Claiming copyright infringement without ownership?
Top Plus Pty Ltd & Ors v K Square Pty Ltd & Ors  FMCA 900
The Top Plus v K Square case is a useful reminder that despite the ever growing “globalisation” of consumer trends and availability of products, copyright remains a territorial right. In many cases, an action for infringement of copyright may be brought before an Australian court even where the relevant work was made or first published outside Australia. In such cases, it will be relevant to consider the Copyright (International Protection) Regulations. In some cases, their application may result in a determination on the issue of ownership or infringement in Australia different from the position elsewhere.
Facts of the case
The applicants sought an interim injunction in the Federal Magistrates’ Court for infringement of the copyright in a large number of karaoke cinematograph films (“KTVs”). The first applicant, Top Plus, claimed to be the exclusive licensee in Australia of the copyright in the KTVs, and the second to fifth applicants and two of the respondents (together “the record companies”) were the copyright owners.
The first respondent, K Square, operates a karaoke lounge in George Street, Sydney. It was alleged that K Square had infringed the copyright in the KTVs by making copies of them, causing them to be seen in public and communicating them to the public when it declined to renew a sub-licence it had from Top Plus because Top Plus was introducing rates that were nine times the old rates. At the interlocutory injunction hearing K Square put in issue:
- the validity of the exclusive licences granted by the record companies to Top Plus; and
- the ownership of copyright in the KTVs by the record companies.
Validity of exclusive licences
Relevantly, section 86 of the Copyright Act 1968 (Cth) (“the Act”) provides that copyright in relation to a cinematograph film is the exclusive right to make a copy of the film, to cause the film to be seen or heard in public and/or to communicate the film to the public. Copyright in a cinematograph film is infringed by a person who, 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: section 101.
An action for infringement of the copyright may be brought by either or both of the copyright owner and an “exclusive licensee”: section 115(1). The term “exclusive licence” is defined in section 10 as a licence in writing, signed on behalf of the owner of copyright, authorising the licensee, to the exclusion of all other persons (including the copyright owner), to do an act that, under the Act, the owner of the copyright would, but for the licence, have the exclusive licence to do.
In relation to the validity of the exclusive licences in this case, Raphael FM analysed the provisions of the licence agreements Top Plus had entered into with each of the record companies and, to the extent that he was required to make such a finding for the purposes of the interlocutory application, he found that they were capable of being construed as effective exclusive licences.
Relevantly, a number of the licence agreements Top Plus had entered into contained provisions in relation to the “scope of the rights granted” in the following form:
“…In sum the Record Company grants to [Top Plus] exclusively the right to publicly perform, display, copy, reproduce (including switching media), synchronize and commercially exploit any and all of the copyrighted songs, images or video which are included in the licence contents of the computerised karaoke system.”
Raphael FM held that the above “in sum” expression of rights (and other comparable clauses) sufficiently identified the rights in section 86 of the Act for him to find that there was a serious question to be tried with respect to the rights of Top Plus.
However, the Federal Magistrate was not satisfied that the record companies had proven copyright ownership. The evidence from the record companies was that they had hired independent film makers to make the KTVs and the independents had simply handed over the finished films. It appeared that no written assignment of copyright to the record companies had taken place.
Although section 98 of the Australian Copyright Act provides that the copyright in a commissioned film (i.e. one made pursuant to an agreement for valuable consideration) belongs to the person commissioning the film, there was no evidence that this was the position in Hong Kong. The applicants were seeking to argue that as the agreements concerning the product of the KTVs were all subject to Hong Kong law, the issue of copyright ownership also fell to be determined under Hong Kong law. However, the applicants did not present any evidence about what was the law of Hong Kong concerning copyright ownership. The applicants argued that, in the absence of any evidence to the contrary, the Court should apply the principle that the law of Hong Kong should be presumed to be the same as Australian law: Neilson v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331 (“Neilson”). However, Raphael FM held that this principle as not “quite as hard and fast as the applicants would wish it”.
The Federal Magistrate was of the view that the record companies had the onus of establishing copyright ownership since the respondents had put it in issue, and they had merely asserted it rather than proving it. Raphael FM was not prepared to apply the principle from Neilson, particularly as there was some suggestion that the laws of Hong Kong were relevantly different to those in Australia.
Further, Raphael FM was of the view that the question of whether the Australian courts could consider the proceedings was difficult. The record companies claimed to be the owners of copyright in Hong Kong and were attempting to sue for infringement in Australia. Top Plus sued under the Australian Copyright Act as if it had taken an assignment of the Hong Kong copyright, but this had been done under agreements which had as their governing law the law of Hong Kong. Raphael FM held that an ‘assignment’ can only be as effective as the original right. If the assignors did not hold the copyright, there was nothing to give the assignee.
