreed as the price for what the defendant did if they had entered into negotiations beforehand and had concluded what would have been a reasonable bargain in all the circumstances. That price then represents the notional licence fee or royalty, and is therefore the sum to be awarded by way of infringement damages.

14. The notional negotiators are taken to (as Lord Wilberforce pointed out in the General Tire case at p.221) "bargain as they are, with their strengths and weaknesses, in the market as it exists". So although the negotiations are notional, their context is taken from reality. And the terms of the bargain to be attributed to the parties reflect that reality.

15. Commercially sound reluctance of the kind which existed in the PBI case is relevant to the price which could reasonably be demanded. And so is business rivalry such as that which exists in the present case. Putting commercially useful material into the hands of a competitor carries a commercial downside legitimately to be offset by a payment of money. It is not a question of adding a premium to the price under an agreement attributed to willing parties neither of whom are either keen or reluctant. Their business rivalry goes to the price at which both parties acting reasonably would be willing to contract in all the circumstances. In this connection, it is worth noting how Falconer J put it in Catnic Components Ltd v. Hill & Smith Ltd [1983] FSR 512 at p.533. He said that "the rate of royalty which would have been reasonable for the defendants to pay must reflect [the] advantage of entering the market in competition with the patentees, who were the market leaders, by using the highly successful patented construction".

16. The notional licence fee in the present case should reflect the price-enhancing fact that a valuable "scoop" was being shared with a rival publisher.

17. I turn now to the other Hong Kong case, Kemp's case.

Again the background may be taken from the first paragraph of the headnote, which paragraph reads:

" The plaintiff was a freelance professional photographer who had resided in Hong Kong for three and a half years. Some of his photographs, accompanied by texts and captions in Japanese, were published in a Japanese magazine. The defendant, a newspaper publisher in Hong Kong, published those photographs in its own newspaper."

18. At pp 252 I - 253A, His Honour Judge Downey said:

"... I think that I should depart from the 50% premium apparently applied by the Court of Appeal in the PBI case (CA 91/87, unreported). I do have some evidence as to what...

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