KK Sony Computer Entertainment v Van Veen & Anor

This is an important conflict of laws case involving intellectual property. For the first time the New Zealand court has entered judgment for infringement of foreign copyright statutes in respect of infringements occurring in those countries.

The plaintiffs were proprietors of the PlayStation 2 computer games system and computer games for use within that system. The CD’s and DVD’s marketed for use with PlayStation 2 were embedded with code to prevent copying of games from the CD or DVD to another medium. 

The first defendant developed a software program called HD Loader which enabled a user to circumvent the Sony embedded copy protection code and then to copy the games on to CD’s or DVD’s. The first defendant sold or licensed the HD Loader program and it had been sold and distributed inter alia in New Zealand, the UK and Hong Kong through arrangements involving the second defendant. 

Sony commenced proceedings and obtained a number of interim orders. In its pleadings, Sony pleaded six causes of action:

(1)  Breach of ss 226 and 37 of the New Zealand Copyright Act 1994;

(2)  Breach of the New Zealand Trade Marks Act 2002;

(3)  Breach of s296 of the UK Copyright Designs and Patents Act 1988;

(4)  Breach of s296ZD of the UK Copyright Designs and Patents Act 1988;

(5)  Breach of s273 of the Hong Kong Copyright Ordinance;

(6)  Wrongful possession and use of confidential information relating to the first and second plaintiffs.

In its statement of defence, the first defendant admitted the facts that would make him liable under all of the causes of action. The plaintiffs applied for judgment. Causes of action (1), (2), and (6) were causes of action arising in New Zealand. The issue for the court was whether it could enter judgment for breaches of the UK and Hong Kong copyright statutes in respect of actions which had taken place solely in those jurisdictions and not in New Zealand. 

The Moçambique rule laid down by the House of Lords in British South Africa Co v Cia de Moçambique [1893] AC 602 was that a court has no jurisdiction to entertain an action in respect of title or possession to any immovable situate out of the jurisdiction or to recover damages for trespass to such an immovable. That rule had been applied to intellectual property rights protected under the intellectual property legislations of foreign jurisdictions in cases in Australia, the UK and New Zealand. 

However, the matter had been carefully reviewed by the UK Court of Appeal in Pearce v Ove Arup Partnership Limited [1999] 1 All ER 769 where the court had held (on the facts of that case) that, even without consideration of the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, the English courts had jurisdiction over a claim in respect of the alleged infringement of Dutch copyright by virtue of actions occurring in the Netherlands. 

The plaintiffs, relying on Pearce v Ove Arup, contended that the New Zealand courts did have jurisdiction to enter judgment against the first defendant on the foreign copyright causes of action and that a decision of the New Zealand High Court to the contrary (Atkinson v Hodgskin (1994) 31 IPR 186) should not be followed. 

A further impediment to the plaintiffs obtaining judgment was the ‘double-actionability’ rule, which provides that an act done in a foreign country is a tort and actionable in the jurisdiction only if it is both:

(a)  actionable as a tort according to the laws of the jurisdiction; and

(b)  actionable according to the laws of the foreign country where it was done. 

If the double-actionability rule applied then automatically the plaintiffs would fail because the acts complained off in the UK and IN Hong Kong did not constitute a wrong against the New Zealand copyright statute since that statute is territorial in effect. The plaintiffs again relied on the reasoning of the UK Court of Appeal in Pearce and exceptions to the double-actionability rule to contend that this rule was not an impediment to judgment being entered on the foreign copyright causes of action. 

The Moçambique rule

On this head, MacKenzie J held that:

1. So far as justiciability is concerned, there is a significant distinction between proceedings where issues of title or the extent of rights available under foreign law arise, on the one hand, and claims where the matter and issue is not the existence or nature of the title or rights but whether some action has the effect of infringing the unquestioned rights of the plaintiff. The reasoning of the UK Court of Appeal in Pearce was persuasive in favour of the proposition that in the case of intellectual property rights governed by the law of a foreign country, the second limb of the Moçambique rule should not exclude justiciability in respect of actions for breach of intellectual property rights established under the laws of another jurisdiction, when no question of the existence of those rights arises [13] and [19];
    
2. In the present case, the first defendant’s admissions as to the existence and validity of rights under the UK and Hong Kong statutes meant that no question of title arose in this case [20-22];

MacKenzie J went on to observe that the various forms of protection given under intellectual property statutes are territorial in nature, because the statutes conferring these are necessarily territorial in their application.  To that extent, they have the characteristics of immovable property. But the significant difference between such forms of intellectual property and true immovables such as land is that the same item of intellectual property may be protected by statutory rights in many jurisdictions. A strict application of the second limb of the Moçambique rule to such rights would mean that, where, as here, a defendant commits infringing acts against a single plaintiff in several jurisdictions, separate proceedings in each jurisdiction will be necessary to deal with those infringements. The inconvenience of such a requirement would outweigh the benefit of certainty that the application of a second limb to such claims would provide [22]. 

The double-actionability rule

MacKenzie J held that a strict application of the first limb of the double-actionability rule would lead to the result that the infringement of foreign copyright statutes would not be actionable in New Zealand. However, the first limb does not impose a requirement as to jurisdiction. In applying the first limb in any intellectual property case, it is necessary to effect a notional transfer to New Zealand, for consideration under New Zealand law of both the infringing act and the intellectual property infringed. The infringing act and the intellectual property infringed cannot sensibly be separated in applying the first limb [24] and [25];

By adopting that approach, the first limb in the double-actionability rule is satisfied. The intellectual property claimed by the plaintiffs, Sony, was of a type recognised by, and able to be protected under, New Zealand law. The second limb was also satisfied. There were affidavits before the court from lawyers of both the United Kingdom and Hong Kong which satisfied the court on that point [26]. 

MacKenzie J went on to observe that in reaching the conclusions as to the applicability of the Moçambique rule and the double-actionability rule, the court wished to make it clear that it was dealing with and referring only to the case of a defendant who was resident in New Zealand and thereby subject to the jurisdiction of the Court. Different considerations might apply to a defendant who was out of New Zealand and in respect of whom jurisdiction could only be asserted if service out of New Zealand were permitted under Rules 219 to 227 of the High Court Rules [27].