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[2009] ZASCA 127
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Mr Video (Pty) Ltd and Others v Nu Metro Filmed Entertainment (Pty) Ltd and Others (472/08) [2009] ZASCA 127; [2010] 2 All SA 34 (SCA); 2009 BIP 302 (SCA) (29 September 2009)
Links to summary
THE
SUPREME COURT OF APPEAL
REPUBLIC
OF SOUTH AFRICA
JUDGMENT
Case No: 472/08
MR
VIDEO (PTY)
LTD
........................................................................................................
First
Appellant
MR
VIDEO, CORNER OF DURBAN & RAGLAN STREETS (BELLVILLE)
...........
Second Appellant
MR
VIDEO,
CLAREMON
................................................................................................
Third
Appellant
MR
VIDEO, DELMAR CENTRE
(PAROW)
.................................................................
Fourth
Appellant
MR
VIDEO, SABLE SQUARE
(MILNERTON)
...............................................................
Fifth
Appellant
MR
VIDEO, VRIJZEE
(GOODWOOD)
............................................................................
Sixth
Appellant
MR
VIDEO, AROMA VILLAGE
(BRACKENFELL)
....................................................
Seventh Appellant
MR
VIDEO, 244 VOORTREKKER ROAD
(PAROW)
....................................................
Eighth Appellant
MR
VIDEO, CAPE GATE LIFESTYLE CENTRE
(BRACKENFELL)
............................
Ninth
Appellant
MR
VIDEO, 187 VOORTREKKER STREET
(BELLVILLE)
...........................................
Tenth
Appellant
MR
VIDEO, 94D VOORTREKKER ROAD
(GOODWOOD)
....................................
Eleventh Appellant
MR
VIDEO, VAN RIEBEECK ROAD
(KUILSRIVER)
..............................................
Twelfth Appellant
MR
VIDEO, 7/11 CENTRE
(KUILSRIVER)
............................................................
Thirteenth
Appellant
MR
VIDEO,
PARKLANDS
......................................................................................
Fourteenth
Appellant
MR
VIDEO,
DURBANVILLE
.....................................................................................
Fifteenth
Appellant
MR
VIDEO,
MOWBRAY
.............................................................................................
Sixteenth
Appellant
MR
VIDEO,
GARDENS
............................................................................................
Seventeenth
Appellant
MR
VIDEO, SEA
POINT
.............................................................................................
Eighteenth Appellant
MR
VIDEO, LAKESIDE MALL
(BENONI)
..........................................................
Nineteenth Appellant
MR
VIDEO, CEDAR SQUARE
(FOURWAYS)
...........................................................
Twentieth
Appellant
MR
VIDEO,
NORTHCLIFF
.....................................................................................
Twenty First Appellant
MR
VIDEO, THE BUZZ SHOPPING CENTRE
(FOURWAYS)
........................
Twenty
Second Appellant
MR
VIDEO, ALBERMARLE CENTRE
(GERMISTON)
.....................................
Twenty Third Appellant
and
NU
METRO FILMED ENTERTAINMENT (PTY)
LTD
..................................................
First
Respondent
TWENTIETH
CENTURY FOX FILM
CORPORATION
.............................................
Second
Respondent
DISNEY
ENTERPRISES
INC
..........................................................................................
Third
Respondent
WARNER
BROS ENTERTAINMENT
INC
...................................................................
Fourth
Respondent
VIDEOVISION
ENTERTAINMENT (PTY)
LTD
.............................................................
Fifth
Respondent
Neutral
citation:
Mr Video (Pty) Ltd v Nu Metro
Filmed Entertainment (Pty) Ltd (472/08)[2009] ZASCA 127 (29 September
2009).
Coram:
Harms DP, Lewis, Snyders JJA, Hurt
et
Tshiqi AJJA
Heard:
27 August 2009
Delivered:
29 September 2009
Summary:
Copyright infringement – locus standi of parties to participate
in proceedings to restrain infringement – relief
by way of
order for delivery up of infringing articles- special order for costs
marking court's disapproval of conduct of infringing
parties.
