SKY NETWORK TELEVISION LIMITED v MY BOX NZ LIMITED & ANOR

High Court of New Zealand

Smith A J

5 March – 25 October 2018

[2018] NZHC 2768

Misleading or deceptive conduct - importation and sale of set-top boxes (My Box) in New Zealand – defendant vendor (and its founder) representing to purchasers that My Box is lawful - users should expect to receive access to content broadcast on Sky’s pay TV channels but would avoid Sky’s subscription charges. Claims as to breaches of the Fair Trading Act (NZ) – summary judgment and injunction sought – defendants complaining that no proper pleading of underlying copyright claim nor showing of standing under the Copyright Act – whether summary judgment could be obtained under Fair Trading Act – strike-out application – damages and other relief – Fair Trading Act 1986 (NZ) ss 9, 10, 11 and 13.

Facts:

The plaintiff (Sky) is the largest pay-television broadcaster in New Zealand.  It provided programme content sourced from New Zealand and overseas through a digital satellite network and an internet-based subscription video-on-demand platform known as NEON.  It also offered a service called FAN PASS, being an online, predominantly live sport content streaming service.  Some of its content was via exclusive licences.

The first defendant (My Box) imported and sold in New Zealand digital media hub units under the trade mark MY BOX.  The second defendant, Mr Reddy, was its founder.

Sky alleged that the My Box service comprised a set top box pre-loaded with software (Kodi) which was capable of searching the internet and locating video streams corresponding to users’ menu selections or search queries.  The video streams were then reproduced on a television or computer screen linked to the My Box set top box.  This enabled users of My Box to select and stream content over the internet without the authority of Sky (or other copyright holders).

The defendants claimed that the My Box units were imported from China and that the defendants had not created any add-ons or plays, nor had they created the installed Kodi software.  The defendants themselves did not host any of the content on the My Box units, nor did they have any control over any of the content streamed or viewed.

Pleadings:

Sky complained that the defendants had been acting in breach of ss 9, 10, 11 and 13 of the Fair Trading Act 1986 (FTA) in representing to New Zealand consumers that the use of the My Box service was lawful.  Sky contended that the defendants’ representations to users were misleading or deceptive because it was not lawful for users of the My Box service to use it to stream copyright works without the consent of the copyright owner.

As an example of a breach of Sky’s exclusive rights, Sky relied on a broadcast of the New Zealand versus South Africa test match (the Cricket Match) played on 22 February 2017 in Christchurch.  Sky claimed an exclusive right to communicate television coverage of this game to the New Zealand public live via the internet.

Sky alleged that the defendants had enabled users of My Box units in New Zealand to receive coverage of the Cricket Match as broadcast in the United Kingdom by an offshore producer (the UK channel Sky Sports 2).  Sky contended that in doing so, the defendants were guilty of copyright infringement [22] in:

(a)        Communicating the whole or a substantial part of the copyright works to the public in New Zealand in breach of ss 16(f), 29 and 33 of the Copyright Act 1994 (NZ)               (“the Copyright Act”); and/or

(b)        Copying or causing to be copied the whole or a substantial part of the copyright works, in breach of ss 16(a), 29 and 30 of the Copyright Act; and

(c)        Authorising another person to do a restricted act in breach of ss 16(1)(i), 16(1)(a), 29 and 30 of the Copyright Act.

Sky also relied [23] on a series of representations by the defendants through the My Box website, through its Facebook page, its Twitter account, a My Box YouTube page and promotional emails and statements to the media and public that My Box was lawful and that users should expect to receive access to content that was broadcast on Sky’s channel but would avoid Sky’s subscription charges.

