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Intellectual Property Practice

Dismissing the Appeal of ‘Big Crook’ So far, the criminal conviction and custodial sentence for file sharing stands. Wing L Cheung highlights the unique features of this case as compared with o t he r w e l l - k no w n c a s e s involving the use of similar technology, paying particular attention to the meaning of the word ‘distribute’ in the Copyright Ordinance Photo: Jorge Figueiredo

Introduction The conviction of Chan Nai Ming at Tuen Mun Magistracy on 24 October 2005 (HKSAR v Chan Nai Ming, TMCC 1268/2005) is only part one of the ‘Big Crook Case’. On 12 December 2006, Hon Beeson J delivered a 31 page judgment dismissing the appeal by Chan against his conviction and sentence (HCMA 1221/2005).

To r e c a p i t u l a t e , C h a n w a s convicted by Magistrate Mr Colin Mackintosh of three charges of attempting to distribute an infringing copy of a copyright work (otherwise than for the purpose of, in the course of, any trade or business) to such an extent as to affect prejudicially the owner of the copyright, without the licence of the copyright owner, contrary to ss 118(1)(f) and 119(1)

of the Copyright Ordinance (Cap 528) (the Ordinance) and s 159G of the Crimes Ordinance (Cap 200). He was sentenced to three months’ imprisonment on each charge and the sentences were ordered to run concurrently. The appeal judgment has apparently been widely welcomed. In particular, intellectual property rights owners and the entertainment ==01 • 2007


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Intellectual Property Practice industry are delighted by the clear terms in which Hon Beeson J has rejected the argument that ‘copies’ under the Ordinance must involve physical material entities. Needless to say, the decision of Hon Beeson J in relation to the meaning of ‘copies’ is an important statement of law. That said, it is useful to note that the ‘Big Crook Case’ has many other important implications. The purpose of this article is to highlight the unique features of this case as compared to other well-known cases involving the use of file-sharing technology, and to examine the way in which the word ‘distribute’ should, in light of the appeal judgment, be understood in the context of s 118(1)(f) of the Ordinance.

Unique Features of the Big Crook Case The general description that the Big Crook Case is ‘the first of its type’ requires closer examination. While this is indeed the first criminal prosecution in Hong Kong under subs (1)(f) of s 118 of the Ordinance, the appeal judgment is in fact just another addition to the library of cases around the world involving the use of file-sharing technology. This should be readily understandable, as the use of file-sharing technology began to gain popularity long before the release of BT (Bit Torrent) in 2001. Many readers will be familiar with the United States case of A&M Records, Inc v Napster, Inc, in which the plaintiff was granted a preliminary injunction against Napster, a peer-to-peer music sharing software provider. In the more recent United States case of MetroGoldwyn-Mayer Studios Inc et al v

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 !"# Grokster, Ltd et al, the action was taken by the Plaintiff against Grokster, a distributor of free software allowing peer-to-peer file sharing. In each of these well known cases, the legal battle is civil in nature, engaging commercial entities with huge monetary interests at stake. Clearly this has to be differentiated from the position of Chan, an individual BT seeder, who faces criminal charges. One may find Chan’s position to be similar to that of the defendants in the ‘Tiger Leak Case’ in the United States (Apple Computer, Inc v Doug Steigerwald, et al). In that case, Apple Computer, Inc sued three software developers of the Apple Developer Connection (ADC) program for disseminating on BT the then pre-release version of Mac OS version 10.4 ‘Tiger’. The similarity arises not only because those defendants are also individuals, but also that the United States Attorney’s Office has launched criminal investigation. In so far as the civil case is concerned, Apple has released a statement confirming its settlement with all the defendants. However, the statement provides no information on the current status of the criminal investigation.