ORDER
On
appeal from: High Court, Cape Town (Fourie J sitting as court of
first instance).
The
appeal is dismissed with costs, such costs to include the costs of
two counsel.
JUDGMENT
HURT
AJA (HARMS DP, LEWIS, SNYDERS JJA
et
TSHIQI AJA concurring):
[1]
This is an appeal against certain orders granted by Fourie J in the
Cape High Court. The appeal is with his leave. For the sake
of
clarity and because there are a number of parties involved, I intend
to refer to them as follows:
(a)
to Nu Metro Filmed Entertainment (Pty) Ltd (the first respondent) as
'Nu Metro';
(b)
to the second, third, fourth and fifth respondents collectively as
'the Owners' (a reference to the fact that they are the owners
of the
copyright in the films with which their application in the court
below dealt);
(c) where I refer
individually to any of the Owners, I will use an abbreviation of its
name, ie 'Fox', 'Disney', 'Warner' or 'Videovision';
(d) to all 23
appellants collectively as 'the Video Group';
(e)
where I refer to the first appellant individually, I shall call it
'the Franchisor'.
[2]
Nu Metro trades in films in the theatrical (cinema) sector of the
film market in South Africa and also in the rental and retail
sales
sector of that market. The Owners are well-known producers and
distributors of films in the entertainment field, save that
Videovision is not involved in the production of films, but, as a
substantial part of its business, acquires by assignment the South
African copyright in respect of various films which it distributes in
this country. The Franchisor carries on business as a franchisor
of
businesses, conducted under the name 'Mr Video', for the hiring of
recorded films to members of the public for home viewing. The
Video
Group includes 22 of the Franchisor's franchisees. The application in
the high court related to various films in which the
Owners claimed
to own the copyright. These will be referred to collectively as 'the
films'.
[3]
Nu Metro discovered that the Video Group were offering DVD recordings
of the films, which they had imported from America, for
hire in their
businesses. They therefore brought an application for relief by way
of interdicts, delivery up of infringing articles
and costs, based on
the contention that the Video Group's conduct in offering these
imported DVDs for hire constituted an infringement
of the Owners'
copyright and an infringement of the exclusive licence rights which
Nu Metro claimed to hold as a result of agreements
concluded with the
Owners. The Video Group opposed the application, disputing the
Owners' claim to be the copyright owners and Nu
Metro's claim to be
an exclusive licensee. They admitted that they had imported numbers
of DVD recordings of the films from the USA,
but disputed the
contention that their conduct amounted to copyright infringement.
Shortly before the date on which the opposed application
was set down
for hearing, however, the Video Group conceded that the Owners were,
indeed, the owners of the copyright in the films
and tendered to
submit to the interdicts sought against them and to an order
directing them to pay the Owners' costs.
[4]
This tender disposed of some of the issues in the opposed
application, and the issues with which Fourie J was required to deal
were the following:
(a)
Nu Metro's locus standi to participate in the application, it being
contended that Nu Metro had not proved that it held valid
licences
from the copyright proprietors which entitled it to proceed against
The Video Group;
(b)
the Owners' entitlement to an order for delivery up in terms of
section 24(1)
[1]
of the
Copyright Act No 98 of 1978 ('the Act');
(c) three separate
issues as to costs.
Fourie
J found against the Video Group on all of these issues. It is these
adverse findings that the Video Group have sought to challenge
on
appeal.
The
Locus Standi Issue.
[5]
The Video Group contended, both in the court below and before us,
that Nu Metro had failed to prove that it was the exclusive
licensee
of the Owners. They also submitted that, on a proper interpretation
of the licence agreements which Nu Metro had annexed
to the replying
affidavit, its rights were not such as would entitle it to restrain
the dealing by the Video Group in the imported
DVDs to which
reference has been made. The argument presented in support of these
contentions was complicated but, in my view, futile.