Sky stated that the defendants’ misrepresentations were intended to enable and has enabled users of the My Box service to avoid paying subscription charges for relevant content including Sky’s copyright works – causing loss or damage to Sky.  Sky claimed that 95 percent of My Box customers were ex-Sky subscribers and that, as at 29 June 2017, the defendants had claimed to sell 10,000 My Box units.  On this basis Sky calculated that each My Box user had thus avoided paying a minimum of NZ$80 per month by way of subscription charges to Sky, and that Sky had therefore suffered damage of at least NZ$1,444,000 as at 14 July 2017 and ongoing loss thereafter of at least NZ$570,000 per month [25].

Sky therefore sought a declaration that the defendants’ representations were misleading or deceptive.  It also sought an injunction under s 41 of the FTA restraining the defendants from offering, promoting or supplying the My Box service, My Box units or any equivalent of such service and/or pre-loaded media boxes.  Sky sought a further injunction restraining the defendants from representing in any way, directly or indirectly, that the My Box service, the My Box units or any equivalent service or pre-loaded media box was lawful and/or that use of such did not breach the Copyright Act or any other relevant legal obligations [26].

Sky also sought damages, an enquiry into further damages, interest and costs [27].

The defendants’ strike out

The defendants contended that Sky’s cause of action was untenable and that for it to succeed there would first have to be a finding of copyright infringement under the Copyright Act.  However, Sky had not pleaded infringement of copyright as a first and separate cause of action against the defendants [32].  The defendants therefore sought a strike out.

Sky itself emphasised that its claim was not for copyright infringement per se but for misleading or deceptive misrepresentations (or representations likely to mislead or deceive) under the FTA.  The success of its claim would depend on whether or not the Court was satisfied that the representations by the defendants that it was lawful to use the My Box service to access and view copyright works (whether in the past or in the future) was likely to mislead or deceive [61].

Sky further submitted that there was no reason why a representation directed to a matter of law could not qualify as misleading or deceptive conduct under s 9 of the FTA.  Although not pure statements of law, they simply and unequivocally presented the My Box service as being legitimate and legal.  The representations were untrue as the use of the My Box service involved unlawful and infringing “communication to the public” by the defendants as vendors and encouraged unlawful and infringing “copying” by purchasers in breach of the Copyright Act [62].

Sky stated that the claim had been brought under the FTA because of the misleading nature of the defendants’ conduct in promoting the My Box units transcended the issues that would arise in respect of any particular copyright work.  The defendants’ representations relied on concerned all of the content broadcast by Sky, both to date and into the future, whatever the content might be [63].

Further Sky contended that nothing in the FTA precluded it from suing under the FTA on misrepresentations about the legality of the My Box service.  A misrepresentation was actionable under the FTA without the need for a separate claim under the Copyright Act, so long as the claim was consistent with and did not undermine the policies of the Copyright Act [65].  Sky contended it was not reasonably arguable for the defendants that their My Box service was legal [66].

As to the individual defendant, Mr Reddy, Sky submitted that there was no reason why an employee or director could not be liable under s 9 of the FTA for misleading or deceptive conduct.

The defendants’ response to the summary judgment application

The defendants framed the issue as being [74]:

          “In representing to consumers that My Box is not in breach of copyright laws in enabling users of My Box units to access, receive and view [Sky] “Copyright Works”               are the defendants in breach of ss 9, 10, 11 and 13 of the FTA?”

The defendants contended that the issue was not clear because (inter alia):

(a)        At the time the representations were made there was no New Zealand case that had established that pre-loaded media boxes of the kind marketed were clearly                     illegal under the Copyright Act.  In the absence of such clear authority, there was nothing to render the alleged misrepresentations “untrue” [76].

(b)        Sky’s pleadings were not sufficiently clear and cogent.  The only particularised claim on misleading or deceptive conduct referred to s 9 of the FTA and claims under               ss 10, 11 and 13 were not discretely pleaded [77].  Nor had Sky pleaded how the defendants had jointly or severally communicated, copied or authorised the                       copying of the alleged copyright works [77].