Meaning of ‘Distribute’ – Decision at Magistracy Level Section 118(1)(f) of the Ordinance is in the following terms: A person commits an offence if he, without the licence of the copyright owner…distributes (otherwise than for the purpose of, in the course of, or in connection with, any trade or business) to such an extent as to affect prejudicially the

owner of the copyright, an infringing copy of a copyright work. The word ‘distribute’ is not defined in the Ordinance. According to The Oxford Dictionary, distribute means ‘hand or share out to a number of recipients’. In Words and Phrases Legally Defined, it is defined as ‘delivery of something to several persons’ (quoting the Canadian case of R v McNiven [1944] 1 WWR 127 at 128, per Doiron J). Whether Chan’s acts constituted distribution was argued extensively both at the magistracy level and on appeal. Before the Magistrate, it was argued that the word ‘imports a positive act’ and the defendant’s acts were purely passive. The defence invited the Magistrate to confine to the time of the downloading, submitting that: …the acts were those of the downloaders, not the defendant, whose role at that stage was entirely passive. What was done was not a distribution by the defendant. He did no more than leave his computer in a state whereby others, if they chose to do so, could access it and take material from it. Although the Magistrate found this argument unsustainable, he did not go to the extreme of holding that distribution can be a passive act. He looked beyond the time of the downloading and found as a fact that the defendant had acted positively to distribute the infringing copies of the copyright films: The defendant loaded the files into his computer, he created


 !"# the .torrent files, he created the images of the inlay cards and imprinted them with his logo, the statuette; he published the existence of the .torrent files, and the name of the films in question, on the newsgroup, so that others would know where to go to download. He said, in effect, “Come here to get this film if you want it.” He activated the .torrent file, so as to enable others to download. He kept his computer connected and the BitTorrent software active to allow the downloading to take place. The downloading involved the dissemination of the data comprising the infringing copies. His acts were an essential part of the downloading process and were continuing throughout the downloading, even if he had not been sitting at the computer at all times. These acts were an integral part of the enterprise of downloading the infringing copies to other computers. This amounted to distribution...This was not merely “making available” the BitTorrent files. These were positive acts by the defendant, leading to the distribution of the data.

Meaning of ‘Distribute’ – Decision on Appeal On appeal, it was argued on behalf of Chan that since the ordinary meaning of ‘distribute’ is ‘to hand or share out to a number of recipients’, distribution must require a physical transfer of a tangible object, such as paper, magnetic tape or CD, from the distributor to the recipient. It was further submitted that if there is no physical transfer, there cannot be

distribution of copies in the copyright sense. Counsel for Chan emphasized that: …during downloading, the copies of the films in the Appellant’s computer stayed on the computer’s hard disk and memory but this hardware, a tangible object, was never transferred to the downloaders. Counsel for Chan also relied on s 26 of the Ordinance, which refers specifically to ‘making available of copies of works through the service commonly known as the INTERNET’, submitting that s 26 recognizes an ‘Internet right’. It was argued that the adoption of the Internet right in s 26, in addition to the distribution right in s 24, showed that it was not the intention of the legislature of Hong Kong that making a work available on the Internet should amount to distributing copies of that work. In response, Counsel for the Respondent (HKSAR) invited the Court to give s 118(1)(f) of the Ordinance ‘a fair, large and liberal construction and interpretation’ in accordance with s 19 of the Interpretation and General Clauses Ordinance (Cap 1). Counsel also referred to two decisions where the meaning of distribution was considered. In particular, counsel relied on a case heard in the United States Court of Appeals – Donna R Hotaling & Others v Church of Jesus Christ of Latter-Day Saints. This case relates to making available copyright materials for borrowing or browsing in a public library. The question is whether such an act constituted infringement of the Plaintiffs’ exclusive right to distribute copies of the materials to the public under the

Intellectual Property Practice relevant legislation. In that case, the Court of Appeals found in favour of the plaintiffs. Senior Circuit Judge Butzner said: When a public library adds a work to its collection, lists the work in its index or catalogue system, and makes the work available to the borrowing or browsing public, it has completed all the steps necessary for distribution to the public. At that point, members of the public can use the work. Hon Beeson J agreed that in interpreting s 118(1)(f) of the Ordinance the ordinary meaning of ‘distribution’ should be adopted. Against the argument that distribution must involve a tangible object, the learnt judge referred to s 23(2) of the Ordinance which provides that: Copying of a work means reproducing the work in any material form. This includes storing the work in any medium by electronic means. The learnt judge also accepted that there are various sections of the Ordinance showing that storage by electronic means of digital copies was an integral element of the Ordinance (ss 23(2), 198 and 23(6)) and that the legislature intended to safeguard copyrighted works that existed in digital form (ss 2(1)(a), 4(a), 17(6), 23(2) and (6), 26(1) and (2), 29(1) and (4), 32(2) and s 198). W h e n d e a l i n g w i t h C h a n ’s contention about s 24 of the Ordinance (that if s 24 covered copyright works not in tangible form there was no need to enact s 26), the