I do not think
that it is necessary to decide whether the licence agreements are
valid or what their scope is. At the lowest level,
Nu Metro and the
Owners have established that Nu Metro is appointed as the only local
distributor of the films. The Video Group have
acknowledged that
their conduct infringes the copyright of the the Owners and is
accordingly unlawful. In the premises, Nu Metro
was entitled, quite
apart from any rights it may have as a licensee, to join in the
proceedings to interdict. The challenge to its
locus standi must
accordingly fail.
The
Order for Delivery of Infringing Items.
[6]
The evidence establishes that copyright proprietors in the film
industry have, for the purpose of controlling the distribution
of
their films territorially, divided the world market into six 'zones'
of which zone 1 comprises the USA and Canada, Zone 2 comprises
Japan,
Europe, South Africa, the Middle East and Greenland and the remaining
four zones are situated in other territories in the
world and need
not be further defined for present purposes. The DVD recordings of
films in each zone are electronically encoded.
The playback equipment
marketed in each zone is also encoded so as to preclude it from
playing DVDs which are not encoded for that
particular zone. Thus a
DVD player sold in South Africa will have a code that enables it to
play only DVDs encoded for zone 2. DVD
recordings sold or hired out
for home viewing in each zone have explicit warnings and reservations
of rights on their packaging,
advising the user of the copyright
limitations to the proposed use and the penalties that may result
from misuse.
[7]
According to Fox, Disney and Warner, the DVD recordings of the films
produced for sale in the USA are all sold and supplied with
these
'copyright warnings', inter alia drawing users' attention to the fact
that the DVDs are sold for home viewing in the zone 1
territories
only. It is common cause, however, that the Video Group, having
purchased the American products, offered them for hire
from the
various outlets operated by the franchisees in the Video Group,
and also supplied their customers with a pamphlet
describing how
local DVD players can be 'decoded' to enable them to play zone 1
films.
[8]
The provisions of s 24(1) are quoted earlier in this judgment. The
section gives the court a discretion to order that the infringer
should deliver up all 'infringing copies'. An 'infringing copy' in
relation to a cinematograph film is defined in s 1 of the Act
as
'a
copy of the film or a still photograph made therefrom; . . .being in
any such case an article the making of which constituted an
infringement of the copyright in the . . . cinematograph film . . .
or, in the case of an imported article, would have constituted
an
infringement of that copyright if the article had been made in the
Republic.'
The
Video Group contend that Fourie J erred in ordering The Video Group
to deliver up the zone 1 DVDs in their possession or under
their
control. The argument is that the zone 1 encoded DVDs were acquired
lawfully from the USA and that they are, accordingly, not
'infringing
copies' as defined. The submission is that, to establish that the
zone 1 DVDs are infringing copies, 'it would have been
necessary for
[Nu Metro and the Owners] to allege and prove that the making of the
article in South Africa by the person who as a
fact made the article
in the USA would have constituted an infringement of the copyright in
South Africa'. The Video Group contend
that no allegation to that
effect has been made in the papers. It is difficult to understand
this contention. The very basis upon
which the application is brought
by the proprietors of the copyright in the films is that zone 1 DVDs
are not available for lawful
distribution in South Africa. There is
no evidence to show that the person who manufactured the zone 1 DVDs
in the USA had the right
to do so in South Africa. In fact the
probabilities are overwhelmingly against such a suggestion.
Accordingly, if the DVDs had been
made locally by that person, the
inference must be that the making would have constituted an
infringement. The attitude adopted by
the Owners in these proceedings
is fully in keeping with that inference. There is accordingly no
substance in this contention.
[9]
The further submission concerning the order for delivery up is that
the court should have had regard to the fact that the zone
1 DVDs
were the property of the Video Group and the court should have been
reluctant to deprive them of their property rights.