(c)        The defendants also pointed to differences in Sky’s evidence – including no proof of any copyright work, no evidence of any date on which any copyright work was                 created, nor any evidence that the copyright work relied on in respect of the Cricket Match was made in New Zealand.  Further, copies of the licence agreements                   between New Zealand Rugby and New Zealand Cricket were not produced [78].  

(d)        Insufficient evidence that Mr Reddy was acting in trade had been presented [80].

(e)        The defendants also challenged Sky’s standing to sue, noting that Sky could not have been an exclusive licensee [82]. 

(f)        Sky could not be entitled to the injunction and damages claimed.  It had provided no evidence supporting its alleged losses [83].

Held:

Conclusions on the summary judgment application

A.   Did the defendants represent that their My Box service was lawful and that it was lawful for users in New Zealand to use the My Box service to access, receive and view       copyright works?

(i)         The Court was satisfied that the defendants had represented that their My Box service was lawful and there was not reasonably arguable that they had not [88], [91], [99].  The defendants’ advertising, read with the defendants’ statement to the effect that the My Box services was 100 percent lawful, was that a significant number of My Box customers would inevitably understand that it was also perfectly lawful for them to access the Sky channels, including the live sports events using their My Box units [100].  It was also clear that Mr Reddy had been the “face” of My Box and was the driving force behind its establishment [102].  The Court accepted that both defendants were responsible for anything in the statements relied on by Sky that were misleading or deceptive [103] – [104]. 

         Body Corporate 202254 v Taylor [2008] NZCA 317; [2009] 2 NZLR 17; Gilmour v Decision Makers (Waikato) Limited [2012] NZHC 298 at [87], relied o

B.    Did s 9 and 10 FTA apply to misleading or deceptive statements about whether an activity is legal?

            (ii)        A statement of law will amount to a misrepresentation unless in the circumstances, it would reasonably have appeared that the statement was put forward as nothing more than an opinion on which it would not be reasonable to rely [107].  Even a statement of law may be a misrepresentation if it was reasonable, in all the circumstances, for the representee to rely on it [108].

Fonterra Co-Operative Group Limited v McIntyre & Williamson Partnership [2016] NZCA 538 at [175], relied on

            (iii)        Here the purchasers of My Box service would be spending a relatively modest sum (NZ$269) and it would not be reasonable to expect many of them would obtain their own legal advice.  The advice proffered by My Box was unequivocal and intended to be relied on [109] – [110].  Accordingly, the statements made were such as to render both defendants liable under ss 9 and 10 if and to the extent that they were misleading or deceptive or likely to mislead or deceive (s 9) or were liable to mislead (s 10).

C.    Were the operations of My Box lawful as claimed?

       The users of My Box units

            (iv)       The Court noted it was not entirely clear whether Sky owned copyright in the broadcast of the Cricket Match or whether that right had been assigned to New Zealand Cricket.  But the lack of clarity did not affect Sky’s summary judgment application because [121]:

  • Sky was not suing for copyright infringement;
  • Someone (whether Sky or New Zealand Cricket) was owner of copyright;
  • On the evidence that someone did not authorise the defendants or anyone other than Sky to communicate the coverage to the New Zealand public [124];
  • That someone did not authorise users of My Box units to reproduce the broadcast in order to view it.

            (v)        The fact that offshore producers such as Sky UK held no entitlement to stream the broadcast or re-broadcast it to New Zealand viewers meant that New Zealand users of My Box units had no right to access and view the streamed broadcasts on their My Box units [126].  The accessing and viewing of the live coverage must have involved unlawful “copying” under the Copyright Act [126].

            (vi)       When a broadcast is streamed to a media hub or set top box such as My Box, the process involves reproducing the video data constituting the broadcast [131].  The defendants had accepted that such copying / reproduction occurred in their statement of defence [133].  Inevitably the copying in most if not all cases would involve the reproduction of a substantial part of the copyright work or works as the whole point of the receipt and accessing of a given stream was to enable the My Box unit user to view a particular broadcast or programme he or she had specifically chosen [134].