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Intellectual Property Practice learnt judge was prepared to make use of ‘extraneous materials’ to assist in statutory interpretation, applying the rule in Pepper v Hart (1993) AC 593 as applied in HKSAR v Yau Mee Kwan (2004) 1 HKC 525. The learnt judge took the view that s 26 of the Ordinance was enacted to give additional protection to copyright owners and this intention of the legislature was shown by the speech of the Secretary for Trade and Industry when introducing the enactment of s 26: In devising our own copyright regime, we also have to ensure that the copyright law we put in place can cater for technological advances and suit local circumstances…we propose to protect the interests of copyright owners in the digital environment…We have accordingly included in the Copyright Bill provisions to reflect this consensus, which embodies the guiding principle that the rights of copyright owners must be suitably balanced against the reasonable expectations of all users of the Internet and Hong Kong’s Internet service providers.

An Undecided Point – Does Distribution Involve Successful Receipt of Data? Before leaving the discussion about the meaning of distribution, it may be worth pointing out that when the Magistrate came to his decision he seemed to have placed weight on the fact that the film files uploaded by Chan were successfully downloaded by three downloaders, including a Customs officer. It is not clear if it is the Magistrate’s view that distribution

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 !"# must involve successful receipt of the data in question. This point was not argued on appeal. In any event, it may be useful to note that there are authorities tending to show that successful receipt of data is not a necessary element of distribution. The case of Donna R Hotaling v Church of Jesus Christ of Latter-Day Saints has already been discussed above. The case of Playboy Enterprises, Inc v Chuckleberry Publishing, Inc is another United States case along the same line. In that case, the conduct under complaint was the placing of infringing images on an internet server located in Italy. It was held that the conduct amounted to distribution of the images within the United States, since the defendant ‘caused and contributed to their distribution’.

Closing Remarks The fact that Chan is now serving custodial sentence may have attracted some sympathy. In giving his reasons for sentence, the Magistrate has the following to say about Chan: Despite the handle which he rather flippantly adopted, he is not a bad man, he is not a big crook. He is an ordinary family man with the usual family responsibilities who has used his undoubted knowledge of the Internet, and the time he had available when he was unemployed, for illicit purposes. However, the criminality and seriousness of this case has to be appreciated in light of the Court of Appeal case of Secretary for Justice v Choi Sai Lok [1999] 4 HKC 334

(in which it was decided that immediate custodial sentence should be imposed for offenders under s 118 (1)(d) of the Ordinance), and the often cited judgment of Leonard J in R v Ng Wai Ching (HCMA 1309/96): There is international pressure upon Hong Kong to stamp out traffic in pirated goods. Failure to attack the illegal activity…would be perceived as a default on the part of the government on its international obligations. Chan may lodge a further and final appeal to the Court of Final Appeal. So will the ‘Big Crook Case’ extend to part three? The answer depends of course on a number of factors. Legally speaking, Chan must first obtain leave under s 32 of the Hong Kong Court of Final Appeal Ordinance (Cap 484), on the ground that ‘a point of law of great and general importance is involved’ or that ‘substantial and grave injustice has been done’. In so far as the first limb of the requirement is concerned, given the nature of this case and the arguments presented on appeal, it seems likely that any application for leave by Chan would be readily granted.

Wing L Cheung Kirkpatrick & Lockhart Preston Gates Ellis [email protected]

Formerly, Senior Government Counsel, Prosecutions and Law Drafting Divisions, Department of Justice


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