Fourie J
rejected this submission. He held that the order was necessary in the
circumstances to enable Nu Metro and the Owners to
monitor and
enforce the interdicts. He pointed out that at least 22 respondents
were involved and he surmised that the very opposition
to the order
for delivery indicated a probable intention to deal in the zone 1
DVDs. There is a further consideration which warrants
an order under
s 24(1) in this case. It is that the infringing DVDs were acquired
for an unlawful purpose and there is no lawful
use to which they
could be put in this country: at any rate, no such use could be
suggested by counsel for the Video Group. The history
of the Video
Group's conduct with regard to its use of the zone 1 DVDs also
militates against any suggestion that Nu Metro and the
Owners would
be properly protected if an order for delivery up was not made. As
indicated, this was a matter involving the exercise
of a discretion
by the lower court. I consider that the learned judge correctly
exercised his discretion in favour of the grant of
the order for
delivery.
Costs
[10] The three
orders as to costs made in the court below and challenged on appeal
are the following:
(a) the order that
the costs of the application should include the costs of various
affidavits aimed at establishing infringing conduct
on the part of a
number of the Video Group in their respective franchise businesses;
(b)
the order that the Video Group pay Nu Metro's costs in the
application;
(c)
the order that the costs of the Owners be taxed and paid on the
attorney and client scale.
[11]
The Video Group's submission in relation to the costs of the
affidavits is that they (the Video Group) had made no secret of
the
fact that the franchisees were dealing in zone 1 encoded DVDs which
they had imported from the USA. Accordingly, so the submission
runs,
it was unnecessary for Nu Metro and the Owners to produce evidence of
individual acts of infringement by individual franchisees.
The short
answer to this submission is that, until the answering affidavit was
delivered, Nu Metro and the Owners had no way of knowing
what the
Video Group would put in issue. It is significant that the Video
Group challenged Nu Metro and the Owners' evidence of the
existence
of the licensing agreements on the ground that the relevant contract
documents were not put up with the founding papers.
In those
circumstances, it hardly lies in the Video Group' mouths to object to
the delivery of affidavits proving individual acts
of infringement.
The decision to allow Nu Metro and the Owners these costs was
correct.
[12]
The order for attorney and client costs was also fully justified. The
deponent for the Franchisor is a man with considerable
experience in
the home entertainment market. There had been a debate (I put in no
higher for the purposes of this issue) amongst
the Video Group as
early as 2006, as to the legality of importing DVDs from the USA for
use in the Video Group's businesses. The
conclusion then was that
such conduct was probably unlawful and the Franchisor had circulated
a warning to its franchisees that this
was the case. However it seems
that the Video Group decided to continue with their conduct and bide
their time until faced with an
application for an interdict. The
flagrant way in which the Video Group arranged to bypass the coding
restrictions used by the copyright
owners for the obvious purpose of
controlling the exploitation of their rights, also has considerable
significance in this context.
After the application had been brought,
and before the answering affidavit was filed, the Franchisor was
advised by its attorney
that the Video Group had no defence to the
application. Nevertheless the Video Group delivered an answering
affidavit opposing the
relief sought. It was only at the eleventh
hour, when the heads of argument were being prepared, that the Video
Group capitulated
in respect of the copyright owners. The decision by
Fourie J to mark his disapproval of this conduct by a special costs
award was
fully justified.
[13]
The award of costs in favour of Nu Metro was warranted on the basis
that the opposition to Nu Metro's participation in the application
was unsuccessful.
The
appeal is dismissed with costs, such costs to include the costs of
two counsel.
_______________________
N
V HURT
ACTING
JUDGE OF APPEAL
Appearances:
Counsel
for Appellant: A R Sholto-Douglas SC
R
D E Gordon
Instructed by
De
Klerk & Van Gend, Tyger Valley
E
G Cooper Majiedt Inc, Bloemfontein
Counsel
for Respondent: P Ginsburg SC
G
Marriott
Instructed by
Nortons
Incorporated, Johannesburg
McIntyre
Van der Post, Bloemfontein
[1]
'(1)
Subject to the provisions of this Act, infringements of copyright
shall be actionable at the suit of the owner of the copyright,
and
in any action for such an infringement or such relief by way of
damages, interdict, delivery of infringing copies or plates
used or
intended to be used for infringing copies or otherwise shall be
available to the plaintiff as is available in any corresponding
proceedings in respect of infringements of other proprietary
rights.'