 Munwha Broadcasting Corp v Young International 2009 Limited HC Auckland, CIV 2010-404-00203, 17 December 2010; Football Association Premier League Limited v British Communications Plc [2017] EWHC 48 (Ch) at [31], referred to

            (vii)      The Court accepted that this was an unfair trading claim built on misleading statements made by the defendants about the legality of the use of the My Box units.  A business competitor was entitled to take action under the FTA both for its own benefit and in the wider interests of the public [144].  In these circumstances there was no need for Sky to plead and prove its case based on copyright infringement.  The mischief here lay in what the defendants had represented to the New Zealand public about the legality of their use of the My Box units and in particular the implications that if they used their My Box units to stream live sport and other events that would previously have been accessible only through Sky, they would be doing so lawfully and not exposing themselves to liability to the owners of relevant copyrights (whoever those copyright owners might be) [145].

                        Luxotica Retail New Zealand Limited v SpecSavers New Zealand Limited [2012] NZCA 357 at [39] referred to

            (viii)      As to films, the defendants’ representations that a consumer could stream “any film” located through the Kodi software in the My Box must also raise issues of a likelihood of misleading or deception under the FTA.  In any situation where the film was not free to air and the copying required to view the film through a My Box unit was accordingly not authorised by the copyright owner, it would seem likely that a My Box user would have to access pirate copies of movies and thus infringe the copyright of the films by unlawful copying [147]

D.    No reasonable defence

            (ix)       Sky had shown that the defendants did not have any reasonably arguable defence on this part of the case.  It was and is not lawful for consumers to use My Box units to receive access and view through their My Box units programmes or coverage that Sky broadcasts or otherwise communicates to the public in New Zealand under its exclusive rights in New Zealand without paying the appropriate subscriptions or other fees to Sky [148]

E.   Have the defendants’ actions been lawful?

      Selling and marketing My Box Units

            (x)        Electronic retrieval system:  The My Box units pre-loaded with Kodi software and any add-ons were an “electronic retrieval system” for the purposes of the definition of “communicate” in the Copyright Act [178].

            (xi)       Making available:  It was clear beyond reasonable argument for the defendants that My Box was making available communication works or other original copyright works without the licence of the copyright owners to relevant public in New Zealand.  My Box had deliberately intervened with full knowledge of the consequences of its actions to give its users access to protected copyright works which they would not otherwise be able to readily access [180].  It did not matter that the defendants might not have personally installed the Kodi software or add-ons which had enabled users of My Box units to access Sky broadcasts or programmes that would otherwise not have been available to them.  Nor did it matter that the software or those add-ons might be freely available on the internet.  There was no doubt that the defendants knew that in selling and marketing the My Box units as they did, they would be providing access for their customers to protect copyright works including Sky broadcasts of live sport or other events in circumstances where, in the absence of that intervention, My Box customers would not be able to easily access and enjoy those works [182]. 

Stichting Brein v Wullems European Court of Justice C-527/15, EU:C:2017:300, 26 April 2017; Football Association Premier League Limited v British Communications Plc [2017] EWHC 48 (Ch), referred to

            (xii)      The requirement of communicating to the public was also clearly met in this case regardless of whether “the public” was required to consist of more than a single person for the purposes of s 16(1)(f) of the Copyright Act.  My Box’s activities had made available protected works to a new public (users of My Box units in New Zealand) being a public not taken into account by relevant copyright holders when they authorised the initial communications of their works [184].

                        Munwha Broadcasting Corp v Young International 2009 Limited HC Auckland, CIV 2010-404-00203, 17 December 2010, referred to

            (xiii)      As to the complaint that there was no pleading of copyright infringement, again, Sky was not suing for copyright infringement so the Court was not immediately concerned with the particular standing requirement.  For the same reasons detailed pleadings of the particular copyright works relied on and the precise details of the alleged infringements were not necessary.  Sky’s case was that regardless of who might be the owners of the relevant copyright, My Box’s activities must inevitably involve substantial copyright infringement and to the extent that the defendants had led the public to believe otherwise, they had acted in a way which has been misleading or deceptive was likely to mislead or deceive or liable to mislead contrary to the FTA [185].