Having considered a number of international law cases, the Federal Magistrate thought it could be argued that a declaration by an Australian court that the record companies’ copyright is invalid under Hong Kong law would not be accepted as binding on the Hong Kong courts, and therefore such a finding would have no utility and the proceeding would not be capable of being decided by an Australian court. The alternative proposition was that the finding is only relevant in respect of the particular alleged infringements which occurred in Australia and that accordingly such an action should be capable of being decided by a court in this country. Raphael FM held that the appropriate place to answer such difficult questions was the final hearing, not on an application for interlocutory relief, but the existence of these problems tended to encourage a finding that the balance of convenience did not lie with the grant of an injunction.
In light of the concerns over the record companies’ claim to ownership of copyright and, consequently, their ability to grant the exclusive licences as alleged and, given the delay in commencing proceedings, Raphael FM concluded that it was not an appropriate case for the grant of an interim injunction. However, to safeguard the position of Top Plus and the record companies, K Square was ordered to make payments into a trust account (pending final determination of the matter) of amounts equivalent to the licence fees under the prior licence agreement between Top Plus and K Square, to keep accounts of its activities involving the KTVs and for the matter to be given an expedited hearing date.
The applicants should have pleaded the case for infringement on the basis that they owned the copyright in Australia in the KTVs and that the respondent’s offending conduct amounted to an infringement of its copyright in Australia. Rather, the applicants sought to assert ownership of copyright under Hong Kong law.
Further, possibly as a result of the urgent nature of the interlocutory application, it appears that the parties in this case failed to draw the attention of the Federal Magistrate to regulation 4 of the Copyright (International Protection) Regulations 1969 (Cth). Regulation 4, so far as material, provides as follows:
“4(1) Work, and subject-matter other than a work, made or first published in a foreign country. Subject to these Regulations, a provision of the Act that applies in relation to a … cinematograph file made or first published, in Australia (an Australian work or subject-matter) applies in relation to a … cinematograph film made or first published in a Berne Convention country, a Rome Convention country, a UCC country, a WCT country, a WPPT country or a WTO country (a foreign work or subject-matter):
(a) in the same way as the provision applies, under the Act, in relation to an Australian work or subject-matter; and
(b) as if the foreign work or subject-matter were made or first published in Australia.”
Hong Kong is a Berne Convention country. The effect of regulation 4 is that in an action claiming infringement of the copyright in the KTVs in Australia ownership of the copyright in the KTV’s falls to be considered under Australian law.
As outlined above, under the Act the only persons who may bring an action for infringement of copyright is the copyright owner or an exclusive licensee thereof: sections 115, 119. The issue here is whether the record companies who commissioned various independent film makers to produce the KTVs had standing to sue. In Australia, the record companies could only do so if they were the copyright owners: see Enzed Holdings Ltd & Ors v Wynthea Pty Ltd & Ors (1984) 57 ALR 167. Relevantly, sections 98(2) and (3) of the Act provide as follows:
“98(2) [Ownership] Subject to the next succeeding sub-section, the maker of a cinematograph film is the owner of any copyright subsisting in the film by virtue of this Part.
98(3) [Production under contract] 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.”
Accordingly, as the record companies paid the independent film makers for the KTVs they produced they would be considered the owner of any copyright subsisting in the films in Australia. As owners of the copyright in the KTVs the record companies had title to assign to Top Plus.
This case demonstrates the application of section 126 of the Copyright Act, whereby a person asserting ownership of copyright will need to substantiate the assertion of ownership where it is put in issue by a person being sued for infringement. In order to obtain relief in respect of an infringement of copyright occurring in Australia involving a copyright work made or first published in a foreign country the Copyright (International Protection) Regulations provide that ownership of the work will be determined according to Australian copyright law.
The case also supports the proposition that as copyright is territorial, an Australian Court will likely only entertain proceedings claiming infringement of the Australian copyright, wherever that conduct occurs.
The trial decision in this matter has now been handed down (see Top Plus Pty Ltd & Ors v K Square Pty Ltd & Ors (No.2)  FMCA 67). It appears from this decision that Top Plus did ultimately rely on regulation 4 of the Copyright (International Protection) Regulations and section 98 of the Act on the first day of trial, and that K Square subsequently made concessions in relation to ownership of copyright which enabled the court to make various declarations of copyright infringement and orders by consent.