            (xiv)     As to the claim that Sky was attempting to achieve under the FTA “through the back door” relief it would not be entitled to under the Copyright Act, the FTA legislation required that it be construed to conform with and not override the legislative copyright code.  Both measures must receive due effect [189].  It could not be the case that a company faced with plainly incorrect advertising by a competitor could not avail itself of consumer protection legislation such as the FTA simply because proof of its case under the FTA would also require proof of infringement of the third party’s copyright by the competitor and the company did not have standing to sue under the Act because it was neither owner nor exclusive licensee of the relevant copyright.  This was a case where it was obvious on the evidence that the competitor statements as to the lawfulness of its activities had been misleading or deceptive without the need for pleadings or proof of the kind that would be required for a copyright infringement action [190].  Sky had sufficiently shown that the defendants had no reasonable argument on this part of the case [192].

F.   Had Sky shown that the defendants had no reasonably arguable defence to the claims that their representations relating to lawfulness (whether of their own conduct or       of the conduct of My Box unit users using My Box units to receive access and view Sky broadcasts or programmes) were in breach of ss 9, 10, 11 or 13 of the FTA

            (vx)      As to s 9, the Court had no doubt that the representations as to lawfulness made by the defendants, assessed objectively, did have the capacity to mislead or deceive a hypothetical reasonable person.  There was a real risk (more than a mere possibility) that persons reading or hearing the relevant representations would be misled or deceived into believing that their own use of the My Box units to receive, access and view broadcasts or programmes that they would only otherwise be readily able to view by paying a subscription or fee to Sky, would be lawful, and would not expose them to the risk of copyright infringement.  Accordingly, Sky has satisfied this requirement for s 9 [197] – [198].  The Court’s finding on Sky’s claim under s 9 was also sufficient to establish liability under s 10 [199].

            (xvi)     The Court was not satisfied that Sky had shown the defendants had no reasonably arguable defence to the claims based on alleged contravention of ss 11 and 13 of the FTA [201].

G.   Remedies

            (xvii)    Although the Court accepted that jurisdiction to make a declaratory order will exist in an appropriate case under the FTA, the Court did not consider any useful purpose would be served by making a declaration here.  The fact of the defendants’ breaches of the FTA would be apparent from this judgment, any past losses could be compensated in due course by an appropriate award of damages and future infringers would be prevented by the injunction to be made [207].

 Commerce Commission v ANZ Bank New Zealand Limited [2015] NZHC 1168; Commerce Commission v Sweet Line Distributors Limited (2000) 6 NZBLC 103, 030; OTR International Limited v Tyres Direct Limited HC Auckland, CIV 2008-404-001378, 9 October 2008, referred to

            (xviii)    It was appropriate to grant a final injunction ([213] and Result) in substantially the following terms:  restraining the defendants from representing in any way, in any medium, directly or indirectly, that the use of the My Box units (or any equivalent media box that is pre-loaded with Kodi or other equivalent software or add-ons) permits the user to receive, access and view through that My Box unit or other media box programmes or coverage that Sky broadcasts or otherwise communicates to the public of New Zealand under its exclusive rights in New Zealand (access to which would only otherwise be lawfully available to the user of a My Box unit or equivalent pre-loaded media box on payment of a subscription or fee to Sky (was lawful or did not breach the Copyright Act 1994).

            (xix)     As to damages, the Court would have considered entering judgment on liability under r 12.3 of the High Court Rules 2016, with a quantum of any damages to go to trial in the usual way, but that rule does not appear to permit that course [226].  Leave was reserved for Sky to make a further interlocutory application for an enquiry into damages (Result 2).

 

 Andrew Brown QC